**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





(Mark
      One)


**x
      QUARTERLY REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**





**For
      the Quarterly Period Ended October 31, 2007**





**o
      TRANSITION REPORT UNDER
      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**


(Name
      of
      Small Business Issuer 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 o





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





Large
      accelerated filer o
      accelerated filer o
      Non-accelerated filer x





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





As
      of
      December 6, 2007, there were 46,744,530 shares of registrant’s common stock
      outstanding.





**TRIANGLE
      PETROLEUM CORPORATION AND SUBSIDIARIES**








**INDEX**PART
                I.
            FINANCIAL
                INFORMATIONITEM
                1.
            Consolidated
                balance sheets at October 31, 2007 (unaudited) and January 31,
                2007
            3Consolidated
                statements of operations for the three and nine months ended October
                31,
                2007 and 2006 and accumulated from December 11, 2003 (date of inception)
                to October 31, 2007 (unaudited)
            4Consolidated
                statements of cash flows for the nine months ended October 31, 2007
                and
                2006 (unaudited)
            5Notes
                to unaudited consolidated financial statements
            6
                -
                18ITEM
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            19-31ITEM
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            32ITEM
                4.
            Controls
                and Procedures
            33PART
                II.
            OTHER
                INFORMATIONITEM
                1
            Legal
                proceedings
            34ITEM
                1A
            Risk
                factors
            34ITEM
                2
            Unregistered
                sales of equity securities and use of proceeds
            35ITEM
                3
            Defaults
                upon senior securities
            35ITEM
                4
            Submission
                of matters to a vote of security holders
            35ITEM
                5
            Other
                information
            35ITEM
                6
            Exhibits
            35SIGNATURES
            36





2


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Consolidated
      Balance Sheets


(Expressed
      in U.S. dollars)





October
                31,
              2007
              $
            
            January
                31,
              2007
              $(Unaudited)ASSETSCurrent
                AssetsCash
                and cash equivalents
            
            
            9,343,940
            
            
            5,798,982Prepaid
                expenses (Note 3)
            
            
            847,408
            
            
            2,519,009Other
                receivables
            
            
            1,064,343
            
            
            344,342Total
                Current Assets
            
            
            11,255,691
            
            
            8,662,333Debt
                Issue Costs, net
            
            
            575,417
            
            
            916,353Property
                and Equipment (Note 4)
            
            
            72,291
            
            
            67,091Oil
                and Gas Properties (Note 5)
            
            
            28,045,769
            
            
            21,101,495Total
                Assets
            
            
            39,949,168
            
            
            30,747,272LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                LiabilitiesAccounts
                payable
            
            
            4,284,914
            
            
            4,199,961Accrued
                interest on convertible debentures
            
            
            2,474,348
            
            
            2,095,989Accrued
                liabilities (Note 6)
            
            
            1,939,570
            
            
            466,112Convertible
                debentures, current portion (Note 8(a))
            
            
            —
            
            
            2,234,374Total
                Current Liabilities
            
            
            8,698,832
            
            
            8,996,436Asset
                Retirement Obligations (Note 7)
            
            
            419,365
            
            
            90,913Convertible
                Debentures, less unamortized discount of $4,944,351 and $8,688,063
                (Note
                8)
            
            
            14,805,649
            
            
            15,077,563Total
                Liabilities
            
            
            23,923,846
            
            
            24,164,912Contingencies
                and Commitments (Notes 1 and 12)
              Subsequent
                  Events (Note 14)Stockholders’
                EquityCommon
                Stock (Note 9)
              Authorized:
                100,000,000 shares, par value $0.00001
              Issued:
                37,704,805 shares (January 31, 2007 - 22,475,866 shares)
            
            
            377
            
            
            225Additional
                Paid-In Capital
            
            
            61,837,941
            
            
            33,213,108Deficit
                Accumulated During the Exploration Stage
            
            
            (45,812,996
            )
            
            (26,630,973
            )Total
                Stockholders’ Equity
            
            
            16,025,322
            
            
            6,582,360Total
                Liabilities and Stockholders’ Equity
            
            
            39,949,168
            
            
            30,747,272






The
      accompanying notes are an integral part of these
      consolidatedfinancial
      statements


3


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Consolidated
      Statements of Operations


(Expressed
      in U.S. dollars)


(Unaudited)





Accumulated
                from
              December
                11, 2003
              (Date
                of Inception)
              to
                October 31,
            
            Three
              Months
              Ended
              October
                31,
            
            Three
              Months
              Ended
              October
                31,
            
            Nine
              Months
              Ended
              October
                31,
            
            Nine
              Months
              Ended
              October
                31,2007
            
            2007
            
            2006
            
            2007
            
            2006$
            
            $
            
            $
            
            $
            
            $Revenue,
                net of royalties
            
            
            439,201
            
            
            191,632
            
            
            24,540
            
            
            384,859
            
            
            24,540Operating
                ExpensesOil
                and gas production
            
            
            220,199
            
            
            146,396
            
            
            —
            
            
            220,199
            
            
            —Depletion,
                depreciation and accretion
            
            
            428,113
            
            
            151,327
            
            
            7,590
            
            
            391,884
            
            
            19,828Depreciation -
                property and equipment
            
            
            62,036
            
            
            9,178
            
            
            24,375
            
            
            30,792
            
            
            24,375General
                and administrative
            
            
            17,561,952
            
            
            1,717,907
            
            
            1,634,772
            
            
            5,252,439
            
            
            6,270,152Foreign
                exchange loss (gain)
            
            
            584,230
            
            
            467,707
            
            
            9,170
            
            
            627,454
            
            
            (12,086
            )Impairment
                loss on oil and gas properties
            
            
            10,795,341
            
            
            4,604,726
            
            
            1,041,852
            
            
            8,496,129
            
            
            1,086,789Total
                Operating Expenses
            
            
            29,651,871
            
            
            7,097,241
            
            
            2,717,759
            
            
            15,018,897
            
            
            7,389,058Net
                Loss from Operations
            
            
            (29,212,670
            )
            
            (6,905,609
            )
            
            (2,693,219
            )
            
            (14,634,038
            )
            
            (7,364,518
            )Other
                Income (Expenses)Accretion
                of discounts on convertible debentures
            
            
            (13,752,704
            )
            
            (1,090,303
            )
            
            (1,918,279
            )
            
            (3,743,712
            )
            
            (5,670,347
            )Amortization
                of debenture issue costs
            
            
            (804,584
            )
            
            (109,584
            )
            
            (117,707
            )
            
            (340,937
            )
            
            (294,097
            )Interest
                expense
            
            
            (3,102,407
            )
            
            (317,671
            )
            
            (448,248
            )
            
            (1,006,418
            )
            
            (1,287,136
            )Interest
                income
            
            
            1,091,840
            
            
            147,416
            
            
            166,201
            
            
            543,082
            
            
            444,957Total
                Other Income (Expenses)
            
            
            (16,567,855
            )
            
            (1,370,142
            )
            
            (2,318,033
            )
            
            (4,547,985
            )
            
            (6,806,623
            )Net
                Loss Before Discontinued Operations
            
            
            (45,780,525
            )
            
            (8,275,751
            )
            
            (5,011,252
            )
            
            (19,182,023
            )
            
            (14,171,141
            )Discontinued
                Operations
            
            
            (32,471
            )
            
            —
            
            
            —
            
            
            —
            
            
            —Net
                Loss for the Period
            
            
            (45,812,996
            )
            
            (8,275,751
            )
            
            (5,011,252
            )
            
            (19,182,023
            )
            
            (14,171,141
            )Net
                Loss Per ShareBasic
                and Diluted
            
            
            
            
            
            (0.22
            )
            
            (0.24
            )
            
            (0.55
            )
            
            (0.70
            )Weighted
                Average Number of Shares Outstanding
            
            
            
            
            
            37,345,000
            
            
            20,716,000
            
            
            34,699,000
            
            
            20,107,000









The
      accompanying notes are an integral part of these
      consolidatedfinancial
      statements


4


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Consolidated
      Statements of Cash Flows


(Expressed
      in U.S. dollars)


(Unaudited)





Nine
                Months Ended
              October
                31,
            
            Nine
                Months Ended
              October
                31,2007
            
            2006$
            
            $Operating
                ActivitiesNet
                loss
            
            
            (19,182,023
            )
            
            (14,171,141
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Accretion
                of discount on convertible debentures
            
            
            3,743,712
            
            
            5,670,347Amortization
                of debt issue costs
            
            
            340,937
            
            
            294,097Depletion,
                depreciation and accretion
            
            
            391,884
            
            
            24,375Depreciation
                - property and equipment
            
            
            30,792
            
            
            19,828Impairment
                loss on oil and gas properties
            
            
            8,496,129
            
            
            1,086,789Stock-based
                compensation
            
            
            3,066,979
            
            
            4,670,481Changes
                in operating assets and liabilities:Prepaid
                expenses
            
            
            (7,746
            )
            
            (191,922
            )Other
                receivables
            
            
            (619,287
            )
            
            (251,996
            )Accounts
                payable
            
            
            48,305
            
            
            1,038,261Accrued
                interest on convertible debentures
            
            
            378,359
            
            
            1,287,135Accrued
                liabilities
            
            
            123,966
            
            
            (594,169
            )Due
                to related parties
            
            
            —
            
            
            2,138Net
                Cash Used in Operating Activities
            
            
            (3,187,993
            )
            
            (1,115,777
            )Investing
                ActivitiesPurchase
                of property and equipment
            
            
            (35,992
            )
            
            (23,088
            )Oil
                and gas property expenditures
            
            
            (16,487,736
            )
            
            (11,194,598
            )Proceeds
                received from sale of oil and gas properties
            
            
            983,902
            
            
            —Changes
                in investing assets and liabilities
            
            
            2,964,771
            
            
            —Net
                Cash Used in Investing Activities
            
            
            (12,575,055
            )
            
            (11,217,686
            )Financing
                ActivitiesProceeds
                from issuance of common stock
            
            
            20,824,000
            
            
            —Common
                stock issuance costs
            
            
            (1,515,994
            )
            
            —Proceeds
                from issuance of convertible debentures
            
            
            —
            
            
            5,000,000Convertible
                debentures issuance costs
            
            
            —
            
            
            (425,000
            )Net
                Cash Provided from Financing Activities
            
            
            19,308,006
            
            
            4,575,000Increase
                in Cash and Cash Equivalents
            
            
            3,544,958
            
            
            7,758,463Cash
                and Cash Equivalents - Beginning of Period
            
            
            5,798,982
            
            
            17,394,422Cash
                and Cash Equivalents - End of Period
            
            
            9,343,940
            
            
            9,635,959Non-cash
                Investing and Financing Activities:Common
                stock issued for conversion of debentures
            
            
            6,250,000
            
            
            2,400,000Supplemental
                Disclosures:Interest
                paid
            
            
            628,058
            
            
            —Income
                taxes paid
            
            
            —
            
            
            —











The
      accompanying notes are an integral part of these
      consolidatedfinancial
      statements


5


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)


**1.**
              **Nature
                  of Operations and Continuance of
                  Business**


The
      Company was incorporated in the State of Nevada on December 11, 2003 under
      the
      name Peloton Resources Inc. In December 2003, the Company purchased six mineral
      claims situated in the Greenwood Mining Division in the Province of British
      Columbia, Canada. The Company’s principal business plan was to acquire, explore
      and develop mineral properties and to ultimately seek earnings by exploiting
      the
      mineral claims. During the fiscal year ended January 31, 2006, the Company
      abandoned its mineral property as a result of poor exploration results, and
      changed the Company’s principal business to that of acquisition, exploration and
      development of oil and gas resource properties. On May 10, 2005, the Company
      changed its name to Triangle Petroleum Corporation.





The
      Company is primarily engaged in the acquisition, exploration and development
      of
      oil and gas resource properties. It has been in the exploration stage since
      its
      formation in December 2003 and has not yet realized any significant revenues
      from its planned operations. The Company has incurred losses of $45,812,996
      since inception on December 11, 2003 to October 31, 2007. The Company issued
      $26,000,000 and $5,000,000 of convertible debentures during the year ended
      January 31, 2006 and January 31, 2007, respectively. During the nine month
      period ended October 31, 2007, the Company issued 10,412,000 shares of common
      stock for net proceeds of $19,308,006. The Company’s oil and gas capital
      expenditures for fiscal 2008 are expected to be approximately $23,000,000.
      In
      the nine months ended October 31, 2007, the Company’s oil and gas capital
      expenditures were $16,487,736, leaving an estimated $6,500,000 of capital
      expenditures to be incurred during the three months ended January 31, 2008. As
      at October 31, 2007, the Company had cash and cash equivalents of $9,343,940
      and
      working capital of $2,556,859.





The
      Company will have to raise additional funds to complete the exploration and
      development phase of its programs and, while it has been successful in doing
      so
      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 for a period longer than the
      current fiscal year is dependent upon the ability of the Company 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.





**2.**
            **Summary
                of Significant 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 US 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.





b)
            Interim
                Financial Statements





The
      interim unaudited consolidated financial statements have been prepared in
      accordance with accounting principles generally accepted in the United States
      for interim financial information and with the instructions to Securities and
      Exchange Commission (“SEC”) Form 10-QSB. They do not include all of the
      information and footnotes required by generally accepted accounting principles
      for complete financial statements. Therefore, these financial statements should
      be read in conjunction with the Company’s audited consolidated financial
      statements and notes thereto for the year ended January 31, 2007, included
      in
      the Company’s Annual Report on Form 10-KSB filed on May 1, 2007 with the
      SEC.





