Exhibit 99.2
 PETROFLOW ENERGY LTD.
 MANAGEMENTS DISCUSSION AND ANALYSIS
 FOR THE YEAR ENDED DECEMBER 31, 2008




---



##### 



OVERVIEW AND HIGHLIGHTS
       MANAGEMENTS DISCUSSION AND ANALYSIS
 The following discussion and analysis of the operating and financial results of Petroflow
Energy Ltd. (Petroflow or the Company) is for the year ended December 31, 2008 and is
provided by management as of April 22, 2009. It should be read in conjunction with
Petroflows audited consolidated financial statements and related notes for the years
ended December 31, 2008 and 2007. All dollar amounts are presented in Canadian dollars
and are prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP). Additional information including the Companys Annual Information Form may be
found on the Companys website at www.petroflowenergy.com and on the SEDAR web site at
www.sedar.com.
 FORWARD-LOOKING INFORMATION
   1




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##### 



NON-GAAP MEASURES
  BARREL OF OIL EQUIVALENCY
  FINANCIAL STRATEGY IN THE CURRENT ECONOMIC ENVIRONMENT
   SELECTED ANNUAL INFORMATION
 (Dollars, except share and per share amounts)
    
    2008
    
    2007
    
    2006Oil and natural gas sales
    
    
    54,715,516
    
    
    
    21,993,334
    
    
    
    8,699,242Net Income (loss)
    
    
    4,290,179
    
    
    
    (6,787,325
    )
    
    
    (6,336,018
    )Per share  Basic
    
    
    0.15
    
    
    
    (0.25
    )
    
    
    (0.25
    )Diluted
    
    
    0.13
    
    
    
    (0.25
    )
    
    
    (0.25
    )Total assets
    
    
    195,110,189
    
    
    
    103,029,282
    
    
    
    66,109,107Working capital deficiency(1)
    
    
    (26,221,517
    )
    
    
    (16,936,728
    )
    
    
    (33,250,770
    )Capital expenditures
    
    
    84,015,681
    
    
    
    56,026,844
    
    
    
    43,138,253Total long term debt(2)
    
    
    116,835,958
    
    
    
    60,776,518
    
    
    
    5,459,805
 2




---



##### 



(Dollars, except share and per share amounts)
    
    2008
    
    2007
    
    2006Funds from operations
    
    
    12,648,752
    
    
    
    1,023,801
    
    
    
    (2,872,456
    )Per share  Basic
    
    
    0.43
    
    
    
    0.04
    
    
    
    (0.12
    )Diluted
    
    
    0.40
    
    
    
    0.04
    
    
    
    (0.12
    )Common shares outstanding
    
    
    29,571,094
    
    
    
    29,242,344
    
    
    
    24,858,902Basic weighted average common
shares outstanding
    
    
    29,421,768
    
    
    
    26,815,379
    
    
    
    23,293,792
 (1)
    
    Working capital excludes derivative contracts(2)
    
    Includes the long-term portion of the obligation under capital lease, fair
value of financial instruments, long term debt and the asset retirement obligation    OVERALL PERFORMANCE
    3




---



##### 



Oklahoma
 force majeure
  New Mexico
  Texas
  Canada (Alberta)
  RESULTS OF OPERATIONS
 Petroleum
and Natural gas sales
(Production volumes, commodity prices and revenues)
 Three months ended December 31,
    
    Year ended December 31,2008
    
    2007
    
    % Change
    
    2008
    
    2007
    
    % ChangeTotal Average VolumeCrude oil (bbls)
    
    
    45,453
    
    
    
    23,495
    
    
    
    93
    %
    
    
    159,461
    
    
    
    94,189
    
    
    
    69
    %Natural gas & natural gas liquids (mcf)
    
    
    1,494,062
    
    
    
    798,476
    
    
    
    87
    %
    
    
    4,825,051
    
    
    
    2,461,311
    
    
    
    96
    %Total (boe)
    
    
    294,463
    
    
    
    156,574
    
    
    
    88
    %
    
    
    963,636
    
    
    
    504,408
    
    
    
    91
    %
 4




---



##### 



Three months ended December 31,
    
    Year ended December 31,2008
    
    2007
    
    % Change
    
    2008
    
    2007
    
    % ChangeDaily Sales Volumes  AverageCrude oil (bbls/day)
    
    
    494
    
    
    
    255
    
    
    
    94
    %
    
    
    436
    
    
    
    258
    
    
    
    69
    %Natural gas & natural gas liquids (mcf/day)
    
    
    16,240
    
    
    
    8,679
    
    
    
    87
    %
    
    
    13,183
    
    
    
