**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        DC 20549
 
 **FORM
        10-QSB**
 
 
 **x**
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
 For
                  the quarterly period ended **June 30,
                  2007**
 
 ** ̈**
              TRANSITION
                  REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
                  1934
 
 For
                  the transition period from ________
                  to  ________
 
 
 Commission
        file
        number:     **000-51488**
 
 
 **PETROSEARCH
        ENERGY CORPORATION**
 (Exact
        name of small business issuer as specified in its charter)
  
 **NEVADA**
              
              **20-2033200**(State
                  or other jurisdiction of incorporation or organization)
              
              (IRS
                  Employer Identification No.)
 
 **675
        Bering Drive, Suite 200**
 **Houston,
        TX 77057**
 (Address
        of principal executive offices)
 
 **(713)
        961-9337**
 
 (Issuer’s
        telephone number)
 
 Indicate
        by check mark whether
        the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
        Act).     Yes oNo x
 
 Check
        whether the issuer: (i) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (ii) has been
        subject to such filing requirements for the past 90
        days.     Yes x     No
o
 
 State
        the
        number of shares outstanding of each of the issuer’s classes of common stock, as
        of the latest practicable date:  39,556,789 Shares of $0.001 par value
        Common Stock outstanding as of August 9, 2007
 
 
 Transitional
        Small Business Disclosure Format (check one):     Yes
oNo x
 
 
 1
  **PETROSEARCH
        ENERGY CORPORATION**
 
 **FORM
        10-QSB**
 **For
        The Quarter Ended June 30, 2007**
 
 **INDEX**
 
 PART
                  I - FINANCIAL INFORMATIONITEM
                  1.
              FINANCIAL
                  STATEMENTSITEM
                  2.
              MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATIONSITEM
                  3.
              CONTROLS
                  AND PROCEDURESPART
                  II - OTHER INFORMATIONITEM
                  2.
              UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF
                  PROCEEDSITEM
                  6.
              EXHIBITSSIGNATURES
  2
 *Index*
  **ITEM
                  1.**
              **FINANCIAL
                  STATEMENTS**
 
 **PETROSEARCH
        ENERGY CORPORATION**
 **CONSOLIDATED
        BALANCE SHEETS**
 **June
        30, 2007 and December 31, 2006**
 
 **ASSETS**
              
              **June
                  30,**
                **2007**
                **(Unaudited)**
              
              
              **December
                  31, 2006**
                **(See
                  note)**Current
                  assets:Cash
              
              $
              6,190,902
              
              
              $
              3,715,618Accounts
                  receivable:Joint
                  owners-billed, net of allowance of $83,073
              
              
              233,382
              
              
              
              421,081Joint
                  owners-unbilled
              
              
              4,993
              
              
              
              15,213Oil
                  and gas production sales
              
              
              262,501
              
              
              
              146,408Prepaid
                  expenses and other current assets
              
              
              931,833
              
              
              
              829,104Total
                  current assets
              
              
              7,623,611
              
              
              
              5,127,424Property
                  and equipment:Oil
                  and gas properties, full cost method of accounting:Properties
                  subject to amortization
              
              
              28,516,051
              
              
              
              23,462,639Properties
                  not subject to amortization
              
              
              6,306,989
              
              
              
              6,309,169Other
                  property and equipment
              
              
              149,348
              
              
              
              149,348Total
              
              
              34,972,388
              
              
              
              29,921,156Less
                  accumulated depreciation, depletion and amortization
              
              
              (2,730,137
              )
              
              
              (2,357,347
              )Total
                  property and equipment, net
              
              
              32,242,251
              
              
              
              27,563,809Prepaid
                  oil and gas costs
              
              
              14,507
              
              
              
              14,507Other
                  assets
              
              
              774,960
              
              
              
              656,790Total
                  assets
              
              $
              40,655,329
              
              
              $
              33,362,530**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Current
                  liabilities:Current
                  portion of long-term debt
              
              $
              2,995,435
              
              
              $
              1,863,531Current
                  portion of long-term debt Kallina
              
              
              434,738
              
              
              
              298,806Trade
                  note payable
              
              
              168,530
              
              
              
              409,819Accounts
                  payable
              
              
              907,896
              
              
              
              1,062,679Accrued
                  liabilities for Barnett property costs
              
              
              467,572
              
              
              
              607,013Accrued
                  liabilities
              
              
              868,234
              
              
              
              925,183Warrant
                  liability
              
              
              522,363
              
              
              
              317,752Total
                  current liabilities
              
              
              6,364,768
              
              
              
              5,484,783Long-term
                  debt, net of current portion
              
              
              -
              
              
              
              2,066,074Long-term
                  debt, net of current portion – Kallina
              
              
              6,564,700
              
              
              
              6,963,694Convertible
                  debt
              
              
              5,638,086
              
              
              
              -Other
                  long-term obligations
              
              
              925,406
              
              
              
              906,996Total
                  liabilities
              
              
              19,492,960
              
              
              
              15,421,547Stockholders'
                  equity:Preferred
                  stock, par value $1.00 per share, 20,000,000 shares
                  authorized:Series
                  A  8% convertible preferred stock, 1,000,000 shares
                  authorized;483,416 shares issued and outstanding at June 30, 2007
                  and
                  December 31, 2006
              
              
              483,416
              
              
              
              483,416Series
                  B convertible preferred stock, 100,000 shares authorized;43,000
                  shares
                  issued and outstanding at June 30, 2007 and December 31,
                  2006
              
              
              43,000
              
              
              
              43,000Common
                  stock, par value $0.001 per share, 100,000,000 shares Authorized;
                  39,388,519 and 37,927,070 shares issued and outstanding at June
                  30, 2007
                  and December 31, 2006, respectively
              
              
              39,388
              
              
              
              37,927Additional
                  paid-in capital
              
              
              30,921,284
              
              
              
              23,928,090Un-issued
                  common stock
              
              
              230,799
              
              
              
              771,429Accumulated
                  deficit
              
              
              (10,555,518
              )
              
              
              (7,322,879
              )Total
                  stockholders' equity
              
              
              21,162,369
              
              
              
              17,940,983Total
                  liabilities and stockholders' equity
              
              $
              40,655,329
              
              
              $
              33,362,530
 
 Note:  The
        balance sheet at December 31, 2006 has been derived from the audited financial
        statements at that date but does not include all of the information and
        footnotes required by generally accepted accounting principles for complete
        financial statements. See accompanying notes to unaudited condensed consolidated
        financial statements.
  3
 *Index*
  **PETROSEARCH
        ENERGY CORPORATION**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **for
        the three months and  six months ended June 30, 2007 and
        2006**
 
 **Three
                  Months Ended**
                **June
                  30**
              
              
              **Six
                  Months Ended**
                **June
                  30****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Oil
                  and gas production revenues
              
              $
              373,544
              
              
              $
              369,686
              
              
              $
              736,520
              
              
              $
              491,600Operating
                  costs and expenses:Lease
                  operating and production taxes
              
              
              265,598
              
              
              
              256,192
              
              
              
              342,891
              
              
              
              417,882Depreciation,
                  depletion and amortization
              
              
              194,142
              
              
              
              97,247
              
              
              
              372,789
              
              
              
              134,628General
                  and administrative
              
              
              701,382
              
              
              
              572,773
              
              
              
              1,440,472
              
              
              
              1,295,321Total
                  costs and expenses
              
              
              1,161,122
              
              
              
              926,212
              
              
              
              2,156,152
              
              
              
              1,847,831Operating
                  loss
              
              
              (787,578
              )
              
              
              (556,526
              )
              
              
              (1,419,632
              )
              
              
              (1,356,231
              )Other
                  income (expense):Interest
                  income
              
              
              94,665
              
              
              
              13,491
              
              
              
              157,443
              
              
              
              33,083Interest
                  expense
              
              
              (464,220
              )
              
              
              (128,928
              )
              
              
              (899,020
              )
              
              
              (173,882
              )Amortization
                  of financing costs anddebt
                  discount
              
              
              (540,432
              )
              
              
              (10,433
              )
              
              
              (866,819
              )
              
              
              (29,996
              )Change
                  in value of warrant liability
              
              
              67,331
              
              
              
              -
              
              
              
              (204,611
              )
              
              
              -Gain
                  on sale of investment
              
              
              -
              
              
              
              1,000,000
              
              
              
              -
              
              
              
              1,000,000Total
                  other income (expense)
              
              
              (842,656
              )
              
              
              874,130
              
              
              
              (1,813,007
              )
              
              
              829,205Net
                  Income (Loss)
              
              $
              (1,630,234
              )
              
              $
              317,604
              
              
              $
              (3,232,639
              )
              
              $
              (527,026
              )Basic
                  and diluted net income (loss) per common share
              
