UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)


xQUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For
the Quarterly Period Ended October 31, 2009





 ̈TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For
the Transition Period from _________ to _________





Commission
file number:  000-51321





TRIANGLE
PETROLEUM CORPORATION


(Exact
name of registrant as specified in its charter)





Nevada
              
              98-0430762(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (IRS
      Employer
                Identification
      No.)





Suite
1250, 521 - 3 Avenue SW


Calgary,
Alberta


Canada
T2P 3T3


(Address
of Principal Executive Offices)





(403)
262-4471


(Registrant’s
telephone number, including area code)





(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    ̈ Yes   ̈
No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):




Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈
            Smaller
      reporting company x(Do
      not check if a smaller reporting
company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).Yes  ̈   No x





As of
November 20, 2009, there were 69,926,043 shares of registrant’s common stock
outstanding.





TRIANGLE
PETROLEUM CORPORATION AND SUBSIDIARIES





INDEX





PART
      I.
                                    
                                    FINANCIAL
      INFORMATIONITEM
      1.
                                    
                                    Financial
      Statements
                                    
                                    3Consolidated
      balance sheets at October 31, 2009 and January 31, 2009
      (unaudited)
                                    
                                    3Consolidated
      statements of operations for the three and nine months ended October 31,
      2009 and 2008 (unaudited)
                                    
                                    4Consolidated
      statements of cash flows for the three and nine months ended October 31,
      2009 and 2008 (unaudited)
                                    
                                    5Consolidated
      statements of stockholders’ equity for the three and nine months ended
      October 31, 2009 and 2008 (unaudited)
                                    
                                    6Notes
      to unaudited consolidated financial statements
                                    
                                    7 –
      11ITEM
      2.
                                    
                                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                    
                                    12
      – 21ITEM
      3.
                                    
                                    Quantitative
      and Qualitative Disclosures About Market Risk
                                    
                                    21ITEM
      4T.
                                    
                                    Controls
      and Procedures
                                    
                                    21PART
      II.
                                    
                                    OTHER
      INFORMATIONITEM
      1
                                    
                                    Legal
      Proceedings
                                    
                                    23ITEM
      1A
                                    
                                    Risk
      Factors
                                    
                                    23ITEM
      2
                                    
                                    Unregistered
      Sales of Equity Securities and Use of Proceeds
                                    
                                    23ITEM
      3
                                    
                                    Defaults
      Upon Senior Securities
                                    
                                    23ITEM
      4
                                    
                                    Submission
      of Matters to a Vote of Security Holders
                                    
                                    23ITEM
      5
                                    
                                    Other
      Information
                                    
                                    23ITEM
      6
                                    
                                    Exhibits
                                    
                                    23SIGNATURES
                                    
                                    24


2





Triangle
Petroleum Corporation


Consolidated
Balance Sheets


(Expressed
in U.S. dollars)


(Unaudited)





October 31,
                          2009
                          $
                        
                        
                        January 31,
                          2009
                          $ASSETSCurrent
      AssetsCash
      and cash equivalents
                        
                        
                        5,510,117
                        
                        
                        
                        8,449,471Prepaid
      expenses
                        
                        
                        321,271
                        
                        
                        
                        339,839Other
      receivables
                        
                        
                        278,799
                        
                        
                        
                        998,511Total
      Current Assets
                        
                        
                        6,110,187
                        
                        
                        
                        9,787,821Property
      and Equipment
                        
                        
                        46,548
                        
                        
                        
                        39,765Oil
      and Gas Properties (Note 3)
                        
                        
                        18,963,802
                        
                        
                        
                        16,942,864Total
      Assets
                        
                        
                        25,120,537
                        
                        
                        
                        26,770,450LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      LiabilitiesAccounts
      payable
                        
                        
                        411,970
                        
                        
                        
                        2,123,079Accrued
      liabilities
                        
                        
                        178,565
                        
                        
                        
                        90,539Total
      Current Liabilities
                        
                        
                        590,535
                        
                        
                        
                        2,213,618Asset
      Retirement Obligations (Note 4)
                        
                        
                        1,146,951
                        
                        
                        
                        727,862Total
      Liabilities
                        
                        
                        1,737,486
                        
                        
                        
                        2,941,480Going
      Concern (Note 1)Commitment
      (Note 8)Subsequent
      Events (Note 9)Stockholders’
      EquityCommon
      Stock
                          Authorized:
      150,000,000 shares, par value $0.00001
                          Issued:
      69,926,043 shares
                          (January
      31, 2009 – 69,926,043 shares)
                        
                        
                        699
                        
                        
                        
                        699Additional
      Paid-In Capital
                        
                        
                        81,557,941
                        
                        
                        
                        81,155,715Warrants
      (Note 5)
                        
                        
                        4,237,100
                        
                        
                        
                        4,237,100Deficit
                        
                        
                        (62,412,689
                        )
                        
                        
                        (61,564,544
                        )Total
      Stockholders’ Equity
                        
                        
                        23,383,051
                        
                        
                        
                        23,828,970Total
      Liabilities and Stockholders’ Equity
                        
                        
                        25,120,537
                        
                        
                        
                        26,770,450





The
accompanying notes are an integral part of these consolidated financial
statements


3





Triangle
Petroleum Corporation


Consolidated
Statements of Operations


(Expressed
in U.S. dollars)


(Unaudited)





Three
                                Months
                                Ended
                                October 31,
                              
                              
                              Three
                                Months
                                Ended
                                October 31,
                              
                              
                              Nine
                                Months
                                Ended
                                October 31,
                              
                              
                              Nine
                                Months
                                Ended
                                October 31,2009
                              
                              
                              2008
                              
                              
                              2009
                              
                              
                              2008$
                              
                              
                              $
                              
                              
                              $
                              
                              
                              $Revenue,
      net of royalties
                              
                              
                              29,345
                              
                              
                              
                              54,500
                              
                              
                              
                              92,432
                              
                              
                              
                              314,450Operating
      ExpensesOil
      and gas production
                              
                              
                              20,893
                              
                              
                              
                              29,718
                              
                              
                              
                              73,469
                              
                              
                              
                              93,099Depletion
      and accretion (Notes 3 and 4)
                              
                              
                              54,470
                              
                              
                              
                              52,735
                              
                              
                              
                              145,947
                              
                              
                              
                              146,302Depreciation
      – property and equipment
                              
                              
                              7,272
                              
                              
                              
                              10,368
                              
                              
                              
                              18,946
                              
                              
                              
                              30,115General
      and administrative (Note 7)
                              
                              
                              618,214
                              
                              
                              
                              847,022
                              
                              
                              
                              2,293,362
                              
                              
                              
                              3,190,427Impairment
      of oil and gas properties
                              
                              
                              -
                              
                              
                              
                              8,000,000
                              
                              
                              
                              -
                              
                              
                              
                              8,000,000Gain
      on sale of assets
                              
                              
                              (783,612
                              )
                              
                              
                              -
                              
                              
                              
                              (908,233
                              )
                              
                              
                              (10,705
                              )Foreign
      exchange loss (gain)
                              
                              
                              31,000
                              
                              
                              
                              2,429,433
                              
                              
                              
                              (676,654
                              )
                              
                              
                              2,454,022(51,763
                              )
                              
                              
                              11,369,276
                              
                              
                              
                              946,837
                              
                              
                              
                              13,903,260Gain
      (loss) from Operations
                              
                              
                              81,108
                              
                              
                              
                              (11,314,776
                              )
                              
                              
                              (854,405
                              )
                              
                              
                              (13,588,810
                              )Other
      Income (Expense)Accretion
      of discounts on convertible debentures
                              
                              
                              -
                              
                              
                              
                              (602,277
                              )
                              
                              
                              -
                              
                              
                              
                              (2,608,681
                              )Amortization
      of debt issue costs
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (182,637
                              )Loss
      on debt extinguishment
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (160,662
                              )Interest
      expense
                              
                              
                              -
                              
                              
                              
                              (189,041
                              )
                              
                              
                              -
                              
                              
                              
                              (654,371
                              )Interest
      and royalty income
                              
                              
                              47
                              
                              
                              
                              127,681
                              
                              
                              
                              6,260
                              
                              
                              
                              209,911Unrealized
      gain on fair value of derivatives
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              793,589Total
      Other Income (Expense)
                              
                              
                              47
                              
                              
                              
                              (663,637
                              )
                              
                              
                              6,260
                              
                              
                              
                              (2,602,851
                              )Income
      (Loss) for the Period
                              
                              
                              81,155
                              
                              
                              
                              (11,978,413
                              )
                              
                              
                              (848,145
                              )
                              
                              
                              (16,191,661
                              )Net
      Loss Per Share – Basic and Diluted
                              
                              
                              -
                              
                              
                              
                              (0.18
                              )
                              
                              
                              (0.01
                              )
                              
                              
                              (0.28
                              )Weighted
      Average Number of Shares Outstanding –Basic
      and Diluted
                              
                              
                              69,926,000
                              
                              
                              
                              67,426,000
                              
                              
                              
                              69,926,000
                              
                              
                              
                              58,592,000





The
accompanying notes are an integral part of these consolidated financial
statements


4





Triangle
Petroleum Corporation


Consolidated
Statements of Cash Flows


(Expressed
in U.S. dollars)