    6,743
    
    
    
    96
    %Total (boe/day)
    
    
    3,201
    
    
    
    1,702
    
    
    
    88
    %
    
    
    2,633
    
    
    
    1,382
    
    
    
    91
    %Average PricesCrude Oil ($/bbl)
    
    
    83.70
    
    
    
    89.12
    
    
    
    (6
    %)
    
    
    105.42
    
    
    
    75.35
    
    
    
    40
    %Natural gas & natural gas liquids ($/mcf)
    
    
    5.81
    
    
    
    5.34
    
    
    
    9
    %
    
    
    7.86
    
    
    
    6.05
    
    
    
    29
    %$/ boe
    
    
    42.40
    
    
    
    40.63
    
    
    
    4
    %
    
    
    56.78
    
    
    
    43.60
    
    
    
    30
    %Average Benchmark PricesAverage
exchange rate: US$ to CDN$
    
    
    0.83
    
    
    
    1.02
    
    
    
    (19
    %)
    
    
    0.94
    
    
    
    0.94
    
    
    
    0
    %WTI (US$/bbl)
    
    
    58.33
    
    
    
    90.71
    
    
    
    (36
    %)
    
    
    99.60
    
    
    
    72.30
    
    
    
    38
    %Edmonton Light ($/bbl)
    
    
    63.94
    
    
    
    76.35
    
    
    
    (16
    %)
    
    
    102.20
    
    
    
    72.80
    
    
    
    40
    %NYMEX (US$/mmbtu)
    
    
    6.94
    
    
    
    6.97
    
    
    
    (0
    %)
    
    
    8.85
    
    
    
    6.95
    
    
    
    27
    %AECO natural gas ($/GJ)
    
    
    6.79
    
    
    
    5.69
    
    
    
    19
    %
    
    
    8.15
    
    
    
    6.15
    
    
    
    33
    %RevenueCrude Oil
    
    $
    3,804,247
    
    
    $
    2,093,933
    
    
    
    82
    %
    
    $
    16,810,166
    
    
    $
    7,097,147
    
    
    
    137
    %Natural gas & natural gas liquids
    
    
    8,680,930
    
    
    
    4,267,201
    
    
    
    103
    %
    
    
    37,905,350
    
    
    
    14,896,187
    
    
    
    154
    %Total oil & natural gas revenues
    
    $
    12,485,177
    
    
    $
    6,361,134
    
    
    
    96
    %
    
    $
    54,715,516
    
    
    $
    21,993,334
    
    
    
    149
    %
       5




---



##### 



Derivative Instruments
 Three months ended December 31,
    
    Year ended December 31,2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeUnrealized gain (loss)
    
    $
    6,780,352
    
    
    $
    (562,197
    )
    
    
    1,306
    %
    
    $
    7,300,422
    
    
    $
    (454,062
    )
    
    
    1,708
    %Realized gain (loss)
    
    
    47,245
    
    
    
    (259,434
    )
    
    
    118
    %
    
    
    (1,517,232
    )
    
    
    (259,056
    )
    
    
    (486
    %)Per boe
    
    $
    23.19
    
    
    $
    (5.25
    )
    
    
    542
    %
    
    $
    6.00
    
    
    $
    (1.41
    )
    
    
    526
    %
   6




---



##### 



Royalties
 Three months ended December 31,
    
    Year ended December 31.2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeRoyalties
    
    $
    2,781,961
    
    
    $
    1,478,196
    
    
    
    88
    %
    
    $
    11,837,460
    
    
    $
    4,930,874
    
    
    
    140
    %% of Sales
    
    
    22
    %
    
    
    23

    %
    
    
    
    
    
    
    22
    %
    
    
    22
    %Per boe
    
    $
    9.45
    
    
    $
    9.44
    
    
    
    0
    %
    
    $
    12.28
    
    
    $
    9.78
    
    
    
    26
    %
  
   Operating and Transportation Expenses
 Three months ended December 31,
    
    Year ended December 31.2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeOperating expenses
    
    $
    3,826,398
    
    
    $
    2,240,913
    
    
    
    71
    %
    
    $
    11,018,376
    
    
    $
    6,167,758
    
    
    
    79
    %Per boe
    
    $
    12.99
    
    
    $
    14.31
    
    
    
    (9
    %)
    
    $
    11.43
    
    
    $
    12.23
    
    
    
    (7
    %)Transportation costs
    
    $
    6,221
    
    
    $
    99,548
    
    
    
    (94
    %)
    
    $
    206,645
    
    
    $
    268,161
    
    
    
    (23
    %)Per boe
    
    $
    0.02
    
    
    $
    0.64
    
    
    