              $
              (0.04
              )
              
              $
              0.01
              
              
              $
              (0.08
              )
              
              $
              (0.02
              )
 
 See
        accompanying notes to unaudited condensed consolidated
        financial statements
  4
 *Index*
  **PETROSEARCH
        ENERGY CORPORATION**
 **CONSOLIDATED
        STATEMENT OF STOCKHOLDERS’ EQUITY**
 **For
        the six months ended June 30, 2007**
 
 **Series
                  A**
              
              
              **Series
                  B**
              
              
              **Additional**
              
              
              **Unissued**
              
              
              
              
              
              **Total
                  Stock-****Common
                  Stock**
              
              
              **Preferred
                  Stock**
              
              
              **Preferred
                  Stock**
              
              
              **Paid-In**
              
              
              **Common**
              
              
              **Accumulated**
              
              
              **Holders****Shares**
              
              
              **Amount**
              
              
              **Shares**
              
              
              **Amount**
              
              
              **Shares**
              
              
              **Amount**
              
              
              **Capital**
              
              
              **Stock**
              
              
              **Deficit**
              
              
              **Equity**Balance
                  at December 31, 2006
              
              
              37,927,070
              
              
              $
              37,927
              
              
              
              483,416
              
              
              $
              483,416
              
              
              
              43,000
              
              
              $
              43,000
              
              
              $
              23,928,090
              
              
              $
              771,429
              
              
              $
              (7,322,879
              )
              
              $
              17,940,983Issuance
                  of common stock committed, net of additional costs of raising
                  capital
              
              
              771,429
              
              
              
              771
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              760,083
              
              
              
              (771,429
              )
              
              
              
              
              
              
              (10,575
              )Common
                  stock issued for leasehold costs
              
              
              500,000
              
              
              
              500
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              644,500
              
              
              
              
              
              
              
              
              
              
              
              645,000Common
                  stock issued for employee compensation
              
              
              25,000
              
              
              
              25
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              20,725
              
              
              
              
              
              
              
              
              
              
              
              20,750Common
                  stock issued for services
              
              
              50,000
              
              
              
              50
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              61,926
              
              
              
              
              
              
              
              
              
              
              
              61,976Common
                  stock issued for interest expense
              
              
              83,986
              
              
              
              84
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              125,055
              
              
              
              
              
              
              
              
              
              
              
              125,139Common
                  stock issued for board compensation
              
              
              31,034
              
              
              
              31
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              44,969
              
              
              
              
              
              
              
              
              
              
              
              45,000Common
                  stock committed for interest expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              230,799
              
              
              
              
              
              
              
              230,799Issuance
                  of warrants with debt
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,667,968
              
              
              
              
              
              
              
              
              
              
              
              2,667,968Beneficial
                  conversion feature of convertible debt
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,667,968
              
              
              
              
              
              
              
              
              
              
              
              2,667,968Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,232,639
              )
              
              
              (3,232,639
              )Balance
                  at June 30, 2007
              
              
              39,388,519
              
              
              $
              39,388
              
              
              
              483,416
              
              
              $
              483,416
              
              
              
              43,000
              
              
              $
              43,000
              
              
              $
              30,921,284
              
              
              $
              230,799
              
              
              $
              (10,555,518
              )
              
              $
              21,162,369
 
 See
        accompanying notes to unaudited condensed consolidated financial
        statements
  5
 *Index*
 
 **PETROSEARCH
        ENERGY CORPORATION**
 **CONSOLIDATED
        STATEMENT OF CASH FLOWS**
 **For
        the six months ended June 30, 2007 and 2006**
 
 **2007**
              
              
              **2006****Cash
                  flows from operating activities:****Net
                  loss**
              
              $
              (3,232,639
              )
              
              $
              (527,026
              )**Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:**Depletion,
                  depreciation and amortization expense
              
              
              372,789
              
              
              
              134,628Stock-based
                  compensation and interest expense
              
              
              473,089
              
              
              
              -Amortization
                  of deferred rent
              
              
              (2,454
              )
              
              
              (1,227
              )Amortization
                  of debt discount
              
              
              435,866
              
              
              
              17,682Amortization
                  of beneficial conversion feature
              
              
              262,011
              
              
              
              -Amortization
                  of financing costs
              
              
              168,942
              
              
              
              12,314Accretion
                  of asset retirement obligation
              
              
              17,928
              
              
              
              15,537Change
                  in value of warrant liability
              
              
              204,611
              
              
              
              -Gain
                  on sale of securities
              
              
              
              
              
              
              (1,000,000
              )**Changes
                  in operating assets and liabilities:**Accounts
                  receivable
              
              
              81,826
              
              
              
              (560,194
              )Prepaid
                  expenses and other assets
              
              
              (245,928
              )
              
              
              85,790Accounts
                  payable and accrued liabilities
              
              
              (754,369
              )
              
              
              817,413Trade
                  note payable
              
              
              (241,289
              )
              
              
              -**Net
                  cash used in operating activities**
              
              
              (2,459,617
              )
              
              
              (1,005,083
              )**Cash
                  flows from investing activities:**Capital
                  expenditures, including purchases and development of
                  properties
              
              
              (4,000,099
              )
              
              
              (5,659,508
              )Purchase
                  of prepaid credits for oil and gas properties, net
              
              
              -
              
              
              
              (5,851
              )Proceeds
                  from sale of securities
              
              
              -
              
              
              
              1,000,000**Net
                  cash used in investing activities**
              
              
              (4,000,099
              )
              
              
              (4,665,359
              )**Cash
                  flows from financing activities:**Proceeds
                  from the sale of common stock
              
              
              -
              
              
              
              2,540,625Proceeds
                  from exercise of warrants
              
              
              -
              
              
              
              174,669Proceeds
                  from convertible debt
              
              
              10,000,000
              
              
              
              -Proceeds
                  from notes payable
              
              
              -
              
              
              
              1,800,000Repayment
                  of notes payable
              
              
              (1,065,000
              )
              
              
              (352,500
              )**Net
                  cash provided by financing activities**
              
              
              8,935,000
              
              
              
              4,162,794**Net
                  increase (decrease) in cash and cash equivalents**
              
              
              2,475,284
              
              
              
              (1,507,648
              )**Cash
                  and cash equivalents at beginning of period**
              
              
              3,715,618
              
              
              
              4,052,844**Cash
                  and cash equivalents at end of period**
              
              $
              6,190,902
              
              
              $
              2,545,196**Supplemental
                  disclosures of cash flow information:**Interest
                  paid
              
              $
              239,680
              
              
              $
              232,817Income
                  taxes paid
              
              $
              -
              
              
              $
              -
 
 See
        accompanying notes to unaudited condensed consolidated financial
        statements
  6
 *Index*
  **PETROSEARCH
        ENERGY CORPORATION**
 **NOTES
        TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 
 **1.**
              **Interim
                  Financial Statements**
 
 The
        accompanying un-audited interim financial statements have been prepared without
        audit pursuant to the rules and regulations of the U.S. Securities and Exchange
        Commission.  Certain information and footnote disclosures normally
        included in financial statements prepared in accordance with accounting
        principles generally accepted in the United States of America have been
        condensed or omitted, pursuant to such rules and regulations.  These
        unaudited consolidated condensed financial statements should be read in
        conjunction with the audited financial statements and notes thereto of
        Petrosearch Energy Corporation (the “Company”) for the year ended December 31,
        2006.  In the opinion of management, all adjustments (consisting of
        normal recurring adjustments) considered necessary for a fair presentation
        of
        financial position, results of operations and cash flows for the interim
        periods
        presented have been included.  Operating results for the interim
        periods are not necessarily indicative of the results that may be expected
        for
        the respective full year.
 
 **2.**
              **Income
                  Taxes**
 
 The
        Company uses the liability method in accounting for income taxes. Under this
        method, deferred tax assets and liabilities are determined based on differences
        between financial reporting and income tax carrying amounts of assets and
        liabilities and are measured using the enacted tax rates and laws that will
        be
        in effect when the differences are expected to reverse.  A valuation
        allowance, if necessary, is provided against deferred tax assets, based upon
        management's assessment as to their realization.
 
 The
        difference between the 35% federal statutory income tax rate and amounts
        shown
        in the accompanying interim financial statements is primarily attributable
        to
        the utilization of net operating loss carry-forwards and a valuation allowance
        recorded against net deferred tax assets.
 
 **3.**
              **Stock
                  Warrants**
 
 The
          Company has periodically issued incentive stock warrants to executives,
          officers, directors and employees to provide additional incentives to promote
          the success of the Company’s business and to enhance the ability to attract and
          retain the services of qualified persons.  Warrants have also been
          issued as part of capital financing transactions.  The issuances of
          such warrants are approved by the Board of Directors.  The exercise
          price of a warrant granted is determined by the fair market value of the
          stock
          on the date of grant.  The Company issues shares of authorized common
          stock upon the exercise of the warrant.
 