(Unaudited)




Three Months
                                  Ended
                                  October 31,
                                  2009
                                
                                
                                Three Months
                                  Ended
                                  October 31,
                                  2008
                                
                                
                                Nine Months
                                  Ended
                                  October 31,
                                  2009
                                
                                
                                Nine Months
                                  Ended
                                  October 31,
                                  2008$
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $Operating
      ActivitiesGain
      (loss) for the period
                                
                                
                                81,155
                                
                                
                                
                                (11,978,413
                                )
                                
                                
                                (848,145
                                )
                                
                                
                                (16,191,661
                                )Adjustments
      to reconcile loss for the period to net cash used in operating
      activities:Accretion
      of discounts on convertible debentures
                                
                                
                                -
                                
                                
                                
                                602,277
                                
                                
                                
                                -
                                
                                
                                
                                2,608,681Amortization
      of debt issue costs
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                182,637Depletion
      and accretion (Notes 3 and 4)
                                
                                
                                54,470
                                
                                
                                
                                52,735
                                
                                
                                
                                145,947
                                
                                
                                
                                146,302Depreciation
      – property and equipment
                                
                                
                                7,272
                                
                                
                                
                                10,368
                                
                                
                                
                                18,946
                                
                                
                                
                                30,115Impairment
      of oil and gas costs
                                
                                
                                -
                                
                                
                                
                                8,000,000
                                
                                
                                
                                -
                                
                                
                                
                                8,000,000Stock-based
      compensation (Note 6)
                                
                                
                                131,763
                                
                                
                                
                                135,393
                                
                                
                                
                                402,226
                                
                                
                                
                                476,427Gain
      on sale of assets
                                
                                
                                (783,612
                                )
                                
                                
                                -
                                
                                
                                
                                (908,233
                                )
                                
                                
                                (10,705
                                )Loss
      on debt extinguishment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                160,662Unrealized
      gain on fair value of derivatives
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (793,589
                                )Unrealized
      foreign exchange changes
                                
                                
                                29,466
                                
                                
                                
                                2,443,118
                                
                                
                                
                                (680,346
                                )
                                
                                
                                2,443,118Asset
      retirement costs (Note 4)
                                
                                
                                (17,447
                                )
                                
                                
                                (127,514
                                )
                                
                                
                                (23,956
                                )
                                
                                
                                (499,151
                                )Changes
      in operating assets and liabilities (Note 7)
                                
                                
                                49,036
                                
                                
                                
                                149,628
                                
                                
                                
                                555,502
                                
                                
                                
                                172,584Cash
      Used in Operating Activities
                                
                                
                                (447,897
                                )
                                
                                
                                (712,408
                                )
                                
                                
                                (1,338,059
                                )
                                
                                
                                (3,274,580
                                )Investing
      ActivitiesPurchase
      of property and equipment
                                
                                
                                (2,222
                                )
                                
                                
                                (5,850
                                )
                                
                                
                                (25,729
                                )
                                
                                
                                (9,791
                                )Oil
      and gas property expenditures (Note 3)
                                
                                
                                (273,586
                                )
                                
                                
                                (1,127,139
                                )
                                
                                
                                (2,418,364
                                )
                                
                                
                                (4,863,048
                                )Cash
      advances from partners
                                
                                
                                -
                                
                                
                                
                                (1,560,410
                                )
                                
                                
                                (677,843
                                )
                                
                                
                                1,006,674Proceeds
      received from sale of oil and gas properties
                                
                                
                                744,408
                                
                                
                                
                                13,000
                                
                                
                                
                                877,733
                                
                                
                                
                                3,921,998Cash
      Provided by (Used in) Investing Activities
                                
                                
                                468,600
                                
                                
                                
                                (2,680,399
                                )
                                
                                
                                (2,244,203
                                )
                                
                                
                                55,833Financing
      ActivitiesProceeds
      from issuance of common stock
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                25,560,500Share
      issuance costs
                                
                                
                                -
                                
                                
                                
                                (25,569
                                )
                                
                                
                                -
                                
                                
                                
                                (2,048,156
                                )Convertible
      debenture repayment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (4,800,000
                                )Cash
      Provided by Financing Activities
                                
                                
                                -
                                
                                
                                
                                (25,569
                                )
                                
                                
                                -
                                
                                
                                
                                18,712,344Unrealized
      foreign exchange change on cash and cash equivalents
                                
                                
                                (30,616
                                )
                                
                                
                                (2,796,782
                                )
                                
                                
                                642,908
                                
                                
                                
                                (2,796,782
                                )Increase
      (Decrease) in Cash and Cash Equivalents
                                
                                
                                (9,913
                                )
                                
                                
                                (6,215,158
                                )
                                
                                
                                (2,939,354
                                )
                                
                                
                                12,696,815Cash
      and Cash Equivalents – Beginning of Period
                                
                                
                                5,520,030
                                
                                
                                
                                23,493,562
                                
                                
                                
                                8,449,471
                                
                                
                                
                                4,581,589Cash
      and Cash Equivalents – End of Period
                                
                                
                                5,510,117
                                
                                
                                
                                17,278,404
                                
                                
                                
                                5,510,117
                                
                                
                                
                                17,278,404Cash
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                5,510,117
                                
                                
                                
                                223,269Cash
      equivalents
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                17,055,135Non-cash
      Investing and Financing ActivitiesCommon
      stock issued for conversion of debentures
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                2,100,140Supplemental
      DisclosuresInterest
      Paid
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,299,860





The
accompanying notes are an integral part of these consolidated financial
statements


5





Triangle
Petroleum Corporation


Statement
of Stockholders’ Equity


Nine
Months Ended October 31, 2009 and 2008


(Expressed
in U.S. dollars)


(Unaudited)





AdditionalCommon Stock
                                                                          
                                                                          
                                                                          Paid-inShares
                                                                          
                                                                          
                                                                          Amount
                                                                          
                                                                          
                                                                          Capital
                                                                          
                                                                          
                                                                          Warrants
                                                                          
                                                                          
                                                                          Deficit
                                                                          
                                                                          
                                                                          Total#
                                                                          
                                                                          
                                                                          $
                                                                          
                                                                          
                                                                          $
                                                                          
                                                                          
                                                                          $
                                                                          
                                                                          
                                                                          $
                                                                          
                                                                          
                                                                          $Balance
      – January 31, 2008
                                                                          
                                                                          
                                                                          46,794,530
                                                                          
                                                                          
                                                                          
                                                                          468
                                                                          
                                                                          
                                                                          
                                                                          57,852,277
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          (47,794,059
                                                                          )
                                                                          
                                                                          
                                                                          10,058,686Issuance
      of common stock for cash pursuant to private placement at $1.40 per unit
      in June 2008
                                                                          
                                                                          
                                                                          18,257,500
                                                                          
                                                                          
                                                                          
                                                                          183
                                                                          
                                                                          
                                                                          
                                                                          21,323,217
                                                                          
                                                                          
                                                                          
                                                                          4,237,100
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          25,560,500Share
      issuance costs
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          (2,251,230
                                                                          )
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          (2,251,230
                                                                          )Issuance
      of common stock on conversion of convertible debentures at a weighted
      average price of $0.88 per share
                                                                          
                                                                          
                                                                          2,374,013
                                                                          
                                                                          
                                                                          
                                                                          23
                                                                          
                                                                          
                                                                          
                                                                          2,100,117
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          2,100,140Fair
      value of conversion feature of convertible debentures
      converted
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          1,039,906
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          1,039,906Stock
      based compensation (Note 6)
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          476,427
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          476,427Net
      loss for the period
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          (16,191,661
                                                                          )
                                                                          
                                                                          
                                                                          (16,191,661
                                                                          )Balance
      – October 31, 2008
                                                                          
                                                                          
                                                                          67,426,043
                                                                          
                                                                          
                                                                          
                                                                          674
                                                                          
                                                                          
                                                                          
                                                                          80,540,714
                                                                          
                                                                          
                                                                          
                                                                          4,237,100
                                                                          
                                                                          
                                                                          
                                                                          (63,985,720
                                                                          )
                                                                          
                                                                          
                                                                          20,792,768Balance
      – January 31, 2009
                                                                          
                                                                          
                                                                          69,926,043
                                                                          
                                                                          
                                                                          
                                                                          699
                                                                          
                                                                          
                                                                          
                                                                          81,155,715
                                                                          
                                                                          
                                                                          
                                                                          4,237,100
                                                                          
                                                                          
                                                                          
                                                                          (61,564,544
                                                                          )
                                                                          
                                                                          
                                                                          23,828,970Stock
      based compensation (Note 6)
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          402,226
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          402,226Net
      loss for the period
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          (848,145
                                                                          )
                                                                          
                                                                          
                                                                          (848,145
                                                                          )Balance
      – October 31, 2009
                                                                          
                                                                          
                                                                          69,926,043
                                                                          
                                                                          
                                                                          
                                                                          699
                                                                          
                                                                          
                                                                          
                                                                          81,557,941
                                                                          
                                                                          
                                                                          
                                                                          4,237,100
                                                                          
                                                                          
                                                                          
                                                                          (62,412,689
                                                                          )
                                                                          
                                                                          
                                                                          23,383,051





The
accompanying notes are an integral part of these consolidated financial
statements


6


Triangle
Petroleum Corporation


Notes to
the Consolidated Financial Statements


(Expressed
in U.S. dollars, except as noted)


(Unaudited)





Triangle
Petroleum Corporation, together with its consolidated subsidiaries (“Triangle”
or the “Company”), is an independent oil and gas company focused primarily on
the acquisition, exploration and development of resource properties consisting
mainly of shale gas reserves.  The Company’s primary exploration and
development acreage is located in the Horton Bluff formation of the Maritimes
Basin in Canada. The Company also has minor producing properties in the Fort
Worth Basin and in the Alberta Deep Basin.





