----

----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

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

| Nevada(State or other jurisdiction of incorporation or organization)P.O. Box 22165Houston, Texas(Address of principal executive offices) | 20-5893642 (I.R.S. Employer Identification No.) 77227-2165  (Zip Code) |
|------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|

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

----

| Part I. Financial Information |   |                                                                                                                                                                                                                     |
|-------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 1                        |   | Financial Statements                                                                                                                                                                                                     |   |   |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | Consolidated Balance Sheets (unaudited) - June 30, 2012 and December 31, 2011                                                                                                                                            |   | 5 |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | Consolidated Statements of Operations and Comprehensive Loss (unaudited) - For the Three and Six  Months Ended June 30, 2012 and 2011 and the Period From Inception (September 19, 2003) through June 30, 2012 |   | 6 |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | Consolidated Statements of Cash Flows (unaudited) - For the Six Months Ended June 30, 2012 and 2011 and the Period from Inception (September 19, 2003) through June 30, 2012                                             |   | 7 |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | Consolidated Statements of Changes in Stockholders' Equity (Deficiency) and Comprehensive Loss (unaudited) for the Period from Inception (September 19, 2003) through June 30, 2012                                      | 8 |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | Notes to the Consolidated Financial Statements (unaudited)                                                                                                                                                               |   | 11 |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 2                        |   | Management's Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                    |   | 24 |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 3                        |   | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                               |   | 29 |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 4                        |   | Controls and Procedures                                                                                                                                                                                                  |   | 29 |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | Part II. Other Information                                                                                                                                                                                               |   |   |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 1                        |   | Legal Proceedings                                                                                                                                                                                                        |   | 30 |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 1A                       |   | Risk Factors                                                                                                                                                                                                             |   | 30 |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 2                        |   | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                                                              |   | 30 |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 3                        |   | Defaults Upon Senior Securities                                                                                                                                                                                          |   | 30 |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 4                        |   | Mining Safety Disclosures                                                                                                                                                                                                |   | 30 |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 5                        |   | Other Information                                                                                                                                                                                                        |   | 31 |
|                          |   |                                                                                                                                                                                                                     |   |   |
| Item 6                        |   | Exhibits                                                                                                                                                                                                                 |   | 31 |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | Signatures                                                                                                                                                                                                               |   | 32 |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | EX-31.1 (EXHIBIT 31.1)                                                                                                                                                                                                   |   |   |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | EX-31.2 (EXHIBIT 31.2)                                                                                                                                                                                                   |   |   |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | EX-32.1 (EXHIBIT 32.1)                                                                                                                                                                                                   |   |   |
|                          |   |                                                                                                                                                                                                                     |   |   |
|                          |   | EX-32.2 (EXHIBIT 32.2)                                                                                                                                                                                                   |   |   |
|                          |   |                                                                                                                                                                                                                     |   |   |

----

----

----

|                                                                                                                  |   | June 30,    |        |   | December 31, |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|-------------|-------------|--------|--------------|--------|
|                                                                                                                  |   | 2012        |        |   | 2011         |   |
|                                                                                                                  |   | (Unaudited) |        |   | (Unaudited)  |   |
| ASSETS                                                                                                                |   |        |        |   |         |   |
| Current Assets                                                                                                        |   |        |        |   |         |   |
|        Cash                                                                        |   | $           | 1,736,264   |   |         | $      | 2,202,699 |   |
|        Prepaid expenses                                                            |   |        | 210,226     |   |         |   | 48,750 |   |
| Total Current Assets                                                                                                  |   |        | 1,946,490   |   |         |   | 2,251,449 |   |
|                                                                                                                  |   |        |        |   |         |   |   |   |
|        Fixed Assets:                                                               |   |        |        |   |         |   |   |   |
|        Computer Equipment                                                          |   |        | 25,391      |   |         |   | 25,391 |   |
|        Software License                                                            |   |        | 62,563      |   |         |   | 62,563 |   |
|        Less:  Accumulated Depreciation                                   |   |        | (58,117     | )      |         |   | (44,007 | ) |
| Net Fixed Assets                                                                                                      |   |        | 29,837      |   |         |   | 43,947 |   |
|                                                                                                                  |   |        |        |   |         |   |   |   |
| Other Assets                                                                                                          |   |        |        |   |         |   |   |   |
|        Investments in oil and gas properties (Notes 3 and 8)                       |   |        | 17,976,060  |   |         |   | 22,768,465 |   |
| Total Other Assets                                                                                                    |   |        | 17,976,060  |   |         |   | 22,768,465 |   |
|                                                                                                                  |   |        |        |   |         |   |   |   |
| Total Assets                                                                                                          |   | $           | 19,952,387  |   |         | $      | 25,063,861 |   |
|                                                                                                                  |   |        |        |   |         |   |   |   |
| LIABILITIES                                                                                                           |   |        |        |   |         |   |   |   |
| Current                                                                                                               |   |        |        |   |         |   |   |   |
|          Accounts payable and accrued liabilities                        |   | $           | 256,254     |   |         | $      | 371,868 |   |
|          Accounts payable to operators of working interests              |   |        | -           |   |         |   | 1,011,084 |   |
|          Loans payable related parties (Note 6)                          |   |        | 26,574      |   |         |   | 26,574 |   |
| Total Current Liabilities                                                                                             |   |        | 282,828     |   |         |   | 1,409,526 |   |
|                                                                                                                  |   |        |        |   |         |   |   |   |
| Total Liabilities                                                                                                     |   |        | 282,828     |   |         |   | 1,409,526 |   |
| STOCKHOLDERS' EQUITY                                                                                                  |   |        |        |   |         |   |   |   |
| Preferred Stock, 50,000,000 shares authorized, none issued or outstanding                                             |   |        | -           |   |         |   | - |   |
| Common Stock                                                                                                          |   |        |        |   |         |   |   |   |
|          Authorized:                                                     |   |        |        |   |         |   |   |   |
|             700,000,000 shares with a par value of $0.001 |   |        |        |   |         |   |   |   |
|          Issued and Outstanding:                                         |   |        |        |   |         |   |   |   |
|            551,517,726  as of June 30, 2012 and      |   |        | 551,518     |   |         |   | 460,268 |   |
|            460,267,726  as of December 31, 2011      |   |        |        |   |         |   |   |   |
| Additional paid-in capital                                                                                            |   |        | 50,605,656  |   |         |   | 43,464,689 |   |
| Accumulated other comprehensive loss                                                                                  |   |        | (288        | )      |         |   | (1,201 | ) |
| Deficit Accumulated During The Development Stage                                                                      |   |        | (31,487,327 | )      |         |   | (20,269,421 | ) |
| Total Stockholders' Equity                                                                                            |   |        | 19,669,559  |   |         |   | 23,654,335 |   |
|                                                                                                                  |   |        |        |   |         |   |   |   |
| Total Liabilities and Stockholders' Equity                                                                            |   | $           | 19,952,387  |   |         | $      | 25,063,861 |   |

