----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-QSB**

**x          **

**March 31, 2007**

**000-51488**

**PETROSEARCH      ENERGY CORPORATION**

| **NEVADA**                                                                                   | **20-2033200**                                   |
|----------------------------------------------------------------------------------------------|--------------------------------------------------|
| (State                or other jurisdiction of incorporation                or organization) | (IRS                Employer Identification No.) |

**675      Bering Drive, Suite 200**

**Houston,      TX 77057**

**(713)      961-9337**

**  Yes x       **
**No o**

**Yes o No x**

**We      had 39,388,519 Shares of $0.001 par value Common Stock outstanding as of May      10,      2007**

**Yes o  No x**

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*Table          of Contents*

**PETROSEARCH      ENERGY CORPORATION**

**FORM      10-QSB**

**For      The Quarter Ended March 31, 2007**

**INDEX**

| PART                  I - FINANCIAL INFORMATION  |
|-------------------------------------------------------|
| ITEM                  1.                              | FINANCIAL                  STATEMENTS |
| ITEM                  2.                              | MANAGEMENT'S                  DISCUSSION AND ANALYSIS OR PLAN OF                  OPERATIONS |
| ITEM                  3.                              | CONTROLS                  AND PROCEDURES |
| PART                  II--OTHER INFORMATION      |
| ITEM                  1.                              | LEGAL                  PROCEEDINGS |
| ITEM                  2.                              | UNREGISTERED                  SALES OF EQUITY SECURITIES AND USE OF                  PROCEEDS |
| ITEM                  6.                              | EXHIBITS |
|                                                  |   |
| SIGNATURES                                       |

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*Table          of Contents*

**ITEM      1.       FINANCIAL STATEMENTS**

**PETROSEARCH      ENERGY CORPORATION**

**CONSOLIDATED      BALANCE SHEETS**

**March      31, 2007 and December 31, 2006**

| **ASSETS**                                                                                                                                                      |   | **March                31,****2007****(Unaudited)** |       |   | **December                31,**** 2006****(See                note)** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|------------|--------|----------------------------------------------------------------------------|--------|
|                                                                                                                                                            |   |                                                |       |   |                                                                       |   |
| Current                assets:                                                                                                                                  |   |                                                |       |   |                                                                       |   |
| Cash                                                                                                                                                            |   | $                                                   | 10,540,493 |   |                                                                       | $      | 3,715,618 |   |
| Accounts                receivable:                                                                                                                             |   |                                                |       |   |                                                                       |   |   |   |
|                 Joint                owners-billed, net of allowance of $83,073 |   |                                                | 293,918    |   |                                                                       |   | 421,081 |   |
| Joint                owners-unbilled                                                                                                                            |   |                                                | 5,103      |   |                                                                       |   | 15,213 |   |
| Oil                and gas production sales                                                                                                                     |   |                                                | 201,797    |   |                                                                       |   | 146,408 |   |
| Prepaid                expenses and other current assets                                                                                                        |   |                                                | 1,062,698  |   |                                                                       |   | 829,104 |   |
| Total                current assets                                                                                                                             |   |                                                | 12,104,009 |   |                                                                       |   | 5,127,424 |   |
|                                                                                                                                                            |   |                                                |       |   |                                                                       |   |   |   |
| Property                and equipment:                                                                                                                          |   |                                                |       |   |                                                                       |   |   |   |
| Oil                and gas properties, full cost method of accounting:                                                                                          |   |                                                |       |   |                                                                       |   |   |   |
| Properties                subject to amortization                                                                                                               |   |                                                | 26,009,252 |   |                                                                       |   | 23,462,639 |   |
| Properties                not subject to amortization                                                                                                           |   |                                                | 5,568,720  |   |                                                                       |   | 6,309,169 |   |
| Other                property and equipment                                                                                                                     |   |                                                | 149,348    |   |                                                                       |   | 149,348 |   |
| Total                                                                                                                                                           |   |                                                | 31,727,320 |   |                                                                       |   | 29,921,156 |   |
| Less                accumulated depreciation, depletion and amortization                                                                                        |   |                                                | (2,535,994 | )      |                                                                       |   | (2,357,347 | ) |
| Total                property and equipment, net                                                                                                                |   |                                                | 29,191,326 |   |                                                                       |   | 27,563,809 |   |
|                                                                                                                                                            |   |                                                |       |   |                                                                       |   |   |   |
| Prepaid                oil and gas costs                                                                                                                        |   |                                                | 14,507     |   |                                                                       |   | 14,507 |   |
|                                                                                                                                                            |   |                                                |       |   |                                                                       |   |   |   |
| Other                assets                                                                                                                                     |   |                                                | 853,725    |   |                                                                       |   | 656,790 |   |
|                                                                                                                                                            |   |                                                |       |   |                                                                       |   |   |   |
| Total                assets                                                                                                                                     |   | $                                                   | 42,163,567 |   |                                                                       | $      | 33,362,530 |   |

| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                               |   |   |       |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                                                                                                                                                                                                                                        |   |   |       |   |   |   |
| Current                liabilities:                                                                                                                                                                                                                                         |   |   |       |   |   |   |
| Current                portion of long-term debt                                                                                                                                                                                                                            |   | $      | 1,859,972  |   |   | $      | 1,863,531 |   |
| Current                portion of long-term debt Kallina                                                                                                                                                                                                                    |   |   | 310,844    |   |   |   | 298,806 |   |
| Trade                note payable                                                                                                                                                                                                                                           |   |   | 290,864    |   |   |   | 409,819 |   |
| Accounts                payable                                                                                                                                                                                                                                             |   |   | 773,043    |   |   |   | 1,062,679 |   |
| Accrued                liabilities for Barnett property costs                                                                                                                                                                                                               |   |   | 1,045,319  |   |   |   | 607,013 |   |
| Accrued                liabilities                                                                                                                                                                                                                                          |   |   | 867,482    |   |   |   | 925,183 |   |
| Warrant                liability                                                                                                                                                                                                                                            |   |   | 589,694    |   |   |   | 317,752 |   |
| Total                current liabilities                                                                                                                                                                                                                                    |   |   | 5,737,218  |   |   |   | 5,484,783 |   |
|                                                                                                                                                                                                                                                                        |   |   |       |   |   |   |   |   |
| Long-term                debt, net of current portion                                                                                                                                                                                                                       |   |   | 1,601,882  |   |   |   | 2,066,074 |   |
| Long-term                debt, net of current portion – Kallina                                                                                                                                                                                                       |   |   | 6,661,162  |   |   |   | 6,963,694 |   |
| Convertible                debt                                                                                                                                                                                                                                             |   |   | 5,313,303  |   |   |   | - |   |
| Other                long-term obligations                                                                                                                                                                                                                                  |   |   | 916,354    |   |   |   | 906,996 |   |
| Total                liabilities                                                                                                                                                                                                                                            |   |   | 20,229,919 |   |   |   | 15,421,547 |   |
|                                                                                                                                                                                                                                                                        |   |   |       |   |   |   |   |   |
| Stockholders'                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 March 31, 2007and December 31,                2006                                                   |   |   | 483,416    |   |   |   | 483,416 |   |
| Series                B convertible preferred stock, 100,000 shares authorized; 43,000                shares issued and outstanding at March 31, 2007                and  December 31, 2006                                                                       |   |   | 43,000     |   |   |   | 43,000 |   |
| Common                  stock, par value $0.001 per share, 100,000,000 shares Authorized;                  38,773,499                  and 37,927,070 shares issued and outstanding at March 31, 2007                  and                  December 31, 2006, respectively |   |   | 38,773     |   |   |   | 37,927 |   |
| Additional                paid-in capital                                                                                                                                                                                                                                   |   |   | 30,117,335 |   |   |   | 23,928,090 |   |
| Unissued                common stock                                                                                                                                                                                                                                        |   |   | 176,408    |   |   |   | 771,429 |   |
| Accumulated                deficit                                                                                                                                                                                                                                          |   |   | (8,925,284 | )      |   |   | (7,322,879 | ) |
| Total                stockholders' equity                                                                                                                                                                                                                                   |   |   | 21,933,648 |   |   |   | 17,940,983 |   |
|                                                                                                                                                                                                                                                                        |   |   |       |   |   |   |   |   |
| Total                liabilities and stockholders' equity                                                                                                                                                                                                                   |   | $      | 42,163,567 |   |   | $      | 33,362,530 |   |