1.
            Going
      Concern





The
Company is primarily engaged in the acquisition, exploration and development of
oil and gas resource properties and has a limited number of producing wells that
generate cash flows from operations. The Company has not generated significant
revenues from operations and has incurred significant losses since inception.
These factors, among others, raise substantial doubt about the Company’s ability
to continue as a going concern.





The
Company will have to raise additional funds through equity or debt offerings,
dispositions of assets or other means to fund general and administrative
expenses and to complete the exploration and development phase of its programs.
While the Company has been successful in raising funds in the past, there can be
no assurance that it will be able to do so in the future. The continuation of
the Company as a going concern is dependent upon its ability to obtain necessary
additional funds to continue operations and to determine the existence,
discovery and successful exploitation of economically recoverable reserves in
its resource properties, confirmation of the Company’s interests in the
underlying properties, and the attainment of profitable operations.





Failure
to obtain additional financing will result in the going concern assumption being
inappropriate and adjustments would be required to the carrying values of assets
and liabilities, the reported revenues and expenses, and the balance sheet
classifications used.





2.
            Accounting
      Policies





(a)        Basis
of Presentation





These
financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States, and are expressed
in U.S. dollars. These consolidated financial statements include the accounts of
the Company and its two wholly-owned subsidiaries, Elmworth Energy Corporation,
incorporated in the Province of Alberta, Canada, and Triangle USA Petroleum
Corporation, incorporated in the State of Colorado, USA. All significant
intercompany balances and transactions have been eliminated. The Company’s
fiscal year-end is January 31.





In the
opinion of management, the accompanying financial statements reflect all
adjustments necessary of a normal recurring nature to present fairly our
financial position at October 31, 2009 and our operations and cash flows for the
three and nine month periods ended October 31, 2009 and 2008. In preparing the
accompanying financial statements, management has made certain estimates and
assumptions that affect reported amounts in the financial statements and
disclosures of contingencies. Actual results may differ from those estimates.
The results for interim periods are not necessarily indicative of annual
results.




Certain
reclassifications have been made to the prior period’s financial statements to
conform to the current period’s presentation. Certain disclosures have been
condensed or omitted from these financial statements. Accordingly, they should
be read in conjunction with the consolidated financial statements and notes
thereto included in our Annual Report on Form 10-K for the year ended January
31, 2009.





The
Company’s oil and gas operations are generally conducted jointly with others
and, as such, these financial statements reflect the Company’s proportionate
share of these operations.


7


Triangle
Petroleum Corporation


Notes to
the Consolidated Financial Statements


(Expressed
in U.S. dollars, except as noted)


(Unaudited)





2.
            Accounting
      Policies (continued)





(b)        Recently
Adopted Accounting Pronouncements





U.S.
accounting standards setters have implemented new standards in December 2007
with respect to accounting for business combinations. These new standards
require an acquirer to be identified for all business combinations and applies
the same method of accounting for business combinations – the acquisition method
– to all transactions. In addition, transaction costs associated with
acquisitions are required to be expensed. The revised statement was effective to
business combinations after February 1, 2009. The adoption of these standards
will impact business combinations, if any, after February 1, 2009.





In
December 2007, new accounting standards were issued with respect to
non-controlling interests in consolidated financial statements. These new
standards require the Company to report non-controlling interest in subsidiaries
as equity in the consolidated financial statements; and all transactions between
equity and non controlling interests as equity. These new standards were
effective for the Company commencing on February 1, 2009. The adoption of these
standards did not affect the Company's financial statements.





In March
2008, new accounting standards were issued with respect to disclosures about
derivative instruments and hedging activities, which require disclosures about
how and why an entity uses derivative instruments, how derivative instruments
and related hedged items are accounted for, and how derivative instruments and
related hedged items affect an entity’s financial position, financial
performance and cash flows. These new standards were effective on February 1,
2009. The adoption of these standards did not affect the Company's financial
statements.





In May
2009, new accounting standards were issued with respect to subsequent events,
which are intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued.  In
particular, these standards set forth the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements; the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial
statements; and the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. These standards are
effective for interim and annual periods ending after June 15, 2009. The
adoption of this standard did not impact the third quarter financial statements
except for disclosures with respect to the financial statement approval date.
Subsequent events have been evaluated through November 23, 2009, the date at
which the financial statements were approved for distribution.





3.
            Oil
      and Gas Properties





Nine
months ended October 31, 2009:





Costs
                                
                                
                                Accumulated Depletion
                                
                                
                                Net CarryingOpening
                                
                                
                                Additions
                                
                                
                                Closing
                                
                                
                                Opening
                                
                                
                                Depletion
                                
                                
                                Gain
                                
                                
                                Closing
                                
                                
                                Value$
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $Proved
      Properties
                                
                                
                                12,775,959
                                
                                
                                
                                21,377
                                
                                
                                
                                12,797,336
                                
                                
                                
                                12,703,090
                                
                                
                                
                                38,781
                                
                                
                                
                                -
                                
                                
                                
                                12,741,871
                                
                                
                                
                                55,465Unproven
      Properties
                                
                                
                                34,746,896
                                
                                
                                
                                1,130,109
                                
                                
                                
                                35,877,005
                                
                                
                                
                                17,876,901
                                
                                
                                
                                -
                                
                                
                                
                                (908,233
                                )
                                
                                
                                16,968,668
                                
                                
                                
                                18,908,337Total
                                
                                
                                47,522,855
                                
                                
                                
                                1,151,486
                                
                                
                                
                                48,674,341
                                
                                
                                
                                30,579,991
                                
                                
                                
                                38,781
                                
                                
                                
                                (908,233
                                )
                                
                                
                                29,710,539
                                
                                
                                
                                18,963,802


8


Triangle
Petroleum Corporation


Notes to
the Consolidated Financial Statements


(Expressed
in U.S. dollars, except as noted)


(Unaudited)





3.
            Oil
      and Gas Properties (continued)





Proved
Properties





At
October 31, 2009, the carrying value of the Company’s proved properties was
$55,465 (January 31, 2009 - $72,869), which were all located in the Alberta Deep
Basin of Canada. For the three month period ended October 31, 2009, depletion
expense was $8,436 (2008 - $12,796) in Canada and $nil (2008 - $nil) in the
United States. For the nine month period ended October 31, 2009, depletion
expense was $24,327 (2008 - $57,902) in Canada and $14,454 (2008 - $5,922) in
the United States.





Unproven
Properties





All of
the Company’s unproven properties are not subject to depletion.





In
September 2009, the Company sold its 50% working interest in 11,800 gross acres
(5,900 net acres) in the Fayetteville area of Arkansas and all the related
seismic rights for net cash proceeds of $744,408. The net book value of the U.S.
properties at the time of sale was $171 and non-cash asset retirement
obligations pertaining thereto were $39,375. As such, the Company recorded a
gain on sale of assets of $783,612.





In June
2009, the Company sold its 25% working interest in 17,307 acres in the Nugget
area of Colorado (Rocky Mountains project) for cash of $83,325 and recovered a
drilling deposit in the Fayetteville area of Arkansas for cash of $50,000. The
net book value of the U.S. properties at the time of sale was $8,704. As such,
the Company recorded a gain on sale of assets of $124,621.





In June
2009, the Company acquired an additional 30% working interest in the Windsor
Block of the Maritimes Basin in Nova Scotia from Contact Exploration Inc.
(“Contact”) for a cash payment of approximately $245,000. The Company also
agreed to provide Contact a 5.75% non-convertible gross overriding royalty
interest and assumed the liabilities related to Contact's former working
interest.





The
Company's unproven acquisition and exploration costs were distributed in the
following geographic areas:





October 31, 2009
                      $
                    
                    
                    January 31, 2009
                      $Windsor
      Block of Maritimes Basin  (Nova Scotia)
                    
                    
                    18,703,319
                    
                    
                    
                    16,818,586Western
      Canadian Shale (Alberta and B.C.)
                    