----

|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   | Period From          |        |
|-------------------------------------------------------|--------|-----------------------------|-------------|--------|---------------------------|--------|-------------|---------|--------|--------|-------------|--------|--------|----------------------|-------------|
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   | Inception            |        |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   | (September 19, 2003) |        |
|                                                  |   | Three Months Ended June 30, |        |   | Six Months Ended June 30, |   |        | Through |   |
|                                                  |   | 2012                        |        |   | 2011                      |   |        | 2012    |   |   | 2011        |   |   | June 30, 2012        |        |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |
| Revenues                                              |   | $                           | -           |   |                      | $      | -           |    |   | $      | -           |   |   | $                    | -           |   |   | $ | - |   |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Cost of Sales                                         |   |                        | -           |   |                      |   | -           |    |   |   | -           |   |   |                 | -           |   |   |   | - |   |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Gross Profit                                          |   |                        | -           |   |                      |   | -           |    |   |   | -           |   |   |                 | -           |   |   |   | - |   |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| General and administrative expenses                   |   |                        | 1,755,804   |   |                      |   | 1,798,219   |    |   |   | 2,460,287   |   |   |                 | 2,856,911   |   |   |   | 9,233,398 |   |
| General and administrative expenses - related parties |   |                        | 36,407      |   |                      |   | -           |    |   |   | 103,089     |   |   |                 | -           |   |   |   | 9,284,940 |   |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Operating Loss                                        |   |                        | (1,792,211  | )      |                      |   | (1,798,219  | )       |   |   | (2,563,376  | )      |   |                 | (2,856,911  | ) |   |   | (18,518,338 | ) |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Other (Income) and Expense                            |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Gain on settlement of debt                            |   |                        | -           |   |                      |   | -           |    |   |   | -           |   |   |                 | -           |   |   |   | (3,333 | ) |
| Interest expense                                      |   |                        | -           |   |                      |   | 225,871     |    |   |   | -           |   |   |                 | 749,210     |   |   |   | 2,027,906 |   |
| Interest expense - related parties                    |   |                        | 220,000     |   |                      |   | -           |    |   |   | 220,000     |   |   |                 | 114,423     |   |   |   | 912,826 |   |
| Impairment of oil and gas properties                  |   |                        | 8,436,144   |   |                      |   | -           |    |   |   | 8,436,144   |   |   |                 | -           |   |   |   | 8,436,144 |   |
| Interest Income                                       |   |                        | (1,062      | )      |                      |   | (7,702      | )       |   |   | (1,614      | )      |   |                 | (10,957     | ) |   |   | (21,271 | ) |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Loss from continuing operations                       |   |                        | (10,447,293 | )      |                      |   | (2,016,388  | )       |   |   | (11,217,906 | )      |   |                 | (3,709,587  | ) |   |   | (29,870,610 | ) |
| Gain (Loss) from discontinued operations              |   |                        | -           |   |                      |   | -           |    |   |   | -           |   |   |                 | 150,000     |   |   |   | (1,616,717 | ) |
| Net Loss                                              |   | $                           | (10,447,293 | )      |                      | $      | (2,016,388  | )       |   | $      | (11,217,906 | )      |   | $                    | (3,559,587  | ) |   | $ | (31,487,327 | ) |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Basic And Diluted Loss per share                      |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| from continuing operations                            |   | $                           | (0.02       | )      |                      | $      | -           |    |   | $      | (0.02       | )      |   | $                    | (0.04       | ) |   | $ | (0.24 | ) |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Basic And Diluted Loss per share                      |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| from discontinued operations                          |   | $                           | -           |   |                      |   | -           |    |   | $      | -           |   |   | $                    | -           |   |   | $ | (0.01 | ) |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Basic And Diluted Net Loss per share                  |   | $                           | (0.02       | )      |                      | $      | -           |    |   | $      | (0.02       | )      |   | $                    | (0.03       | ) |   | $ | (0.25 | ) |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Weighted Average Shares Outstanding                   |   |                        | 530,753,837 |   |                      |   | 454,667,726 |    |   |   | 495,123,495 |   |   |                 | 428,524,200 |   |   |   | 121,709,017 |   |
|                                                  |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Comprehensive Income (Loss)                           |   |                        |        |   |                      |   |        |    |   |   |        |   |   |                 |        |   |   |   |   |   |
| Net Loss                                              |   | $                           | (10,447,293 | )      |                      | $      | (2,016,388  | )       |   | $      | (11,217,906 | )      |   | $                    | (3,559,587  | ) |   | $ | (31,487,327 | ) |
| Currency exchange gain (loss)                         |   |                        | 461         |   |                      |   | (346        | )       |   |   | 913         |   |   |                 | (346        | ) |   |   | (288 | ) |
| Net Comprehensive Loss                                |   | $                           | (10,446,832 | )      |                      | $      | (2,016,734  | )       |   | $      | (11,216,993 | )      |   | $                    | (3,559,933  | ) |   | $ | (31,487,615 | ) |