 In
          December 2004, the FASB issued SFAS 123(R), which is a revision of
          SFAS 123.  SFAS 123(R) requires all share-based payments to
          employees, including grants of employee stock warrants, to be recognized
          as
          stock-based compensation expense in the Company’s Consolidated Statements of
          Operations based on their fair values.  For purposes of determining
          compensation expense associated with stock warrants, the fair value of
          the
          Company’s stock was determined based upon the Black-Scholes option pricing
          model.
 
 For
          warrants granted during 2007 and 2006, the fair value of such warrants
          was
          estimated at the date of grant using a Black-Scholes option-pricing model
          with
          the following assumptions:
 
 **2007**
              
              **2006**Dividend
                  yield
              -0-
              
              -0-Expected
                  volatility
              105%
              
              70%Risk
                  free interest
              4.52%
              
              3.00%Expected
                  lives
              4
                  years
              
              2-4
                  years
  7
 *Index*
  The
        Black-Scholes option valuation model was developed for use in estimating
        fair
        value of traded options or warrants that have no vesting restrictions and
        are
        fully transferable.  In addition, option valuation models require the
        input of highly subjective assumptions including the expected stock price
        volatility.  Because the Company’s stock warrants have characteristics
        significantly different from those of traded options/warrants, and because
        changes in the subjective input assumptions can materially affect the fair
        value
        estimate, in management’s opinion, the existing models do not necessarily
        provide a reliable single measure of the fair value of its stock
        warrants.
 
 A
        summary
        of the Company’s stock warrant activity and related information for the six
        months ended June 30, 2007 follows:
 
 **Weighted**
              
              
              **Total****Average**
              
              
              **Intrinsic****Number
                  of**
              
              
              
              
              
              **Weighted**
              
              
              **Grant**
              
              
              **Value****Shares**
              
              
              
              
              
              **Average**
              
              
              **Date
                  Fair**
              
              
              **Warrant****Under**
              
              
              **Exercise**
              
              
              **Exercise**
              
              
              **Value**
              
              
              **Exercises****Warrant**
              
              
              **Price**
              
              
              **Price**
              
              
              **($/share)
                  (2)**
              
              
              ****
              **(1)**Warrants
                  outstanding at December 31, 2006
              
              
              14,147,690
              
              
              $
              0.92-$9.75
              
              
              $
              1.88Issued
              
              
              5,225,000
              
              
              $
              1.40
              
              
              $
              1.40
              
              
              $
              0.51Expired
              
              
              (703,853
              )
              
              $
              6.50-$9.75
              
              
              $
              9.18Warrants
                  outstanding at June 30, 2007
              
              
              18,668,837
              
              
              $
              0.92-$6.50
              
              
              $
              1.47
 
 All
        outstanding stock warrants are exercisable at June 30, 2007.  A
        summary of outstanding stock warrants at June 30, 2007 follows:
 
 **Weighted****Number
                  of**
              
              
              
              **Remaining**
              
              
              **Average**
              
              
              
              
              
              **Weighted****Common**
              
              
              
              **Contracted**
              
              
              **Remaining**
              
              
              
              
              
              **Average**
              
              
              **Aggregate****Stock**
              
              **Expiration**
              
              **Life**
              
              
              **Contractual**
              
              
              **Exercise**
              
              
              **Exercise**
              
              
              **Intrinsic****Equivalents**
              
              **Date**
              
              **(Years)**
              
              
              **Term
                  (Years)**
              
              
              **Price**
              
              
              **Price**
              
              
              **Value
                  (1)**76,923
              
              July
                  2007
              
              
              .08
              
              
              
              
              
              
              $
              5.20-$6.50
              
              
              $
              6.24269,231
              
              September
                  2007
              
              
              .25
              
              
              
              
              
              
              $
              4.88-$5.20
              
              
              $
              5.15150,000
              
              March
                  2008
              
              
              .50
              
              
              
              
              
              
              $
              1.95
              
              
              $
              1.9520,000
              
              August
                  2008
              
              
              1.17
              
              
              
              
              
              
              $
              1.95
              
              
              $
              1.954,851,969
              
              November
                  2008
              
              
              1.42
              
              
              
              
              
              
              $
              0.98-$1.95
              
              
              $
              1.931,060,714
              
              February
                  2010
              
              
              1.67
              
              
              
              
              
              
              $
              2.00
              
              
              $
              2.005,225,000
              
              January
                  2011
              
              
              3.58
              
              
              
              
              
              
              $
              1.40
              
              
              $
              1.40575,000
              
              October
                  2011
              
              
              4.33
              
              
              
              
              
              
              $
              .92
              
              
              $
              .926,440,000
              
              December
                  2011
              
              
              4.50
              
              
              
              
              
              
              $
              .92
              
              
              $
              .9218,668,837
              
              
              
              
              
              
              
              
              3.22
              
              
              
              
              
              
              
              
              
              
              $
              3,016,450
 
 (1) The
        intrinsic value of a warrant is the amount by which the current market value
        of
        the underlying stock exceeds the exercise price of the warrant, or the market
        price at the end of the period less the exercise price.
 
 (2)****The
        weighted average grant date fair value was determined by using the Black
        Scholes
        Option Pricing Model as described above.
 
 The
        following table provides a detail of stock-based compensation incurred during
        the six months ended June 30, 2007, and 2006:
  8
 *Index*
 
 **Six
                  Months Ended****June
                  30,****2007**
              
              
              **2006**Restricted
                  stock – Interest Expense
              
              $
              125,139
              
              
              $
              -Restricted
                  stock – General and Administrative
              
              
              117,151
              
              
              
              -Restricted
                  stock – Property Costs
              
              
              645,000
              
              
              
              545,000Committed
                  restricted stock
              
              
              230,799
              
              
              
              -Total
                  stock-based compensation
              
              $
              1,118,089
              
              
              
              545,000Less
                  amounts capitalized – Property Costs
              
              
              (645,000
              )
              
              
              (545,000
              )Stock
                  compensation expense, net of amounts capitalized
              
              $
              473,089
              
              
              $
              -
 
 The
        above
        table excludes common stock issued for cash, warrants issued in financing
        arrangements, and debt discounts recorded in equity.
 
 **4.**
              **Related
                  Party Transactions**
 
 During
        the three months and six months ended June 30, 2007 there were no related
        party
        transactions.
 
 **5.**
              **Non-Cash
                  Investing and Financing
                  Activities**
 
 During
        the six months ended June 30, 2007 and 2006, the Company engaged in non-cash
        financing and investing activities as follows:
  **Six
                  Months Ended****June
                  30,****2007**
              
              
              **2006**Issuance
                  of common stock for acquisition of property
              
              $
              645,000
              
              
              $
              545,000Increase
                  in accounts payable and accrued liabilities for property
                  costs
              
              $
              698,203
              
              
              $
              768,172Beneficial
                  conversion feature on convertible debt
              
              $
              2,667,968
              
              
              
              -Issuance
                  of warrants with debt
              
              $
              2,667,968
              
              
              
              -Issuance
                  of convertible debt for financing costs
              
              $
              450,000
              
              
              ****
              **-**
 
 **6.**
              **Earnings
                  Per Share**
 
 The
        Company has adopted SFAS No. 128, which provides for calculation of "Basic"
        and
        "Diluted" earnings per share.  Basic earnings per share includes no
        dilution and is computed by dividing net income available to common shareholders
        by the weighted average common shares outstanding for the
        period.  Diluted earnings per share reflect the potential dilution of
        securities that could share in the earnings of an entity similar to fully
        diluted earnings per share. Following is a reconciliation of the numerators
        and
        denominators of the basic and diluted EPS computations for the three and
        six
        months ended June 30, 2007 and 2006:
  9
 *Index*
 
 Three
                  Months Ended
                June
                  30,
              
              
              Six
                  Months Ended
                June
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Basic
                  EPS:Net
                  income (loss)
              
              $
              (1,630,234
              )
              
              $
              317,604
              
              
              $
              (3,232,639
              )
              
              $
              (527,026
              )Less:
                  Preferred stock dividends
              
              
              (9,668
              )
              
              
              (9,668
              )
              
              
              (19,336
              )
              
              
              (19,336
              )Net
                  income (loss) available to common stockholders
              
              $
              (1,639,902
              )
              
              $
              307,936
              
              
              $
              (3,251,975
              )
              
              $
              (546,362
              )Weighted
                  average shares of common stock
              
              
              39,253,000
              
              
              
              31,093,846
              
              
              
              38,992,889
              
              
              