                    
                    205,018
                    
                    
                    
                    51,409Total
      unproven acquisition and exploration costs
                    
                    
                    18,908,337
                    
                    
                    
                    16,869,995





4.
            Asset
      Retirement Obligations





Nine Months
                      October 31, 2009
                      $
                    
                    
                    Nine Months
                      October 31, 2008
                      $Balance,
      beginning of period
                    
                    
                    727,862
                    
                    
                    
                    1,003,353Liabilities
      incurred
                    
                    
                    375,254
                    
                    
                    
                    439,083Liabilities
      settled as part of disposition
                    
                    
                    (39,375
                    )
                    
                    
                    (172,828
                    )Liabilities
      settled in cash
                    
                    
                    (23,956
                    )
                    
                    
                    (499,151
                    )Accretion
                    
                    
                    107,166
                    
                    
                    
                    82,478Balance,
      end of period
                    
                    
                    1,146,951
                    
                    
                    
                    852,935


9


Triangle
Petroleum Corporation


Notes to
the Consolidated Financial Statements


(Expressed
in U.S. dollars, except as noted)


(Unaudited)





5.
            Warrants





As at
October 31, 2009, the Company had 9,128,750 warrants outstanding that can be
exercised into 9,128,750 shares of common stock at a price of $2.25 per share,
which expire on June 3, 2010. The warrants were granted on June 3, 2008, at
which time they had a relative fair value compared to the common stock issued of
$4,237,100.





6.
            Stock
      Options





No stock
options were granted during the three month period ended October 31, 2009. The
weighted average grant date fair value of stock options granted during the nine
month period ended October 31, 2009 was $0.213. No stock options were exercised
during the three and nine month periods ended October 31, 2009. During the three
and nine month periods ended October 31, 2009, the Company recorded stock-based
compensation of $131,763 and $402,226 (2008 - $135,393 and $476,427),
respectively, as general and administrative expense.





A summary
of the Company’s stock options outstanding is as follows:





Options
                                  #
                                
                                
                                Weighted
                                  Average
                                  Exercise Price
                                  $
                                
                                Aggregate
                                  Intrinsic
                                  Value
                                  $Outstanding,
      January 31, 2009
                                
                                
                                4,985,000
                                
                                
                                
                                1.14Granted
                                
                                
                                250,000
                                
                                
                                
                                0.27Forfeited
                                
                                
                                (100,000
                                )
                                
                                
                                0.24Outstanding,
      October 31, 2009
                                
                                
                                5,135,000
                                
                                
                                
                                1.11
                                
                                -Exercisable,
      October 31, 2009
                                
                                
                                2,085,000
                                
                                
                                
                                2.16
                                
                                -





The
weighted average remaining contractual life of stock options outstanding as of
October 31, 2009 was 3.6 years.





As at
October 31, 2009, there was $669,116 of total unrecognized compensation costs
related to non-vested share-based compensation arrangements which are expected
to be recognized over a weighted-average period of 24 months.





A summary
of the status of the Company’s non-vested share options as of October 31, 2009,
and changes during the nine month period ended October 31, 2009, is presented
below:





Options
                      #
                    
                    
                    Weighted Average
                      Grant-Date Fair Value
                      $Non-vested
      at January 31, 2009
                    
                    
                    3,525,000
                    
                    
                    
                    0.31Granted
                    
                    
                    250,000
                    
                    
                    
                    0.21Vested
                    
                    
                    (625,000
                    )
                    
                    
                    0.73Forfeited
                    
                    
                    (100,000
                    )
                    
                    
                    0.09Non-vested
      at October 31, 2009
                    
                    
                    3,050,000
                    
                    
                    
                    0.22


10


Triangle
Petroleum Corporation


Notes to
the Consolidated Financial Statements


(Expressed
in U.S. dollars, except as noted)


(Unaudited)





7.
            Supplementary
      Cash Flow Information





Three Months
                                Ended
                                October 31,
                                2009
                              
                              
                              Three Months
                                Ended
                                October 31,
                                2008
                              
                              
                              Nine Months
                                Ended
                                October 31,
                                2009
                              
                              
                              Nine Months
                                Ended
                                October 31,
                                2008$
                              
                              
                              $
                              
                              
                              $
                              
                              
                              $Changes
      in operating assets and liabilitiesUnrealized
      foreign exchange changes
                              
                              
                              (860
                              )
                              
                              
                              (19,809
                              )
                              
                              
                              (5,354
                              )
                              
                              
                              (19,809
                              )Prepaid
      expenses
                              
                              
                              22,840
                              
                              
                              
                              3,622
                              
                              
                              
                              (781
                              )
                              
                              
                              58,261Other
      receivables
                              
                              
                              22,860
                              
                              
                              
                              (292,757
                              )
                              
                              
                              706,104
                              
                              
                              
                              837,680Accounts
      payable
                              
                              
                              574
                              
                              
                              
                              278,796
                              
                              
                              
                              (153,828
                              )
                              
                              
                              (18,944
                              )Accrued
      interest on convertible debentures
                              
                              
                              -
                              
                              
                              
                              189,045
                              
                              
                              
                              -
                              
                              
                              
                              (644,932
                              )Accrued
      liabilities
                              
                              
                              3,622
                              
                              
                              
                              (9,269
                              )
                              
                              
                              9,361
                              
                              
                              
                              (39,672
                              )Total
                              
                              
                              49,036
                              
                              
                              
                              149,628
                              
                              
                              
                              555,502
                              
                              
                              
                              172,584





8.
            Commitment





The
Company entered into a 10-year production lease for 474,625 gross acres on the
Windsor Block in Nova Scotia, Canada on April 15, 2009. During the first five
years of the lease, Triangle has agreed to continue to evaluate the Windsor
Block by drilling seven wells, completing three wells previously drilled and
acquiring seismic, which was estimated to cost C$12.7 million gross
(approximately US$11.8 million). At the end of the fifth year of the lease,
areas of the block not adequately drilled or otherwise evaluated may be subject
to surrender. Furthermore, at the end of the second year of the lease, a
technical report is required to be provided to and assessed by the Nova Scotia
government to maintain certain lands.





During
the first year of the lease, the Company has agreed to perform completion
operations on the three wells drilled in the prior year and acquire seismic,
which was estimated to cost C$2 million gross (approximately US$1.9 million).
The Company posted a C$200,000 (approximately US$189,000) gross refundable
deposit related to the first year commitment; should the Company not perform the
work, a portion or all of the deposit could be forfeited. As of November 30,
2009, all three of the required well completions have been performed and the
seismic has been acquired, which should satisfy the first year lease
requirements.





9.
            Subsequent
      Events





In
November 2009, the Company sold its remaining acreage in the Fayetteville area
of Arkansas (3,380 net acres) for cash proceeds of approximately
$247,000.  Also in November 2009, the Company entered into an
agreement to sell its 18% working interest in one producing well and its 12%
working interest in 1,280 gross acres (154 net acres) in the Alberta Deep Basin
of Canada for cash proceeds of C$450,000 (approximately US$420,000), which is
scheduled to close in early December.


11





ITEM
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





This
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements that reflect
Management's current views with respect to future events and financial
performance. You can identify these statements by forward-looking words such as
“may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or
similar words.  Those statements include statements regarding the
intent, belief or current expectations of us and members of our management team
as well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risk and uncertainties, and that
actual results may differ materially from those contemplated by such
forward-looking statements.





Readers
are urged to carefully review and consider the various disclosures made by us in
this report and in our other reports filed with the Securities and Exchange
Commission. The following Management’s Discussion and Analysis of Financial
Condition and Results of Operations of the Company should be read in conjunction
with the Consolidated Financial Statements and notes related thereto included in
this Quarterly Report on Form 10-Q.
Important  factors  currently  known  to
Management  could  cause  actual  results  to
differ  materially  from  those in
forward-looking  statements.  We undertake no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes in the future operating results
over time. We believe that our assumptions are based upon reasonable data
derived from and known about our business and operations.  No
assurances are made that actual results of operations or the results of our
future activities will not differ materially from our
assumptions.  Factors that could cause differences include, but are
not limited to, expected market demand for our products, fluctuations in pricing
for materials, and competition.





Overview





We are an
exploration company focused on emerging shale opportunities.  Our core
project is focused on the Windsor Block in Nova Scotia, which is a shale gas
opportunity located in the Maritimes Basin of Eastern Canada where we have an
87% working interest in 474,625 gross acres (412,924 net acres). We are also in
the process of evaluating a potential secondary shale project in Western
Canada.





Our
corporate strategy is to utilize our team’s U.S. shale experience to secure
early stage shale projects in Canada.  In conjunction with this
strategy, we have participated in various shale gas projects in North America,
including the Barnett Shale trend in Texas (three producing wells), the
Fayetteville Shale trend in Arkansas and the Beech Hill Block in New
Brunswick.  We have also participated in conventional oil and gas
plays in the province of Alberta (one producing well) and in the U.S Rocky
Mountains. These other projects are currently designated as non-core due to our
desire to focus our resources on our one core project





Prior to
May 2005, we were known as Peloton Resources Inc., a mining exploration company
which was actively searching for ore bodies containing gold in British Columbia.
In May 2005, we abandoned all mining activities, changed our name to Triangle
Petroleum Corporation and shifted our focus towards oil and gas
exploration.





Plan
of Operations





During
fiscal 2010, our plan of operations was to finalize the Windsor Block production
lease and fulfill the first year operations requirements under this new lease,
which consisted of completing the three exploration wells drilled in 2008 and
acquiring additional seismic, all of which has been completed and should satisfy
the first year operations requirements. We also planned to search for one or
more new joint venture partners to join us in the next phase of our Windsor
Block exploration program and to actively position ourselves for entry into
potential shale plays in Western Canada. For the balance of fiscal 2010, our
plan is to process and interpret the seismic acquired on the Windsor Block in
October 2009, continue searching for new joint venture partners in our Windsor
Block exploration program and continue to position ourselves for entry into
potential shale plays in Western Canada. We intend to allocate our available
working capital to the Windsor Block and Western Canada as described
above.  However, there may be circumstances where, for sound business
reasons, a reallocation of the funds may be necessary.  Furthermore,
while we intend to use our working capital as described above, our current
working capital is not sufficient to complete the anticipated exploration
programs.