----

|                                                                                  |   |                      |        |   |    |   |       | Period From          |   |
|---------------------------------------------------------------------------------------|--------|---------------------------|-------------|--------|---------|--------|------------|----------------------|--------|
|                                                                                  |   |                      |        |   |    |   |       | Inception            |   |
|                                                                                  |   |                      |        |   |    |   |       | (September 19, 2003) |   |
|                                                                                  |   | Six Months Ended June 30, |        |   | Through |   |
|                                                                                  |   | 2012                      |        |   | 2011    |   |       | June 30, 2012        |   |
| Cash Flows From Operating Activities                                                  |   |                      |        |   |    |   |       |                 |   |
|    Net loss for the period                                             |   | $                         | (11,217,906 | )      |    | $      | (3,559,587 | )                    |   | $ | (31,487,327 | ) |
|  Adjustments to reconcile net loss to net cash used by                           |   |                      |        |   |    |   |       |                 |   |   |   |   |
|    operating activities:                                               |   |                      |        |   |    |   |       |                 |   |   |   |   |
|    Depreciation expense                                                |   |                      | 14,110      |   |    |   | 11,044     |                 |   |   | 58,117 |   |
|    Common stock issued for prepaid expenses/services                   |   |                      | 36,667      |   |    |   | -          |                 |   |   | 36,667 |   |
|    Expenses/services paid by issuance of common stock                  |   |                      | 200,000     |   |    |   | 698,300    |                 |   |   | 10,241,000 |   |
|    Accrued interest added to shareholder loans                         |   |                      | -           |   |    |   | -          |                 |   |   | 631,444 |   |
|    Stock-based compensation                                            |   |                      | 230,969     |   |    |   | -          |                 |   |   | 447,065 |   |
|    Loan discount amortization                                          |   |                      | -           |   |    |   | 1,278,726  |                 |   |   | 1,809,023 |   |
|    Non-cash portion of interest expense                                |   |                      | -           |   |    |   | -          |                 |   |   | 3,333 |   |
|    Gain on settlement of debt                                          |   |                      | -           |   |    |   | -          |                 |   |   | (3,333 | ) |
|    Foreign currency translation loss                                   |   |                      | 913         |   |    |   | 346        |                 |   |   | (288 | ) |
|    Impairment of investment in joint venture projects                  |   |                      | -           |   |    |   | -          |                 |   |   | 1,951,210 |   |
|    Impairment of oil and gas properties                                |   |                      | 8,436,144   |   |    |   | -          |                 |   |   | 8,436,144 |   |
| Change in operating assets and liabilities                                            |   |                      |        |   |    |   |       |                 |   |   |   |   |
|    Payroll taxes receivable                                            |   |                      | -           |   |    |   | 39,153     |                 |   |   | - |   |
|    Prepaid expenses                                                    |   |                      | (158,143    | )      |    |   | (26,997    | )                    |   |   | (148,393 | ) |
|    Accounts payable and accrued liabilities                            |   |                      | (115,614    | )      |    |   | (420,297   | )                    |   |   | 81,023 |   |
| Net cash used by operating activities                                                 |   |                      | (2,572,860  | )      |    |   | (1,979,312 | )                    |   |   | (7,944,315 | ) |
| Cash Flows From Investing Activities                                                  |   |                      |        |   |    |   |       |                 |   |   |   |   |
|      Capital Expenditures                                    |   |                      | -           |   |    |   | (8,853     | )                    |   |   | (87,954 | ) |
|      Investment in oil and gas projects                      |   |                      | (4,654,823  | )      |    |   | (6,229,720 | )                    |   |   | (22,590,973 | ) |
|      Advances to and investment in joint venture properties  |   |                      | -           |   |    |   | -          |                 |   |   | (250,000 | ) |
| Net cash used by investing activities                                                 |   |                      | (4,654,823  | )      |    |   | (6,238,573 | )                    |   |   | (22,928,927 | ) |
|                                                                                  |   |                      |        |   |    |   |       |                 |   |   |   |   |
| Cash Flows From Financing Activities                                                  |   |                      |        |   |    |   |       |                 |   |   |   |   |
|      Proceeds from sale of common stock                      |   |                      | 6,761,248   |   |    |   | 24,964,119 |                 |   |   | 33,196,917 |   |
|      Proceeds of bridge financing                            |   |                      | -           |   |    |   | -          |                 |   |   | 3,800,000 |   |
|      Principal payment on bridge financing                   |   |                      | -           |   |    |   | -          |                 |   |   | (3,800,000 | ) |
|      Increase in loans payable to related parties            |   |                      | -           |   |    |   | -          |                 |   |   | 226,574 |   |
|      Principal payments on shareholder loans                 |   |                      | -           |   |    |   | -          |                 |   |   | (5,539,685 | ) |
|      Shares issued for discount in shareholder notes payable |   |                      | -           |   |    |   | (623,232   | )                    |   |   | - |   |
|      Payments on shareholder loans                           |   |                      | -           |   |    |   | (7,338,843 | )                    |   |   | 4,725,700 |   |
| Net cash provided by financing activities                                             |   |                      | 6,761,248   |   |    |   | 17,002,044 |                 |   |   | 32,609,506 |   |
| (Decrease)/Increase In Cash During The Period                                         |   |                      | (466,435    | )      |    |   | 8,784,159  |                 |   |   | 1,736,264 |   |
| Cash, Beginning Of Period                                                             |   |                      | 2,202,699   |   |    |   | 120,340    |                 |   |   | - |   |
|                                                                                  |   |                      |        |   |    |   |       |                 |   |   |   |   |
| Cash, End Of Period                                                                   |   | $                         | 1,736,264   |   |    | $      | 8,904,499  |                 |   | $ | 1,736,264 |   |