The
      consolidated financial statements included herein are unaudited; however, they
      contain all normal recurring accruals and adjustments that, in the opinion
      of
      management, are necessary to present fairly the Company’s consolidated financial
      position at October 31, 2007, and the consolidated results of its operations
      and
      consolidated cash flows for the nine months ended October 31, 2007 and 2006.
      The
      results of operations for the three and nine months ended October 31, 2007
      are
      not necessarily indicative of the results to be expected for future quarters
      or
      the full year.


6


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)


**2.**
              **Summary
                  of Significant Accounting Policies
                  (continued)**
  c)
              Use
                  of Estimates





The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management 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. The
      Company regularly evaluates estimates and assumptions related to useful
      life and recoverability of long-lived assets, proved and unproved oil and gas
      expenditures, asset
      retirement obligations, stock-based compensation and deferred income tax asset
      valuation allowances. The Company bases its estimates and assumptions on current
      facts, historical experience and various other factors that it believes 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 the Company may differ materially and
      adversely from the Company’s estimates. To the extent there are material
      differences between the estimates and the actual results, future results of
      operations will be affected.





d)
            Foreign
                Currency Translation





The
      Company's functional and reporting currency is the United States dollar and
      management has adopted SFAS No. 52, “ *Foreign
      Currency Translation”* .
      Monetary assets and liabilities denominated in foreign currencies are translated
      into United States dollars at rates of exchange in effect at the balance sheet
      date. Non-monetary assets, liabilities and items recorded in income arising
      from
      transactions denominated in foreign currencies are translated at rates of
      exchange in effect at the date of the transaction. Foreign currency transactions
      are primarily undertaken in Canadian dollars. The Company has not, to the date
      of these financials statements, entered into derivative instruments to offset
      the impact of foreign currency fluctuations.





e)
            Cash
                and Cash Equivalents





The
      Company considers all highly liquid instruments with maturity of three months
      or
      less at the time of issuance to be cash equivalents.





f)
            Property
                and Equipment





Property
      and equipment consists of computer hardware, geophysical software, furniture
      and
      equipment and leasehold improvements, and is recorded at cost. Computer hardware
      and geophysical software are depreciated on a straight-line basis over their
      estimated useful lives of three years. Furniture and equipment are depreciated
      on a straight-line basis over their estimated useful lives of five years.
      Leasehold improvements are depreciated on a straight-line basis over their
      estimated useful lives of five years.





g)
            Long-lived
                Assets





In
      accordance with SFAS No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* ,
      the
      Company tests long-lived assets or asset groups for recoverability when events
      or changes in circumstances indicate that their carrying amount may not be
      recoverable. Circumstances which could trigger a review include, but are not
      limited to: significant decreases in the market price of the asset; significant
      adverse changes in the business climate or legal factors; accumulation of costs
      significantly in excess of the amount originally expected for the acquisition
      or
      construction of the asset; current period cash flow or operating losses combined
      with a history of losses or a forecast of continuing losses associated with
      the
      use of the asset; and current expectation that the asset will more likely than
      not be sold or disposed significantly before the end of its estimated useful
      life.





Recoverability
      is assessed based on the carrying amount of the asset and its fair value which
      is generally determined based on the sum of the undiscounted cash flows expected
      to result from the use and the eventual disposal of the asset, as well as
      specific appraisal in certain instances. An impairment loss is recognized when
      the carrying amount is not recoverable and exceeds fair value.





h)
            Oil
                and Gas Properties


The
      Company utilizes the full-cost method of accounting for petroleum and natural
      gas properties. Under this method, the Company capitalizes all costs associated
      with acquisition, exploration and development of oil and natural gas reserves,
      including leasehold acquisition costs, geological and geophysical expenditures,
      lease rentals on undeveloped properties and costs of drilling of productive
      and
      non-productive wells into the full cost pool on a country by country basis.
      When
      the Company obtains proven oil and gas reserves, capitalized costs, including
      estimated future costs to develop the proved reserves and estimated abandonment
      costs, net of salvage, will be depleted on the units-of-production method using
      estimates of proved reserves. The costs of unproved properties are not amortized
      until it is determined whether or not proved reserves can be assigned to the
      properties. Until such determination is made the Company assesses the unproven
      properties at least annually whether impairment has occurred, and includes
      in
      the amortization base drilling exploratory dry holes associated with unproved
      properties.


7


Triangle
      Petroleum Corporation


(An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)
  **2.**
                **Summary
                    of Significant Accounting Policies
                    (continued)**
 h)
                  Oil
                      and gas properties
                      (continued)





The
      Company applies a ceiling test to the capitalized cost in the full cost pool.
      The ceiling test limits such cost to the estimated present value, using a ten
      percent discount rate, of the future net revenue from proved reserves, based
      on
      current economic and operating conditions. Specifically, the Company computes
      the ceiling test so that capitalized cost, less accumulated depletion and
      related deferred income tax, do not exceed an amount (the ceiling) equal to
      the
      sum of: (A) The present value of estimated future net revenue computed by
      applying current prices of oil and gas reserves (with consideration of price
      changes only to the extent provided by contractual arrangements) to estimated
      future production of proved oil and gas reserves as of the date of the latest
      balance sheet presented, less estimated future expenditures (based on current
      cost) to be incurred in developing and producing the proved reserves computed
      using a discount factor of ten percent and assuming continuation of existing
      economic conditions; plus (B) the cost of property not being amortized; plus
      (C)
      the lower of cost or estimated fair value of unproven properties included in
      the
      costs being amortized; less (D) income tax effects related to differences
      between the book and tax basis of the property.





For
      unproven properties, the Company excludes from capitalized costs subject to
      depletion, all costs directly associated with the acquisition and evaluation
      of
      the unproved property until it is determined whether or not proved reserves
      can
      be assigned to the property. Until such a determination is made, the Company
      assesses the unproven property at least annually to ascertain whether impairment
      has occurred. In assessing impairment the Company considers factors such as
      historical experience and other data such as primary lease terms of the
      property, average holding periods of unproved property, comparable leasehold
      sales and geographic and geologic data. The Company adds the amount of
      impairment assessed to the cost to be amortized subject to the ceiling test.





i)
            Asset
                Retirement Obligations





The
      Company recognizes a liability for future retirement obligations associated
      with
      the Company’s oil and gas properties. The estimated fair value of the asset
      retirement obligation is based on the current 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 the Company settles the
      obligation.





j)
            Debt
                Issue Costs





In
      accordance with the Accounting Principles Board Opinion 21 *“Interest
      on Receivables and Payables”* ,
      the
      Company recognizes debt issue costs on the balance sheet as deferred charges,
      and amortizes the balance over the term of the related debt. The Company follows
      the guidance in the EITF 95-13 “ *Classification
      of Debt Issue Costs in the Statement of Cash Flows”* and
      classifies cash payments for debt issue costs as a financing
      activity.





k)
            Revenue
                Recognition





The
      Company recognizes oil and gas revenue when production is sold at a fixed or
      determinable price, persuasive evidence of an arrangement exists, delivery
      has
      occurred and title has transferred, and collectibility is reasonably
      assured.





l)
            Income
                Taxes





The
      Company has adopted SFAS No. 109 *“Accounting
      for Income Taxes”* as of
      its inception. Pursuant to SFAS No. 109 the Company is required to compute
      tax
      asset benefits for net operating losses carried forward. Potential benefits
      of
      income tax losses are not recognized in the accounts until realization is more
      likely than not. The potential benefits of net operating losses have not been
      recognized in these financial statements because the Company cannot be assured
      it is more likely than not it will utilize the net operating losses carried
      forward in future years.





On
      February 1, 2007, the Company adopted Financial Accounting Standards Board
      Interpretation No. 48, “ *Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
      109”* (“FIN
      48”). FIN 48 prescribes a measurement process for recording in the financial
      statements uncertain tax positions taken or expected to be taken in a tax
      return. Additionally, FIN 48 provides guidance regarding uncertain tax positions
      relating to derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition. At October 31, 2007, the Company
      had
      no material uncertain tax positions.


8


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)


**2.**
            **Summary
                of Significant Accounting Policies
                (continued)**




m)
            Basic
                and Diluted Net Income (Loss) Per
                Share





The
      Company computes net income (loss) per share in accordance with SFAS No.
      128 *,
      "Earnings per Share"* (“SFAS
      128”). SFAS 128 requires presentation of both basic and diluted earnings per
      share (EPS) on the face of the income statement. Basic EPS is computed by
      dividing net income (loss) available to common shareholders (numerator) by
      the
      weighted average number of shares outstanding (denominator) during the period.
      Diluted EPS gives effect to all dilutive potential common shares outstanding
      during the period including stock options, and warrants, using the treasury
      stock method, and convertible securities, using the if-converted method. In
      computing diluted EPS, the average stock price for the period is used in
      determining the number of shares assumed to be purchased from the exercise
      of
      stock options or warrants. Diluted EPS excludes all dilutive potential shares
      if
      their effect is anti-dilutive. Shares underlying these securities totaled
      approximately 22,215,000 as of October 31, 2007.





n)
            Financial
                Instruments





The
      fair
      values of financial instruments, which include cash and cash equivalents, other
      receivables, accounts payable, accrued interest on convertible debt and accrued
      liabilities approximate their carrying values due to the relatively short
      maturity of these instruments. The fair value of convertible debentures are
      estimated to approximate their carrying values based on borrowing rates
      currently available to the Company for debt with similar terms.





o)
            Concentration
                of Risk





The
      Company does not believe that it is exposed to interest rate risk. The Company
      maintains its cash accounts in one commercial bank located in Calgary, Alberta,
      Canada. The Company's cash accounts consist of uninsured and insured business
      checking accounts and deposits maintained principally in U.S. dollars. Financial
      instruments that potentially subject the Company to concentrations of credit
      risk consist primarily of cash in excess of federally insured amounts. As at
      October 31, 2007, the Company has not engaged in any transactions that would
      be
      considered derivative instruments on hedging activities. To date, the Company
      has not incurred a loss relating to this concentration of credit risk.





p)
            Comprehensive
                Loss





SFAS
      No.
      130, *“Reporting
      Comprehensive Income,”* establishes standards for the reporting and display of comprehensive loss and
      its components in the financial statements. As at October 31, 2007 and 2006,
      the
      Company has no items that represent comprehensive loss and, therefore, has
      not
      included a schedule of comprehensive loss in the financial
      statements.





q)
            Stock-Based
                Compensation





The
      Company records stock based compensation in accordance with SFAS 123(R),
“Share-Based Payments,” which requires the measurement and recognition of
      compensation expense, based on estimated fair values, for all share-based
      awards, made to employees and directors, including stock options. In
      March 2005, the Securities and Exchange Commission issued SAB 107 relating
      to SFAS 123(R). The Company applied the provisions of SAB 107 in its adoption
      of
      SFAS 123(R).





All
      transactions in which goods or services are received for the issuance of equity
      instruments are accounted for based on the fair value of the consideration
      received or the fair value or the equity instrument issued, whichever is the
      more reliable measure.





SFAS
      123(R) requires companies to estimate the fair value of share-based awards
      on
      the date of grant using an option-pricing model. The Company uses the
      Black-Scholes option-pricing model as its method of determining fair value.
      This
      model is affected by the Company’s stock price as well as assumptions regarding
      a number of subjective variables. These subjective variables include, but are
      not limited to the Company’s expected stock price volatility over the term of
      the awards, and actual and projected employee stock option exercise behaviors.
      The value of the portion of the award that is ultimately expected to vest is
      recognized as an expense in the consolidated statement of operations over the
      requisite service period.





No
      tax
      benefits were attributed to stock-based compensation expense because a full
      valuation allowance was maintained for all net deferred tax assets.




9


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)




**2.**
              **Summary
                  of Significant Accounting Policies
                  (continued)**


r)
            Recently
                Issued Accounting Pronouncements





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      Amendment of FASB Statement No. 115”* .
      This
      statement permits entities to choose to measure many financial instruments
      and
      certain other items at fair value. Most of the provisions of SFAS No. 159 apply
      only to entities that elect the fair value option. However, the amendment to
      SFAS No. 115 *“Accounting
      for Certain Investments in Debt and Equity Securities”* applies
      to all entities with available-for-sale and trading securities. SFAS No. 159
      is
      effective as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
      year that begins on or before November 15, 2007, provided the entity also elects
      to apply the provision of SFAS No. 157, *“Fair
      Value Measurements”* .
      The
      adoption of this statement is not expected to have a material effect on the
      Company's financial statements.





In
      September 2006, the FASB issued SFAS No. 157, *“Fair
      Value Measurements* ”.
      The
      objective of SFAS No. 157 is to increase consistency and comparability in fair
      value measurements and to expand disclosures about fair value measurements.
      SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any new
      fair
      value measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on the
      Company's future reported financial position or results of
      operations.





s)
            Recently
                Adopted Accounting Pronouncements





In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“ *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements.”* SAB No.
      108 addresses how the effects of prior year uncorrected misstatements should
      be
      considered when quantifying misstatements in current year financial statements.
      SAB No. 108 requires companies to quantify misstatements using a balance sheet
      and income statement approach and to evaluate whether either approach results
      in
      quantifying an error that is material in light of relevant quantitative and
      qualitative factors. SAB No. 108 is effective for periods ending after November
      15, 2006. The adoption of SAB No. 108 did not have a material effect on the
      Company’s financial statements.