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*Table          of Contents*

**PETROSEARCH      ENERGY CORPORATION**

**CONSOLIDATED      CONDENSED STATEMENTS OF OPERATIONS**

**for      the three months ended March 31, 2007 and 2006**

|                                                             |   | **Three                Months Ended****March                31,** |       |
|------------------------------------------------------------------|--------|-------------------------------------------------------------------|------------|
|                                                             |   | **2007**                                                          |       |   | **2006** |   |
|                                                             |   |                                                              |       |   |   |   |
| Oil                and gas production revenues                   |   | $                                                                 | 362,976    |   |   | $ | 121,914 |   |
|                                                             |   |                                                              |       |   |   |   |   |   |
| Operating                costs and expenses:                     |   |                                                              |       |   |   |   |   |   |
| Lease                operating and production taxes              |   |                                                              | 77,293     |   |   |   | 161,690 |   |
| Depreciation,                depletion and amortization          |   |                                                              | 178,647    |   |   |   | 37,381 |   |
| General                and administrative                        |   |                                                              | 739,090    |   |   |   | 722,548 |   |
|                                                             |   |                                                              |       |   |   |   |   |   |
| Total                costs and expenses                          |   |                                                              | 995,030    |   |   |   | 921,619 |   |
|                                                             |   |                                                              |       |   |   |   |   |   |
| Operating                loss                                    |   |                                                              | (632,054   | ) |   |   | (799,705 | ) |
|                                                             |   |                                                              |       |   |   |   |   |   |
| Other                income (expense):                           |   |                                                              |       |   |   |   |   |   |
| Interest                income                                   |   |                                                              | 62,778     |   |   |   | 19,592 |   |
| Interest                expense                                  |   |                                                              | (434,800   | ) |   |   | (44,954 | ) |
| Amortization                of financing costs and debt discount |   |                                                              | (326,387   | ) |   |   | (19,563 | ) |
| Change                in value of warrant liability              |   |                                                              | (271,942   | ) |   |   | - |   |
|                                                             |   |                                                              |       |   |   |   |   |   |
| Total                other income (expense)                      |   |                                                              | (970,351   | ) |   |   | (44,925 | ) |
|                                                             |   |                                                              |       |   |   |   |   |   |
| Net                loss                                          |   | $                                                                 | (1,602,405 | ) |   | $ | (844,630 | ) |
|                                                             |   |                                                              |       |   |   |   |   |   |
| Basic                and diluted net loss per common share       |   | $                                                                 | (0.04      | ) |   | $ | (0.03 | ) |
|                                                             |   |                                                              |       |   |   |   |   |   |
| Weighted                average common shares                    |   |                                                              | 38,729,888 |   |   |   | 29,327,487 |   |

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*Table          of Contents*