              30,234,355Basic
                  net income (loss) per share
              
              $
              (0.04
              )
              
              $
              0.01
              
              
              $
              (0.08
              )
              
              $
              (0.02
              )Diluted
                  EPS:Income
                  (loss) available to common stockholders
              
              $
              (1,639,902
              )
              
              $
              307,936
              
              
              $
              (3,251,975
              )
              
              $
              (546,362
              )Plus
                  assumed conversions
              
              
              9,668
              
              
              
              9,668
              
              
              
              19,336
              
              
              
              19,336Net
                  income (loss) used for diluted EPS
              
              $
              (1,630,234
              )
              
              $
              317,604
              
              
              $
              (3,232,639
              )
              
              $
              (527,026
              )Weighted
                  average shares of common stock
              
              
              39,253,000
              
              
              
              31,093,846
              
              
              
              38,992,889
              
              
              
              30,234,355Plus
                  effect of dilutive securities:Warrants
              
              
              -
              
              
              
              84,546
              
              
              
              -
              
              
              
              -Convertible
                  preferred stock
              
              
              -
              
              
              
              94,465
              
              
              
              -
              
              
              
              -Weighted
                  average shares used for Diluted EPS
              
              
              39,253,000
              
              
              
              31,272,857
              
              
              
              38,992,889
              
              
              
              30,234,355Diluted
                  net income (loss) per share
              
              $
              (0.04
              )
              
              $
              0.01
              
              
              $
              (0.08
              )
              
              $
              (0.02
              )
 
 For
        the
        six month period ended June 30, 2006, potential dilutive securities had an
        anti-dilutive effect and were not included in the calculation of diluted
        net
        loss per common share.  These securities included in-the-money
        warrants for the purchase of 126,421 common shares and preferred stock
        convertible into 94,218 common shares.    For the three and
        six months ended June 30, 2007, these securities included in-the-money warrants
        for the purchase of 2,572,264 and 2,043,093 common shares, respectively,
        and
        preferred stock convertible into 94,218 common shares.
 
 **7.**
              **Convertible
                  Debt**
 
 The
        Company evaluates and accounts for conversion options embedded in its
        convertible instruments in accordance with SFAS No. 133 “Accounting
        for Derivative Instruments and Hedging Activities” (“SFAS 133”) and EITF
        00-19 “Accounting for Derivative Financial Instruments Indexed to, and
        Potentially Settled in, a Company’s Own Stock” (“ EITF 00-19”).
 
 SFAS 133
        generally provides three criteria that, if met, require companies to bifurcate
        conversion options from their host instruments and account for them as free
        standing derivative financial instruments in accordance with EITF 00-19.
        These
        three criteria include circumstances in which (a) the economic
        characteristics and risks of the embedded derivative instrument are not clearly
        and closely related to the economic characteristics and risks of the host
        contract, (b) the hybrid instrument that embodies both the embedded
        derivative instrument and the host contract is not remeasured at fair value
        under otherwise applicable generally accepted accounting principles with
        changes
        in fair value reported in earnings as they occur and (c) a separate
        instrument with the same terms as the embedded derivative instrument would
        be
        considered a derivative instrument subject to the requirements of SFAS 133.
        SFAS 133 and EITF 00-19 also provide an exception to this rule when the
        host instrument is deemed to be conventional (as that term is described in
        the
        implementation guidance to SFAS 133 and further clarified in EITF 05-2 “The
        Meaning of “Conventional Convertible Debt Instrument” in Issue
        No. 00-19).
  10
 *Index*
  The
        Company accounts for convertible instruments (when it has determined that
        the
        embedded conversion options should not be bifurcated from their host
        instruments) in accordance with the provisions of EITF 98-5 “Accounting for
        Convertible Securities with Beneficial Conversion Features,” (“EITF 98-5”) and
        EITF 00-27 “Application of EITF 98-5 to Certain Convertible Instruments.”
Accordingly, the Company records when necessary discounts to convertible
        notes
        for the intrinsic value of conversion options embedded in debt instruments
        based
        upon the differences between the fair value of the underlying common stock
        at
        the commitment date of the note transaction and the effective conversion
        price
        embedded in the note. Debt discounts associated with beneficial conversion
        features under these arrangements are amortized over the term of the related
        debt.
 
 On
        February 1, 2007 the Company executed a Note and Warrant Purchase Agreement
        with
        an Institutional Investor for the sale of a $10,000,000, 8% Senior Secured
        Convertible Promissory Note and a four-year warrant to purchase 5,000,000
        shares
        of common stock at an exercise price of $1.40 per share for total proceeds
        of
        $10,000,000.  At the option of the investor, the three-year
        Convertible Note will be convertible into shares of common stock at a price
        of
        $1.00 per share after the earlier of one year from the closing of the
        transaction or three months after a registration statement relating to this
        transaction becomes effective.  The Warrant is exercisable one year
        after the closing of the transaction.
 
 The
        Company  may  elect  to redeem part or all of the
        outstanding Convertible Note at the later  of  (i) such time
        as RCH Petro
        Investors, L.P. (RCH) has the right to convert; and (ii) twelve months
        from  the  date  of  closing, at
        one-hundred ten percent (110%) of the principal amount of the Convertible
        Note,
        provided however that such redemption right only
        applies  if,  upon  receiving notice of
        redemption, the lender has the right to convert
        all  the  shares  the Company intends to redeem at
        the applicable conversion price and the applicable  registration
        statement for the resale of such shares of common stock
        is  effective.
 
 The
        Convertible Note is collateralized by a security interest in twenty five
        percent
        of the membership interest of the Company’s wholly owned subsidiary, Exploration
        Holding Co., LLC, which owns one-hundred percent of Barnett Petrosearch,
        LLC.  Barnett Petrosearch is the subsidiary which owns a 5.54%
        interest in DDJET, Ltd, LLP, and participates in the Barnett Shale
        Project.
 
 The
        debentures meet the definition of conventional convertible debt in EITF Issue
        No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and
        Potentially Settled in, a Company’s Own Stock. We have evaluated each of the
        features of the debentures and concluded that none of these features constitute
        embedded derivatives that must be bifurcated from the host contract and
        accounted for as derivatives in accordance with SFAS 133, Accounting for
        Derivative Instruments and Hedging Activities.
 
 The
        Company allocated the debt proceeds to the warrants and the debt based on
        the
        relative fair value of each. In accordance with EITF 98-5 and EITF 00-27,
        the
        Company recorded a discount of $2.7 million to the convertible note for the
        intrinsic value of conversion options embedded in debt instruments based
        upon
        the differences between the fair value of the underlying common stock at
        the
        commitment date of the note transaction and the effective conversion price
        embedded in the note. The fair value assigned to the warrants of $2.7 million
        was also recorded as a debt discount.
  11
 *Index*
  **Item
                  2.**
              **Management’s
                  Discussion and Analysis or Plan of
                  Operation**
 
 **FORWARD
        LOOKING STATEMENTS**
  Statements
        contained herein and the information incorporated by reference herein may
        be
        forward-looking statements within the meaning of Section 21E of the Securities
        Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements can
        be
        identified by the use of forward-looking terminology such as, but not limited
        to, "may," "will," "expect," "anticipate," "estimate," "would be," "believe,"
        or
        "continue" or the negative or other variations of comparable
        terminology.  We intend such forward-looking statements to be covered
        by the safe harbor provisions applicable to forward-looking statements contained
        in Section 21E of the Exchange Act. Such statements (none of which is intended
        as a guarantee of performance) are subject to certain assumptions, risks
        and
        uncertainties, which could cause our actual future results, achievements
        or
        transactions to differ materially from those projected or anticipated. Such
        risks and uncertainties are set forth herein.
 
 Forward-looking
        statements include statements concerning plans, objectives, goals, strategies,
        future events, or performance and underlying assumptions and other statements,
        which are other than statements of historical facts. These statements are
        subject to uncertainties and risks including, but not limited to, product
        and
        service demands and acceptance, changes in technology, economic conditions,
        the
        impact of competition and pricing, and government regulation and approvals.
        Petrosearch cautions that assumptions, expectations, projections, intentions,
        or
        beliefs about future events may, and often do, vary from actual results and
        the
        differences can be material. Some of the key factors which could cause actual
        results to vary from those Petrosearch expects include changes in natural
        gas
        and oil prices, the timing of planned capital expenditures, availability
        of
        acquisitions, uncertainties in estimating proved reserves and forecasting
        production results, operational factors affecting the commencement or
        maintenance of producing wells, the condition of the capital markets generally,
        as well as our ability to access them, and uncertainties regarding environmental
        regulations or litigation and other legal or regulatory developments affecting
        our business.
 