In
      September 2006, the FASB issued SFAS No. 158, *“Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans - an
      amendment of FASB Statements No. 87, 88, 106, and 132(R)”* .
      This
      statement requires employers to recognize the overfunded or underfunded status
      of a defined benefit postretirement plan (other than a multiemployer plan)
      as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net assets
      of a not-for-profit organization. This statement also requires an employer
      to
      measure the funded status of a plan as of the date of its year-end statement
      of
      financial position, with limited exceptions. The provisions of SFAS No. 158
      are
      effective for employers with publicly traded equity securities as of the end
      of
      the fiscal year ending after December 15, 2006. The adoption of this statement
      did not have a material effect on the Company's financial
      statements.





In
      March
      2006, the FASB issued SFAS No. 156, *"Accounting
      for Servicing of Financial Assets, an amendment of FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities"* .
      This
      statement requires all separately recognized servicing assets and servicing
      liabilities be initially measured at fair value, if practicable, and permits
      for
      subsequent measurement using either fair value measurement with changes in
      fair
      value reflected in earnings or the amortization and impairment requirements
      of
      Statement No. 140. The subsequent measurement of separately recognized servicing
      assets and servicing liabilities at fair value eliminates the necessity for
      entities that manage the risks inherent in servicing assets and servicing
      liabilities with derivatives to qualify for hedge accounting treatment and
      eliminates the characterization of declines in fair value as impairments or
      direct write-downs. SFAS No. 156 is effective for an entity's first fiscal
      year
      beginning after September 15, 2006. The adoption of this statement did not
      have
      a material effect on the Company's financial statements.





In
      February 2006, the FASB issued SFAS No. 155, *"Accounting
      for Certain Hybrid Financial Instruments-an amendment of FASB Statements No.
      133
      and 140"* ,
      to
      simplify and make more consistent the accounting for certain financial
      instruments. SFAS No. 155 amends SFAS No. 133, *"Accounting
      for Derivative Instruments and Hedging Activities"* ,
      to
      permit fair value re-measurement for any hybrid financial instrument with an
      embedded derivative that otherwise would require bifurcation, provided that
      the
      whole instrument is accounted for on a fair value basis. SFAS No. 155 amends
      SFAS No. 140, *"Accounting
      for the Impairment or Disposal of Long-Lived Assets"* ,
      to
      allow a qualifying special-purpose entity to hold a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument. SFAS No. 155 applies to all financial instruments acquired
      or issued after the beginning of an entity's first fiscal year that begins
      after
      September 15, 2006, with earlier application allowed. The adoption of this
      statement did not have a material effect on the Company's future reported
      financial position or results of operations.


10


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)




**2.**
                **Summary
                    of Significant Accounting Policies
                    (continued)**
  t)
                Reclassifications


Certain
      reclassifications have been made to the prior period’s financial statements to
      conform to the current period’s presentation.





**3.**
                **Prepaid
                    Expenses**


The
      components of prepaid expenses are as follows:





October
                31, 2007
              $
            
            January
                31,
              2007
              $Office
                space deposit
            
            
            24,702
            
            
            —Prepaid
                insurance
            
            
            71,842
            
            
            151,086Prepaid
                joint-venture exploration costs
            
            
            688,578
            
            
            2,367,923Professional
                and consulting services
            
            
            32,376
            
            
            —Royalty
                deposit
            
            
            23,088
            
            
            —Software
                subscriptions
            
            
            6,822
            
            
            —Total
                prepaid expenses
            
            
            847,408
            
            
            2,519,009







**4.**
                **Property
                    and Equipment**


October
                31, 2007
            
            January
                31, 2007Cost
              $
            
            Accumulated
              Depreciation
              $
            
            Net
                Carrying
              Value
              $
            
            Net
                Carrying
              Value
              $Computer
                hardware
            
            
            69,708
            
            
            32,494
            
            
            37,214
            
            
            31,906Furniture
                and equipment
            
            
            48,273
            
            
            15,312
            
            
            32,961
            
            
            25,164Geophysical
                software
            
            
            8,000
            
            
            5,884
            
            
            2,116
            
            
            5,086Leasehold
                improvements
            
            
            7,927
            
            
            7,927
            
            
            —
            
            
            4,935Total
            
            
            133,908
            
            
            61,617
            
            
            72,291
            
            
            67,091





**5.**
                        **Oil
                            and Gas Properties**
  The
                  following table summarizes information regarding
                  the Company's oil and gas acquisition, exploration and development
                  activities:
  October
                                31, 2007
                            
                            January
                                31, 2007$
                            
                            $Proved
                                PropertiesExploration
                                costs
                            
                            
                            13,661,354
                            
                            
                            2,965,420Less:Accumulated
                                depletion
                            
                            
                            (387,303
                            )
                            
                            (36,229
                            )Impairment
                                costs
                            
                            
                            (10,795,341
                            )
                            
                            (2,299,212
                            )2,478,710
                            
                            
                            629,979Unproven
                                PropertiesAcquisition
                                costs
                            
                            
                            10,795,922
                            
                            
                            14,405,798Exploration
                                costs
                            
                            
                            14,771,137
                            
                            
                            6,065,71825,567,059
                            
                            
                            20,471,516Net
                                Carrying Value
                            
                            
                            28,045,769
                            
                            
                            21,101,495


All
      of
      the Company’s oil and gas properties are located in the United States and
      Canada. The Company is currently participating in oil and gas exploration
      activities in Arkansas, Montana, Wyoming and Texas, USA, and Nova Scotia and
      New
      Brunswick, Canada.





(a)
            On
                July 18, 2007, the Company sold its 27% interest in 12,100 gross
                acres in
                northeast Hill County of Texas for gross proceeds of $983,902. The
                Company
                had incurred unproven land and geological and geophysical costs of
                $1,929,305 related to this prospect which resulted in a $945,403
                non-cash
                impairment being recognized in the three months ended July 31,
                2007.





11


Triangle
          Petroleum Corporation
 (An
          Exploration Stage Company)
 Notes
          to
          the Consolidated Financial Statements
 (Expressed
          in U.S. dollars, except as noted)
 (Unaudited)
  (b)
              As
                  at July 31, 2007, the Company’s proved property costs exceeded the ceiling
                  test limitation which resulted in a $2,946,000 non-cash impairment
                  loss
                  being recognized in the three months ended July 31, 2007.


(c)
            During
                2007, the Company’s unproven properties in Alberta were considered
                impaired. As a result, the unproven property costs were no longer
                eligible
                to be classified as unproven property costs under full cost accounting.
                As
                such, they were reclassified to the proved property costs at October
                31,
                2007 resulting in the ceiling test limitation to be exceeded and
                a
                $4,604,726 non-cash impairment loss being recognized in the three
                months
                ended October 31, 2007.





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





October
                31, 2007
              $
            
            January
                31, 2007
              $Alberta
            
            
            —
            
            
            6,154,643East
                Coast (Nova Scotia and New Brunswick)
            
            
            8,018,366
            
            
            654,159Canada
            
            
            8,018,366
            
            
            6,808,802Arkansas
            
            
            14,297,692
            
            
            7,569,101Rocky
                Mountains (Colorado, Montana, Wyoming)
            
            
            2,548,245
            
            
            2,187,391Texas
            
            
            702,756
            
            
            3,906,222United
                States
            
            
            17,548,693
            
            
            13,662,714Total
                unproven acquisition and exploration costs
            
            
            25,567,059
            
            
            20,471,516





**6.**
            **Accrued
                Liabilities**





The
      components of accrued liabilities are as follows:





October
                31, 2007
              $
            
            January
                31, 2007
              $Oil
                and gas expenditures
            
            
            1,939,570
            
            
            466,112





**7.**
            **Asset
                Retirement Obligations**





October
                31, 2007
              $
            
            January
                31, 2007
              $Beginning
                asset retirement obligations
            
            
            90,913
            
            
            33,000Additions
                related to new properties
            
            
            —
            
            
            —Liabilities
                incurred
            
            
            261,180
            
            
            58,186Deletions
                related to property disposals
            
            
            —
            
            
            —Accretion
            
            
            38,018
            
            
            1,467Increase
                (decrease) due to foreign exchange
            
            
            29,254
            
            
            (1,740
            )Total
                asset retirement obligations
            
            
            419,365
            
            
            90,913





The
      Company is required to recognize an estimated liability for future costs
      associated with the abandonment of its oil and gas properties including without
      limitation the costs of reclamation of drilling sites, storage and transmission facilities and access roads. The Company bases its estimate of
      the
      liability on management’s industry experience and on its current understanding
      of federal and state regulatory requirements. The present value calculations
      requires an estimate of the economic lives of the Company’s properties,
      assumptions of future inflation rates to apply to external estimates and the
      determination of the credit-adjusted risk-free rate. The estimated asset
      retirement obligations are reflected in depreciation, depletion and accretion
      calculations over the remaining life of the oil and gas
      properties.




12


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)




**8.**
            **Convertible
                Debentures**





(a)
            On
                June 14, 2005, the Company entered into a securities purchase agreement
                with a single accredited investor (the “Purchase Agreement”) pursuant to
                which the investor purchased an 8% convertible debenture with a principal
                amount of $1,000,000, and a warrant to purchase 1,000,000 shares of the
                Company’s common stock, exercisable at a price of $1.00 per share until
                June 15, 2008. Pursuant to the Purchase Agreement, the investor had
                the
                right to purchase up to $5,000,000 of additional convertible debentures
                and warrants to purchase 5,000,000 shares of common stock which was
                exercised on July 14, 2005, in exchange for an 8% convertible debenture
                with a principal amount of $5,000,000 and warrants to purchase 5,000,000
                shares of the Company’s common stock, exercisable at a price of $1.00 per
                share until June 15, 2008.





The
      total
      convertible debentures of $6,000,000 were due and payable on June 10, 2007.
      The
      principal and accrued interest on these convertible debentures may be converted
      into shares of the Company’s common stock at a rate of $1.00 per share, at the
      option of the holder. The investor has contractually agreed to restrict the
      ability to convert the convertible debentures to an amount which would not
      exceed the difference between the number of shares of common stock beneficially
      owned by the holder or issuable upon exercise of the warrant held by such holder
      and 4.99% of the outstanding shares of common stock of the Company. The
      securities were issued in a private placement transaction pursuant to Regulation
      D under the Securities Act of 1933, as amended. The Company filed an SB-2
      Registration Statement registering the resale of shares of the Company's common
      stock issuable upon conversion of these convertible debentures and exercise
      of
      the warrants.





In
      accordance with EITF 98-5 *“Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios”,* the
      Company recognized the value of the embedded beneficial conversion feature
      of
      $2,666,667 as additional paid-in capital and an equivalent discount which will
      be expensed over the term of the convertible debentures. In addition, in
      accordance with EITF 00-27 *“Application
      of Issue No. 98-5 to Certain Convertible Instruments”* ,
      the
      Company has allocated the proceeds of issuance between the convertible debt
      and
      the detachable warrants based on their relative fair values. Accordingly, the
      Company recognized the fair value of the detachable warrants of $3,333,333
      as
      additional paid-in capital and an equivalent discount against the convertible
      debentures. During the year ended January 31, 2006, a debenture with a principal
      amount of $900,000 was converted into 900,000 shares of common stock. The
      unamortized discount on the respective convertible debenture of $378,722 was
      charged to accretion expense. During the year ended January 31, 2007, debentures
      with a principal amount of $2,350,000 were converted into 2,350,000 shares
      of
      common stock. The unamortized discount on the respective convertible debentures
      of $1,049,247 was charged to accretion expense. During the nine month period
      ended October 31, 2007, debentures with a principal amount of $2,750,000 was
      converted into 2,750,000 shares of common stock. The unamortized discount on
      the
      respective convertible debenture of $151,815 was charged to accretion expense.
      As at October 31, 2007, all of these $6,000,000 convertible debentures have
      been
      converted into common stock of the Company. On June 21, 2007, accrued interest
      of $628,058 was paid.





(b)
            On
                December 8, 2005, the Company entered into a Securities Purchase
                Agreement
                with a single investor pursuant to which the investor purchased 5%
                secured
                convertible debentures in the aggregate principal amount of $15,000,000.
                The gross proceeds of this financing will be received as
                follows:





(i)
            $5,000,000
                was received on closing;





(ii)
            $5,000,000
                was received on the second business day prior to the filing date
                of the
                SB-2 Registration Statement; and





(iii)
            $5,000,000
                was received on the fifth business day following the effective date
                of the
                SB-2 Registration Statement





The
      Company agreed to pay an 8% fee on the receipt of each installment, and a
      $15,000 structuring fee. The convertible debentures mature on the third
      anniversary of the date of issue (the “Maturity Date”) and bear interest at 5%
      per annum. The Company is not required to make any payments until the Maturity
      Date. The investor may convert, at any time, any amount outstanding under the
      convertible debentures into shares of common stock of the Company at a
      conversion price per share equal to the lesser of $5.00 or 90% of the average
      of
      the three lowest daily volume weighted average prices of the common stock,
      as
      quoted by Bloomberg, LP, of the ten trading days immediately preceding the
      date
      of conversion.