**PETROSEARCH      ENERGY CORPORATION**

**CONSOLIDATED      STATEMENT OF STOCKHOLDERS’ EQUITY**

**For      the three months ended March 31, 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 | ) |   | $ | 17,940,983 |   |
| Issuance                of common stock committed                |   |                            | 771,429    |   |                               |   | 771    |                               |   |   |                        |   |   |           |    |   |            |   |   |        |   |   |                            |   |   |   | 770,658 |   |   |   | (771,429 | ) |   |   |   |   |   |   | - |   |
| Common                stock issued for employee compensation     |   |                            | 25,000     |   |                               |   | 25     |                               |   |   |                        |   |   |           |    |   |            |   |   |        |   |   |                            |   |   |   | 20,725 |   |   |   |   |   |   |   |   |   |   |   | 20,750 |   |
| Common                stock issued for services                  |   |                            | 50,000     |   |                               |   | 50     |                               |   |   |                        |   |   |           |    |   |            |   |   |        |   |   |                            |   |   |   | 61,926 |   |   |   |   |   |   |   |   |   |   |   | 61,976 |   |
| Common                stock committed for board compensation     |   |                            |       |   |                               |   |   |                               |   |   |                        |   |   |           |    |   |            |   |   |        |   |   |                            |   |   |   |   |   |   |   | 45,000 |   |   |   |   |   |   |   | 45,000 |   |
| Common                stock committed for interest expense       |   |                            |       |   |                               |   |   |                               |   |   |                        |   |   |           |    |   |            |   |   |        |   |   |                            |   |   |   |   |   |   |   | 131,408 |   |   |   |   |   |   |   | 131,408 |   |
| Issuance                of warrants with debt                    |   |                            |       |   |                               |   |   |                               |   |   |                        |   |   |           |    |   |            |   |   |        |   |   |                            |   |   |   | 2,667,968 |   |   |   |   |   |   |   |   |   |   |   | 2,667,968 |   |
| Beneficial                conversion feature of convertible debt |   |                            |       |   |                               |   |   |                               |   |   |                        |   |   |           |    |   |            |   |   |        |   |   |                            |   |   |   | 2,667,968 |   |   |   |   |   |   |   |   |   |   |   | 2,667,968 |   |
| Net                loss                                          |   |                            |       |   |                               |   |   |                               |   |   |                        |   |   |           |    |   |            |   |   |        |   |   |                            |   |   |   |   |   |   |   |   |   |   |   | (1,602,405 | ) |   |   | (1,602,405 | ) |
| Balance                at March 31, 2007                         |   |                            | 38,773,499 |   |                               | $      | 38,773 |                               |   |   | 483,416                     |   |   | $              | 483,416 |   |            |   | 43,000 |        |   | $      | 43,000                          |   |   | $ | 30,117,335 |   |   | $ | 176,408 |   |   | $ | (8,925,284 | ) |   | $ | 21,933,648 |   |

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*Table          of Contents*

**PETROSEARCH      ENERGY CORPORATION**

**CONSOLIDATED      STATEMENT OF CASH FLOWS**

**For      the three months ended March 31, 2007 and 2006**

|                                                                                                      |   | **Three                Months Ended****March                31,** |       |
|-----------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|------------|
|                                                                                                      |   | **2007**                                                          |       |   | **2006** |   |
| Cash                flows from operating activities:                                                      |   |                                                              |       |   |   |   |
| Net                loss                                                                                   |   | $                                                                 | (1,602,405 | ) |   | $ | (844,630 | ) |
| Adjustments                to reconcile net loss to net cash used in operating                activities: |   |                                                              |       |   |   |   |   |   |
| Depletion,                depreciation and amortization expense                                           |   |                                                              | 178,647    |   |   |   | 37,380 |   |
| Stock                based compensation                                                                   |   |                                                              | 259,134    |   |   |   | - |   |
| Amortization                of deferred rent                                                              |   |                                                              | (1,227     | ) |   |   | (1,227 | ) |
| Amortization                of debt discount                                                              |   |                                                              | 156,684    |   |   |   | 8,841 |   |
| Amortization                of beneficial conversion feature                                              |   |                                                              | 122,897    |   |   |   | - |   |
| Amortization                of financing costs                                                            |   |                                                              | 46,726     |   |   |   | 10,722 |   |
| Accretion                of asset retirement obligation                                                   |   |                                                              | 8,607      |   |   |   | - |   |
| Change                in value of warrant liability                                                       |   |                                                              | 271,942    |   |   |   | - |   |
| Changes                in operating assets and liabilities:                                               |   |                                                              |       |   |   |   |   |   |
| Accounts                receivable                                                                        |   |                                                              | 81,884     |   |   |   | 128,422 |   |
| Prepaid                expenses and other assets                                                          |   |                                                              | (333,342   | ) |   |   | 12,392 |   |
| Accounts                payable and accrued liabilities                                                   |   |                                                              | (456,587   | ) |   |   | (32,617 | ) |
| Trade                note payable                                                                         |   |                                                              | (118,955   | ) |   |   | - |   |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Net                cash used in operating activities                                                      |   |                                                              | (1,385,995 | ) |   |   | (680,717 | ) |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Cash                flows from investing activities:                                                      |   |                                                              |       |   |   |   |   |   |
| Capital                expenditures, including purchases and development of                properties     |   |                                                              | (1,256,630 | ) |   |   | (3,944,545 | ) |
| Purchase                of prepaid credits for oil and gas properties, net                                |   |                                                              | -          |   |   |   | (159,586 | ) |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Net                cash used in investing activities                                                      |   |                                                              | (1,256,630 | ) |   |   | (4,104,131 | ) |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Cash                flows from financing activities:                                                      |   |                                                              |       |   |   |   |   |   |
| Proceeds                from the sale of common stock                                                     |   |                                                              | -          |   |   |   | 2,692,097 |   |
| Proceeds                from convertible debt                                                             |   |                                                              | 10,000,000 |   |   |   | - |   |
| Repayment                of notes payable                                                                 |   |                                                              | (532,500   | ) |   |   | - |   |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Net                cash provided by financing activities                                                  |   |                                                              | 9,467,500  |   |   |   | 2,692,097 |   |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents                                       |   |                                                              | 6,824,875  |   |   |   | (2,092,751 | ) |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Cash                and cash equivalents at beginning of year                                             |   |                                                              | 3,715,618  |   |   |   | 4,052,844 |   |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Cash                and cash equivalents at end of year                                                   |   | $                                                                 | 10,540,493 |   |   | $ | 1,960,093 |   |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Supplemental                disclosures of cash flow information:                                         |   |                                                              |       |   |   |   |   |   |
| Interest                paid                                                                              |   | $                                                                 | 132,680    |   |   | $ | 90,695 |   |
|                                                                                                      |   |                                                              |       |   |   |   |   |   |
| Income                taxes paid                                                                          |   |                                                              | -          |   |   |   | - |   |