----

|                                                 |          |        |       |   |    |   |       |      |          |   | DEFICIT     |   |   |   |
|------------------------------------------------------|---------------|-------------|------------|--------|---------|--------|------------|-----------|---------------|--------|-------------|--------|--------|--------|
|                                                 |          |        |       |   |    |   |       |      | ACCUMULATED   |   | ACCUMULATED |   |   |   |
|                                                 | COMMON SHARES |        | ADDITIONAL |   | COMMON  |   | OTHER      |      | DURING THE    |   |        |   |
|                                                 |          |        | PAR        |   | PAID-IN |   | SHARES     |      | COMPREHENSIVE |   | DEVELOPMENT |   |   |   |
|                                                 | NUMBER        |        | VALUE      |   | CAPITAL |   | SUBSCRIBED |      | LOSS          |   | STAGE       |   | TOTAL  |   |
| Balance, September 19,                               |          |        |       |   |    |   |       |      |          |   |        |   |   |   |
| 2003 (date of inception)                             |          | -           |       | $      | -       |   | $          | -         |          | $      | -           |   | $      | -      |   | $ | - |   | $ | - |   |
| Capital stock issued for cash:                       |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
| October 2003 at $0.001                               |          | 2,500,000   |       |   | 2,500   |   |       | -         |          |   | -           |   |   | -      |   |   | - |   |   | 2,500 |   |
| November 2003 at $0.005                              |          | 160,000     |       |   | 160     |   |       | 640       |          |   | -           |   |   | -      |   |   | - |   |   | 800 |   |
| December 2003 at $0.005                              |          | 1,400,000   |       |   | 1,400   |   |       | 5,600     |          |   | -           |   |   | -      |   |   | - |   |   | 7,000 |   |
| June 2004 at $0.01                                   |          | 1,000,000   |       |   | 1,000   |   |       | 9,000     |          |   | -           |   |   | -      |   |   | - |   |   | 10,000 |   |
| July 2004 at $0.25                                   |          | 23,000      |       |   | 23      |   |       | 5,727     |          |   | -           |   |   | -      |   |   | - |   |   | 5,750 |   |
| Net loss for the period                              |          | -           |       |   | -       |   |       | -         |          |   | -           |   |   | -      |   |   | (15,880 | ) |   | (15,880 | ) |
| Balance, August 31, 2004                             |          | 5,083,000   |       |   | 5,083   |   |       | 20,967    |          |   | -           |   |   | -      |   |   | (15,880 | ) |   | 10,170 |   |
| Net loss for the year                                |          | -           |       |   | -       |   |       | -         |          |   | -           |   |   | -      |   |   | (16,578 | ) |   | (16,578 | ) |
| Balance, August 31, 2005                             |          | 5,083,000   |       |   | 5,083   |   |       | 20,967    |          |   | -           |   |   | -      |   |   | (32,458 | ) |   | (6,408 | ) |
| November 10, 2005 Stock                              |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
| Split Adjustment                                     |          | 20,332,000  |       |   | 20,332  |   |       | (20,332   | )             |   | -           |   |   | -      |   |   | - |   |   | - |   |
| Net loss for the year                                |          | -           |       |   | -       |   |       | -         |          |   | -           |   |   | -      |   |   | (31,577 | ) |   | (31,577 | ) |
| Balance, August 31, 2006                             |          | 25,415,000  |       |   | 25,415  |   |       | 635       |          |   |        |   |   |   |   |   | (64,035 | ) |   | (37,985 | ) |
| Capital stock issued for investment:                 |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   January 2007 at $0.735 per share         |          | 185,000     |       |   | 185     |   |       | 135,790   |          |   | -           |   |   | -      |   |   | - |   |   | 135,975 |   |
|   July 2007 at $0.735 per share            |          | 750,000     |       |   | 750     |   |       | 550,500   |          |   | -           |   |   | -      |   |   | - |   |   | 551,250 |   |
| Net loss for the year                                |          | -           |       |   | -       |   |       | -         |          |   | -           |   |   | -      |   |   | (257,804 | ) |   | (257,804 | ) |
| Balance, August 31, 2007                             |          | 26,350,000  |       |   | 26,350  |   |       | 686,925   |          |   |        |   |   |   |   |   | (321,839 | ) |   | 391,436 |   |
| Net loss for the year                                |          | -           |       |   | -       |   |       | -         |          |   | -           |   |   | -      |   |   | (378,039 | ) |   | (378,039 | ) |
| Balance, August 31, 2008                             |          | 26,350,000  |       |   | 26,350  |   |       | 686,925   |          |   |        |   |   |   |   |   | (699,878 | ) |   | 13,397 |   |
| Net loss for the year                                |          | -           |       |   | -       |   |       | -         |          |   | -           |   |   | -      |   |   | (1,353,766 | ) |   | (1,353,766 | ) |
| Balance, August 31, 2009                             |          | 26,350,000  |       |   | 26,350  |   |       | 686,925   |          |   | -           |   |   | -      |   |   | (2,053,644 | ) |   | (1,340,369 | ) |
| Capital stock issued for settlement                  |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|  of name issue:                                 |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   January 2010 at $0.01 per share          |          | 50,000      |       |   | 50      |   |       | 450       |          |   | -           |   |   | -      |   |   | - |   |   | 500 |   |
| Capital stock issued to buy                          |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|  subsidiary:                                    |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   March 2010 at $0.032 per share           |          | 300,000     |       |   | 300     |   |       | 9,300     |          |   | -           |   |   | -      |   |   | - |   |   | 9,600 |   |
| Capital stock issued for cash:                       |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   March 2010 at $0.01 per share            |          | 59,750,000  |       |   | 59,750  |   |       | 527,750   |          |   | -           |   |   | -      |   |   | - |   |   | 587,500 |   |
| Capital stock issued for services:                   |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   March 2010 at $0.01 per share            |          | 20,750,000  |       |   | 20,750  |   |       | 186,750   |          |   | -           |   |   | -      |   |   | - |   |   | 207,500 |   |
|   April 2010 at $0.01 per share            |          | 1,500,000   |       |   | 1,500   |   |       | 13,500    |          |   | -           |   |   | -      |   |   | - |   |   | 15,000 |   |
| Capital stock issued for oil and                     |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|  gas properties:                                |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   March 2010 at $0.01 per share            |          | 40,000,000  |       |   | 40,000  |   |       | 384,000   |          |   | 200,000     |   |   | -      |   |   | - |   |   | 624,000 |   |
| Capital stock issued for loan                        |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|  conversion:                                    |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   March 2010 at $0.01 per share            |          | 20,000,000  |       |   | 20,000  |   |       | 180,000   |          |   | 200,000     |   |   | -      |   |   | - |   |   | 400,000 |   |
| Shareholder loan interest forgiven                   |          | -           |       |   | -       |   |       | 631,444   |          |   | -           |   |   | -      |   |   | - |   |   | 631,444 |   |
| Capital stock issued with short-                     |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|  term debt:                                     |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   April 2010 at $0.065 per share           |          | 17,500,000  |       |   | 17,500  |   |       | 671,894   |          |   | -           |   |   | -      |   |   | - |   |   | 689,394 |   |
|   May 2010 at $0.065 per share             |          | 5,000,000   |       |   | 5,000   |   |       | 191,970   |          |   | -           |   |   | -      |   |   | - |   |   | 196,970 |   |
|   June 2010 at $0.087  per share |          | 2,500,000   |       |   | 2,500   |   |       | 113,810   |          |   | -           |   |   | -      |   |   | - |   |   | 116,310 |   |
|   July 2010 at $0.075  per share |          | 3,000,000   |       |   | 3,000   |   |       | 125,571   |          |   | -           |   |   | -      |   |   | - |   |   | 128,571 |   |
|   July 2010 at $0.120  per share |          | 500,000     |       |   | 500     |   |       | 26,773    |          |   | -           |   |   | -      |   |   | - |   |   | 27,273 |   |
|   August 2010 at $0.120 per share          |          | 500,000     |       |   | 500     |   |       | 26,773    |          |   | -           |   |   | -      |   |   | - |   |   | 27,273 |   |
| Capital stock issued for oil and                     |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|  gas properties:                                |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   June 2010 at $0.01  per share  |          | 20,000,000  |       |   | 20,000  |   |       | 180,000   |          |   | (200,000    | )      |   | -      |   |   | - |   |   | - |   |
|   July 2010 at $0.052  per share |          | 56,000,000  |       |   | 56,000  |   |       | 2,856,000 |          |   | -           |   |   | -      |   |   | - |   |   | 2,912,000 |   |
| Capital stock issued for loan                        |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|  conversion:                                    |          |        |       |   |    |   |       |      |          |   |        |   |   |   |   |   |   |   |   |   |   |
|   June 2010 at $0.01  per share  |          | 20,000,000  |       |   | 20,000  |   |       | 180,000   |          |   | (200,000    | )      |   | -      |   |   | - |   |   | - |   |
| Net loss for the period                              |          | -           |       |   | -       |   |       | -         |          |   | -           |   |   | -      |   |   | (2,315,199 | ) |   | (2,315,199 | ) |
| Balance, August 31, 2010                             |          | 293,700,000 |       |   | 293,700 |   |       | 6,992,910 |          |   | -           |   |   | -      |   |   | (4,368,843 | ) |   | 2,917,767 |   |