12





Properties





All of
our oil and gas properties are located in the United States and
Canada.





Core
Property





Eastern Canadian
Shale Gas Project –Windsor Block–We have an 87% working
interest in 474,625 gross acres (412,924 net acres) in the Windsor Sub-Basin of
the Maritimes Basin located in the Province of Nova Scotia, Canada and serve as
operator of the Windsor Block; Zodiac Exploration Corp. has earned a 13% working
interest in the Windsor Block. We acquired an additional 30% working interest in
the Windsor Block in June 2009 from Contact Exploration Inc. (“Contact”) in
exchange for agreeing to provide Contact a 5.75% non-convertible gross
overriding royalty interest. Contact also received a cash payment of C$270,000
(approximately US$254,000) and we assumed the liabilities related to Contact's
former working interest. Up to April 15, 2009, the land was governed by an
exploration agreement. On April 15, 2009, the Windsor Block exploration
agreement was transferred to a 10-year production lease. Under the terms of this
lease:





·
            The
      production lease grants rights to 474,625 gross acres (412,924 net acres),
      covering substantially all of the land which we had leased previously
      under the terms of the exploration agreement. Fringe acreage deemed
      non-prospective was voluntarily
surrendered;


·
            We
      hold rights to conventional oil and gas within the lease, which includes
      shale gas, in the Windsor and Horton Groups, excluding natural gas from
      coal. We believe coals are not prospective within the Windsor
      Block;


·
            To
      retain rights to this land block, we have agreed to continue to evaluate
      the lands during the first five years of the lease by drilling seven
      wells, completing three exploration wells previously drilled, and
      acquiring seismic, which was estimated to cost C$12.7 million gross
      (approximately US$11.9 million). These wells are to be distributed across
      the land block to fully evaluate conventional and shale resources. In
      addition to annual progress reporting to maintain the lease in good
      standing, on the second anniversary of the lease, we are obliged to
      provide a detailed report to the Nova Scotia government to assess our
      evaluation activities to maintain certain lands.  After the
      fifth anniversary, leased areas not adequately drilled or otherwise
      evaluated may be subject to
surrender;


·
            During
      the first year of the lease, we agreed to complete the three exploration
      wells that were drilled in the prior year and acquire seismic, which was
      estimated to cost C$2 million gross (approximately US$1.9 million). A
      C$200,000 (US$188,000) gross refundable deposit was posted related to the
      first year commitment; should the work not be competed, a portion or all
      of the deposit could be forfeited;


·
            Current
      royalty rates are set at 10% in Nova Scotia;
and


·
            Tenure
      on some or all of the lands is eligible for renewal after the first 10
      years, based on the establishment of commercial production and/or the
      satisfaction of certain drilling and evaluation
  criteria.





From May
2007 to June 2008, we executed the first phase of the Windsor Block exploration
program consisting of a 2D and 3D seismic program, geological studies, and
drilling and completing two vertical test wells (Kennetcook #1 and Kennetcook
#2). From July 2008 to September 2009, we executed the second phase of the
Windsor Block shale gas exploration program, which consisted of drilling three
vertical exploration wells (N-14-A, O-61-C and E-38-A) and undertaking
completion operations on all three of these wells.





During
the first quarter of fiscal 2010, we tested the N-14-A well, which was completed
in early December 2008 with a four-stage perforation and fracture treatment. The
frac flowback operations were suspended in April 2009 after the well recovered
15% of load fluid but negligible gas production.  Subsequent analysis
indicated an unusually high insitu stress regime in the immediate vicinity of
the well, which contributed to fracture ineffectiveness. Completion operations
on the O-61-C well commenced in March 2009 and continued into early May. Several
tight sand and carbonate intervals were perforated but have not yet been
fracture-treated. No hydrocarbons flowed from the well.


13





During
the second and third quarters of fiscal 2010, three intervals in the E-38-A well
were perforated and treated with diagnostic “micro-fracs.”  The two
lower intervals appeared to have high insitu stress and a tendency to fracture
horizontally.  The upper tested interval indicated lower stress and
the likelihood of desirable vertical fracturing. As this was a diagnostic frac
in a very low permeability zone, no gas flow was expected, and none was
detected. We are continuing to work with these results to determine future
completion operations as well looking for future drilling locations and
completion strategies.





Also
during the second quarter of fiscal 2010, the two wells drilled in 2007,
Kennetcook #1 and Kennetcook #2, were re-entered to isolate and test individual
zones to try to identify the “gassiest” intervals in each well and eliminate
water inflow. From these tests, it appears the fracture treatments undertaken
previously had commingled multiple zones together, making it difficult to
determine which zone is contributing to the water inflow.





All three
of our most recent wells (N-14-A, O-61-C, and E-38-A) still have a variety of
completion and testing opportunities.  Our technical team is in the
process of evaluating and ranking these opportunities with a goal of
demonstrating hydrocarbon production and providing further direction to the
ongoing exploration drilling program in the Windsor Block.





In
October 2009, we acquired 30 kilometers of 2D seismic on the Windsor Block.
Processing and interpretation of the seismic data is currently underway.The program is estimated to
cost approximately $500,000. This seismic program assesses a geologic structure
in the west-central area of the Windsor Block, where no seismic has yet been
acquired. We believe that the best potential for both Horton Bluff gas shales
and conventional reservoirs exists in areas with geologic structure. This
seismic program, combined with the three completion operations on previously
drilled vertical exploration wells, should satisfy the first-year requirements
of our 10-year production lease.





Other
Properties





Western Canadian
Shale Project–
We continue to actively position ourselves for an entry into potential shale
plays in Alberta or British Columbia. Our objective is to potentially establish
an initial land position and to commence an exploration program in 2009 or 2010.
To date, we have undertaken in-depth technical studies of several prospective
shale horizons using our proprietary shale knowledge and experience, and have
identified prospective areas where we believe we may have a technical and
business advantage. A joint venture partner will be added at the appropriate
time to provide funding and mitigate exploration risk. This approach is
consistent with the strategy we employed to establish our position in the
Windsor Block in Nova Scotia.




Non-Core
Properties –In fiscal 2009, there was no exploration activity on our
non-producing and undeveloped land positions and we continue to plan not to
participate in any exploration activity for these projects in fiscal 2010. We
are in the process of rationalizing our non-core properties. During fiscal 2010,
we sold:





·
            our
      25% working interest 4,327 non-operated net acres in the U.S. Rocky
      Mountains for gross proceeds of $83,325 in June
  2009;


·
            our
      50% working interest in 5,900 non-operated net acres in the Fayetteville
      Shale and all the related seismic data for gross cash proceeds of $767,000
      in September 2009 and our remaining 3,380 non-operated net acres of the
      Fayetteville Shale acreage for gross cash proceeds of $247,000 in November
      2009. Costs related to these sales were approximately $70,000;
      and


·
            we
      entered into an agreement to sell one of the producing wells and our 12%
      working interest in 154 non-operated net acres in the Alberta Deep Basin
      for C$450,000 (approximately US$420,000) in November 2009, which is
      scheduled to close in early
December.





Our
remaining non-core producing properties include one well in the Alberta Deep
Basin of Canada and three low working interest shale gas wells in the Barnett
Shale trend. Our remaining non-core acreage holdings includes 5,165 net acres in
the Alberta Deep Basin of Canada, 4,747non-operated net acres
in the U.S. Rocky Mountains, and 61 non-operated net acres in the Barnett Shale
trend.