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*Table            of Contents*

**PETROSEARCH      ENERGY CORPORATION**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**1.         Interim        Financial Statements**

**2.         Income        Taxes**

**3.         Stock        Warrants**

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*Table          of Contents*

|   | For                warrants granted during the first quarter of 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 |

|                                                                    |   | **Number                of****Shares****Under****Warrant** |       |   | **Exercise****Price** |   |       | **Weighted****Average****Exercise****Price** |   |   | **Weighted****Average****Grant****Date                Fair****Value****($/share)                (2)** |   |   | ** ** | **Total****Intrinsic****Value****Warrant****Exercises****(1)** |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------|------------|--------|-----------------------|--------|------------|----------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------|--------|--------|------------|----------------------------------------------------------------|--------|
|                                                                    |   |                                                       |       |   |                  |   |       |                                         |   |   |                                                                                                  |   |   |       |                                                           |   |
| Warrants                outstanding at December                31, 2006 |   |                                                       | 14,147,690 |   |                  | $      | 0.92-$9.75 |                                         |   | $      | 1.88                                                                                                  |   |   |       |                                                           |   |   |   |   |
|                                                                    |   |                                                       |       |   |                  |   |       |                                         |   |   |                                                                                                  |   |   |       |                                                           |   |   |   |   |
| Issued                                                                  |   |                                                       | 5,225,000  |   |                  | $      | 1.40       |                                         |   | $      | 1.40                                                                                                  |   |   | $          | 0.51                                                           |   |   |   |   |   |
| Cancelled                                                               |   |                                                       | (242,311   | )      |                  | $      | 9.75       |                                         |   | $      | 9.75                                                                                                  |   |   |       |                                                           |   |   |   |   |   |
|                                                                    |   |                                                       |       |   |                  |   |       |                                         |   |   |                                                                                                  |   |   |       |                                                           |   |   |   |   |   |
| Warrants                outstanding at March                31, 2007    |   |                                                       | 19,130,379 |   |                  | $      | 0.92-$9.75 |                                         |   | $      | 1.65                                                                                                  |   |   |       |                                                           |   |   |   |   |   |