----

|                                                                             |   |          |        |       |   |    |   |       |       |          |   | DEFICIT     |   |   |   |   |
|----------------------------------------------------------------------------------|--------|---------------|-------------|------------|--------|---------|--------|------------|------------|---------------|--------|-------------|--------|--------|--------|--------|
|                                                                             |   |          |        |       |   |    |   |       |       | ACCUMULATED   |   | ACCUMULATED |   |   |   |   |
|                                                                             |   | COMMON SHARES |        | ADDITIONAL |   | COMMON  |   | OTHER      |       | DURING THE    |   |        |   |   |
|                                                                             |   |          |        | PAR        |   | PAID-IN |   | SHARES     |       | COMPREHENSIVE |   | DEVELOPMENT |   |   |   |   |
|                                                                             |   | NUMBER        |        | VALUE      |   | CAPITAL |   | SUBSCRIBED |       | LOSS          |   | STAGE       |   |   | TOTAL  |   |
|                                                                             |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |
|                                                                             |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |
| Capital stock issued for services:                                               |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |
|   September 2010 at $0.06 per share                                    |   |          | 2,500,000   |       |   | 2,500   |   |       | 147,500    |          |   | -           |   |   | -      |   |   | - |   |   |   | 150,000 |   |
|   October 2010 at $0.057 per share                                     |   |          | 1,200,000   |       |   | 1,200   |   |       | 67,200     |          |   | -           |   |   | -      |   |   | - |   |   |   | 68,400 |   |
|   December 2010 at $0.081 per share                                    |   |          | 40,000,000  |       |   | 40,000  |   |       | 7,960,000  |          |   | -           |   |   | -      |   |   | - |   |   |   | 8,000,000 |   |
|   January 2011 at $0.063 per share                                     |   |          | 2,700,000   |       |   | 2,700   |   |       | 167,400    |          |   | (170,100    | )      |   | -      |   |   | - |   |   |   | - |   |
|   February 2011 at $0.15 per share                                     |   |          | 304,000     |       |   | 304     |   |       | 60,496     |          |   | -           |   |   | -      |   |   | - |   |   |   | 60,800 |   |
|   March 2011 at $0.30 per share                                        |   |          | 125,000     |       |   | 125     |   |       | 37,375     |          |   | (37,500     | )      |   | -      |   |   | - |   |   |   | - |   |
|   March 2011 at $0.26 per share                                        |   |          | 2,000,000   |       |   | 2,000   |   |       | 515,000    |          |   | -           |   |   | -      |   |   | - |   |   |   | 517,000 |   |
|   July 2011 at $0.162 per share                                        |   |          | -           |       |   | -       |   |       | -          |          |   | 824,600     |   |   | -      |   |   | - |   |   |   | 824,600 |   |
| Capital stock issued for cash:                                                   |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|   December 2010 at $0.20 per share                                     |   |          | 3,875,000   |       |   | 3,875   |   |       | 746,915    |          |   | -           |   |   | -      |   |   | - |   |   |   | 750,790 |   |
|   January 2011 at $0.20 per share                                      |   |          | 9,750,000   |       |   | 9,750   |   |       | 1,878,553  |          |   | 25,000      |   |   | -      |   |   | - |   |   |   | 1,913,303 |   |
|   February 2011 at $0.30 per share                                     |   |          | 83,388,726  |       |   | 83,389  |   |       | 23,074,637 |          |   | -           |   |   | -      |   |   | - |   |   |   | 23,158,026 |   |
|   March 2011 at $0.020 per share                                       |   |          | 125,000     |       |   | 125     |   |       | 24,875     |          |   | (25,000     | )      |   | -      |   |   | - |   |   |   | - |   |
| Capital stock subscribed for services:                                           |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|   September 2010 at $0.063 per share                                   |   |          | -           |       |   | -       |   |       | -          |          |   | 170,100     |   |   | -      |   |   | - |   |   |   | 170,100 |   |
|   February 2011 at $0.30 per share                                     |   |          | -           |       |   | -       |   |       | -          |          |   | 37,500      |   |   | -      |   |   | - |   |   |   | 37,500 |   |
| Capital stock issued with short-                                                 |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|  term debt:                                                                 |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|   September 2010 at $0.043 per share                                   |   |          | 6,500,000   |       |   | 6,500   |   |       | 272,073    |          |   | -           |   |   | -      |   |   | - |   |   |   | 278,573 |   |
|   October 2010 at $0.047 per share                                     |   |          | 1,000,000   |       |   | 1,000   |   |       | 45,524     |          |   | -           |   |   | -      |   |   | - |   |   |   | 46,524 |   |
|   October 2010 at $0.043 per share                                     |   |          | 1,500,000   |       |   | 1,500   |   |       | 62,787     |          |   | -           |   |   | -      |   |   | - |   |   |   | 64,287 |   |
|   November 2010 at $0.047  per share                         |   |          | 1,500,000   |       |   | 1,500   |   |       | 68,286     |          |   | -           |   |   | -      |   |   | - |   |   |   | 69,786 |   |
|   Januuary 2011 at $0.047 per share                                    |   |          | 1,500,000   |       |   | 1,500   |   |       | 68,286     |          |   | (69,786     | )      |   | -      |   |   | - |   |   |   | - |   |
|   February 2011 at $0.047 per share                                    |   |          | 1,000,000   |       |   | 1,000   |   |       | 45,524     |          |   | (46,524     | )      |   | -      |   |   | - |   |   |   | - |   |
|   March 2011 at $0.047 per share                                       |   |          | 1,000,000   |       |   | 1,000   |   |       | 46,752     |          |   | (47,752     | )      |   | -      |   |   |   |   |   |   |   |   |
| Capital stock subscribed with                                                    |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|  short-term debt:                                                           |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|   November 2010 at $0.047  per share                         |   |          | -           |       |   | -       |   |       | -          |          |   | 139,572     |   |   | -      |   |   | - |   |   |   | 139,572 |   |
|   November 2010 at $0.049  per share                         |   |          | -           |       |   | -       |   |       | -          |          |   | 24,490      |   |   | -      |   |   | - |   |   |   | 24,490 |   |
| Capital stock issued for oil and                                                 |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|  gas properties:                                                            |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|   November 2010 at $0.09  per share                          |   |          | 1,000,000   |       |   | 1,000   |   |       | 89,000     |          |   | -           |   |   | -      |   |   | - |   |   |   | 90,000 |   |
| Compensation expense paid by                                                     |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|   stock option and grant issuance                                      |   |          | -           |       |   | -       |   |       | 74,772     |          |   | -           |   |   | -      |   |   | - |   |   |   | 74,772 |   |
| Net loss                                                                         |   |          | -           |       |   | -       |   |       | -          |          |   | -           |   |   | -      |   |   | (14,573,721 | ) |   |   | (14,573,721 | ) |
|      Other comprehensive loss -                         |   |          |        |       |   |    |   |       |       |          |   |        |   |   |   |   |   |   |   |   |   |   |   |
|         Currency transalation adjustment |   |          |        |       |   |    |   |       |       |          |   |        |   |   | (29    | )      |   |   |   |   |   | (29 | ) |
| Total comprehensive loss                                                         |   |          | -           |       |   | -       |   |       | -          |          |   | -           |   |   | -      |   |   | - |   |   |   | (14,573,750 | ) |
| Balance, August 31, 2011                                                         |   |          | 454,667,726 |       |   | 454,668 |   |       | 42,445,865 |          |   | 824,600     |   |   | (29    | )      |   | (18,942,564 | ) |   |   | 24,782,540 |   |