14





Results
of operations for the three and nine months ended October 31, 2009 compared to
the three and nine months ended October 31, 2008





Daily Sales Volumes, Working
Interest before royalties





Three Months
                        Ended
                        October 31,
                        2009
                      
                      
                      Three Months
                        Ended
                        October 31,
                        2008
                      
                      
                      Nine Months
                        Ended
                        October 31,
                        2009
                      
                      
                      Nine Months
                        Ended
                        October 31,
                        2008Barnett
      Shale in Texas, USA
                      Mcf/day
                      
                      
                      35
                      
                      
                      
                      33
                      
                      
                      
                      48
                      
                      
                      
                      58Deep
      Basin in Alberta, Canada
                      Mcf/day
                      
                      
                      68
                      
                      
                      
                      80
                      
                      
                      
                      66
                      
                      
                      
                      108Total
      Company
                      Mcf/day
                      
                      
                      103
                      
                      
                      
                      113
                      
                      
                      
                      114
                      
                      
                      
                      166Total
      Company
                      Boe/day*
                      
                      
                      17
                      
                      
                      
                      19
                      
                      
                      
                      19
                      
                      
                      
                      28





*
Thousand Cubic Feet (“Mcf”) converted into Barrel of Oil Equivalent (“Boe”) on a
basis of 6:1





Net Operating
Results





Three Months
                      Ended
                      October 31,
                      2009
                    
                    
                    Three Months
                      Ended
                      October 31,
                      2008
                    
                    
                    Nine Months
                      Ended
                      October 31,
                      2009
                    
                    
                    Nine Months
                      Ended
                      October 31,
                      2008Volumes
                    Mcf
                    
                    
                    9,499
                    
                    
                    
                    10,401
                    
                    
                    
                    31,039
                    
                    
                    
                    45,306Price
                    $/Mcf
                    
                    
                    3.54
                    
                    
                    
                    6.63
                    
                    
                    
                    3.53
                    
                    
                    
                    8.50Revenue
                    
                    
                    $
                    33,622
                    
                    
                    $
                    69,008
                    
                    
                    $
                    109,606
                    
                    
                    $
                    384,970Royalties
                    
                    
                    
                    4,277
                    
                    
                    
                    14,508
                    
                    
                    
                    17,174
                    
                    
                    
                    70,520Revenue,
      net of royalties
                    
                    
                    
                    29,345
                    
                    
                    
                    54,500
                    
                    
                    
                    92,432
                    
                    
                    
                    314,450Production
      expenses
                    
                    
                    
                    20,893
                    
                    
                    
                    29,718
                    
                    
                    
                    73,469
                    
                    
                    
                    93,099Net
                    
                    
                    $
                    8,452
                    
                    
                    $
                    24,782
                    
                    
                    $
                    18,963
                    
                    
                    $
                    221,351





For the
three and nine month periods ended October 31, 2009, we realized $33,622 and
$109,606, respectively, in revenue from sales of natural gas and natural gas
liquids, as compared to $69,008 and $384,970 in the same periods of the prior
year. Revenue decreased mainly due to reduced natural gas prices, and to a
lesser effect, due to reduced production volumes. Royalties as a percent of
revenue were 13% and 16% for the three and nine month periods ended October 31,
2009, respectively, as compared to 21% and 18% in the same periods of the prior
year. The decrease in royalty rates is due to the sliding scale of royalty rates
as gas prices decrease. Production expenses related to this revenue were
$13.20/Boe and $14.20/Boe for the three and nine month periods ended October 31,
2009, respectively, compared to $17.14/Boe and $12.33/Boe in the same periods of
the prior year; the increase in the per Boe rate in the nine month period ended
October 31, 2009 was mainly the effect of fixed production costs being spread
over reduced production volumes.


15





Depletion, Depreciation and Accretion





Three Months
                      Ended
                      October 31,
                      2009
                    
                    
                    Three Months
                      Ended
                      October 31,
                      2008
                    
                    
                    Nine Months
                      Ended
                      October 31,
                      2009
                    
                    
                    Nine Months
                      Ended
                      October 31,
                      2008Depletion
      – oil and gas properties
                    
                    $
                    8,434
                    
                    
                    $
                    12,796
                    
                    
                    $
                    38,781
                    
                    
                    $
                    63,824Accretion
                    
                    
                    46,036
                    
                    
                    
                    39,939
                    
                    
                    
                    107,166
                    
                    
                    
                    82,478Depletion
      and Accretion
                    
                    
                    54,470
                    
                    
                    
                    52,735
                    
                    
                    
                    145,947
                    
                    
                    
                    146,302Depreciation
      – property and equipment
                    
                    
                    7,272
                    
                    
                    
                    10,368
                    
                    
                    
                    18,946
                    
                    
                    
                    30,115Total
                    
                    $
                    61,742
                    
                    
                    $
                    63,103
                    
                    
                    $
                    164,893
                    
                    
                    $
                    176,417Depletion
      per BOE
                    
                    $
                    5.33
                    
                    
                    $
                    7.38
                    
                    
                    $
                    7.50
                    
                    
                    $
                    8.45





Unproven
property costs of $18,908,337 (January 31, 2009 – $16,869,995) were excluded
from costs subject to depletion at October 31, 2009. Depletion expense per Boe
related to oil and gas properties in the three and nine month periods ended
October 31, 2009 decreased as compared with the same period of the prior year
mainly as a result of the ceiling test write-downs on proved properties in the
previous year which decreased the depletion base.





General and Administrative
(“G&A”)





Three Months
                                  Ended
                                  October 31,
                                  2009
                                
                                
                                Three Months
                                  Ended
                                  October 31,
                                  2008
                                
                                
                                Nine Months
                                  Ended
                                  October 31,
                                  2009
                                
                                
                                Nine Months
                                  Ended
                                  October 31,
                                  2008Salaries,
      benefits and consulting fees
                                
                                $
                                288,339
                                
                                
                                $
                                391,750
                                
                                
                                $
                                1,053,322
                                
                                
                                $
                                1,349,859Office
      costs
                                
                                
                                124,943
                                
                                
                                
                                230,333
                                
                                
                                
                                428,070
                                
                                
                                
                                680,827Professional
      fees
                                
                                
                                25,975
                                
                                
                                
                                47,920
                                
                                
                                
                                209,823
                                
                                
                                
                                344,866Public
      company costs
                                
                                
                                57,130
                                
                                
                                
                                126,441
                                
                                
                                
                                242,185
                                
                                
                                
                                455,444Operating
      overhead recoveries
                                
                                
                                (9,936
                                )
                                
                                
                                (84,815
                                )
                                
                                
                                (42,264
                                )
                                
                                
                                (116,996
                                )Stock-based
      compensation
                                
                                
                                131,763
                                
                                
                                
                                135,393
                                
                                
                                
                                402,226
                                
                                
                                
                                476,427Total
      G&A
                                
                                $
                                618,214
                                
                                
                                $
                                847,022
                                
                                
                                $
                                2,293,362
                                
                                
                                $
                                3,190,427





G&A
expenses decreased in the three and nine month periods ended October 31, 2009
compared to the same period of the prior year primarily due to management
implementing cost reductions and in the nine months ended October 31, 2009 due
to the strengthening of the U.S. dollar versus the Canadian dollar,
including:





·
            Salaries,
      benefits and consulting fees, which are primarily incurred in Canadian
      dollars, decreased $103,411 and $296,537 in the three and nine month
      periods, respectively, mainly due to reduced staff and consultants of
      $101,000 and $167,000, respectively, and the strengthening of the U.S.
      dollar versus the Canadian dollar by 11% in the nine month period causing
      a decrease of $132,000;


·
            Office
      costs, which are primarily incurred in Canadian dollars, decreased in the
      three and nine month periods $105,390 and $252,757, respectively, mainly
      due to reduced software, insurance and travel costs of $51,000 and
      $126,000, respectively, and the strengthening of the U.S. dollar versus
      the Canadian dollar by 11% in the nine month period causing a decrease of
      $67,000;


·
            Professional
      fees, which are primarily incurred in Canadian dollars, decreased in the
      nine month period $135,043 mainly due to reduced audit and accounting fees
      of $101,000, which were higher in the prior year due to non-recurring
      audit and accounting fees for restatements of financial statements, and
      the strengthening of the U.S. dollar versus the Canadian dollar by 11%
      causing a decrease of $33,000, which was offset by increased legal fees of
      $9,000 due to the TSX Venture listing late in the prior year. Professional
      fees decreased in the three month period $21,945 mainly due to decreased
      legal fees of $13,000 and reduced audit and tax fees of $8,000 due to the
      TSX Venture listing late in the prior year;
and


16





·
            Public
      company costs decreased in the three and nine month periods $69,313 and
      $213,259, respectively, mainly due to reduced investor relation costs of
      $40,000 and $149,000, respectively.  Public company costs
      consist mainly of fees for investor relations and also include directors'
      fees, press release costs, Securities Exchange Commission  and
      Toronto Stock Exchange filing costs, printing costs and transfer agent
      fees.





Accretion of Discounts on
Convertible Debentures




Agreement Date
                    
                    Three Months
                      Ended
                      October 31,
                      2009
                    
                    
                    Three Months
                      Ended
                      October 31,
                      2008
                    
                    
                    Nine Months
                      Ended
                      October 31,
                      2009
                    
                    
                    Nine Months
                      Ended
                      October 31,
                      2008December
      8, 2005
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    813,337December
      28, 2005
                    
                    
                    -
                    
                    
                    
                    602,277
                    
                    
                    
                    -
                    
                    
                    
                    1,795,344Total
      accretion of discounts
                    
                    $
                    -
                    
                    
                    $
                    602,277
                    
                    
                    $
                    -
                    
                    
                    $
                    2,608,681





The
accretion of discounts was fully recognized in the prior year since the December
8, 2005 debentures were fully converted and repaid June 5, 2008 and the December
28, 2005 debentures were settled December 18, 2008.





Interest
Expense




Agreement Date
                    
                    Three Months
                      Ended
                      October 31,
                      2009
                    
                    
                    Three Months
                      Ended
                      October 31,
                      2008
                    
                    
                    Nine Months
                      Ended
                      October 31,
                      2009
                    
                    
                    Nine Months
                      Ended
                      October 31,
                      2008December
      8, 2005
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    91,360December
      28, 2005
                    
                    
                    -
                    
                    
                    
                    189,041
                    
                    
                    
                    -
                    
                    
                    
                    563,011Total
      interest expense
                    
                    $
                    -
                    
                    
                    $
                    189,041
                    
                    
                    $
                    -
                    
                    
                    $
                    654,371





There was
no interest expense in the current period since the December 8, 2005 debentures
were fully converted and repaid June 5, 2008 and the December 28, 2005
debentures were settled December 18, 2008.