The
      Company, at its option has the right, with three business days advance written
      notice, to redeem a portion or all amounts outstanding under these convertible
      debentures prior to the Maturity Date provided that the closing bid price of
      the
      common stock is less than $5.00 at the time of the redemption. In the event
      of
      redemption, the
      Company is
      obligated to pay an amount equal to the principal amount being redeemed plus
      a
      20% redemption premium, and accrued interest.







13


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


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


(Unaudited)


**8.**
            **Convertible
                Debentures (continued)**





In
      connection with the Purchase Agreement, the
      Company also
      entered into a registration rights
      agreement (the
“Registration Rights
      Agreement ”)
      providing for the filing of an SB-2 Registration Statement (the “Registration
      Statement”) with the U.S. Securities and Exchange Commission (“SEC”) registering
      the common stock issuable upon conversion of the convertible debentures. The
      Company was
      obligated to use its best efforts to cause the Registration Statement to be
      declared effective no later than June
      30,
      2006 and to
      insure that the Registration Statement remains in effect until all of the shares
      of common stock issuable upon conversion of the convertible debentures have
      been
      sold. In the event of a default of its obligations under the Registration Rights
      Agreement ,
      including its agreement to file the Registration Statement with the SEC no
      later
      than January
      22, 2006 ,
      or if
      the Registration Statement was not declared effective by June
      30,
      2006 ,
      it is
      required pay to the investor, as liquidated damages, for each month that the
      Registration Statement has not been filed or declared effective, as the case
      may
      be, either a cash amount or shares of common stock equal to 2% of the liquidated
      value of the convertible debentures. The Company filed an SB-2 Registration
      Statement on January 18, 2006 that was declared effective May 26,
      2006.





The
      investor has agreed to restrict its ability to convert the convertible
      debentures and receive shares of the
      Company ’s
      common
      stock such that the number of shares of common stock held by the investor in
      the
      aggregate and its affiliates after such conversion or exercise does not exceed
      4.9% of the then issued and outstanding shares of the
      Company ’s
      common
      stock.





In
      connection with the Securities Purchase Agreement, the
      Company and each
      of its subsidiaries executed
      security agreements (the “Security Agreements”) in favor of the investor
      granting them a first priority security interest in all of the Company’s goods,
      inventory, contractual rights and general intangibles, receivables, documents,
      instruments, chattel paper, and intellectual property. The Security Agreements
      state that if an event of default occurs under the convertible debentures or
      Security Agreements, the investor has the right to take possession of the
      collateral, to operate the Company’s business using the collateral, and have the
      right to assign, sell, lease or otherwise dispose of and deliver all or any
      part
      of the collateral, at public or private sale or otherwise to satisfy the
      Company’s obligations under these agreements.





In
      accordance with EITF 98-5 *“Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios”,* the
      Company recognized the value of the embedded beneficial conversion feature
      of
      $2,697,057 as additional paid-in capital and an equivalent discount which will
      be expensed over the term of convertible debentures. During the year ended
      January 31, 2007, debentures with a principal amount of $1,750,000 were
      converted into 943,336 shares of common stock. The unamortized discount on
      the
      respective convertible debentures of $48,980 was charged to accretion expense.
      During the nine month period ended October 31, 2007, debentures with a principal
      amount of $3,500,000 were converted into 2,016,939 shares of common stock.
      The
      unamortized discount on the respective convertible debentures of $89,526 was
      charged to accretion expense. The carrying value of the convertible debentures
      will be accreted to the face value of $9,750,000 to maturity. To October 31,
      2007, accrued interest of $1,120,240 (January 31, 2007 - $693,699) has been
      included in accrued liabilities. To October 31, 2007, accumulated accretion
      of
      $1,734,428 (January 31, 2007 - $1,697,551) has increased the carrying value
      of
      the convertible debentures to $8,787,384 (January 31, 2007 - $11,552,449).





(c)
            On
                December 28, 2005, the Company entered into a Securities Purchase
                Agreement with two accredited investors providing for the sale bythe
                Companyto
                the investors of 7.5% convertible debentures in the aggregate principal
                amount of $10,000,000, of which $5,000,000 was advanced immediately,
                and
                1,250,000 warrants (the “Warrants”) to purchase 1,250,000 shares ofthe
                Company’s
                common stock, exercisable at a price of $5.00 per share untilDecember
                28,2006,
                of which 625,000 were issued. The second installment of $5,000,000
                and
                625,000 warrants was advanced on January 18, 2006, upon the filing
                of an
                SB-2 Registration Statement bythe
                Companywith the SEC. The warrants expired in full without exercise during
                the
                fiscal year ended January 31, 2007.





The
      convertible debentures mature on the third anniversary of the date of issuance
      (the “Maturity Date”) and bear interest at the annual rate of 7.5%. The
      Company is not
      required to make any payments until the Maturity Date. The investors may
      convert, at any time, any amount outstanding under the convertible debentures
      into shares of common stock of the
      Company at a
      conversion price per share of $4.00.





In
      connection with the Securities Purchase Agreement, the
      Company also
      entered into a registration rights
      agreement (the
“Registration Rights Agreement”) providing for the filing of a registration
      statement (the “Registration Statement”) with the SEC registering the common
      stock issuable upon conversion of the convertible debentures and Warrants. The
      Company was
      obligated to use its best efforts to cause the Registration Statement to be
      declared effective no later than May
      28,
      2006 and to
      insure that the registration statement remains in effect until all of the shares
      of common stock issuable upon conversion of the convertible debentures have
      been
      sold. In the event of a default of its obligations under the Registration Rights
      Agreement, including its agreement to file the Registration Statement with
      the
      SEC no later than February
      26, 2006 ,
      or if
      the Registration Statement was not declared effective by June 30,
      2006 ,
      the
      Company is required pay to the investors, as liquidated damages, for each month
      that the Registration Statement has not been filed or declared effective, as
      the
      case may be, a cash amount equal to 1% of the liquidated value of the
      convertible debentures. The Company filed an SB-2 Registration Statement on
      January 18, 2006 that was declared effective May 25, 2006.





Each
      investor has agreed to restrict its ability to convert the convertible
      debentures or exercise the Warrants and receive shares of the
      Company ’s
      common
      stock such that the number of shares of common stock held by them in the
      aggregate and their affiliates after such conversion or exercise does not exceed
      4.99% of the then issued and outstanding shares of the
      Company ’s
      common
      stock.




14


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)


**8.**
            **Convertible
                Debentures (continued)**





In
      accordance with EITF 98-5 *“Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios”,* the
      Company recognized the value of the embedded beneficial conversion feature
      of
      $6,609,128 as additional paid-in capital and an equivalent discount which will
      be expensed over the term of the convertible debentures. In addition, in
      accordance with EITF 00-27 *“Application
      of Issue No. 98-5 to Certain Convertible Instruments”* ,
      the
      Company has allocated the proceeds of issuance between the convertible debt
      and
      the detachable warrants based on their relative fair values. Accordingly, the
      Company recognized the fair value of the detachable warrants of $3,390,872
      as
      additional paid-in capital and an equivalent discount against the convertible
      debentures. The Company will record further interest expense over the term
      of
      the Convertible Debentures of $10,000,000 resulting from the difference between
      the stated value and carrying value at the date of issuance. The carrying value
      of the convertible debentures will be accreted to the face value of $10,000,000
      to maturity. To October 31, 2007, accrued interest of $1,354,108 (January 31,
      2007 - $793,150) has been included in accrued liabilities, and accumulated
      accretion expense of $6,018,265 (January 31, 2007 - $3,525,114) increased the
      carrying value of the convertible debentures to $6,018,265 (January 31, 2007
      -
      $3,525,114).





**9.**
            **Common
                Stock**





Shares
            
            Common
                Stock
            
            Additional
                Paid-In Capital$
            
            $January
                31, 2006
            
            
            19,182,530
            
            
            192
            
            
            27,623,110Conversion
                of debentures
            
            
            3,293,336
            
            
            33
            
            
            4,239,912Stock
                based compensation
            
            
            —
            
            
            —
            
            
            1,338,686Donated
                capital
            
            
            —
            
            
            —
            
            
            11,400January
                31, 2007
            
            
            22,475,866
            
            
            225
            
            
            33,213,108Conversion
                of debentures (c)
            
            
            4,766,939
            
            
            47
            
            
            6,249,953Private
                placement (d)
            
            
            10,412,000
            
            
            104
            
            
            20,823,896Issuance
                costs (d)
            
            
            —
            
            
            —
            
            
            (1,515,994
            )Investor
                relations services (e)
            
            
            50,000
            
            
            1
            
            
            108,499Stock-based
                compensation (a, b and Note 10)
            
            
            —
            
            
            —
            
            
            2,958,479October
                31, 2007
            
            
            37,704,805
            
            
            377
            
            
            61,837,941





(a)
            On
                May 16, 2005, the Company issued 4,000,000 shares of common stock
                to the
                President of the Company at $0.01 per share for proceeds of $40,000.
                As
                the shares were issued for below fair value, a discount on the issuance
                of
                shares of $4,160,000 was recorded as deferred compensation. During
                the
                year ended January 31, 2007, $2,080,000 was charged to operations.
                During
                the nine month period ended October 31, 2007, $606,667 was charged
                to
                operations.





(b)
            On
                June 2, 2005, the Company issued 2,000,000 shares of common stock
                to the
                President of the Company’s subsidiary at $0.01 per share for proceeds of
                $20,000. As the shares were issued for below fair value, a discount
                on the
                issuance of shares of $2,700,000 was recorded as deferred compensation.
                During the year ended January 31, 2007, $1,350,000 was charged to
                operations. During the nine month period ended October 31, 2007,
                $450,000
                was charged to operations.




15


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)






**9.**
            **Common
                Stock (continued)**





(c)
            During
                the nine months period ended October 31, 2007, the Company issued
                4,766,939 shares of common stock upon the conversion of $6,250,000
                of
                convertible notes. The date of issuance is shown on the table below.







Date
            
            
            Shares
            
            
            Common
                Stock
            
            
            Additional
                Paid-In Capital
            
            
            Total#
            
            
            $
            
            
            $
            
            
            $February
                20, 2007
            
            
            108,923
            
            
            1
            
            
            249,999
            
            
            250,000March
                6, 2007
            
            
            900,000
            
            
            9
            
            
            899,991
            
            
            900,000March
                7, 2007
            
            
            106,696
            
            
            1
            
            
            249,999
            
            
            250,000April
                11, 2007
            
            
            129,333
            
            
            1
            
            
            249,999
            
            
            250,000April
                30, 2007
            
            
            128,939
            
            
            1
            
            
            249,999
            
            
            250,000May
                4, 2007
            
            
            748,000
            
            
            7
            
            
            747,993
            
            
            748,000May
                11, 2007
            
            
            130,494
            
            
            2
            
            
            249,999
            
            
            250,000May
                21, 2007
            
            
            265,041
            
            
            3
            
            
            499,997
            
            
            500,000June
                15, 2007
            
            
            279,002
            
            
            3
            
            
            499,997
            
            
            500,000June
                21, 2007
            
            
            1,102,000
            
            
            11
            
            
            1,101,989
            
            
            1,102,000June
                25, 2007
            
            
            138,742
            
            
            1
            
            
            249,998
            
            
            250,000June
                28, 2007
            
            
            138,566
            
            
            1
            
            
            249,999
            
            
            250,000September
                25, 2007
            
            
            591,203
            
            
            6
            
            
            749,994
            
            
            750,000Total
            
            
            4,766,939
            
            
            47
            
            
            6,249,953
            
            
            6,250,000





(d)
            On
                February 26, 2007, the Company issued 10,412,000 shares of common
                stock
                pursuant to a private placement for net proceeds of $19,308,006 after
                issue costs of $1,515,994. Pursuant to the terms of sale, the Company
                agreed to cause a resale registration statement covering the common
                stock
                to be filed no later than 30 days after the closing and declared
                effective
                no later than 120 days after the closing. If the Company fails to
                comply
                with the registration statement filing or effective date requirements,
                it
                will be required to pay the investors a fee equal to 1% of the aggregate
                amount invested by the purchasers per each 30 day period of delay,
                not to
                exceed 10%. On March 14, 2007, the registration statement was declared
                effective. In connection with the financing the Company paid the
                placement
                agents of the offering a cash fee of 6.5% of the proceeds of the
                offering.





(e)
            On
                June 26, 2007, the Company issued 50,000 shares of common stock at
                a fair
                value of $108,500 for investor relation services
                rendered.






**10.**
            **Stock
                Options**





Effective
      August 5, 2005, the Company approved the 2005 Incentive Stock Plan (the “2005
      Plan”) to issue up to 2,000,000 shares of common stock. Pursuant to the 2005
      Plan, stock options vest 20% upon granting and 20% every six months. As at
      October 31, 2007, the Company had 320,000 stock options available for granting
      pursuant to the 2005 Plan. The 2005 Plan allows for the granting of stock
      options at a price of not less than fair value of the stock and for a term
      not
      to exceed five years. The total number of options granted to any person shall
      not exceed 5% of the issued and outstanding common stock of the
      Company.