----

|                                                                             |          |        |       |   |    |   |       |       |          |       |     | DEFICIT     |   |   |   |
|----------------------------------------------------------------------------------|---------------|-------------|------------|--------|---------|--------|------------|------------|---------------|------------|----------|-------------|--------|--------|--------|
|                                                                             |          |        |       |   |    |   |       |       | ACCUMULATED   |       |     | ACCUMULATED |   |   |   |
|                                                                             | COMMON SHARES |        | ADDITIONAL |   | COMMON  |   | OTHER      |       |          | DURING THE |     |        |   |
|                                                                             |          |        | PAR        |   | PAID-IN |   | SHARES     |       | COMPREHENSIVE |       |     | DEVELOPMENT |   |   |   |
|                                                                             | NUMBER        |        | VALUE      |   | CAPITAL |   | SUBSCRIBED |       | LOSS          |       |     | STAGE       |   | TOTAL  |   |
|                                                                             |          |        |       |   |    |   |       |       |          |       |     |        |   |   |   |
|                                                                             |          |        |       |   |    |   |       |       |          |       |     |        |   |   |   |
| Capital stock issued for services:                                               |          |        |       |   |    |   |       |       |          |       |     |        |   |   |   |
|   September 2011 at $0.162 per share                                   |          | 5,100,000   |       |   | 5,100   |   |       | 819,500    |          |       | (824,600 | )           |   | -      |   |   |   | - |   |   | - |   |
|   November 2011 at $0.117 per share                                    |          | 500,000     |       |   | 500     |   |       | 58,000     |          |       | -        |        |   | -      |   |   |   | - |   |   | 58,500 |   |
| Compensation expense paid by                                                     |          |        |       |   |    |   |       |       |          |       |     |        |   |   |   |   |   |   |   |   |   |   |
|   stock option issuance                                                |          | -           |       |   | -       |   |       | 141,324    |          |       | -        |        |   | -      |   |   |   | - |   |   | 141,324 |   |
| Net loss                                                                         |          | -           |       |   | -       |   |       | -          |          |       | -        |        |   | -      |   |   |   | (1,326,857 | ) |   | (1,326,857 | ) |
|      Other comprehensive income -                       |          |        |       |   |    |   |       |       |          |       |     |        |   | -      |   |   |   |   |   |   |   |   |
|         Currency transalation adjustment |          |        |       |   |    |   |       |       |          |       |     |        |   | (1,172 | )      |   |   |   |   |   | (1,172 | ) |
| Total comprehensive loss                                                         |          | -           |       |   | -       |   |       | -          |          |       | -        |        |   | -      |   |   |   | - |   |   | (1,328,029 | ) |
| Balance, December 31, 2011                                                       |          | 460,267,726 |       |   | 460,268 |   |       | 43,464,689 |          |       | -        |        |   | (1,201 | )      |   |   | (20,269,421 | ) |   | 23,654,335 |   |
| Capital stock issued for services:                                               |          |        |       |   |    |   |       |       |          |       |     |        |   |   |   |   |   |   |   |   |   |   |
|   June 2012 at $0.08 per share                                         |          | 500,000     |       |   | 500     |   |       | 39,500     |          |       | -        |        |   | -      |   |   |   | - |   |   | 40,000 |   |
| Capital stock issued for cash:                                                   |          |        |       |   |    |   |       |       |          |       |     |        |   |   |   |   |   |   |   |   |   |   |
|   April 2012 at $0.08 per share                                        |          | 88,250,000  |       |   | 88,250  |   |       | 6,672,998  |          |       | -        |        |   | -      |   |   |   | - |   |   | 6,761,248 |   |
| Capital stock issued for interest expense:                                       |          |        |       |   |    |   |       |       |          |       |     |        |   |   |   |   |   |   |   |   |   |   |
|   June 2012 at $0.08 per share                                         |          | 2,500,000   |       |   | 2,500   |   |       | 197,500    |          |       | -        |        |   | -      |   |   |   | - |   |   | 200,000 |   |
| Compensation expense paid by                                                     |          |        |       |   |    |   |       |       |          |       |     |        |   |   |   |   |   |   |   |   |   |   |
|   stock option and grant issuance                                      |          | -           |       |   | -       |   |       | 230,969    |          |       | -        |        |   | -      |   |   |   | - |   |   | 230,969 |   |
| Net loss                                                                         |          | -           |       |   | -       |   |       | -          |          |       | -        |        |   | -      |   |   |   | (11,217,906 | ) |   | (11,217,906 | ) |
|      Other comprehensive income -                       |          |        |       |   |    |   |       |       |          |       |     |        |   |   |   |   |   |   |   |   |   |   |
|         Currency transalation adjustment |          |        |       |   |    |   |       |       |          |       |     |        |   | 913    |   |   |   |   |   |   | 913 |   |
| Total comprehensive loss                                                         |          | -           |       |   | -       |   |       | -          |          |       | -        |        |   | -      |   |   |   | - |   |   | (11,216,993 | ) |
| Balance, June 30, 2012                                                           |          | 551,517,726 |       | $      | 551,518 |   | $          | 50,605,656 |          | $          | -        |        | $      | (288   | )      |   | $ | (31,487,327 | ) | $ | 19,669,559 |   |

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

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----

----

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|                          |   |   |                |   |   |   |   |   |   |   |   |   |   | Method of Determining Assumptions                                                                                            |   |
|-------------------------------|--------|--------|---------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------|--------|
| Risk-free rate                |   |   | 1.67%;0.89%         |   |   |   |   |   |   |   |   |   |   | U.S. treasury yield for 5-year treasury notes in effect at the award dates June 14, 2011 and November 1, 2011, respectively. |   |
| Expected years until exercise |   |   | 5.00                |   |   |   |   |   |   |   |   |   |   | Full option term                                                                                                             |   |
| Expected stock volatility     |   |   | 100%;94%            |   |   |   |   |   |   |   |   |   |   | Historical Gulf United Energy, Inc. volatility at August 31, 2011 and November 1, 2011, respectively.                        |   |
| Dividend yield                |   |   |    - |   |   |   |   |   |   |   |   |   |   | Historical record and plan                                                                                                   |   |

----

|                          |   |   |                |   |   |   |   |   |   |   |   |   |   | Method of Determining Assumptions                                         |   |
|-------------------------------|--------|--------|---------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------------------------------------------------------------|--------|
| Risk-free rate                |   |   | 1.67%;              |   |   |   |   |   |   |   |   |   |   | U.S. treasury yield for 10-year treasury notes in effect at June 4, 2012. |   |
| Expected years until exercise |   |   | 10.00               |   |   |   |   |   |   |   |   |   |   | Full option term                                                          |   |
| Expected stock volatility     |   |   | 109%;          |   |   |   |   |   |   |   |   |   |   | Historical Gulf United Energy, Inc. volatility at June 4, 2012.           |   |
| Dividend yield                |   |   |    - |   |   |   |   |   |   |   |   |   |   | Historical record and plan                                                |   |

|                                               |                                                                                                    |   | Weighted  |   | Weighted    |   |      |
|----------------------------------------------------|---------------------------------------------------------------------------------------------------------|--------|-----------|--------|-------------|--------|-----------|
|                                               | Number of                                                                                               |   | Average   |   | Average     |   |      |
|                                               | Shares                                                                                                  |   | Exercise  |   | Contractual |   | Aggregate |
|                                               | Underlying                                                                                              |   | Price per |   | Life in     |   | Intrinsic |
|                                               | Options                                                                                                 |   | Share     |   | Years       |   | Value     |
| Balance outstanding  - December 31, 2011 | 3,500,000                                                                                               |   | $         | 0.31   |        |   |      | 4.5 |   |   $ | - |
| Granted                                            | 9,000,000                                                                                               |   |      | 0.08   |        |   |      | 10.0 |   |   | - |
| Exercised                                          |                  - |   |      |   |        |   |      |   |   |   |   |
| Forfeited                                          |                  - |   |      |   |        |   |      |   |   |   |   |
| Expired                                            |                  - |   |      |   |        |   |      |   |   |   |   |
| Balance outstanding - June 30, 2012                |       12,500,000                                                          |   | $         | 0.14   |        |   |      | 8.5 |   | $ | - |
| Currently exercisable — June 30, 2012        | 1,000,000                                                                                               |   | $         | 0.31   |        |   |      |   |   | $ | - |