 Our
        expectations, beliefs and projections are expressed in good faith and are
        believed to have a reasonable basis, including without limitation, our
        examination of historical operating trends, data contained in our records
        and
        other data available from third parties. There can be no assurance, however,
        that our expectations, beliefs or projections will result, be achieved, or
        be
        accomplished. Readers are cautioned not to place undue reliance on these
        forward-looking statements, which speak only as of the date
        hereof.  We undertake no duty to update these forward-looking
        statements.
 
 **OVERVIEW
        – CORPORATE STRATEGY**
 
 In
        the
        second quarter of 2007 we have continued to make significant progress in
        ramping
        up the development of our high quality portfolio of oil and gas assets,
        particularly the Barnett Shale Project. Our production from the Barnett Shale
        Project is up 372% from the first quarter of 2007 to the second quarter and
        we
        have continued to increase our acreage position in the project.  (See
“Barnett Shale Project” below)  As disclosed in previous filings, in
        March 2007, Metroplex Barnett Shale, LLC (“Metroplex” - wholly owned subsidiary
        of Exxon Mobil Corporation) completed the final transition as Operator of
        our
        Barnett Shale Project from the previous Operator, taking control and
        responsibility of all leasing activities, drilling operations, completion
        operations and gathering system operations for the project. Also, in July,
        2007
        we have added a second deep drilling rig and one shallow rig to the Barnett
        Shale Project and a third deep rig is planned for the fourth quarter of
        2007.
 
 We
        have
        continued to evaluate the financing options for the initiation of the
        development of our North Texas Panhandle Water Flood Project (“Water Flood”) as
        well as financings for future capital needs in our Barnett Shale
        Project.   We are in negotiations to obtain a joint venture
        partner in the Water Flood Project which would add capital resources and
        technical expertise to that Project.
 
 We
        believe our high quality oil and gas projects will allow us to have multiple
        year growth and allows us to effectively align our financing needs with the
        capital needs of each project.  Our core assets are resource plays,
        which allow us to re-invest our capital into our projects to enhance the
        rates
        of return, revenue growth and reserve growth.  Our interest in the
        Barnett Shale Partnership is unique in that it is, in effect, an interest
        in an
        integrated natural gas company.  The Barnett Shale Partnership owns
        the mineral leases, the gas wells, the pipeline gathering system that brings
        the
        natural gas to the market and has access to multiple drilling
        rigs.  Rigs will be added to the project based on leasing requirements
        and drilling location availability.
  12
 *Index*
  Management
        continues to believe that the development of our core assets should have
        a
        significant impact on our production, revenues and cash flows throughout
        the
        remainder of 2007.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 Since
        inception, we have primarily financed our operating and investing cash flow
        needs through private offerings of equity securities, sales of crude oil
        and
        natural gas, and the use of debt instruments such as convertible notes and
        revolving credit facilities.  The proceeds from, and the utilization
        of, all these methods have been, and Management believes will continue to
        be,
        sufficient to keep the operations funded and the business plan moving
        forward.  We plan to continue to utilize these methods to access
        capital in order to implement our business plan, which we believe will be
        an
        effective vehicle to carry out our business plan.
 
 ***Convertible
        Securities***
 
 On
        February 1, 2007, we executed a Note and Warrant Purchase Agreement for the
        sale
        of a $10,000,000 8% Senior Secured Convertible Promissory Note and a four
        year
        warrant to purchase 5,000,000 shares of our common stock at an exercise price
        of
        $1.40 per share for total gross proceeds to us of
        $10,000,000.   We completed the transaction and received funding
        on February 7, 2007.  Upon closing, we issued the Convertible Note and
        the Warrant, and executed a Pledge and Security Agreement and a Registration
        Rights Agreement.
 
 ***Private
        Equity Placements***
 
 In
        December 2006, we completed sales of $3.2 million of our common stock in
        a
        private offering.  We received net proceeds of approximately $3.0
        million which were used for general corporate purposes.
 
 In
        February 2006, we completed sales of $2.7 million of our common stock in
        a
        private offering.  We received net proceeds of approximately $2.56
        million which were used for general corporate purposes, including the drilling
        of projects in our prospect inventory.
 
 ***Project
        Financings***
 
 In
        November 2006, we signed a Securities Purchase Agreement and Secured Term
        Note
        with Laurus Master Fund, Ltd to provide financing for the drilling of our
        Kallina 46 #1 well and payment of the future completion costs for the Kallina
        46
        #1 well.   We formed a subsidiary, Garwood Petrosearch Inc.
        (“Garwood”), to hold our interest in the Kallina Lease and the Kallina 46 #1
        well.  Also, as a part of the financing arrangement,
        Garwood  issued Laurus a Warrant to acquire, upon payout of the Note
        indebtedness, 45% of Garwood’s outstanding common stock such that upon exercise
        of the Warrant, Garwood would be owned 55% by us and 45% by
        Laurus.  The collateral for this financing is  recourse to
        the Kallina 46 #1 well and the associated lease acreage only.
 
 ***Revolving
        Credit Agreement***
 
 On
        October 16, 2006, we amended our existing revolving credit facility with
        Fortuna
        Energy, LP (“Fortuna”).   The principal available under the
        revolving borrowing base remains $10,000,000, with a current outstanding
        balance
        of $2,845,000 as of August 1, 2007.  Under the terms of the
        transaction, Fortuna advanced us $780,000 for the purpose of paying amounts
        due
        for the Barnett Shale Project.  As part of the financing, we provided
        Fortuna additional collateral.  In addition, we agreed to issue to
        Fortuna 475,000 five year warrants with a strike price of $0.92 per
        share.  The Warrants contain a “put” provision which allows Fortuna to
“put” the warrants to the Company at a price of $0.65 per share for two (2)
        years, which “put” period shall commence 180 days after the issuance of the
        amendment. Additionally, as part of the transaction, we agreed to issue 100,000
        new warrants, which expire five years from the date of issue, at a price
        of
        $0.92 per share to replace 100,000 warrants previously issued to Fortuna
        at a
        price of $2.00 per share, which were previously set to expire on November
        1,
        2007.  We do not intend to draw down any more funds from this credit
        facility.
  13
 *Index*
  ***Joint
        Ventures***
 
 We
        continue to strive to develop relationships with institutional investors
        and
        venture partners to participate in our prospects.  Management believes
        this will reduce our capital risk and increase the diversity of the projects
        in
        which we use our own capital.  We intend to establish these joint
        venture relationships with terms that are standard in the oil and gas
        industry.
 
 **CURRENT
        PROJECTS AND CAPITAL REQUIREMENTS**
 
 **Barnett
        Shale Project** - Our Barnett Shale**Project is part of the
        Barnett Shale natural gas play in the Fort Worth Basin, which is arguably
        one of
        the most exciting plays to emerge in the lower 48 in the past decade. In
        December 2006, through our wholly owned subsidiary, Barnett Petrosearch LLC,
        we
        joined in the formation of a partnership, DDJET Limited LLP (“Partnership), for
        the development of the integrated venture. We own a 5.54% interest in the
        Partnership along with partners Metroplex Barnett Shale LLC (“Metroplex” - a
        wholly owned subsidiary of Exxon Mobil Corporation), which is directing
        operations, and Cinco County Barnett Shale LLC (a privately held Dallas-based
        company).
 
 The
        Partnership’s assets include all leases acquired to-date within a contract area
        that includes parts of eight counties, comprising approximately 2 million
        acres.
        Partnership assets also include associated facilities that include nearly
        100
        miles of pipeline and an option on a separate pipeline right-of-way.
        Approximately 80 miles of pipeline facilities have been completed and are
        operational. We believe the Partnership’s ownership of these pipeline assets is
        a decided strategic advantage in this urban area.  An aggressive
        leasing program within the contract area and a multi-rig drilling program
        is in
        progress for 2007, 2008 and beyond.
 
 Currently,
        the Partnership holds leases covering approximately 25,000 net acres, and
        has
        drilled, or is in the process of drilling 12 wells. There are currently two
        deep
        rigs running in the drilling program and one shallow rig that is being utilized
        to drill and set the surface casing on the wells in an effort to reduce costs
        on
        the upper section of the wells.  A third deep rig is planned for the
        fourth quarter of 2007.  Also, there have been 25 drilling permits
        obtained to date for Partnership wells, 12 which have been drilled and 13
        to be
        drilled.
 