    (97
    %)
    
    $
    0.21
    
    
    $
    0.53
    
    
    
    (60
    %)
 7




---



##### 



Depletion, Depreciation and Accretion
 Three months ended December 31,
    
    Year ended December 31.2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeDepletion and depreciation
    
    $
    3,305,901
    
    
    $
    1,926,364
    
    
    
    72
    %
    
    $
    10,333,337
    
    
    $
    5,940,961
    
    
    
    74
    %Accretion on asset retirement
obligation
    
    
    26,028
    
    
    
    (19,089
    )
    
    
    236
    %
    
    
    63,360
    
    
    
    75,937
    
    
    
    (17
    %)$
    3,331,929
    
    
    $
    1,907,275
    
    
    
    75
    %
    
    $
    10,396,697
    
    
    $
    6,016,898
    
    
    
    73
    %Per boe
    
    $
    11.32
    
    
    $
    12.18
    
    
    
    (7
    %)
    
    $
    10.79
    
    
    $
    11.93
    
    
    
    (10
    %)Write-down of property
and equipment
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    1,015,950
    
    
    $
    
    
    
    
    100
    %Per boe
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    1.05
    
    
    $
    
    
    
    
    100
    %
   8




---



##### 



General and Administrative Expenses
 Three months ended December 31,
    
    Year ended December 31.2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeGeneral and administrative
    
    $
    2,712,367
    
    
    $
    1,740,974
    
    
    
    56
    %
    
    $
    9,825,217
    
    
    $
    5,101,582
    
    
    
    93
    %Per boe
    
    $
    9.21
    
    
    $
    11.12
    
    
    
    (17
    %)
    
    $
    10.20
    
    
    $
    10.11
    
    
    
    1
    %General and administrative
    
    $
    2,712,367
    
    
    $
    1,740,974
    
    
    
    56
    %
    
    $
    9,825,217
    
    
    $
    5,101,582
    
    
    
    93
    %One-time costs:Non-cash issuance of
Common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (708,000
    )
    
    
    
    
    
    
    Bonuses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000,000
    )
    
    
    
    
    
    
    Non-recurring costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (700,000
    )
    
    
    
    
    
    
    $
    2,712,367
    
    
    $
    1,740,974
    
    
    
    56
    %
    
    $
    7,417,217
    
    
    $
    5,101,582
    
    
    
    65
    %Per boe without one-time costs
    
    $
    9.21
    
    
    $
    11.12
    
    
    
    (17
    %)
    
    $
    7.70
    
    
    $
    10.11
    
    
    
    (14
    %)
   9




---



##### 



Stock Based Compensation
 Three months ended December 31,
    
    Year ended December 31.2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeStock based compensation
    
    $
    510,095
    
    
    $
    523,712
    
    
    
    (3
    %)
    
    $
    3,172,349
    
    
    $
    1,261,763
    
    
    
    151
    %Per boe
    
    $
    1.73
    
    
    $
    3.34
    
    
    
    (48
    %)
    
    $
    3.29
    
    
    $
    2.50
    
    
    
    32
    %
   Interest Expense
 Three months ended December 31,
    
    Year ended December 31.2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeInterest expense and
financing expense
    
    $
    1,567,271
    
    
    $
    1,317,894
    
    
    
    19
    %
    
    $
    6,101,430
    
    
    $
    4,314,555
    
    
    
    41
    %Average interest rate
    
    
    5.75
    %
    
    
    9.85
    %
    
    
    (42
    %)
    
    
    6.66
    %
    
    
    7.92
    %
    
    
    (16
    %)Per boe
    
    $
    5.32
    
    
    $
    8.42
    
    
    
    (37
    %)
    
    $
    6.33
    
    
    $
    8.55
    
    
    
    (26
    %)
   10




---



##### 



Income Taxes
 Three months ended December 31,
    
    Year ended December 31.2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeCurrent tax expense
    
    $
    185,603
    
    
    $
    
    
    
    
    100
    %
    
    $
    185,603
    
    
    $
    
    
    
    
    100
    %Future income tax expense
    
    
    366,000
    
    
    
    
    
    
    
    100
    %
    
    
    366,000
    
    
    
    
    
    
    
    100
    %Per boe
    
    $
    1.87
    
    
    $
    
    
    
    
    100
    %
    
    $
    0.57
    
    
    $
    
    
    
    
    100
    %
   Net Income (Loss) and Cash Flow from Operations
 Three months ended December 31,
    
    Year ended December 31.2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeNet income (loss)
    
    $
    3,302,166
    
    
    $
    (3,837,080
    )
    