|   | All                outstanding stock warrants are exercisable at March 31, 2007.  A                summary of outstanding stock warrants at March 31, 2007                follows: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Number                of****Common****Stock****Equivalents** |       | **Expiration****Date** |                          | **Remaining****Contracted****Life****(Years)** |   | **Weighted****Average****Remaining****Contractual****Term                (Years)** |   | **Exercise****Price** |   |   | **Weighted****Average****Exercise****Price** |   | **Aggregate****Intrinsic****Value                (1)** |
|----------------------------------------------------------------|------------|------------------------|-------------------------------|------------------------------------------------|--------|------------------------------------------------------------------------------------|--------|-----------------------|--------|--------|----------------------------------------------|--------|--------------------------------------------------------|
|                                                           | 300,004    |                   | April                2007     |                                           |   | .08                                                                                |   |                  |   | $      | 9.75                                         |   |                                                   | $ | 9.75 |   |   |
|                                                           | 161,538    |                   | May                2007       |                                           |   | .17                                                                                |   |                  |   | $      | 6.50-$9.75                                   |   |                                                   | $ | 7.27 |   |   |
|                                                           | 76,923     |                   | July                2007      |                                           |   | .25                                                                                |   |                  |   | $      | 5.20-$6.50                                   |   |                                                   | $ | 6.24 |   |   |
|                                                           | 269,231    |                   | September                2007 |                                           |   | .42                                                                                |   |                  |   | $      | 4.88-$5.20                                   |   |                                                   | $ | 5.15 |   |   |
|                                                           | 150,000    |                   | March                2008     |                                           |   | 1.00                                                                               |   |                  |   | $      | 1.95                                         |   |                                                   | $ | 1.95 |   |   |
|                                                           | 20,000     |                   | August                2008    |                                           |   | 1.37                                                                               |   |                  |   | $      | 1.95                                         |   |                                                   | $ | 1.95 |   |   |
|                                                           | 4,851,969  |                   | November                2008  |                                           |   | 1.67                                                                               |   |                  |   | $      | 0.98-$1.95                                   |   |                                                   | $ | 1.93 |   |   |
|                                                           | 1,060,714  |                   | February                2009  |                                           |   | 1.92                                                                               |   |                  |   | $      | 2.00                                         |   |                                                   | $ | 2.00 |   |   |
|                                                           | 5,225,000  |                   | January                2011   |                                           |   | 3.83                                                                               |   |                  |   | $      | 1.40                                         |   |                                                   | $ | 1.40 |   |   |
|                                                           | 575,000    |                   | October                2011   |                                           |   | 4.58                                                                               |   |                  |   | $      | .92                                          |   |                                                   | $ | .92 |   |   |
|                                                           | 6,440,000  |                   | December                2011  |                                           |   | 4.75                                                                               |   |                  |   | $      | .92                                          |   |                                                   | $ | .92 |   |   |
|                                                           |       |                   |                          |                                           |   |                                                                               |   |                  |   |   |                                         |   |                                                   |   |   |   |   |
|                                                           | 19,130,379 |                   |                          |                                           |   |                                                                               |   | 3.33                  |   |   |                                         |   |                                                   |   |   |   | $4,468,800 |

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*Table          of Contents*

|   | (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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                  |   | **Three                Months Ended****March                31,** |    |
|-----------------------------------------------------------------------|--------|-------------------------------------------------------------------|---------|
|                                                                  |   | **2007**                                                          |    |   | **2006** |   |
|                                                                  |   |                                                              |    |   |   |   |
| Restricted                stock                                       |   |                                                              | 82,726  |   |   | $ | 545,000 |   |
| Committed                restricted stock                             |   |                                                              | 176,408 |   |   |   | - |   |
| Total                stock-based compensation                         |   |                                                              | 259,134 |   |   | $ | 545,000 |   |
| Less                amounts capitalized                               |   |                                                              | (88,750 | ) |   |   | (545,000 | ) |
| Stock                compensation expense, net of amounts capitalized |   | $                                                                 | 170,384 |   |   |   | - |   |

|   | Amounts                capitalized in 2007 are for prepaid expenses.  Amounts expensed                in the first quarter of 2007 include $38,976 for general and                administrative expense and $131,408 for interest                expense.  Amounts capitalized in 2006 were for property                costs.   The above table excludes common stock issued for                cash, warrants issued in financing arrangements, and debt discounts                recorded in equity. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**4.         Related      Party Transactions**