Oil and Gas
Properties




Net Book Value
                      January 31,
                      2009
                    
                    
                    Additions
                    
                    
                    Depletion and
                      Impairment
                    
                    
                    Dispositions
                    
                    
                    Gain
                      (Loss)
                    
                    
                    Net Book
                      Value
                      October 31,
                      2009UnprovenWindsor
      Block Maritimes Shale – Nova Scotia, Canada
                    
                    $
                    16,818,586
                    
                    
                    $
                    1,884,733
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    18,703,319Western
      Canadian Shale – Alberta and B.C., Canada
                    
                    
                    51,409
                    
                    
                    
                    153,609
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    205,018Fayetteville
      and Rocky Mountains
                    
                    
                    -
                    
                    
                    
                    (30,500
                    )
                    
                    
                    -
                    
                    
                    
                    (877,733
                    )
                    
                    
                    908,233
                    
                    
                    
                    -ProvedCanada
                    
                    
                    72,869
                    
                    
                    
                    6,923
                    
                    
                    
                    (24,327
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    55,465U.S.A.
                    
                    
                    -
                    
                    
                    
                    14,454
                    
                    
                    
                    (14,454
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
                    
                    $
                    16,942,864
                    
                    
                    $
                    2,029,219
                    
                    
                    $
                    (38,781
                    )
                    
                    $
                    (877,733
                    )
                    
                    $
                    908,233
                    
                    
                    $
                    18,963,802


17





During
the nine month period ended October 31, 2009, we focused on the Windsor Block
and spent $1,884,733 primarily for:





·
            completing
      the second phase of the Windsor Block exploration program consisting of
      testing the N-14-A well (approximately $163,000), completion operations on
      the O-61-C well (approximately $206,000), completion operations on the
      E-38-A well (approximately $188,000) and capitalizing the related non-cash
      asset retirement costs (approximately
$213,000);


·
            retesting
      the Kennetcook #1 and #2 wells (approximately
  $232,000);


·
            acquiring
      Contact’s 30% working interest in the Windsor Block for cash of $245,000
      and the assumption of future estimated non-cash asset retirement costs of
      $144,750. We also agreed to provide Contact a 5.75% non-convertible gross
      overriding royalty interest on our resulting 87% working interest;
      and


·
            acquiring
      2D seismic (approximately
$441,000).





During
the nine month period ended October 31, 2009, we sold our:





·
            25%
      working interest 4,327 non-operated net acres in the U.S. Rocky Mountains
      for gross proceeds of $83,325 in June 2009;
and


·
            50%
      working interest in 5,900 non-operated net acres in the Fayetteville Shale
      and all the related seismic data for gross cash proceeds of $767,000 in
      September 2009. Furthermore, a $50,000 drilling deposit was refunded
      related to the Fayetteville Shale
properties.





Net Cash Oil and Gas
Additions:





Three Months
                    Ended
                    October 31,
                    2009
                  
                  
                  Three Months
                    Ended
                    October 31,
                    2008
                  
                  
                  Nine Months
                    Ended
                    October 31,
                    2009
                  
                  
                  Nine Months
                    Ended
                    October 31,
                    2008Net
      additions
                  
                  $
                  797,156
                  
                  
                  $
                  2,227,249
                  
                  
                  $
                  2,029,220
                  
                  
                  $
                  3,970,840Non-cash
      ARO additions
                  
                  
                  (230,504
                  )
                  
                  
                  (393,633
                  )
                  
                  
                  (375,254
                  )
                  
                  
                  (439,083
                  )Non-cash
      ARO dispositions
                  
                  
                  39,375
                  
                  
                  
                  35,399
                  
                  
                  
                  39,375
                  
                  
                  
                  172,828Changes
      in investing working capital
                  
                  
                  (332,441
                  )
                  
                  
                  (741,876
                  )
                  
                  
                  725,023
                  
                  
                  
                  1,158,463Net
      oil and gas additions, per Statements of Cash Flows
                  
                  $
                  273,586
                  
                  
                  $
                  1,127,139
                  
                  
                  $
                  2,418,364
                  
                  
                  $
                  4,863,048





Liquidity
and Capital Resources




To date,
we have not generated significant revenues and have incurred significant
operating losses in every quarter. These factors among others raise substantial
doubt about our ability to continue as a going concern.




As at
October 31, 2009, we had working capital of $5,519,652, resulting primarily from
our cash of $5,510,117, prepaid expenses of $321,271 and other receivables of
$278,799, offset by payables and accrued liabilities of $590,535. For the nine
month period ended October 31, 2009, we had a net cash outflow from operating
activities before changes in working capital of $1,893,561, mainly related to
$1,891,136 of cash general and administrative expenses, which is equal to
general and administrative expenses net of non-cash stock based compensation
expense.


18


On April
15, 2009 we converted the Windsor Block exploration agreement to a 10 year
production lease for 474,625 gross acres (412,924 net acres) of land. During the
first five years of the lease, we agreed to continue to evaluate the Block by
drilling seven wells, completing three exploration wells previously drilled and
acquiring seismic at a total gross estimate cost of C$12.7 million (US$11.7
million). At the end of the second year of the lease, a technical report is due
and the Nova Scotia government may request the surrender of certain lands they
deem not adequately evaluated. At the end of the fifth year of the lease, areas
of the land block not adequately drilled or otherwise evaluated may be subject
to surrender. During the first year of the lease, we have agreed to spend an
estimated gross C$2,000,000 to complete the three exploration wells drilled in
the prior year and to acquire seismic. We paid a C$200,000 gross refundable
deposit related to the first year commitment; should we not have performed the
work, a portion or all of the deposit could be forfeited. As of November 23,
2009, all three of the required well completions have been performed and the
seismic has been acquired, which should satisfy the first year lease
requirements.





We expect
significant capital expenditures during the next 12 months for drilling programs
on our Canadian shale program, overhead and working capital purposes. There is a
risk that our joint venture partner in the Windsor Block will not be able to pay
for their portion (13%) of the well costs, which would slow down or stop
exploration on the Windsor Block. There is also a risk we may not secure a
new joint operating partner in the Windsor Block, which would slow down or stop
exploration on the Windsor Block. We will have to raise additional funds to
complete the exploration and development phase of our programs and, while we
have been successful in doing so in the past, there can be no assurance that we
will be able to do so in the future. Our continuation as a going concern for a
period longer than the 2010 fiscal year is dependent upon our ability to obtain
necessary additional funds to continue operations and to determine the
existence, discovery and successful exploitation of economically recoverable
reserves in our resource properties and the attainment of profitable
operations.




By
adjusting our operations to the current level of capitalization, we believe we
have sufficient capital resources to meet projected cash flow deficits in the
near term. However, if during that period, or thereafter, we are not successful
in generating sufficient liquidity from operations or in raising sufficient
capital resources, on terms acceptable to us, this could have a material adverse
effect on our business, results of operations, liquidity and financial
condition.




We
presently do not have any available credit, bank financing or other external
sources of liquidity. Due to our brief history and historical operating losses,
our operations have not been a source of liquidity. We will need to obtain
additional capital in order to expand operations and become profitable. In order
to obtain capital, we may need to sell additional shares of our common stock or
borrow funds from private lenders. There can be no assurance that we will be
successful in obtaining additional funding.




We will
still need additional capital in order to continue operations until we are able
to achieve positive operating cash flow. Additional capital is being sought, but
we cannot guarantee that we will be able to obtain such investments. Financing
transactions may include the issuance of equity or debt securities, obtaining
credit facilities, or other financing mechanisms. However, the trading price of
our common stock and a downturn in the North American stock and debt markets
could make it more difficult to obtain financing through the issuance of equity
or debt securities. Even if we are able to raise the funds required, it is
possible that we could incur unexpected costs and expenses, fail to collect
significant amounts owed to us, or experience unexpected cash requirements that
would force us to seek alternative financing. Furthermore, if we issue
additional equity or debt securities, stockholders may experience additional
dilution or the new equity securities may have rights, preferences or privileges
senior to those of existing holders of our common stock. If additional financing
is not available or is not available on acceptable terms, we will have to
curtail our operations.





Critical
Accounting Policies




Use of
Estimates




The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. We base our estimates and assumptions on
current facts, historical experience and various other factors that we believe
to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by us may differ materially and adversely from
our estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be
affected.


19





Investment in Oil and Gas
Properties




We
utilize the full cost method to account for our investment in oil and gas
properties. Accordingly, all costs associated with acquisition and exploration
of oil and gas reserves, including such costs as leasehold acquisition costs,
interest costs relating to unproven properties, geological expenditures and
direct internal costs are capitalized into the full cost pool. We have
properties in two countries with proved reserves. For our proved oil and gas
reserves, capitalized costs, including estimated future costs to develop the
reserves and estimated abandonment costs, net of salvage, will be depleted on
the units-of-production method using estimates of proved reserves. Investments
in unproven properties and major development projects including capitalized
interest, if any, are not amortized until proved reserves associated with the
projects can be determined. If the future exploration of unproven properties is
determined uneconomical, the amounts of such properties are added to the
capitalized cost to be amortized. The capitalized costs included in the full
cost pool are subject to a ceiling test.