 **Status**
              **Well
                  Count**Producing
              4Awaiting
                  Completion
              2Drilling
              3Under
                  Evaluation
              1Abandoned
              2**Total**
              **12**
  As
        of
        August 1, 2007 four Partnership wells, in Ellis and Tarrant Counties, have
        been
        completed and are selling gas through the Partnership-owned pipeline. The
        average peak daily volume for these four wells exceeded 4.0 MMcfpd per
        well.  An additional five wells in Ellis and Tarrant Counties have
        been drilled; completion of two of these wells is expected within the third
        quarter of 2007;  one well  is being evaluated after poor
        post-stimulation testing results that we believe were caused by the proximity
        of
        a previously unrecognized fault; and two wells with mechanical difficulties
        were
        drilled prior to Metroplex taking over as operator of the project and have
        been
        abandoned due to mechanical difficulties; (one after an unsuccessful attempt
        was
        made to repair partd casing and one that experienced mechanical problems
        while
        drilling and did not reach the Barnett formation and is currently being
        re-drilled).  These results have reinforced our interest in this area
        of the Barnett Shale and we are continuing nearby development
        activities.
  14
 *Index*
  Three
        wells are currently in the process of being drilled, one of which is the
        re-drill mentioned above.  The second is currently drilling the
        lateral section of the well in the Barnett formation and the third well has
        had
        the surface casing set by the shallow rig mentioned above and is currently
        waiting on a deep rig.  The Texas Railroad Commission has approved
        drilling permits filed for another thirteen wells.  We anticipate a
        substantial increase in  proved reserve additions in 2007 and 2008
        from this project.
 
 In
        order
        to finance our participation in the Partnership for 2007, on February 1,
        2007 we
        executed a Note and Warrant Purchase Agreement with an institutional investor,
        RCH Petro Investors, L.P., for the sale of a $10,000,000, 8% Senior Secured
        Convertible Promissory Note and a four-year warrant to purchase 5,000,000
        shares
        of common stock at an exercise price of $1.40 per share.
 
 **North
        Texas/Panhandle Water flood Project -**In November 2005, we acquired a
        100% working interest in 1,755 acres in the Quinduno Field in Roberts County,
        Texas, in the Anadarko Basin. The project is focused on infill drilling and
        the
        implementation of a water flood on the property. Our leases at Quinduno have
        a
        large established resource base of over 20.6 million barrels of original
        oil in
        place.  Since its discovery in 1953, approximately 5.1 million barrels
        have been produced using primary production.
 
 One
        infill well has been drilled to date. We have had a program to enter each
        of the
        20 wells that have not been plugged. So far, we have entered seven of these
        older wells to determine their mechanical status and establish potential
        productivity. Two of these wells have been equipped and are now capable of
        producing although the reservoir has insufficient pressure to produce until
        the
        water flood is installed. As of December 31, 2006, our independent engineers,
        Ryder Scott, have estimated our share of proved oil reserves recoverable
        by
        water flood at 1.6 million barrels of oil equivalent.  Slightly deeper
        than the water flood target zone, the Moore County Lime formation has undrilled
        exploration potential that may be tested in a future well.
 
 To
        provide adequate water for injection, in November, 2006 we executed a water
        supply agreement with a landowner in the leasehold, which allows us to draw
        fresh water from the aquifer underlying the landowner’s property, and in that
        same month we received approval from the Panhandle Groundwater Authority
        District (“PGAD”) to produce up to 5,000 barrels per day from the aquifer for
        use in the flood.  We received the approval from the PGAD over the
        protest filed with the PGAD by the Colorado River Municipal Water Authority
        (“CRMWA”) attempting to preserve the freshwater for local municipal use only in
        the area in which we own the rights to the fresh water.  We also
        applied to the Texas Railroad Commission to amend a previously granted saltwater
        injection permit to include fresh water injection and are awaiting approval.
        On
        January 5, 2007 we received a letter from the Texas Railroad Commission (“TRRC”)
        informing us of a protest by CRMWA contesting our application for fresh water
        injection in the Quinduno Field water flood.  The hearing on this
        protest is currently set for September 21, 2007 however we expect the protest
        to
        be withdrawn as part of a pending agreement with CRMWA that addresses their
        concerns with our use of fresh water for enhanced oil recovery.
 
 We
        are
        currently negotiating with an international oilfield service company for
        them to
        install an expandable 5000 barrel per day water treatment facility on the
        leasehold that will provide us with a secure, continuous, economical source
        of
        treated and filtered produced water from third parties that we can use for
        injection.  This will alleviate the need to use fresh water as our
        primary source of injection fluids although fresh water will remain available
        as
        a back-up source to be used as needed.  The facility will also treat
        our own produced water later in the life of the flood.  Our capital
        investment in the facility would be minimal.  At present we are also
        in negotiations with potential industry partners to allow for the installation
        of the flood to begin before the end of the year.
 
 **SW
        Garwood, Colorado County, Texas -**The Wilcox Trend,
        SW******Garwood field has had three wells drilled with
        one of these in the process of being completed.  Two additional
        locations are on current leases.   The initial well on this
        prospect, the Pintail #1, completed in the Upper Wilcox in December 2004,
        paid
        out in April of 2006.  As of payout, we began participating in the
        production from the well with a 16% working interest. As of the end of July,
        2007, the well was producing approximately 410 Mcfpd and 9 bopd.
 
 The
        second well, the Pintail Flats #1, was completed and fracture stimulated
        in May
        2005 from 15,950 feet to 16,010 feet in the Lower Wilcox.  In July
        2006 we re-completed and fracture stimulated an up-hole zone at 15,135 feet.
        The
        well flowed back frac fluids with a 2000 Mcfpd gas rate into the sales line
        in
        August 2006. As of the end of July, 2007 the well was flowing 162 Mcfpd and
        we
        are continuing to analyze several options to improve well performance. We
        have a
        16% working interest in the well after payout. The well has four additional
        potentially productive zones in the Lower Wilcox and five additional potentially
        productive zones in the Upper Wilcox.
  15
 *Index*
  A
        third
        well, the Kallina 46 #1 began drilling in June 2006 and reached its targeted
        depth of 16,230 feet in August 2006. Data available while drilling and from
        open-hole logs indicated several potentially productive Wilcox sands from
        10,400
        feet to 16,100 feet. Gross prospective interval was believed to exceed 250
        feet
        of pay. We have tested and abandoned as non-commercial, several zones up
        to the
        top of the Lower Wilcox. Testing is in progress on a zone at 13,456 feet
        and
        consideration is being given to adding zones shallower in the
        wellbore.  We have an 87.5% working interest in the Kallina lease and
        the Kallina 46 #1 well before payout and a 75.5% interest after
        payout.
 
 In
        order
        to finance the Kallina 46 #1 well and future wells on the Kallina lease,
        we
        signed a Securities Purchase Agreement and Secured Term Note with Laurus
        Master
        Fund, Ltd.  (“Laurus”) for Laurus to provide financing for the
        drilling of the Kallina 46 #1 well and payment of the future completion costs
        for the  Kallina 46 #1 well which is in process of being
        completed.   We formed a subsidiary, Garwood Petrosearch Inc.,
        (“Garwood”) to hold our interest in the Kallina Lease and the Kallina 46 #1
        well.  Also, as a part of the financing arrangement,
        Garwood  issued Laurus a Warrant to acquire, upon payout of the Note
        indebtedness, 45% of Garwood’s outstanding common stock such that upon exercise
        of the Warrant, Garwood would be owned 55% by us and 45% by Laurus and the
        sole
        asset is the Kallina lease.
 
 In
        the SW
        Garwood Project, in addition to the working interest in the wells noted above,
        we currently own a 16% after payout working interest in 960 acres of undeveloped
        leases; and an 87.5% before payout and 75.5% after payout working interest
        in
        438 acres.
 
 *OTHER
        PROJECT AREAS:*
 
 **Gruman
        Prospect, Stark County, North Dakota –**In April 2006 we reached a total
        depth of 9,890 feet on the Gruman 18-3 well.  This well was completed
        as an injection well.
 
 In
        October 2006, we undertook certain remedial work on the Gruman 18-1 which
        initially improved the production from the well. We have continually experienced
        “down hole” production problems which have resulted in only producing 76% and
        41% of the days in the first and second quarters of 2007,
        respectively.  The production problems have been caused by mechanical
        problems with the down-hole submersible pump, and what appears to be erratic
        reservoir pressure, that has hindered achieving stabilized production
        from the well. As a result, daily production rates seem to be in line with
        the
        historical trend, but monthly volumes are well below expectation.  We
        are currently waiting on a work over rig to replace the defective pump
        equipment.
 
 On
        February 1, 2007, we began injecting produced water into the Gruman 18-3
        well.
        The result has been to reduce the cost of operating the Gruman 18-1 by
        eliminating the need to truck produced water to a disposal facility.
        Supplementing this injection with water from the shallower Dakota formation
        for
        pressure maintenance in the mound will make flow from the reservoir more
        consistent is also expected to improve the run time of the pump. We have
        established that the Gruman 18-3 is in pressure communication with the Gruman
        18-1.
 