**5.         Non-Cash      Investing and Financing Activities**

|                                                                                                  |   | **Three                Months Ended****March                31,** |      |
|-------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|-----------|
|                                                                                                  |   | **2007**                                                          |      |   | **2006** |   |
|                                                                                                  |   |                                                              |      |   |   |   |
| Issuance                of common stock for acquisition of property                                   |   |                                                              | -         |   |   | $ | 545,000 |   |
|                                                                                                  |   |                                                              |      |   |   |   |   |   |
| Increase                in accounts payable and accrued liabilities for property                costs |   | $                                                                 | 841,605   |   |   |   | - |   |
|                                                                                                  |   |                                                              |      |   |   |   |   |   |
| Beneficial                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**

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*Table          of Contents*

|                                                                                           |   | **Three                Months Ended****March                31,** |       |
|------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|------------|
|                                                                                           |   | **2007**                                                          |       |   | **2006** |   |
|                                                                                           |   |                                                              |       |   |   |   |
| Net                loss                                                                        |   | $                                                                 | (1,602,405 | ) |   | $ | (844,630 | ) |
| Less:  Preferred                stock dividends (1)                                  |   |                                                              | (9,668     | ) |   |   | (9,668 | ) |
|                                                                                           |   |                                                              |       |   |   |   |   |   |
| Net                loss available to common  stockholders                (numerator) |   | $                                                                 | (1,612,073 | ) |   | $ | (854,298 | ) |
|                                                                                           |   |                                                              |       |   |   |   |   |   |
| Weighted                average shares of common stock                                         |   |                                                              | 38,729,888 |   |   |   | 29,327,487 |   |
|                                                                                           |   |                                                              |       |   |   |   |   |   |
| Basic                and diluted net loss per share                                            |   | $                                                                 | (0.04      | ) |   | $ | (0.03 | ) |

**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). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table            of Contents*

|   | 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

**Item2.**
**Management’s      Discussion and Analysis or Plan of Operation**

**FORWARD      LOOKING STATEMENTS**

**OVERVIEW      – CORPORATE STRATEGY**

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*Table          of Contents*

**LIQUIDITY      AND CAPITAL RESOURCES**

***Convertible      Securities***

***Private      Equity Placements***

***Project      Financings***

***Revolving      Credit Agreement***

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*Table          of Contents*

***Joint      Ventures***

**CURRENT      PROJECTS AND CAPITAL REQUIREMENTS**

**Barnett      Shale Project**
* *

**North      Texas/Panhandle Water flood Project - **

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*Table            of Contents*

**SW      Garwood, Colorado County, Texas - **
*** ***

*OTHER      PROJECT AREAS:*

**Gruman      Prospect, Stark County, North Dakota - **

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*Table            of Contents*

**Mississippi      Tuscaloosa Prospects -- **

**Rodney      Island, Tensas Parish, Louisiana - **

**RESULTS      OF OPERATIONS**

**For      the Three months Ended March 31, 2007 Compared to the Three months Ended March      31, 2006**

***Revenues***

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*Table            of Contents*

***Lease      Operating and Production Tax Expense***

***Depletion,      Depreciation and Amortization***

***General      and Administrative Expenses***

***Net      Operating Loss***

***Other      Income (Expense)***

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*Table          of Contents*

**Off-Balance      Sheet Arrangements**

**Item      3.         Controls and      Procedures**

**PART      II--OTHER INFORMATION**

**Item      1.        Legal      Proceedings**

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

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*Table          of Contents*

**Item6.            Exhibits**

|  **Exhibit                  Number** |  **Description                  of Exhibit**                              |
|-------------------------------------------|-------------------------------------------------------------------------------------|
| 31.1                                 | Rule                13a-14(a) Certification of Chief Executive Officer              |
| 31.2                                 | Rule                13a-14(a) Certification of Chief Financial Officer              |
| 32.1                                 | Section                1350 Certification of Chief Executive Officer                |
| 32.2                                 | Section                1350 Certification of Chief Financial                Officer |

**SIGNATURES**

**PETROSEARCH      ENERGY CORPORATION**

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