Effective
      August 17, 2007, the Company approved the 2007 Incentive Stock Plan (the “2007
      Plan”) to issue up to 2,000,000 shares of common stock. Pursuant to the 2007
      Plan, stock options vest 20% upon granting and 20% every six months. As at
      October 31, 2007, the Company had 1,300,000 stock options available for granting
      pursuant to the 2007 Plan. The 2007 Plan allows for the granting of stock
      options at a price of not less than fair value of the stock and for a term
      not
      to exceed five years. The total number of options granted to any person shall
      not exceed 5% of the issued and outstanding common stock of the
      Company.





The
      weighted average grant date fair value of stock options granted during the
      nine
      month periods ended October 31, 2007 and 2006 was $1.21 and $2.96 per share,
      respectively. No stock options were exercised during the nine month periods
      ended October 31, 2007 and 2006. During the nine month period ended October
      31,
      2007 and 2006, the Company recorded stock-based compensation of $1,901,812
      and
      $2,097,981, respectively, as general and administrative expense.




16


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)





**10.**
              **Stock
                  Options (continued)**


A
      summary
      of the Company’s stock option activity is as follows:





Number
                of Options
            
            Weighted
                Average Exercise Price
              $
            
            Weighted
                Average Remaining Contractual Term
            
            Aggregate
                Intrinsic Value
              $Outstanding,
                January 31, 2007
            
            
            1,630,000
            
            
            3.31Granted
            
            
            1,250,000
            
            
            2.02Forfeited
            
            
            (500,000
            )
            
            3.14Outstanding,
                October 31, 2007
            
            
            2,380,000
            
            
            2.67
            
            
            3.93
            
            
            —Exercisable,
                October 31, 2007
            
            
            1,280,000
            
            
            3.16
            
            
            3.31
            
            
            —





The
      fair
      value of each stock option grant was estimated on the date of the grant using
      the Black-Scholes option pricing model with the following weighted average
      assumptions:





Nine
                Month
              PeriodEnded
              October
                31, 2007Expected
                dividend yield
            
            
            0
            %Expected
                volatility
            
            
            129
            %Expected
                life (in years)
            
            
            2.5Risk-free
                interest rate
            
            
            4.39
            %





As
      at
      October 31, 2007, there was $1,520,844 (January 31, 2007 - $2,187,094) of total
      unrecognized compensation costs related to nonvested share-based compensation
      arrangements granted under the 2005 Plan and 2007 Plan which are expected to
      be
      recognized over a weighted-average period of 20 months. The total fair value
      of
      shares vested during the nine months ended October 31, 2007 and 2006 was
      $1,901,812 and $2,097,981, respectively.





A
      summary
      of the status of the Company’s nonvested shares as of October 31, 2007, and
      changes during the nine month period ended October 31, 2007, is presented
      below:





Number
                of Shares
            
            Weighted-Average
              Grant-Date
              Fair
                Value
              $Nonvested
                at January 31, 2007
            
            
            782,000
            
            
            2.80Granted
            
            
            1,250,000
            
            
            1.21Forfeited
            
            
            (120,000
            )
            
            2.35Vested
            
            
            (812,000
            )
            
            2.34Nonvested
                at October 31, 2007
            
            
            1,100,000
            
            
            1.38







**11.**
                **Share
                    Purchase Warrants**


The
      following table summarizes the continuity of the Company’s share purchase
      warrants:







Number
                of
              Warrants
            
            Weighted
                average
              exercise
                price
              $Balance,
                January 31, 2007 and October 31, 2007
            
            
            6,000,000
            
            
            1.00






17


Triangle
        Petroleum Corporation
 (An
        Exploration Stage Company)
 Notes
        to
        the Consolidated Financial Statements
 (Expressed
        in U.S. dollars, except as noted)
 (Unaudited)





**11.**
                  **Share
                      Purchase Warrants
                      (continued)**





As
      at
      October 31, 2007, the following share purchase warrants were
      outstanding:





Number
                of Warrants
            
            Exercise
                Price
            
            Expiry
                Date6,000,000
            
            $
                1.00
            
            June
                15, 2008







**12.**
                    **Commitments**


On
      February 28, 2007, the Company entered into a lease agreement commencing May
      1,
      2007 for office premises for a 6 year term expiring May 1, 2013. Annual rent
      under the new lease is payable at $219,829 (Cdn$207,680) for the first three
      years and $228,073 (Cdn$215,468) for the remaining three years. The Company
      must
      also pay its share of building operating costs and taxes. During the nine months
      ended October 31, 2007, the Company paid rent expense of $139,304 (2006 -
      $39,680). Future minimum lease payments over the next five fiscal years are
      as
      follows:





2008
            
            $
            55,0002009
            
            
            220,0002010
            
            
            220,0002011
            
            
            220,0002012
            
            
            220,000$
            935,000





**13.**
                      **Segment
                          Disclosures**





The
      Company operates as one operating segment which is the acquisition, exploration
      and development of oil and gas resource properties. The Chief Executive Officer
      is the Company’s Chief Operating Decision Maker (CODM) as defined by SFAS 131,
“ *Disclosure
      about Segments of an Enterprise and Related Information.”* The
      CODM
      allocates resources and assesses the performance of the Company based on the
      results of operations.





**14.**
                        **Subsequent
                            Events**




a)
            Subsequent
                to October 31, 2007, the Company received notices of conversion to
                issue
                3,039,725 shares of common stock for the conversion of convertible
                debentures with an aggregate principal amount of
                $3,649,860.





b)
            Subsequent
                to October 31, 2007, the Company received proceeds of $6,000,000
                related
                to the exercise of all 6,000,000 share purchase warrants which resulted
                in
                the issuance of 6,000,000 shares of common
                stock.





18


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





*This
      report includes certain forward-looking statements. Forward-looking statements
      are statements that predict the occurrence of future events and are not based
      on
      historical fact. Forward-looking statements may be identified by the use of
      forward-looking terminology, such as “may”, “shall”, “will”, “could”, “expect”,
“estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”,
“continue”, or similar terms, variations of those terms or the negative of those
      terms. We have written the forward-looking statements specified in the following
      information on the basis of assumptions we consider to be reasonable. However,
      we cannot predict our future operating results. Any representation, guarantee,
      or warranty should not be inferred from those forward-looking statements.*




*The
      assumptions we used for purposes of the forward-looking statements specified
      in
      the following information represent estimates of future events and are subject
      to uncertainty in economic, legislative, industry, and other circumstances.
      As a
      result, judgment must be exercised in the identification and interpretation
      of
      data and other information and in their use in developing and selecting
      assumptions from and among reasonable alternatives. To the extent that the
      assumed events do not occur, the outcome may vary substantially from anticipated
      or projected results. Accordingly we express no opinion on the achievability
      of
      those forward-looking statements. We cannot guarantee that any of the
      assumptions relating to the forward-looking statements specified in the
      following information are accurate. We assume no obligation to update any such
      forward-looking statements.*




**Overview**





Prior
      to
      May 2005, we were known as Peloton Resources Inc., a mining exploration company.
      Peloton was actively searching for ore bodies containing gold in British
      Columbia. A consultant was hired to assess the economic viability of exploring
      for and developing gold reserves on Peloton’s properties. Based upon his report,
      Peloton decided to abandon all mining activities and to commence shifting
      towards an oil and gas exploration company. In connection with the shift in
      operational focus, we changed our name to Triangle Petroleum
      Corporation.





The
      changeover from a mining to an oil and gas exploration company has taken place
      over the past two years, during one of the strongest markets for oil and natural
      gas. The average monthly price for West Texas Intermediate (WTI) crude oil
      and
      natural gas (Henry Hub Nymex), currently, as compared to the past, is as
      follows:














19










Although
      these strong commodity prices have resulted in extremely competitive conditions
      for the supply of products and services for exploration companies, our outlook
      remains positive. Despite these strong fundamentals, it should be noted that
      significant short term fluctuations in North American natural gas prices have
      occurred based upon seasonal weather patterns and gas storage levels. It should
      also be noted that actual prices received for oil and gas are typically less
      than the WTI and Henry Hub prices, respectively. This discount varies from
      time
      to time and is based on location, quality and other factors.




**Plan
      of Operations**





Since
      our
      inception, we have had the opportunity to screen various projects in a variety
      of geographic locations with numerous potential joint venture partners. The
      project areas outlined below were carefully selected based on our belief in
      balancing overall project risk against potential project returns and the
      anticipated time horizons required to achieve such returns. The three core
      project areas (Canadian Shale, Fayetteville Shale and Rocky Mountain
      Conventional Programs) represent distinctive exploration opportunities. In
      conjunction with our joint venture partners, we intend to execute our operating
      plan in order to realize the full value of the initial land base that has been
      established. The remaining two project areas (Barnett Shale and Western Canadian
      Programs) are currently designated as non-core due to existing market conditions
      related to land acquisition costs, drilling costs and completion
      costs.





**Eastern
      Canada - Canadian Shale Gas Program**





Over
      the
      last 21 months, a multi-disciplined geoscience team has screened prospective
      basins in Eastern Canada. The screening process includes an assessment of the
      geologic history for a given area, estimates of pressure and temperature
      profiles and a determination of the ability to fracture stimulate a prospective
      shale package. As a direct result of implementing this strategy, we have
      executed two farm-in agreements with a Canadian company to pursue two shale
      gas
      opportunities in Eastern Canada.





20


The
      first
      project covers approximately 68,000 gross acres in the Moncton sub-basin of
      New
      Brunswick, Canada. We are entitled to earn a 70% working interest in the block
      subsequent to the acquisition and evaluation of a seismic program and then
      electing to drill a test well no later than December 31, 2008. We believe this
      acreage to be located in a favorable geological setting based on technical
      work
      performed to date and drilling activity in the area. Additional laboratory
      measurements will be taken on core samples and drill cuttings, which are
      available from previously drilled conventional wells, to select our first
      drilling location.





The
      second agreement covers approximately 516,000 gross acres in the Windsor Area
      of
      Nova Scotia, Canada. We are entitled to earn a 70% working interest in the
      block
      subsequent to drilling and completing a test well no later than September 15,
      2008. Based on an extensive screening process and technical work performed
      to
      date, this area is also believed to be located in a highly favorable geological
      setting. Our current Windsor Basin exploration program is estimated to cost
      approximately $11 million. Laboratory measurements were taken on core samples
      and drill cuttings which are available from previously drilled conventional
      wells and two drilling locations were selected. The following is a summary
      of
      the two wells drilled in the Company's Windsor Basin land block.




The
      first
      well, Kennetcook #1, reached a total depth of 4,390 feet and was rig released
      on
      September 15, 2007 after running casing to total depth. Kennetcook #1 is located
      25 miles west of the community of Truro, Nova Scotia. This well was extensively
      cored over an interval of 1,150 feet. Based upon the preliminary log analysis
      and lab work, the primary zone of interest is approximately 350 feet thick
      and
      the secondary zone of interest is approximately 260 feet thick. Advanced well
      log data was acquired on this well and the data was integrated with the special
      core measurements performed by service companies with extensive unconventional
      shale gas expertise.


The
        second well, Kennetcook #2, reached a total depth of 6,350 feet and was rig
        released on October 13, 2007 after running casing to total depth. Kennetcook
        #2
        is located approximately two miles north-west of Kennetcook #1 and was cored
        over an interval of 430 feet. Similar logging programs to Kennetcook #1 were
        performed and the integration with shale gas laboratory measurements was
        performed. Based upon preliminary log analysis, the primary shale zone in
        Kennetcook # 2 is approximately 500 feet thick.
 
 We
        have
        concluded that a comprehensive hydraulic fracture stimulation program is
        warranted to assess the Horton Bluff deliverability. As such, a stimulation
        program design moved forward in October based on favorable laboratory
        measurements of rock properties, gas content and fluid compatibility. The
        design
        required two frac water holding ponds to be constructed, each with the capacity
        to hold up to 2.5 million gallons of fluid, and the Kennetcook #1 well to
        be
        completed first with the results of this operation used to guide the completion
        planning for Kennetcook #2.
 
 A
        large,
        slick water fracture stimulation program was performed in two stages on each
        well during the later part of November and early December 2007. The Kennetcook
        #1 first stage frac used 850,000 gallons of slick water with 560,000 pounds
        of
        sand proppant volumes, and the second stage frac used 660,000 gallons of
        water
        and 386,000 pounds of sand. The Kennetcook #2 first stage frac used 641,000
        gallons of slick water with 176,000 pounds of sand, and the second stage
        frac
        used 653,000 gallons of water 366,000 pounds of sand. Stimulations of this
        magnitude are in line with the current stimulations in the Barnett Shale
        of the
        Fort Worth Basin and the Fayetteville Shale of the Arkoma Basin.
 
 An
        aggressive seismic program was acquired during October 2007: the 25 square
        mile
        3-D program covers our initial target area over the Kennetcook wells and
        the 30
        mile 2-D program extends to another favorable area of the land block. Shot
        hole
        drilling for both the 3-D and the 2-D programs has been completed and all
        the
        data was recorded. The processing phase of the seismic program was finished
        in
        early December. Interpretation of this data is expected to occur over the
        next
        60-90 days. The first priority of the interpreted 3-D seismic program will
        be to
        select future well locations.
 
 The
        development of on-shore gas production in Nova Scotia is in a very early
        phase.
        We are currently in discussions with various marketing groups to communicate
        our
        aggressive exploration program initiatives that are in progress for the Windsor
        Basin of Nova Scotia. The gas currently marketed into the northeastern U.S.
        markets is being sold at a premium to other North American producing
        areas.
 