 Proved
        developed reserves in the prospect to our share of the well as of December
        31,
        2006, were 252 Mbo and 54.4 MMcf of natural gas, as estimated by a third
        party
        engineering firm, McCartney Engineering, LLC.
 
 **Mississippi
        Tuscaloosa Prospects --**We have identified five Tuscaloosa oil
        prospects in the Mississippi Inland Salt Basin, in Yazoo County, comprising
        a
        maximum of 2,295 acres and up to 18 potential drilling locations.  The
        company currently holds approximately 725 net acres and we are in initial
        discussions with a potential industry partner to co-develop these
        prospects.   We plan to initially drill 8 locations, ranging from
        6,150 feet to 7,500 feet in depth. Seismic data on the prospects has been
        reprocessed and confirmed our original geological analysis. We currently
        own
        100% of the prospect.
  16
 *Index*
  **Rodney
        Island, Tensas Parish, Louisiana -**In October 2005, we took over
        operations of the Harper Z-1 well on the Rodney Island prospect from the
        previous operator after casing was set and cemented. Down hole mechanical
        difficulties hindered our attempt to complete the well, which was directionally
        drilled to a measured depth of 11,701 feet (vertical depth = 9,373 feet)
        and
        logged approximately 19 feet of oil pay in the Tuscaloosa Massive
        Sand.
  As
        the
        operator, and with the agreement of the other working interest owners, we
        initiated litigation in February 2006 against the previous operator for
        non-payment of their share of drilling and completion costs.  We had
        made the decision, along with all the other working interest owners, to allow
        the leases associated with this project to expire in May 2007 and pursue
        the
        lawsuit against the previous operator.  We have currently reached a
        tentative settlement with the previous operator and we anticipate a full
        resolution of the matter in the third quarter of 2007.
 
 **RESULTS
        OF OPERATIONS**
 
 The
        following discussion and analysis of our financial condition and results
        of
        operations should be read in conjunction with the financial statements and
        accompanying notes and the other financial information appearing elsewhere
        in
        this filing.
 
 The
        factors that most significantly affect our results of operations are: (i)
        the
        sale prices of crude oil and natural gas; (ii) the amount of production sales;
        and (iii) the amount of lease operating expenses. Sales of production and
        level
        of borrowings are significantly impacted by our ability to maintain or increase
        production and reserves from existing oil and gas properties through exploration
        and development activities.
 
 **For
        the three months ended June 30, 2007 Compared to the three months ended June
        30,
        2006**
 
 ***Revenues***
 
 Consolidated
        oil and gas production revenue for the three months ended June 30, 2007 was
        $373,544 versus $369,686 for the three months ended June 30,
        2006.  Although the total between the two quarters is similar, the
        sources of the revenue are significantly different from 2006 to
        2007.  In the second quarter of 2006 the revenue was 67% from the
        Gruman, North Dakota well as compared to only 16% in the second quarter of
        2007.  Also, the Barnett Shale Project did not account for any of the
        revenue for the second quarter of 2006 and accounted for approximately 50%
        of
        the revenue for the second quarter of 2007.  In 2006 we had a one time
        sale of oil accumulated on the Panhandle Water Flood Project.  We
        continue to work on improving the reliability of the daily production for
        our North Dakota well, and expect to continue to grow revenues for our Barnett
        Shale Project in the second quarter of 2007.
 
 See
        below
        for revenue detail from the second quarter 2006 compared to the second quarter
        of 2007.
 
 **2007**
              
              
              **%
                  of**
              
              
              **2006**
              
              
              **%
                  of****2nd
                  Qtr**
              
              
              **Total**
              
              
              **2nd
                  Qtr**
              
              
              **Total**Barnett
                  Shale
              
              
              185,786
              
              
              
              50
              %
              
              
              -
              
              
              
              0
              %Gruman
                  - North Dakota
              
              
              59,630
              
              
              
              16
              %
              
              
              246,603
              
              
              
              67
              %SW
                  Garwood
              
              
              70,341
              
              
              
              19
              %
              
              
              14,091
              
              
              
              4
              %Panhandle
                  - Water Flood
              
              
              4,286
              
              
              
              1
              %
              
              
              40,168
              
              
              
              11
              %Oklahoma
              
              
              31,649
              
              
              
              8
              %
              
              
              40,066
              
              
              
              11
              %Other
              
              
              21,852
              
              
              
              6
              %
              
              
              28,758
              
              
              
              8
              %**Total**
              
              ****
              **373,544**
              
              
              ****
              **100**
              **%**
              
              ****
              **369,686**
              
              
              ****
              **100**
              **%**
 
 Note
        that
        there was a 372% increase in the Barnett Shale revenue from the first quarter
        of
        2007 to the second quarter of 2007.
  17
 *Index*
  ***Lease
        Operating and Production Tax Expense***
 Lease
        operating and production tax expenses for the quarters ended June 30, 2007
        and
        2006 were $265,598 and $256,192, respectively.  These expenses relate
        to the costs that are incurred to operate and maintain our wells and related
        production equipment, including the costs applicable to the operating costs
        of
        support equipment and facilities.  The four percent fluctuation in
        these expenses is expected given the minimal fluctuations in revenue from
        the
        second quarter of 2007 to the second quarter of 2006.
 
 ***Depletion,
        Depreciation and Amortization***
 
 Costs
        for
        depletion, depreciation and amortization for the quarters ended June 30,
        2007,
        and 2006, were $194,142 and $97,247 respectively.  The significant
        increase is mainly due to a significant increase in the amortizable costs
        at
        June 30, 2007 as compared to the same period in 2006.  Given the fact
        that depletion is calculated by multiplying the net amortizable costs times
        the
        units of production in the related period relative to the total proved reserves,
        the depletion amount for the second quarter of 2007 was significantly higher
        than the depletion for the same period in 2006.
 
 ***General
        and Administrative Expenses***
 
 General
        and administrative expenses for the quarters ended June 30, 2007 and 2006,
        were
        $701,382 and $572,773, respectively.  The difference of $128,609 is
        mainly related an increase in legal fees, professional fees attributed to
        a
        special project related to our land department and an increase in corporate
        expenses primarily related to third party investor relations
        consulting.   A summary listing of general and administrative
        expenses is provided below.
 
 **2nd
                  Quarter**
              
              
              **2nd
                  Quarter****2007**
              
              
              **2006****Total**
              
              
              **Total**Personnel
                  Costs
              
              
              287,788
              
              
              
              285,752Travel,
                  Meals and Entertainment
              
              
              25,250
              
              
              
              28,748Corporate
                  expenses
              
              
              96,647
              
              
              
              56,829Accounting,
                  Legal and Professional Fees
              
              
              153,636
              
              
              
              97,709Third
                  Party Consultants and Contractors
              
              
              61,038
              
              
              
              47,313Office
                  Expenses
              
              
              50,901
              
              
              
              57,155Other
              
              
              26,122
              
              
              
              (733
              )**Total
                  General and Administrative**
              
              ****
              **701,382**
              
              
              ****
              **572,773**
 
 ***Net
        Operating Loss***
 
 We
        generated a net operating loss of $(787,578) or $(0.02) per share, for the
        quarter ended June 30, 2007, compared to a net operating loss of $(556,526)
        or
        $(0.02) per share, for the quarter ended June 30, 2006.  The $231,052
        variance is related mainly to an increase of approximately $97,000 in DD&A
        expense and an increase of approximately $129,000 of general and administrative
        expenses for the quarter ended June 30, 2007 as compared to the quarter ended
        June 30, 2006.
 
 ***Other
        Income (Expense)***
 
 The
        $1,716,786 change from $874,130 in Other Income for the quarter ended June
        30,
        2006 versus ($842,656) in Other Expense from the quarter ended June 30, 2007
        is
        due to a significant increase in interest expense and amortization of debt
        discount related to A) the non-recourse financing with Laurus Master Fund
        Ltd
        for the Kallina #46-1 well; 2) the $10 million Convertible note with RCH
        Petro
        Investors; and 3) the change in liability related to warrants issued to Fortuna
        Energy with a put option related to the revolving credit
        facility.   The significant difference also relates to $1,000,000
        in other income related to the sale of securities in the quarter ending June
        30,
        2006 that did not occur in the quarter ended June 30, 2007.
 
  18
 *Index*
  **For
        the six months Ended June 30, 2007 Compared to the six months Ended June
        30,
        2006**
 
 ***Revenues***
 
 Consolidated
        oil and gas production revenue for the six months ended June 30, 2007 was
        $736,520 versus $491,600 for the six months ended June 30,
        2006.   The difference partially relates to the increased
        production from our North Dakota well which was down during most of the first
        quarter of 2006.  The revenue totals for the second quarter of 2007
        versus the same period of 2006 were similar in quantity, although different
        in
        source.  In the six months ended June 30, 2006 the revenue was 63%
        from the Gruman, North Dakota well as compared to only 32% in the six months
        ended June 30, 2007.  Also, the Barnett Shale Project did not account
        for any of the revenue for the six months ended June 30, 2006 and accounted
        for
        approximately 32% of the revenue for the six months ended June 30,
        2007.  Our 16% reversionary interest in one SW Garwood wells was in
        effect for all of the six month period ended June 30, 2007.
 