    
    186
    %
    
    $
    4,290,179
    
    
    $
    (6,787,325
    )
    
    
    163
    %Per share    Basic
    
    
    0.11
    
    
    
    (0.14
    )
    
    
    179
    %
    
    
    0.15
    
    
    
    (0.25
    )
    
    
    160
    % Diluted
    
    
    0.10
    
    
    
    (0.14
    )
    
    
    171
    %
    
    
    0.13
    
    
    
    (0.25
    )
    
    
    152
    %Funds from operations
    
    $
    729,838
    
    
    $
    (1,092,229
    )
    
    
    167
    %
    
    $
    12,648,752
    
    
    $
    1,023,801
    
    
    
    1,135
    %Per share    Basic
    
    
    0.02
    
    
    
    (0.04
    )
    
    
    150
    %
    
    
    0.43
    
    
    
    0.04
    
    
    
    975
    % Diluted
    
    
    0.02
    
    
    
    (0.04
    )
    
    
    150
    %
    
    
    0.40
    
    
    
    0.04
    
    
    
    900
    %Cash flow from operating
activities
    
    $
    7,294,182
    
    
    $
    (6,449,293
    )
    
    
    213
    %
    
    $
    9,604,755
    
    
    $
    680,965
    
    
    
    1,310
    %Per share    Basic
    
    
    0.25
    
    
    
    (0.22
    )
    
    
    214
    %
    
    
    0.33
    
    
    
    0.03
    
    
    
    1000
    % Diluted
    
    
    0.23
    
    
    
    (0.22
    )
    
    
    205
    %
    
    
    0.30
    
    
    
    0.03
    
    
    
    900
    %
  11




---



##### 



SUMMARY OF QUARTERLY RESULTS
 2008
    
    2007($ thousands, except per share amounts)
    
    Q4
    
    Q3
    
    Q2
    
    Q1
    
    Q4
    
    Q3
    
    Q2
    
    Q1Oil and gas sale
    
    
    12,485
    
    
    
    16,618
    
    
    
    15,392
    
    
    
    10,220
    
    
    
    6,361
    
    
    
    5,753
    
    
    
    5,965
    
    
    
    3,915Funds from operations
    
    
    730
    
    
    
    6,023
    
    
    
    2,579
    
    
    
    3,317
    
    
    
    (1,092
    )
    
    
    510
    
    
    
    1,491
    
    
    
    115Per share  Basic
    
    
    0.02
    
    
    
    0.19
    
    
    
    0.09
    
    
    
    0.12
    
    
    
    (0.04
    )
    
    
    0.02
    
    
    
    0.06
    
    
    
    0.00Per share  Diluted
    
    
    0.02
    
    
    
    0.18
    
    
    
    0.09
    
    
    
    0.12
    
    
    
    (0.04
    )
    
    
    0.02
    
    
    
    0.06
    
    
    
    0.00Net income (loss)
    
    
    3,302
    
    
    
    12,031
    
    
    
    (8,884
    )
    
    
    (2,159
    )
    
    
    (3,792
    )
    
    
    (1,271
    )
    
    
    74
    
    
    
    (1,797
    )
 12




---



##### 



2008
    
    2007($ thousands, except per share amounts)
    
    Q4
    
    Q3
    
    Q2
    
    Q1
    
    Q4
    
    Q3
    
    Q2
    
    Q1Per share  Basic
    
    
    0.11
    
    
    
    0.41
    
    
    
    (0.30
    )
    
    
    (0.07
    )
    
    
    (0.14
    )
    
    
    (0.05
    )
    
    
    0.00
    
    
    
    (0.07
    )Per share  Diluted
    
    
    0.10
    
    
    
    0.39
    
    
    
    (0.30
    )
    
    
    (0.07
    )
    
    
    (0.14
    )
    
    
    (0.05
    )
    
    
    0.00
    
    
    
    0.00Total assets
    
    
    195,110
    
    
    
    137,143
    
    
    
    111,147
    
    
    
    120,764
    
    
    
    103,029
    
    
    
    88,923
    
    
    
    82.686
    
    
    
    74,873Working capital (deficiency)
    
    
    (26,222
    )
    
    
    (12,778
    )
    
    
    (15,151
    )
    
    
    (20,223
    )
    
    
    (17,147
    )
    
    
    (53,021
    )
    
    
    (53,947
    )
    
    
    (46,299
    )
 (1)
    
    Working capital excludes derivative contracts
  2008
    
    2007Q4
    
    Q3
    
    Q2
    
    Q1
    
    Q4
    
    Q3
    
    Q2
    
    Q1WTI (US$/bbl)
    
    
    58.33
    
    
    