----

|                                                            |      |      |      | Weighted      |   |
|-----------------------------------------------------------------|-----------|-----------|-----------|---------------|--------|
|                                                            |      |      |      | Average Grant |   |
|                                                            |      |      |      | Date Fair     |   |
|                                                            | Number of | Value per |      |
|                                                            | Shares    | Share     |      |
| Balance outstanding — December 31, 2011              |      |      | 1,950,000 |          |   | $ | 0.30 |   |
| Granted                                                         |      |      | 0         |          |   |   | - |   |
| Vested                                                          |      |      | 400,000   |          |   |   | 0.32 |   |
| Forfeited                                                       |      |      | 0         |          |   |   | - |   |
| Balance outstanding — June 30, 2012                       |      |      | 1,950,000 |          |   | $ | 0.30 |   |
| Total grant date fair value of shares vesting during the period |      |      | 400,000   |          |   | $ | 128,000 |   |

----

----

|                            |   | Total Costs at June 30, 2012 |            |   | Remaining 2012 Commitment |   |
|---------------------------------|--------|------------------------------|-----------------|--------|---------------------------|--------|
|                            |   |                         |            |   |                      |   |
| Block XXIV and TEA – Peru |   | $                            |  4,306,367 |   |                      | $      | 700,000 |   |
| Block Z-46 – Peru         |   |                         | 8,711,832       |   |                      |   | 6,072,000 |   |
| CPO-4 – Colombia          |   |                         | 13,394,005      |   |                      |   |  3,366,000 |   |
|                            |   | $                            | 26,412,204      |   |                      |   | 10,138,000  |   |

----

|   | Total shares issued and outstanding as of August 31, 2011: |   |            |   |    454,667,726                                             |
|--------|------------------------------------------------------------|--------|-----------------|--------|---------------------------------------------------------------------------|
|   | Shares previously subscribed for services rendered         |   | September, 2011 |   |         5,100,000                 |
|   | Shares issued for services to be rendered                  |   | November, 2011  |   |            500,000 |
|   | Shares issue for cash                                      |   | April, 2012     |   |      88,250,000                                  |
|   | Shares issued for services to be rendered                  |   | June, 2012      |   |            500,000 |
|   | Shares previously subscribed for interest expense          |   | June, 2012      |   |         2,500,000                 |
|   |                                                       |   |            |   |                                                                      |
|   | Total shares issued and outstanding as of June 30, 2012:   |   |            |   |    551,517,726                                             |

|                                      |   | June 30, 2012 |        |   | December 31, 2011 |   |
|-------------------------------------------|--------|---------------|-------------|--------|-------------------|--------|
| Net operating loss carryforward benefit   |   | $             | 6,859,812   |   |              | $      | 5,962,063 |   |
| Stock-based compensation expense          |   |          | 121,523     |   |              |   | 73,473 |   |
| Impairment loss on oil and gas properties |   |          | 2,868,289   |   |              |   | - |   |
| Loss from discontinued operations         |   |          | 544,411     |   |              |   | 544,411 |   |
| Total deferred tax asset                  |   |          | 10,394,035  |   |              |   | 6,579,947 |   |
| Less: Valuation allowance                 |   |          | (10,394,035 | )      |              |   | (6,579,947 | ) |
| Net deferred tax asset                    |   | $             | -           |   |              | $      | - . |   |

|                                                 |   | Six Months Ended |            |   | Year Ended        |   |
|------------------------------------------------------|--------|------------------|-----------------|--------|-------------------|--------|
|                                                 |   | June 30, 2012    |            |   | December 31, 2011 |   |
| Provision for taxes (benefit) at U.S. statutory rate |   | $                | (3,814,088      | )      |              | $      | (451,132 | ) |
| Increase in deferred tax asset valuation allowance   |   |             |  3,814,088 |   |              |   |  451,132 . |   |
| Effective taxes                                      |   | $                | -               |   |              | $      | - |   |
| Effective tax rate                                   |   |             | 0               | %      |              |   | 0 | % |

----

| Unsecured loans to related parties | $     26,574 |
|------------------------------------|---------------------------------------|

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|                                                                                   |   | Six months ended June 30, |    |   | Period From Inception Through |   |
|----------------------------------------------------------------------------------------|--------|---------------------------|---------|--------|-------------------------------|--------|
|                                                                                   |   | 2012                      |    |   | 2011                          |   |   | June 30, 2012 |   |
|     Investment advances paid from shareholder loans                |   | $                         | -       |   |                          | $      | - |   |   | $ | 1,263,985 |   |
|     Common stock issued for investment in joint venture projects   |   | $                         | -       |   |                          | $      | - |   |   | $ | 687,225 |   |
|  Common stock issued or subscribed for expenses/services                          |   | $                         | 219,500 |   |                          | $      | 9,086,800 |   |   | $ | 10,260,500 |   |
|  Common stock issued for prepaid expenses/services                                |   | $                         | 36,667  |   |                          | $      | - |   |   | $ | 36,667 |   |
|  Common stock issued for oil and gas properties                                   |   | $                         | -       |   |                          | $      | 90,000 |   |   | $ | 3,646,000 |   |
|  Common stock issued or subscribed in connection with  short-term notes |   | $                         | -       |   |                          | $      | 623,232 |   |   | $ | 1,809,023 |   |
|  Interest forgiven on shareholder loan payable                                    |   | $                         | -       |   |                          | $      | - |   |   | $ | 631,444 |   |
|  Common stock issued in conversion of shareholder loan                            |   | $                         | -       |   |                          | $      | - |   |   | $ | 400,000 |   |
|  Capital expenditures acquired with accounts payable                              |   | $                         | -       |   |                          | $      | - |   |   | $ | 31,282 |   |

| Settlement of loan payable by assignment of investment:                                                         |   |   |   |   |   |   |    |   |   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
|            Loan payable                                  |   | $      | -      |   |   | $      | -       |   |   | $ | (200,000 | ) |
|            Investment                                    |   | $      | -      |   |   | $      | -       |   |   | $ | 200,000 |   |
|            Warrants issued for non-employee compensation |   | $      | -      |   |   | $      | 538,411 |   |   | $ | 538,411 |   |
| Supplemental Disclosure of Cash Flow Information:                                                               |   |   |   |   |   |   |    |   |   |   |   |   |
|          Cash paid for:                                            |   |   |   |   |   |   |    |   |   |   |   |   |
|            Interest                                      |   | $      | 20,000 |   |   | $      | 328,970 |   |   | $ | 527,714 |   |
|            Income taxes                                  |   | $      | -      |   |   | $      | -       |   |   | $ | - |   |

----

| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------------|

|       Property |                Gross Acres |              Net Acres |  Interest(1) | Operator      |
|----------------------------------------------|-------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|-------------------|---------------|
| Colombia Properties                          |                                                                                                  |                                                                                    |              |          |
| Block VIM-2                                  | 148,513                                                                                               | 74,257                                                                                  | 50.0%             | SK Innovation |
| Block SSJN-5                                 | 570,452                                                                                               | 228,181                                                                                 | 40.0%             | SK Innovation |
| Block CPO-4                                  | 345,592                                                                                               | 43,200                                                                                  | 12.5%             | SK Innovation |
|                                         |                                                                                                  |                                                                                    |              |          |
| Peru Properties                              |                                                                                                  |                                                                                    |              |          |
| Block Z-46                                   | 2,803,411                                                                                             | 1,121,411                                                                               | 40.0%             | SK Innovation |
| Block XXIV                                   | 276,137                                                                                               | 13,807                                                                                  | 5.0%              | Upland        |
| TEA Area I, II, III, IV                      | 40,321,163                                                                                            | 806,423                                                                                 | 2.0%              | Upland        |