 **Arkoma
      Basin Arkansas - Fayetteville Shale Program**





We
      have
      entered into a new joint venture agreement with our operating partner, Kerogen
      Resources, Inc. ("Kerogen") of Houston, Texas in October 2007. The expanded
      joint-venture will build on the 20,000 net acres (34,000 gross acres) currently
      held in Conway, Pope and Faulkner Counties, Arkansas where both companies now
      hold an equal 50% working interest. The new joint venture includes a 52 township
      Area of Mutual Interest ("AMI") in Conway, Faulkner, Pope and Van Buren
      Counties, which covers a significant portion of the core producing areas of
      the
      Fayetteville. The term of this agreement is for three years during which time
      both companies expect to initiate an aggressive drilling program.





21


Under
      the
      terms of this new joint venture agreement, we are obligated to drill and
      complete one new net horizontal well. We will pay 67% of the capped capital
      costs to earn a 50% interest. All future operations under the joint venture
      will
      be shared on an equal basis. The noted drilling commitment is a replacement
      for
      a previous drilling commitment on the acreage originally acquired by both
      companies. We reimbursed Kerogen for actual land costs which totaled
      $458,000.





Currently,
      one vertical test Fayetteville well has been drilled in Conway County, on a
      location covered by a recently acquired 12 square mile proprietary 3-D seismic
      survey. An adjacent second 12 square mile proprietary 3-D seismic survey has
      been shot and is currently being processed and merged with the first survey.
      Kerogen, the operator, advises that completion of this vertical test well
      remains a high priority. This completion will be beneficial for providing key
      reservoir parameters needed to assist both Kerogen and us in horizontal drilling
      programs in the AMI.





**States
      of Colorado, Montana and Wyoming - Rocky Mountain Program**





We
      have
      embarked on a joint venture with Hunter Energy LLC of Denver, Colorado. We
      made
      an initial commitment to participate in the drilling of three projects. We
      have
      a 25% working interest in the three Hunter Energy projects. The project areas
      are geographically located in northwestern Colorado, southwestern Wyoming,
      and
      northern Montana. The gross acreage position in the three areas is approximately
      77,000 acres. We have advanced approximately $3.8 million dollars in land,
      prospect fees and drilling costs relating to this project.





Although
      the initial test well in Colorado was not successful, plans for this project
      include working with area operators to continue the exploration program. We
      commenced a oil exploration program in southwestern Wyoming in September 2007.
      We pay 33% of the costs for a 25% working interest. We drilled a 2,000 foot
      test
      well into the Nugget Sandstone formation. We were targeting a conventional
      oil
      reservoir on this 17,000 gross acre prospect in Lincoln County, Wyoming. Based
      on the data collected to date, the well will not be commercially viable.
      Drilling on the Montana project is anticipated to commence in early to mid
      2008
      with consideration being given to service industry equipment availability and
      prevailing short-term winter weather conditions. It is anticipated that our
      share of costs to drill these two wells will be approximately $1.9
      million.





**Greater
      Fort Worth Basin Texas - Barnett Shale Program (non-core
      project)**





We
      participated in a five-county joint venture program with Kerogen where we earned
      working interests ranging between 6% and 27%. Approximately 12,400 gross acres
      have been leased. As of October 31, 2007, we have expended approximately $2.5
      million in prospect fees, land costs and, geological and geophysical
      expenditures. In July 2007, we sold our working interest position (27%) of
      approximately of 12,100 gross acres of undeveloped acreage and received proceeds
      of $984,000. Our investment in this land position was approximately $1.9
      million. The remaining unsold acreage contains our four producing wells which
      we
      participated in at a lower working interest (approximately 6%). The four wells
      are currently producing at various rates. The operator of these wells has
      commenced voluntary bankruptcy proceedings. As a result, we have not received
      our monthly production revenue since January 2007; however the amounts owing
      to
      us have been set aside by the bankruptcy trustee in a separate bank account.
      In
      addition, we continue to receive monthly statements detailing our share of
      production revenue and related production royalties and operating expenses.
      We
      spent approximately $1.2 million drilling and completing these four wells.





In
      late
      2006, we participated in four Barnett Shale gas wells with another joint venture
      at working interests ranging between 11% and 15%. We have commenced production
      from two of the first four horizontal wells (Hood County) and the other two
      wells (Parker County) have been drilled and were completed and placed on
      production in late November 2007. We have spent approximately $1.6 million
      on
      these four wells to date.





**Alberta
      Canada Deep Basin - Western Canadian Program (non-core
      project)**





We
      originally licensed a 120 square mile seismic data set, at a cost of
      approximately $1.3 million, to assist in the generation of the most prospective
      drilling sites. To date, we have participated in drilling and/or completing
      eight Deep Basin wells at a total cost of approximately $7.0 million net to
      us.
      These eight wells were drilled as part of four different joint ventures with
      varying working interests.





22


We
      have
      commenced production from two of eight wells. The first well located in the
      Kakwa Area has been tested at an initial rate of 3.6 mmcfpd or 600 BOED (barrels
      of oil equivalent per day) and it is expected to produce at 2.2 mmcfd starting
      in the fourth quarter of calendar 2007. We paid 20% of the well costs for an
      18%
      interest before payout (and 12% after payout). The second well is located in
      the
      Wapiti Area and we have an approximate 35% working interest in this well.
      Subsequent to completion, the well was connected to a nearby pipeline and
      initial production rates ranged from 0.4 to 0.6 mmcfpd or 60 to 100 BOED. The
      third well was also drilled in the Wapiti Area and we have a 50% interest in
      this well that was testing the Cadomin and Falher zones. The Cadomin zone was
      completed but tested wet and the Falher zone tested gas but at rates that were
      uneconomic to tie-in this past winter season.





Of
      the
      remaining six wells drilled by us, one of the wells tested fresh water, with
      no
      natural gas present. Two other wells tested gas but at rates that that were
      uneconomic to warrant a pipeline tie-in based on today’s natural gas pricing
      environment. The final three wells were taken over by a new operator during
      mid
      2006 and we are waiting for the new operator to propose a potential completion
      strategy for these wells.





**Results
      of Operations for the three and nine months ended October 31, 2007 compared
      to
      the three and nine months ended October 31, 2006**





***Daily
      Sales Volumes, Working Interest before royalties***





Three
                Months Ended
              October
                31,
            
            Nine
                Months Ended
              October
                31,2007
            
            2006
            
            2007
            
            2006Barnett
                Shale in Texas, USA
            
            
            Mcfpd
            
            
            333
            
            
            60
            
            
            193
            
            
            20Deep
                Basin in Alberta, Canada
            
            
            Mcfpd
            
            
            247
            
            
            —
            
            
            127
            
            
            —Total
                Company
            
            
            Mcfpd
            
            
            580
            
            
            60
            
            
            320
            
            
            20Total
                Company
            
            
            Boepd
            
            
            97
            
            
            10
            
            
            53
            
            
            3





***Net
      Operating Results***





Three
                Months Ended
              October
                31,
            
            Nine
                Months Ended
              October
                31,2007
            
            2006
            
            2007
            
            2006Volumes
            
            
            Mcf
            
            
            53,516
            
            
            5,481
            
            
            87,492
            
            
            5,481Price
            
            
            $/Mcf
            
            
            5.77
            
            
            4.48
            
            
            6.28
            
            
            4.47Revenue
            
            
            
            
            $
            308,613
            
            $
            24,540
            
            $
            549,554
            
            $
            24,540Royalties
            
            
            
            
            
            116,981
            
            
            —
            
            
            164,695
            
            
            —Revenue,
                net of royalties
            
            
            
            
            
            191,632
            
            
            24,540
            
            
            384,859
            
            
            24,540Production
                expenses
            
            
            
            
            
            146,396
            
            
            —
            
            
            220,199
            
            
            —Net
            
            
            
            
            $
            45,236
            
            $
            24,540
            
            $
            164,660
            
            $
            24,540





For
      the
      three and nine month periods ended October 31, 2007, we realized $308,613 and
      $549,554, respectively, in revenue from sales of natural gas and natural gas
      liquids, as compared to $24,540 for the comparable periods in 2006. This revenue
      was the result of production from six small working interest wells located
      in
      the Barnett Shale in Texas that came on production in the three months ended
      October 31, 2006 and two wells located in the Deep Basin of Alberta that came
      on
      production in the three months ended July 31, 2007. Royalties related to this
      revenue totaled $116,981 and $164,695 (38% and 30% of revenue) for the three
      and
      nine month periods ended October 31, 2007, respectively, as compared to $nil
      for
      the comparable periods in 2006. Production expenses related to this revenue
      totaled $146,396 and $220,199 ($16.42/Boe and $15.11/Boe) for the three and
      nine
      month periods ended October 31, 2007, respectively, as compared to $nil for
      the
      comparable periods in 2006.


23




***Depletion,
      Depreciation and Accretion (“DD&A”)***





Three
                Months Ended October 31,
            
            Nine
                Months Ended October 31,2007
            
            2006
            
            2007
            
            2006DD&A
                - oil and gas properties
            
            $
            151,327
            
            $
            7,590
            
            $
            391,884
            
            $
            19,828Depreciation
                - property and equipment
            
            
            9,178
            
            
            24,375
            
            
            30,792
            
            
            24,375Total
            
            $
            160,505
            
            $
            31,965
            
            $
            422,676
            
            $
            44,203Total
                per BOE
            
            $
            18.00
            
            $
            34.99
            
            $
            28.99
            
            $
            48.39





Due
      to
      the startup of production in the three months ended October 31, 2006, depletion
      on the proven oil and gas properties was calculated and expensed at $34.99/BOE
      in the three months ended October 31, 2006 compared to $18.00 for the comparable
      period of 2007. The decrease in the depletion rate was due to a $2,946,000
      non-cash “ceiling test” impairment loss that was booked against proved
      properties under “full cost” accounting method in the three months ended July
      31, 2007, as discussed next.





Unproven
      property costs of $25,567,059 were excluded from costs subject to depletion
      in
      the current three and nine month periods.





***Impairment
      costs***





Three
                Months Ended October 31,
            
            Nine
                Months Ended October 31,2007
            
            2006
            
            2007
            
            2006Unproven
                property cost impairment:Alberta
                Deep Basin
            
            $
            4,604,726
            
            $
            1,041,852
            
            $
            4,604,726
            
            $
            1,086,789Texas
                Barnett shale
            
            
            —
            
            
            —
            
            
            945,403
            
            
            —Proved
                property cost impairmentAlberta
                Deep Basin
            
            
            —
            
            
            —
            
            
            1,208,000
            
            
            —Texas
                Barnett shale
            
            
            —
            
            
            —
            
            
            1,738,000
            
            
            —Total
            
            $
            4,604,726
            
            $
            1,041,852
            
            $
            8,496,129
            
            $
            1,086,789





We
      recognized unproven property cost impairments of $4,604,726 in the three months
      ended October 31, 2007 and $1,041,852 in the three months ended October 31,
      2006
      related mainly to seismic purchase and drilling costs in the Alberta Deep Basin
      that management now considers a non-core asset. Also in the current year, we
      recognized an unproven property cost impairment loss of $945,403 related to
      land
      and geological and geophysical costs of $1,929,305 spent on 12,100 gross acres
      (27% working interest) in northeast Hill County of Texas that was sold for
      gross
      proceeds of $983,902 on July 18, 2007.





In
      the
      current year, we recognized proved property impairments (“ceiling test”
write-down) of $1,208,000 and $1,738,000 related to the Alberta Deep Basin
      and
      Barnett Shale projects, respectively, that management now considers non-core
      assets. These were mainly the result of low gas prices, higher costs to drill
      and complete the wells than anticipated and lower production and reserves than
      forecasted.


24


***General
      and Administrative (“G&A”)***





Three
                Months Ended October 31,
            Nine
                Months Ended October 31,2007
            2006
            2007
            2006Salaries,
                wages and consulting fees
            
            $
                412,276
            $
                375,105
            $
                1,035,518
            $
                802,191Other
                travel and office expense
            
            392,296
            151,331
            1,149,942
            797,480Stock-based
                compensation
            
            913,335
            1,108,336
            3,066,979
            4,670,481G&A
            
            $
                1,717,907
            $
                1,634,772
            $
                5,252,439
            $
                6,270,152





General
      and administrative expenses have decreased significantly in the nine months
      ended October 31, 2007 compared to the same period of 2006 primarily due to
      decreased stock-based compensation expense mainly as a result of shares issued
      to our executives that have now been fully recognized.