    118.21
    
    
    
    123.95
    
    
    
    97.87
    
    
    
    90.71
    
    
    
    75.39
    
    
    
    65.03
    
    
    
    58.23Edmonton Light ($/bbl)
    
    
    63.94
    
    
    
    122.61
    
    
    
    126.74
    
    
    
    98.16
    
    
    
    76.35
    
    
    
    80.70
    
    
    
    72.62
    
    
    
    67.30NYMEX (US$/mmbtu)
    
    
    6.94
    
    
    
    10.24
    
    
    
    10.93
    
    
    
    8.93
    
    
    
    6.97
    
    
    
    6.06
    
    
    
    7.56
    
    
    
    6.96AECO natural gas ($/GJ)
    
    
    6.79
    
    
    
    9.49
    
    
    
    9.37
    
    
    
    7.81
    
    
    
    5.69
    
    
    
    5.61
    
    
    
    7.07
    
    
    
    7.07Average exchange rate:US$ to Can
    
    $
    0.83
    
    
    
    0.96
    
    
    
    0.99
    
    
    
    1.00
    
    
    
    1.02
    
    
    
    0.96
    
    
    
    0.91
    
    
    
    0.85
   CAPITAL EXPENDITURES
 Three months ended December 31,
    
    Year ended December 31,2008
    
    2007
    
    %Change
    
    2008
    
    2007
    
    % ChangeLand and rentals
    
    $
    2,083,877
    
    
    $
    (20,560
    )
    
    
    10,236
    %
    
    $
    3,132,210
    
    
    $
    (118,963
    )
    
    
    2,733
    %Seismic
    
    
    70,088
    
    
    
    (51
    )
    
    
    100
    %
    
    
    70,088
    
    
    
    10,234
    
    
    
    585
    %Drilling and completions
    
    
    14,494,052
    
    
    
    10,884,227
    
    
    
    33
    %
    
    
    45,857,054
    
    
    
    36,998,997
    
    
    
    24
    %Equipment and facilities
    
    
    5,428,516
    
    
    
    4,150,974
    
    
    
    31
    %
    
    
    20,399,707
    
    
    
    11,801,375
    
    
    
    73
    %Other assets
    
    
    201,633
    
    
    
    108,271
    
    
    
    86
    %
    
    
    380,269
    
    
    
    144,320
    
    
    
    163
    %22,278,165
    
    
    
    15,122,861
    
    
    
    47
    %
    
    
    69,839,327
    
    
    
    48,835,963
    
    
    
    43
    %Property disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,249,927
    )
    
    
    
    
    
    
    (100
    %)26,984,708
    
    
    
    15,122,861
    
    
    
    73
    %
    
    
    41,589,400
    
    
    
    48,835,963
    
    
    
    Assets under capital lease
    
    
    4,108,380
    
    
    
    5,528,910
    
    
    
    (26
    %)
    
    
    14,176,355
    
    
    
    7,190,881
    
    
    
    97
    %Total
    
    $
    26,386,545
    
    
    $
    20,651,771
    
    
    
    28
    %
    
    $
    55,765,755
    
    
    $
    56,026,844
    
    
    
    
   13




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##### 



LIQUIDITY AND CAPITAL RESOURCES
 .
    14




---



##### 



SHARE CAPITAL AND OPTION ACTIVITY
 As at April 22,
    
    
    As at December 31,2009
    
    
    2008
    
    
    2007Common
    
    
    29,523,894
    
    
    
    29,571,094
    
    
    
    29,242,344Warrants
    
    
    1,692,000
    
    
    
    1,692,000
    
    
    
    1,692,000Stock Options
    
    
    2,882,200
    
    
    
    2,898,600
    
    
    
    2,476,200
    CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES
  2009
    
    $
    309,7842010
    
    
    230,9562011
    
    
    80,2312012
    
    
    81,0862013
    
    
    34,040$
    736,097
  OFF-BALANCE SHEET ARRANGEMENTS
  RELATED PARTY TRANSACTIONS
  15




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##### 



CRITICAL ACCOUNTING ESTIMATES
  Oil and natural gas reserves
   Depletion and depreciation
  16




---



##### 



Impairment of property, plant & equipment
  Asset retirement obligation
  Fair value of derivative instruments
  Stock-based compensation
  Income taxes
  Other estimates
  17




---



##### 



NEW ACCOUNTING POLICIES
   FUTURE ACCOUNTING CHANGES
    Managements Report on Internal Control over Financial Reporting
  18




---



##### 



BUSINESS RISKS AND RISK MANAGEMENT
        19




---



##### 



FUTURE PROSPECTS
    20