Asset Retirement
Obligations




We
recognize a liability for future retirement obligations associated with our oil
and gas properties. The estimated fair value of the asset retirement obligations
is based on the current estimated cost escalated at an inflation rate and
discounted at a credit adjusted risk-free rate. This liability is capitalized as
part of the cost of the related asset and amortized over its useful life. The
liability accretes until we settle the obligation. The costs are estimated by
management based on its knowledge of industry practices, current laws and past
experiences. The costs could increase significantly from management’s current
estimate.




Stock-Based
Compensation




We record
compensation expense in the consolidated financial statements for stock options
granted to employees, consultants and directors using the fair value method.
Fair values are determined using the Black Scholes option pricing model, which
is sensitive to the estimate of our stock price volatility and the options
expected life. Compensation costs are recognized over the vesting
period.





Recently Issued Accounting
Pronouncements





In December 2008, the SEC adopted
revisions to its required oil and gas reporting disclosures. Additionally, on
two separate occasions in October 2009, the SEC issued certain compliance and
disclosure interpretations of its oil and gas rules. The disclosure revisions
are intended to provide investors with a more meaningful and comprehensive
understanding of oil and gas reserves. In the three decades that have passed
since adoption of these disclosure items, there have been significant changes in
the oil and gas industry. The amendments are designed to modernize and update
the oil and gas disclosure requirements to align them with current practices and
changes in technology. In addition, the amendments concurrently align the SEC’s
full cost accounting rules with the revised disclosures. The revised disclosure
requirements must be incorporated in registration statements filed on or after
January 1, 2010, and annual reports on Form 10-K for fiscal years ending on or
after December 31, 2009. A company may not apply the new rules to disclosures in
quarterly reports prior to the first annual report in which the revised
disclosures are required.





The
following amendments have the greatest likelihood of affecting our reserve
disclosures, including the comparability of our reserves disclosures with those
of our peer companies:





·
            Pricing
      mechanism for oil and gas reserves estimation - The SEC’s current rules
      require proved reserve estimates to be calculated using prices as of the
      end of the period and held constant over the life of the reserves. Price
      changes can be made only to the extent provided by contractual
      arrangements. The revised rules require reserve estimates to be calculated
      using a 12-month average price. The 12-month average price will also be
      used for purposes of calculating the full cost ceiling limitations. Price
      changes can still be incorporated to the extent defined by contractual
      arrangements. The use of a 12-month average price rather than a single-day
      price is expected to reduce the impact on reserve estimates and the full
      cost ceiling limitations due to short-term volatility and seasonality of
      prices;


20





·
            Reasonable
      certainty - The SEC’s current definition of “proved oil and gas reserves”
      incorporates certain specific concepts such as “lowest known
      hydrocarbons,” which limits the ability to claim proved reserves in the
      absence of information on fluid contacts in a well penetration,
      notwithstanding the existence of other engineering and geoscientific
      evidence.





The
revised rules amend the definition to permit the use of new reliable
technologies to establish the reasonable certainty of proved reserves. This
revision also includes provisions for establishing levels of lowest known
hydrocarbons and highest known oil through reliable technology other than well
penetrations;





·
            The
      revised rules also amend the definition of proved oil and gas reserves to
      include reserves located beyond development spacing areas that are
      immediately adjacent to developed spacing areas if economic producibility
      can be established with reasonable certainty. These revisions are designed
      to permit the use of reliable technologies to establish proved reserves in
      lieu of requiring companies to use specific tests. In addition, they
      establish a uniform standard of reasonable certainty that applies to all
      proved reserves, regardless of location or distance from producing
      wells.





Because
the revised rules generally expand the definition of proved reserves, we expect
our proved reserve estimates will increase upon adoption of the revised rules.
However, we are not able to estimate the magnitude of the potential increase at
this time; and





·
            Unproved
      reserves - The SEC’s current rules prohibit disclosure of reserve
      estimates other than proved in documents filed with the SEC. The revised
      rules permit disclosure of probable and possible reserves and provide
      definitions of probable reserves and possible reserves. Disclosure of
      probable and possible reserves is optional. However, such disclosures must
      meet specific requirements. Disclosures of probable or possible reserves
      must provide the same level of geographic detail as proved reserves and
      must state whether the reserves are developed or undeveloped. Probable and
      possible reserve disclosures must also provide the relative uncertainty
      associated with these classifications of reserves estimations. We have not
      yet determined whether we will disclose our probable and possible reserves
      in documents filed with the SEC.





ITEM
3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
required under Regulation S-K for “smaller reporting companies.”





ITEM
4T - CONTROLS AND PROCEDURES





(a)
Evaluation of disclosure controls and procedures.





Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as
of October 31, 2009. In designing and evaluating the disclosure controls
and procedures, management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. In addition, the design of disclosure
controls and procedures must reflect the fact that there are resource
constraints and that management is required to apply its judgment in evaluating
the benefits of possible controls and procedures relative to their
costs.


21


Based
on our evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as a result of the material weaknesses described below, our
disclosure controls and procedures are not designed at a reasonable assurance
level and are ineffective to provide reasonable assurance that information we
are required to disclose in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms, and that such
information is not accumulated nor communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. The material weaknesses, which
relate to internal control over financial reporting, that were identified
are:





a)
            We
      did not have sufficient personnel in our accounting and financial
      reporting functions.  As a result, we were not able to achieve
      adequate segregation of duties and were not able to provide for adequate
      reviewing of the financial statements. This control deficiency, which is
      pervasive in nature, results in a reasonable possibility that material
      misstatements of the financial statements will not be prevented or
      detected on a timely basis; and





b)
            We
      did not maintain sufficient personnel with an appropriate level of
      technical accounting knowledge, experience, and training in the
      application of US GAAP commensurate with our complexity and our financial
      accounting and reporting requirements. This control deficiency is
      pervasive in nature and specifically resulted in us restating previously
      filed annual and quarterly financial statements as a result of errors in
      the accounting for convertible debentures and warrants. Further, there is
      a reasonable possibility that material misstatements of the consolidated
      financial statements including disclosures will not be prevented or
      detected on a timely basis as a
result.





Management
believes that hiring additional knowledgeable personnel with technical
accounting expertise will remedy the material weaknesses. Due to the fact that
our accounting staff consists of a Chief Financial Officer and accounting clerk,
additional personnel will also ensure the proper segregation of duties and
provide more checks and balances within the department. We believe this will
greatly decrease any control and procedure issues we may encounter in the
future. To compensate for the current limited number of personnel in the
accounting and reporting group, we focus on audit committee oversight and the
use of external consultants for complex accounting matters. Furthermore, we will
continue to engage consultants in the future as necessary in order to ensure
proper accounting treatment of complex transactions.





Management
will continue to monitor and evaluate the effectiveness of our disclosure
controls and procedures and our internal controls over financial reporting on an
ongoing basis and are committed to taking further action and implementing
additional enhancements or improvements, as necessary and as funds allow. As
part of this commitment, we will continue to assess our current personnel
resources and technical accounting expertise within the accounting function. As
our activities levels increase, we will look to increase our personnel resources
to increase segregation of duties and provide in-house non-routine or complex
accounting expertise. When funds are available to us and as operations increase,
we will hire additional knowledgeable personnel with technical accounting
expertise to further support our current accounting personnel, which management
estimates could cost approximately $100,000 per annum.





(b)
Changes in internal control over financial reporting.





We regularly
review our system of internal control over financial reporting and make changes
to our processes and systems to improve controls and increase efficiency, while
ensuring that we maintain an effective internal control environment. Changes may
include such activities as implementing new, more efficient systems,
consolidating activities, and migrating processes.





There
were no changes in our internal control over financial reporting that occurred
during the period covered by this Quarterly Report on Form 10-Q that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.


22


PART
II - OTHER INFORMATION





Item
1. Legal Proceedings.





From time
to time, we may become involved in various lawsuits and legal proceedings which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. We are currently not aware
of any such legal proceedings or claims that we believe will have, individually
or in the aggregate, a material adverse affect on our business, financial
condition or operating results.





Item
1A. Risk Factors.





Not
required under Regulation S-K for “smaller reporting companies.”





Item
2.   Unregistered Sales of Equity Securities and Use of
Proceeds.





None.





Item
3.   Defaults Upon Senior Securities.





None.





Item
4.   Submission of Matters to a Vote of Security Holders.





None.





Item
5.   Other Information.





None.





Item
6.   Exhibits





31.01
            Certification
      of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002





31.02
            Certification
      of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002





32.01
            Certifications
      of Chief Executive Officer and Chief Financial Officer pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002


23




SIGNATURES




In
accordance with requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





TRIANGLE
      PETROLEUM CORPORATIONDate:  November
      23, 2009
                By:
                /s/ MARK GUSTAFSONMark
      GustafsonChief
      Executive Officer (Principal Executive Officer)Date:  November
      23, 2009
                By:
                /s/ SHAUN TOKERShaun
      TokerChief
      Financial Officer (Principal Financial Officer and
                  Principal
      Accounting Officer)


24