***Convertible
      debentures***





Carrying
      value of convertible debentures :





October
                31, 2007
            
            January
                31, 2007Issuance
                Date
            
            Face
                Value
            
            Discount
            
            Carrying
                Value
            
            Face
                Value
            
            Discount
            
            Carrying
                ValueJune
                14, 2005
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            2,750,000
            
            $
            515,626
            
            $
            2,234,374December
                8, 2005
            
            
            9,750,000
            
            
            962,616
            
            
            8,787,384
            
            
            13,250,000
            
            
            1,697,551
            
            
            11,552,449December
                28, 2005
            
            
            10,000,000
            
            
            3,981,735
            
            
            6,018,265
            
            
            10,000,000
            
            
            6,474,886
            
            
            3,525,114Total
                convertible debentures
            
            $
            19,750,000
            
            $
            4,944,351
            
            $
            14,805,649
            
            $
            26,000,000
            
            $
            8,688,063
            
            $
            17,311,937





Accretion
      of discounts on convertible debentures :





Three
                Months Ended October 31,
            
            Nine
                Months Ended October 31,Issuance
                Date
            
            2007
            
            2006
            
            2007
            
            2006June
                14, 2005
            
            $
            —
            
            $
            837,500
            
            $
            515,626
            
            $
            2,506,250December
                8, 2005
            
            
            250,120
            
            
            240,596
            
            
            734,935
            
            
            670,946December
                28, 2005
            
            
            840,183
            
            
            840,183
            
            
            2,493,151
            
            
            2,493,151Total
                accretion of discounts
            
            $
            1,090,303
            
            $
            1,918,279
            
            $
            3,743,712
            
            $
            5,670,347





Accretion
      of discounts on convertible debentures deceased in the three and nine months
      periods ended October 31, 2007 compared to the comparable periods of 2006 due
      primarily to the June 14, 2005 debenture discounts being fully converted as
      at
      June 2007.





Interest
      expense :





Three
                Months Ended October 31,
            
            Nine
                Months Ended October 31,Issuance
                Date
            
            2007
            
            2006
            
            2007
            
            2006June
                14, 2005
            
            $
            —
            
            $
            73,556
            
            $
            18,918
            
            $
            251,486December
                8, 2005
            
            
            128,630
            
            
            185,650
            
            
            426,541
            
            
            474,690December
                28, 2005
            
            
            189,041
            
            
            189,042
            
            
            560,959
            
            
            560,960Total
                interest expense
            
            $
            317,671
            
            $
            448,248
            
            $
            1,006,418
            
            $
            1,287,136





Interest
      expense deceased in the three and nine months periods ended October 31, 2007
      compared to the comparable periods of 2006 due primarily to the June 14, 2005
      convertible debentures being fully converted as at June 2007.


25


***Oil
      and gas property expenditures***








Three
                Months Ended
              October
                31,
            
            Nine
                Months Ended
              October
                31,2007
            
            2007Alberta
            
            
            106,807
            
            $
            1,263,946Arkansas
            
            
            1,260,572
            
            
            6,728,589East
                Coast (Nova Scotia and New Brunswick)
            
            
            7,282,495
            
            
            7,364,209Rocky
                Mountains (Colorado, Montana, Wyoming)
            
            
            313,477
            
            
            398,275Texas
            
            
            (670,404
            )
            
            732,717Total
                oil and gas expenditures
            
            $
            8,292,947
            
            $
            16,487,736





During
      the three months ended October 31, 2007, we spent $1,260,572 on the Fayetteville
      project in Arkansas mainly for land brokerage fees ($0.5 million) and seismic
      acquisition ($0.6 million) and $7,282,495 on the Nova Scotia shale gas project
      in the East Coast mainly for Kennetcook #1 and #2 drilling ($3.9 million),
      preliminary Kennetcook #1 and #2 completions ($0.5 million) plus 2D and 3D
      seismic acquisition ($2.8 million).




***Liquidity
      and Capital Resources***





As
      at
      October 31, 2007, we had working capital of $2,556,859. For the nine months
      ended October 31, 2007, we had net cash outflow from operating activities of
      $3,187,993. Cash used in investing activities totaled $12,575,055 for the nine
      months ended October 31, 2007, which was used to fund our share of costs
      relating to the first two wells drilled in Nova Scotia, acquiring 2D and 3-D
      seismic in Nova Scotia, the first vertical well drilled in Fayetteville Shale
      Project in the Arkoma Basin, acquiring additional land and 3-D seismic in
      Fayetteville Shale Project, as well as the remaining capital commitments for
      the
      three Deep Basin gas wells drilled in Alberta during the winter of the prior
      year. Cash provided by financing activities totaled $19,308,006 for the nine
      months ended October 31, 2007. On February 26, 2007, we sold an aggregate of
      10,412,000 shares of our common stock at $2.00 per share to 24 accredited
      investors in a private placement transaction for aggregate proceeds of
      $20,824,000. Subsequent to October 31, 2007, we received proceeds of $6,000,000
      related to the exercise of all share purchase warrants issued in connection
      with
      our June 14, 2005 private placement which resulted in the issuance of 6,000,000
      shares of common stock.





We
      expect
      significant capital expenditures during the next 12 months for seismic data
      acquisitions, land and drilling rights acquisitions, drilling programs, overhead
      and working capital purposes. We believe we have sufficient funds to conduct
      our
      operations for the balance of fiscal 2008. If additional financing is required,
      there can be no assurance that it will be available in amounts or on terms
      acceptable to us, if at all.





By
      adjusting our operations to the 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 investments in order to continue operations until we
      are
      able to achieve positive operating cash flow. Additional investments are 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 U.S. 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.





26


To
      date,
      we have generated minimal revenues and have incurred operating losses in every
      quarter. Our registered independent auditors have stated in their report dated
      April 2, 2007, that we are an early exploration company, have not generated
      significant revenues from operations and have incurred significant losses since
      inception. These factors among others raise substantial doubt about our ability
      to continue as a going concern.





***December
      8, 2005 Secured Convertible Debenture Financing***





To
      obtain
      funding for our ongoing operations, we entered into a Securities Purchase
      Agreement with YA
      Global
      Investments, L.P. (formerly, Cornell Capital Partners, L.P.),
      an
      accredited investor, on December 8, 2005 for the sale of $15,000,000 in secured
      convertible debentures. They provided us with an aggregate of $15,000,000 as
      follows:





·
            $5,000,000
                was disbursed on December 8, 2005;





·
            $5,000,000
                was disbursed on January 17, 2006;
                and





·
            $5,000,000
                was disbursed on June 1, 2006.





As
      of
      December 6, 2007, $8,899,860 of the debenture had been converted into 6,000,000
      shares of common stock and $6,100,140 remained outstanding.





The
      secured convertible debentures bear interest at 5%, mature three years from
      the
      date of issuance, and are convertible into our common stock, at the selling
      stockholders' option, at the lower of (i) $5.00 or (ii) 90% of the average
      of
      the three lowest daily volume weighted average prices of our common stock,
      as
      quoted by Bloomberg, LP, of the 10 trading days immediately preceding the date
      of conversion. Accordingly, there is in fact no limit on the number of shares
      into which the secured convertible debentures may be converted. As of December
      6, 2007, the average of the three lowest intraday trading prices for our common
      stock during the preceding 10 trading days as quoted by Bloomberg, LP was $1.37
      and, therefore, the conversion price for the secured convertible notes was
      $1.233. Based on this conversion price, the $6,100,140 in secured convertible
      debentures remaining outstanding, excluding interest, were convertible into
      4,947,397 shares of our common stock. The sale of such a large number of shares
      of common stock could significantly deflate the market price of our common
      stock, which would have the further effect of requiring us to issue additional
      shares upon conversion of the secured convertible debentures. Depending on our
      stock price, the conversion of the secured convertible debentures could lead
      to
      the sale of potentially controlling amounts of shares of common
      stock.





The
      investor has contractually agreed to restrict its ability to convert the
      debentures and receive shares of our common stock such that the number of shares
      of common stock held by it and its affiliates after such conversion does not
      exceed 4.9% of the then issued and outstanding shares of common
      stock. **** In
      addition, the investor is restricted from converting more than $1,500,000 in
      principle amount of the debenture in any thirty day period, with no more than
      $1,000,000 of such amount at the variable market conversion price.





We
      have
      the right, at our option, with three business days advance written notice,
      to
      redeem a portion or all amounts outstanding under the secured convertible
      debentures prior to the maturity date provided that the closing bid price of
      our
      common stock, is less than $5.00 at the time of the redemption. In the event
      of
      a redemption, we are obligated to pay an amount equal to the principal amount
      being redeemed plus a 20% redemption premium, and accrued interest.





In
      connection with the Securities Purchase Agreement dated December 8, 2005, we
      granted the investor registration rights. We were obligated to use our best
      efforts to cause the registration statement to be declared effective no later
      than June 30, 2006 and to insure that the registration statement remains in
      effect until all of the shares of common stock issuable upon conversion of
      the
      secured convertible debentures have been sold. In the event of a default of
      our
      obligations under the Registration Rights Agreement, including if the
      registration statement is not declared effective by June 30, 2006, we are
      required pay to YA Global Investments, as liquidated damages, for each month
      that the registration statement has not been filed or declared effective, as
      the
      case may be, either a cash amount or shares of our common stock equal to 2%
      of
      the liquidated value of the secured convertible debentures. The registration
      statement was declared effective on May 25, 2006.





27


In
      connection with the Securities Purchase Agreement dated December 8, 2005, we
      and
      each of our subsidiaries executed security agreements in favor of the investor
      granting them a first priority security interest in all of our goods, inventory,
      contractual rights and general intangibles, receivables, documents, instruments,
      chattel paper, and intellectual property. The security agreements state that
      if
      an event of default occurs under the secured convertible debentures or security
      agreements, the investors have the right to take possession of the collateral,
      to operate our business using the collateral, and have the right to assign,
      sell, lease or otherwise dispose of and deliver all or any part of the
      collateral, at public or private sale or otherwise to satisfy our obligations
      under these agreements.





***December
      28, 2005 Convertible Debenture and Warrants
      Financing***





To
      obtain
      funding for our ongoing operations, we entered into Securities Purchase
      Agreements with two accredited investors on December 28, 2005 for the sale
      of
      (i) $10,000,000 in convertible debentures and (ii) warrants to purchase
      1,250,000 shares of our common stock. The two accredited investors, Bank Sal.
      Oppenheim Jr. & Cie., (Schweiz) AG and Centrum Bank each subscribed for 50%
      of the total offering.





The
      investors provided us with an aggregate of $10,000,000 as follows:





·
            $5,000,000
                was disbursed on December 28, 2005;
                and





·
            $5,000,000
                was disbursed on January 23, 2006.





Pursuant
      to the Securities Purchase Agreements, we issued to each investor 625,000
      warrants to purchase shares of common stock on December 28, 2005 and January
      23,
      2006. As of December 6, 2007, $10,000,000 of the issued debentures were
      outstanding and none had been converted.





The
      convertible debentures bear interest at 7.5%, mature three years from the date
      of issuance, and are convertible into our common stock, at the selling
      stockholders' option, at a rate of $4.00 per share. The investors have
      contractually agreed to restrict their ability to convert its debentures or
      exercise its warrants and receive shares of our common stock such that the
      number of shares of common stock held by it and its affiliates after such
      conversion or exercise does not exceed 4.99% of the then issued and outstanding
      shares of common stock. ****




In
      connection with the Securities Purchase Agreement dated December 28, 2005,
      we
      granted the investors registration rights. Pursuant to the registration rights
      agreement, if we did not have the registration statement declared effective
      on
      or before May 27, 2006, we were obligated to pay liquidated damages in the
      amount of 1.0% for each 30-day period or pro rata for any portion thereof
      following the date by which such registration statement should have been filed
      for which no registration statement is filed or should have been declared
      effective. The registration statement was declared effective on May 25,
      2006.





***February
      26, 2007 Private Placement***





On
      February 26, 2007, we sold an aggregate of 10,412,000 shares of our common
      stock
      at $2.00 per share to 24 accredited investors in a private placement transaction
      for aggregate proceeds of $20,824,000. Pursuant to the terms of sale, we agreed
      to cause a resale registration statement covering the common stock to be filed
      no later than 30 days after the closing and declared effective no later than
      120
      days after the closing. If we fail to comply with the registration statement
      filing or effective date requirements, we will be required to pay the investors
      a fee equal to 1% of the aggregate amount invested by the purchasers per each
      30
      day period of delay, not to exceed 10%. We paid the placement agents of the
      offering a cash fee of 6.5% of the proceeds of the offering. The registration
      statement was declared effective on March 14, 2007.





28


**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 regularly evaluate estimates and
      assumptions related to useful life and recoverability of long-lived assets,
      asset retirement obligations, stock-based compensation and deferred income
      tax
      asset valuation allowances. 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.





*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 unproved properties, geological expenditures and
      direct internal costs are capitalized into the full cost pool. As of October
      31,
      2007, we had two countries with proven reserves. For our proven 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 unproved 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 unproved 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”, which limits such costs to the aggregate of the estimated present value,
      discounted at 10%, of the future net revenues from proved reserves, based on
      current economic and operating conditions and the estimated value of unproven
      properties (adjusted for related income tax effects).





*Long-lived
      Assets*





In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets”, we test long-lived assets or asset groups for recoverability
      when events or changes in circumstances indicate that their carrying amount
      may
      not be recoverable. Circumstances which could trigger a review include, but
      are
      not limited to: significant decreases in the market price of the asset;
      significant adverse changes in the business climate or legal factors;
      accumulation of costs significantly in excess of the amount originally expected
      for the acquisition or construction of the asset; current period cash flow
      or
      operating losses combined with a history of losses or a forecast of continuing
      losses associated with the use of the asset; and current expectation that the
      asset will more likely than not be sold or disposed significantly before the
      end
      of its estimated useful life.





Recoverability
      is assessed based on the carrying amount of the asset and its fair value which
      is generally determined based on the sum of the undiscounted cash flows expected
      to result from the use and the eventual disposal of the asset, as well as
      specific appraisal in certain instances. An impairment loss is recognized when
      the carrying amount is not recoverable and exceeds fair value.