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|   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Cont. |
|----------------------------------------------------------------------------------------------------------------|

----

|  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Cont. |
|----------------------------------------------------------------------------------------------------------|

| Contractual Obligations                                 |   | Payments due by period(in thousands) |   |
|---------------------------------------------------------|--------|--------------------------------------|--------|
|                                                    |   | Remainder of2012                     |   |   |   2013 |   |   |  2014 |   |   | Total |   |
| Commitments under employment agreements                 |   | $                                    | 762    |   |   | $ | 1,079 |   |   | $ | 456 |   |   | $ | 2,297 |   |
| Commitments under consulting contracts                  |   |                                 | 93     |   |   |   | 182 |   |   |   | 182 |   |   |   | 457 |   |
| Commitments under participation and farmout agreements: |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Block CPO-4               |   |                                 | 3,366  | (1) |   |   | 4,420 | (2) |   |   | - |   |   |   | 7,786 |   |
|      Block Z-46                |   |                                 | 6,072  | (3) |   |   | 23,835 | (4) |   |   | - |   |   |   | 29,907 |   |
|      Block XXIV                |   |                                 | 200    |   |   |   | - |   |   |   | - |   |   |   | 200 |   |
|      Peru TEA                  |   |                                 | 500    |   |   |   | - |   |   |   | - |   |   |   | 500 |   |
| Total                                                   |   | $                                    | 10,993 |   |   | $ | 29,516 |   |   | $ | 638 |   |   | $ | 41,146 |   |

|   | (1) | The current obligation remaining on Block CPO-4 includes drilling cost of approximately $3.1 million for the third well, and an estimated $266,000 for joint operating costs. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | The 2013 obligation includes $2.24 million for 3-D seismic expense and $1.7 million for seismic acquisition costs incurred subsequent to July 31, 2010 owed to Houston American Energy 30 days after ANH approval, and estimated joint operating costs of approximately $480,000. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | The current obligation remaining on Block Z-46 includes $4.5 million for seismic acquisition costs, $882,000 in value added tax and $690,000 in joint operating costs. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | The 2013 estimated obligation on Block Z-46 includes a payment of $2.9 million for past costs due to SK Innovation 30 days after final approval of interest transfer.  Based on the current work program, the estimated obligation on Z-46 for calendar 2013 includes an estimated $16.5 million for the 3-D seismic acquisition, an estimated $1.4 million in joint operating costs and an estimated $3.0 million for VAT. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Cont. |
|----------------------------------------------------------------------------------------------------------|

| ($ in Thousands)                     |   | For the three months ended June 30, |    |   | For the six months ended June 30, |   |
|--------------------------------------|--------|-------------------------------------|---------|--------|-----------------------------------|--------|
|                                 |   | 2012                                |    |   | 2011                              |   |   | 2012 |   |   | 2011 |   |
| Revenue                              |   | $                                   | -       |   |                              | $      | - |   |   | $ | - |   |   | $ | - |   |
|                                 |   |                                |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Office and other                     |   |                                | 48      |   |                              |   | 28 |   |   |   | 87 |   |   |   | 48 |   |
| Depreciation expense                 |   |                                | 7       |   |                              |   | 6 |   |   |   | 14 |   |   |   | 11 |   |
| Salary and related expenses          |   |                                | 1,372   |   |                              |   | 1,002 |   |   |   | 1,831 |   |   |   | 1,287 |   |
| Professional fees                    |   |                                | 272     |   |                              |   | 424 |   |   |   | 429 |   |   |   | 810 |   |
| Consulting                           |   |                                | 48      |   |                              |   | 300 |   |   |   | 93 |   |   |   | 645 |   |
| Travel                               |   |                                | 45      |   |                              |   | 38 |   |   |   | 110 |   |   |   | 55 |   |
| Shareholder loan and other interest  |   |                                | 220     |   |                              |   | 226 |   |   |   | 220 |   |   |   | 864 |   |
| Total operating expense              |   |                                | 2,012   |   |                              |   | 2,024 |   |   |   | 2,784 |   |   |   | 3,721 |   |
| Interest income                      |   |                                | (1      | )      |                              |   | (8 | ) |   |   | (2 | ) |   |   | (11 | ) |
| Gain from discontinued operations    |   |                                | -       |   |                              |   | - |   |   |   | - |   |   |   | (150 | ) |
| Impairment on oil and gas properties |   |                                | 8,436   |   |                              |   | - |   |   |   | 8,436 |   |   |   | - |   |
| Net loss for the period              |   | $                                   | (10,447 | )      |                              | $      | (2,016 | ) |   | $ | (11,218 | ) |   | $ | (3,560 | ) |

----

|    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Cont. |
|----------------------------------------------------------------------------------------------------------------------|

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| 10.1                                                                    | Amended and Restated Employment Agreement, dated effective June 4, 2012, by and between the Company and John B. Connally III, incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the SEC on June 8, 2012.                                                    |
|-------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 10.2                                                                    | Amended and Restated Employment Agreement, dated effective June 4, 2012, by and between the Company and Jim D. Ford, incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed with the SEC on June 8, 2012.                                                             |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 10.3                                                                    | Amended and Restated Employment Agreement, dated effective June 4, 2012, by and between the Company and Ernest B. Miller IV, incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed with the SEC on June 8, 2012.                                                     |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 10.4                                                                    | Amended and Restated Employment Agreement, dated effective June 4, 2012, by and between the Company and James C. Fluker III, incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K filed with the SEC on June 8, 2012.                                                     |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 10.5                                                                    | Amended and Restated Employment Agreement, dated effective June 4, 2012, by and between the Company and David Pomerantz, incorporated by reference to Exhibit 10.5 of the Company’s Form 8-K filed with the SEC on June 8, 2012.                                                         |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 10.6                                                                    | Amendment No. 3 to Farmout Agreement, dated effective April 30, 2012, by and between SK Innovation Co., Ltd. (formerly SK Energy Co. Ltd.) and Gulf United Energy de Colombia, incorporated by reference to Exhibit 10.15 of the Company’s Form S-1 filed with the SEC on June 19, 2012. |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 10.7                                                                    | Form of Subscription Agreement relating to 2012 Private Placement incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the SEC on April 23, 2012                                                                                                               |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 10.8                                                                    | Form of Registration Rights Agreement relating to 2012 Private Placement incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the SEC on April 23, 2012.                                                                                                       |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 31.1*            | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                             |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 31.2*                                                                   | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                             |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 32.1*                                                                   | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                               |
|                                                                    |                                                                                                                                                                                                                                                                                           |
| 32.2*                                                                   | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                               |

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| Dated: October 16, 2012 | GULF UNITED ENERGY, INC.                                                      (Registrant) |
|-------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |                                                                                                                                                                                                                                                                                                                                                                     |
|                    | /s/ John B. Connally IIIJohn B. Connally IIIChief Executive Officer(Principal Executive Officer)                                                                                                                                                                                                                                                                         |
|                    |                                                                                                                                                                                                                                                                                                                                                                     |
|                    | /s/ David PomerantzDavid PomerantzChief Financial Officer(Principal Financial and Accounting Officer)                                                                                                                                                                                                                                                                    |

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