 See
        below
        for revenue detail from the six months ended June 30, 2006 compared to the
        same
        period in 2007.
 
 **6/30/2007**
              
              
              **%
                  of**
              
              
              **6/30/2006**
              
              
              **%
                  of****YTD**
              
              
              **Total**
              
              
              **YTD**
              
              
              **Total**Barnett
                  Shale
              
              
              235,702
              
              
              
              32
              %
              
              
              -
              
              
              
              0
              %Gruman
                  - North Dakota
              
              
              236,511
              
              
              
              32
              %
              
              
              312,076
              
              
              
              63
              %SW
                  Garwood
              
              
              135,210
              
              
              
              18
              %
              
              
              14,091
              
              
              
              3
              %Panhandle
                  - Water Flood
              
              
              9,534
              
              
              
              1
              %
              
              
              40,930
              
              
              
              8
              %Oklahoma
              
              
              71,982
              
              
              
              10
              %
              
              
              76,481
              
              
              
              16
              %Other
              
              
              47,581
              
              
              
              6
              %
              
              
              48,022
              
              
              
              10
              %**Total**
              
              ****
              **736,520**
              
              
              ****
              **100**
              **%**
              
              ****
              **491,600**
              
              
              ****
              **100**
              **%**
 
 Note
        that
        there was a 372% increase in the Barnett Shale revenue from the first quarter
        of
        2007 to the second quarter of 2007.
 
 ***Lease
        Operating and Production Tax Expense***
 Lease
        operating and production tax expenses for the six months ended June 30, 2007
        and
        2006 were $342,891 and $417,882, respectively.  These expenses relate
        to the costs that are incurred to operate and maintain our wells and related
        production equipment, including the costs applicable to the operating costs
        of
        support equipment and facilities.  The difference relates mainly to
        higher lease operating expenses in the first quarter of 2006 versus the first
        quarter of 2007, as the lease operating expenses in the second quarter of
        those
        years were similar.  The higher lease operating expenses in the first
        quarter 2006 relate to the fact that in November 2005 we acquired approximately
        30 existing wells associated with our Texas Panhandle Water Flood Project
        that
        required significant lease operating expenses for well evaluation necessary
        for
        the preparation of a development plan for the Water Flood project that will
        be
        needed to grow production and proved reserves.
 
 ***Depletion,
        Depreciation and Amortization***
 
 Costs
        for
        depletion, depreciation and amortization for the six months ended June 30,
        2007,
        and 2006, were $372,789 and $134,628, respectively.  This increase is
        mainly due to a significant increase in the amortizable costs at June 30,
        2007
        as compared to the same period in 2006.  Given the fact that depletion
        is calculated by multiplying the net amortizable costs times the units of
        production in the related period relative to the total proved reserves, the
        depletion amount for the second quarter of 2007 was significantly higher
        than
        the depletion for the same period in 2006.
  19
 *Index*
  ***General
        and Administrative Expenses***
 
 General
        and administrative expenses for the six months ended June 30, 2007 and 2006,
        were $1,440,472 and $1,295,321, respectively.  The difference of
        $145,151 is mainly related an increase in legal fees, professional fees
        attributed to a special project related to our land department and an increase
        in corporate expenses primarily related to third party investor relations
        consulting.   A summary listing of general and administrative
        expenses is provided below.
 
 **6/30/2007**
              
              
              **6/30/2006****YTD**
              
              
              **YTD****Total**
              
              
              **Total**Personnel
                  Costs
              
              
              684,373
              
              
              
              675,787Travel,
                  Meals and Entertainment
              
              
              36,586
              
              
              
              65,656Corporate
                  expenses
              
              
              160,743
              
              
              
              121,602Accounting
                  and Legal Professional Fees
              
              
              270,882
              
              
              
              207,760Third
                  Party Consultants and Contractors
              
              
              138,497
              
              
              
              111,845Office
                  Expenses
              
              
              108,288
              
              
              
              103,674Other
              
              
              41,103
              
              
              
              8,997****
              **1,440,472**
              
              
              ****
              **1,295,321**
 
 ***Net
        Operating Loss***
 
 We
        generated a net operating loss of $(1,419,632) or $(0.04) per share, for
        the six
        months ended June 30, 2007, compared to a net operating loss of $(1,356,231)
        or
        $(0.04) per share, for the six months ended June 30, 2006.  The
        $63,401 variance is related mainly to an increase in DD&A and general and
        administrative expenses, offset partially with an increase in revenues and
        a
        decrease in lease operating expenses.
 
 ***Other
        Income (Expense)***
 
 The
        $2,642,212 change from $829,205 in Other Income for the six months ended
        June
        30, 2006 versus ($1,813,007) in Other Expense for the six months ended June
        30,
        2007 is due to the significant increase in interest expense and amortization
        of
        debt discount and change in warrant liability related to A) the non-recourse
        financing with Laurus Master Fund Ltd for the Kallina #46-1 well; 2) the
        $10
        million Convertible note with RCH Petro Investors; and 3) the change in
        liability related to warrants issued to Fortuna Energy with a put option
        related
        to the revolving credit facility.  The significant difference also
        relates to $1,000,000 in other income related to the sale of securities in
        the
        six months ending June 30, 2006 that did not occur in the six months ending
        June
        30, 2007.
 
 **Off-Balance
        Sheet Arrangements**
 
 We
        had no
        off-balance sheet arrangements during the fiscal quarter ended June 30,
        2007.
 
 
 **Item
                  3.**
              **Controls
                  and
                  Procedures**
 
 Richard
        D. Dole, our Chief Executive Officer, and David J. Collins, our Chief Financial
        Officer, have concluded that our disclosure controls and procedures are
        appropriate and effective.  They have evaluated these controls and
        procedures as of June 30, 2007.  There have been no changes in our
        internal control over financial reporting during the last fiscal quarter
        that
        have materially affected, or are reasonably likely to materially affect our
        internal control over financial reporting.
  20
 *Index*
  **PART
        II--OTHER INFORMATION**
 
 **Item
                  2.**
              **Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds**
 
 During
        the three months ended June 30, 2007, we completed the following transactions
        in
        reliance upon exemptions from registration under the Securities Act of 1933,
        as
        amended (the "Act") as provided in Section 4(2) thereof. All certificates
        issued
        in connection with these transactions were endorsed with a restrictive legend
        confirming that the securities could not be resold without registration under
        the Act or an applicable exemption from the registration requirements of
        the
        Act. We believe that each person was a “qualified” investor within the meaning
        of the Act and had knowledge and experience in financial and business matters,
        which allowed them to evaluate the merits and risks of our securities. Each
        person was knowledgeable about our operations and financial
        condition.
 
 On
        April
        2, 2007 we issued 83,986 restricted common shares to RCH Petro Investors,
        the
        Holder of our $10 million convertible note, as an interest payment for the
        first
        quarter of 2007 related to the convertible note.
 
 On
        April
        9, 2007 we issued 15,517 restricted commons shares to each of our two
        independent directors for board compensation.
 
 On
        April
        25, 2007 we issued 500,000 restricted common stock shares to Quinduno Energy
        for
        the third scheduled payment pursuant to the 2005 Asset Purchase Agreement
        related to our purchase of the North Texas Panhandle Water Flood
        Project.
  21
 *Index*
 
 **Item
                  6.**
              **Exhibits**
 
 
 **Exhibit
                    Number**
              **Description
                    of Exhibit**31.1
              Rule
                  13a-14(a) Certification of Chief Executive Officer31.2
              Rule
                  13a-14(a) Certification of Chief Financial Officer32.1
              Section
                  1350 Certification of Chief Executive Officer32.2
              Section
                  1350 Certification of Chief Financial
                  Officer
  22
 *Index*
 
 **SIGNATURES**
  In
        accordance with the requirements of the Securities and Exchange Act of 1934,
        the
        Registrant has duly caused this report to be signed on its behalf by the
        undersigned, thereunto duly authorized.
  **Petrosearch
        Energy Corporation**
 
 Date:
              **August
                  14, 2007**By:
              /s/
                  Richard Dole**Richard
                  Dole****Chief
                  Executive Officer, President and Chairman**By:
              /s/
                  David Collins**David
                  Collins****Chief
                  Financial Officer and Principal Financial Officer**
   23