*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 obligation
      is based on the current 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.


29


*Revenue
      Recognition*




We
      recognize oil and gas revenue when production is sold to a purchaser at a fixed
      or determinable price, when delivery has occurred and title has transferred,
      and
      if collectibility of the revenue is probable.




*Stock-Based
      Compensation*





Prior
      to
      February 1, 2006, we accounted for stock-based awards under the recognition
      and
      measurement provisions of Accounting Principles Board Opinion (“APB”) No. 25,
“Accounting for Stock Issued to Employees” using the intrinsic value method of
      accounting. Effective February 1, 2006, we adopted the fair value recognition
      provisions of SFAS No. 123R “Share Based Payments”, using the modified
      prospective transition method. Under that transition method, compensation cost
      is recognized for all share-based payments granted prior to, but not yet vested
      as of February 1, 2006, based on the grant date fair value estimated in
      accordance with the original provisions of SFAS No. 123, and compensation cost
      for all share-based payments granted subsequent to February 1, 2006, based
      on
      the grant date fair value estimated in accordance with the provisions of SFAS
      123R. Results for prior periods have not been restated.





**Recently
      Issued Accounting Pronouncements**





In
      February 2007, the FASB issued SFAS No. 159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      Amendment of FASB Statement No. 115”* .
      This
      statement permits entities to choose to measure many financial instruments
      and
      certain other items at fair value. Most of the provisions of SFAS No. 159 apply
      only to entities that elect the fair value option. However, the amendment to
      SFAS No. 115 *“Accounting
      for Certain Investments in Debt and Equity Securities”* applies
      to all entities with available-for-sale and trading securities. SFAS No. 159
      is
      effective as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
      year that begins on or before November 15, 2007, provided the entity also elects
      to apply the provision of SFAS No. 157, *“Fair
      Value Measurements”* .
      The
      adoption of this statement is not expected to have a material effect on our
      future reported financial position or results of operations.





In
      September 2006, the FASB issued SFAS No. 158, *“Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans - an
      amendment of FASB Statements No. 87, 88, 106, and 132(R)”* .
      This
      statement requires employers to recognize the overfunded or underfunded status
      of a defined benefit postretirement plan (other than a multiemployer plan)
      as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net assets
      of a not-for-profit organization. This statement also requires an employer
      to
      measure the funded status of a plan as of the date of its year-end statement
      of
      financial position, with limited exceptions. The provisions of SFAS No. 158
      are
      effective for employers with publicly traded equity securities as of the end
      of
      the fiscal year ending after December 15, 2006. The adoption of this statement
      did not have a material effect on our financial statements.





In
      September 2006, the FASB issued SFAS No. 157, *“Fair
      Value Measurements”* .
      The
      objective of SFAS No. 157 is to increase consistency and comparability in fair
      value measurements and to expand disclosures about fair value measurements.
      SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any new
      fair
      value measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on our
      future reported financial position or results of operations.





30


In
      March
      2006, the FASB issued SFAS No. 156, *"Accounting
      for Servicing of Financial Assets, an amendment of FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities"* .
      This
      statement requires all separately recognized servicing assets and servicing
      liabilities be initially measured at fair value, if practicable, and permits
      for
      subsequent measurement using either fair value measurement with changes in
      fair
      value reflected in earnings or the amortization and impairment requirements
      of
      Statement No. 140. The subsequent measurement of separately recognized servicing
      assets and servicing liabilities at fair value eliminates the necessity for
      entities that manage the risks inherent in servicing assets and servicing
      liabilities with derivatives to qualify for hedge accounting treatment and
      eliminates the characterization of declines in fair value as impairments or
      direct write-downs. SFAS No. 156 is effective for an entity's first fiscal
      year
      beginning after September 15, 2006. The adoption of this statement did not
      have
      a material effect on our financial statements.





In
      February 2006, the FASB issued SFAS No. 155, *"Accounting
      for Certain Hybrid Financial Instruments-an amendment of FASB Statements No.
      133
      and 140"* ,
      to
      simplify and make more consistent the accounting for certain financial
      instruments. SFAS No. 155 amends SFAS No. 133, *"Accounting
      for Derivative Instruments and Hedging Activities"* ,
      to
      permit fair value re-measurement for any hybrid financial instrument with an
      embedded derivative that otherwise would require bifurcation, provided that
      the
      whole instrument is accounted for on a fair value basis. SFAS No. 155 amends
      SFAS No. 140, *"Accounting
      for the Impairment or Disposal of Long-Lived Assets"* ,
      to
      allow a qualifying special-purpose entity to hold a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument. SFAS No. 155 applies to all financial instruments acquired
      or issued after the beginning of an entity's first fiscal year that begins
      after
      September 15, 2006, with earlier application allowed. The adoption of this
      statement did not have a material effect on our future reported financial
      position or results of operations.


31


**ITEM
      3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





**Commodity
      Price Risk**





Because
      of our relatively low level of current oil and gas production, we are not
      exposed to a great degree of market risk relating to the pricing applicable
      to
      our oil and natural gas production. However, our ability to raise additional
      capital at attractive pricing, our future revenues from oil and gas operations,
      our future profitability and future rate of growth depend substantially upon
      the
      market prices of oil and natural gas, which fluctuate widely. We expect
      commodity price volatility to continue. We do not currently utilize hedging
      contracts to protect against commodity price risk. As our oil and gas production
      grows, we may manage our exposure to oil and natural gas price declines by
      entering into oil and natural gas price hedging arrangements to secure a price
      for a portion of our expected future oil and natural gas production.





**Operating
      Cost Risk**





We
      have
      experienced rising operating costs which impacts our cash flow from operating
      activities and profitability. We recognize that rising operating costs could
      continue and continued rising operating costs would negatively impact our oil
      and gas operations.




**Interest
      Rate Risk**





All
      of
      our debt has fixed interest rates, so consequently we are not exposed to cash
      flow or fair value risk from market interest rate changes on this debt.





**Financial
      Instruments**





The
      fair
      values of financial instruments, which include cash and cash equivalents, other
      receivables, accounts payable, accrued interest on convertible debentures and
      accrued liabilities approximate their carrying values due to the relatively
      short maturity of these instruments. The fair value of convertible debentures
      are estimated to approximate their carrying values based on borrowing rates
      currently available to us for debt with similar terms.





**Inflation
      and Changes in Prices**





The
      general level of inflation affects our costs. Salaries and other general and
      administrative expenses are impacted by inflationary trends and the supply
      and
      demand of qualified professionals and professional services. Inflation and
      price
      fluctuations affect the costs associated with exploring for and producing oil
      and natural gas, which has a material impact on our financial performance.





**Exchange
      Rate Risk**





The
      Canadian to U.S. dollar exchange rate has strengthened and may fluctuate over
      time. As product prices are generally U.S. dollar based, our exposure to
      currency exchange rate risks are primarily limited to Canadian capital
      expenditures, Canadian operating costs and the majority of our general and
      administrative expenses which are paid for in Canadian dollars.


32


**ITEM
      4. 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, 2007. 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.





Based
      on our evaluation, our chief executive officer and chief financial officer
      concluded that our disclosure controls and procedures are designed at a
      reasonable assurance level and are effective 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 accumulated and communicated to our
      management, including our chief executive officer and chief financial officer,
      as appropriate, to allow timely decisions regarding required disclosure.





*(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.


33


**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.**





There
      have been no material changes from the risk factors previously disclosed in
      Part I, “Risk Factors,” of the Company’s Annual Report on Form 10-KSB for
      the year ended January 31, 2007, other than to update certain financial
      information as of and for the three and/or nine months ended October 31, 2007
      regarding the following risk factors.





**We
      Have a History Of Losses Which May Continue, Which May Negatively Impact Our
      Ability to Achieve Our Business Objectives.**





We
      incurred net losses of $18,338,534 and $8,244,758 for the years ended January
      31, 2007 and 2006, respectively. For the nine months ended October 31, 2007,
      we
      incurred a net loss of $19,182,023. We cannot assure you that we can achieve
      or
      sustain profitability on a quarterly or annual basis in the future. Our
      operations are subject to the risks and competition inherent in the
      establishment of a business enterprise. There can be no assurance that future
      operations will be profitable. Revenues and profits, if any, will depend upon
      various factors, including whether we will be able to continue expansion of
      our
      revenue. We may not achieve our business objectives and the failure to achieve
      such goals would have an adverse impact on us.





**There
      Are a Large Number of Shares Underlying Our Convertible Debentures and Warrants
      That May be Available for Future Sale and the Sale of These Shares May Depress
      the Market Price of Our Common Stock.**





As
      of
      December 6, 2007, we had 46,744,530  shares
      of
      common stock issued and outstanding, secured convertible debentures issued
      on
      December 8, 2005, January 17, 2006 and June 1, 2006 outstanding that may be
      converted into 4,876,211 shares of common stock based on current market prices
      and convertible debentures issued on December 28, 2005 and January 23, 2006
      outstanding that may be converted into 2,500,000 shares of common stock. All
      of
      the shares, including all of the shares issuable upon conversion of the
      convertible debentures, may be sold without restriction. The sale of these
      shares may adversely affect the market price of our common stock.





**The
      Continuously Adjustable Conversion Price Feature of Our Secured Convertible
      Debentures Could Require Us to Issue a Substantially Greater Number of Shares,
      Which Will Cause Dilution to Our Existing
      Stockholders.**





Our
      obligation to issue shares upon conversion of our secured convertible debentures
      issued to YA Global Investments on December 8, 2005, January 17, 2006 and June
      1, 2006 is essentially limitless. The following is an example of the number
      of
      shares of our common stock that are issuable, upon conversion of our $6,100,140
      remaining face amount of secured convertible debentures (excluding accrued
      interest), based on market prices 25%, 50% and 75% below the market price,
      as of
      December 6, 2007 of $1.53.





With
            
            Number
            
            %
                of%
                Below
            
            Price
                Per
            
            Discount
            
            of
                Shares
            
            OutstandingMarket
            
            Share
            
            at
                10%
            
            Issuable
            
            Stock25%
            
            $
            1.1475
            
            $
            1.03275
            
            
            5,906,696
            
            
            11.22
            %50%
            
            $
            0.765
            
            $
            0.6885
            
            
            8,860,044
            
            
            15.93
            %75%
            
            $
            0.3825
            
            $
            0.34425
            
            
            17,720,088
            
            
            27.49
            %





As
      illustrated, the number of shares of common stock issuable upon conversion
      of
      our secured convertible debentures will increase if the market price of our
      stock declines, which will cause dilution to our existing stockholders.





34


**If
      We Are Required for any Reason to Repay Our Outstanding Convertible Debentures,
      We Would Be Required to Deplete Our Working Capital, If Available, Or Raise
      Additional Funds. Our Failure to Repay the Convertible Debentures, If Required,
      Could Result in Legal Action Against Us, Which Could Require the Sale of
      Substantial Assets.**





In
      December 2005, we entered into three securities purchase agreements for the
      sale
      of an aggregate of $25,000,000 principal amount of convertible debentures,
      secured and unsecured. The $15,000,000 in secured convertible debentures, of
      which $6,100,140 remained outstanding as of December 6, 2007, are due and
      payable, with 5% interest, three years from the date of issuance, unless sooner
      converted into shares of our common stock. Additionally, the $10,000,000 in
      convertible debentures, which all remained outstanding as of December 6, 2007,
      are due and payable, with 7.5% interest, three years from the date of issuance,
      unless sooner converted into shares of our common stock. In addition, any event
      of default such as our failure to repay the principal or interest when due,
      our
      failure to issue shares of common stock upon conversion by the holder, our
      failure to timely file a registration statement or have such registration
      statement declared effective, breach of any covenant, representation or warranty
      in the Securities Purchase Agreements or related convertible debentures, the
      assignment or appointment of a receiver to control a substantial part of our
      property or business, the filing of a money judgment, writ or similar process
      against our company in excess of $50,000, the commencement of a bankruptcy,
      insolvency, reorganization or liquidation proceeding against our company and
      the
      delisting of our common stock could require the early repayment of the
      convertible debentures, secured and unsecured, including default interest rate
      on the outstanding principal balance of the debentures if the default is not
      cured with the specified grace period. We anticipate that the full amount of
      the
      convertible debentures, secured and unsecured, will be converted into shares
      of
      our common stock, in accordance with the terms of the convertible debentures.
      If
      we were required to repay the convertible debentures, secured and unsecured,
      we
      would be required to use our limited working capital and raise additional funds.
      If we were unable to repay the debentures when required, the debenture holders
      could commence legal action against us and foreclose on all of our assets to
      recover the amounts due. Any such action would require us to curtail or cease
      operations.





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




On
      September 25, 2007, we issued 591,203 shares of common stock upon conversion
      of
      $750,000 of a previously issued convertible debenture. The shares were issued
      pursuant to an exemption under Section 4(2) of the Securities Act of
      1933.





**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**





31.1
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended





31.2
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended





32.1
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Executive
                Officer)





32.2
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Financial
                Officer)




35


**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 CORPORATION**Date:
                December 11, 2007
            By:**/s/
                MARK GUSTAFSONMark
                GustafsonPresident
                (Principal Executive Officer)Date:
                December 11, 2007
            By:**/s/
                SHAUN TOKERShaun
                TokerChief
                Financial Officer (Principal Financial Officer and Principal Accounting
                Officer)








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