##### Table of Contents



U.S. Securities And Exchange Commission
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended February 28, 2007
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 001-15511
 PYR ENERGY CORPORATION
  Maryland
    
    95-4580642(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1675 Broadway, Suite 2450, Denver, CO
    
    80202(Address of principal executive offices)
    
    (Zip Code)
 (303) 825-3748
 þ o
  o o þ
 o þ
  Class
    
    Outstanding as of April 6, 2007Common stock, $0.001 par value
    
    37,993,259




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##### 



TABLE OF CONTENTS
 PagePART I.
    
    FINANCIAL INFORMATION
    
    
    3Item 1.
    
    Financial Statements
    
    
    3Balance Sheets  February 28, 2007 (Unaudited) and August 31, 2006
    
    
    3Statements of Operations  Three and Six Months Ended February 28, 2007 and February 28, 2006 (Unaudited)
    
    
    4Statements of Cash Flows  Six Months Ended February 28, 2007 and February 28, 2006 (Unaudited)
    
    
    5Notes to Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 4.
    
    Controls and Procedures
    
    
    26PART II.
    
    OTHER INFORMATION
    
    
    27Item 1.
    
    Legal Proceedings
    
    
    27Item 1A.
    
    Risk Factors
    
    
    28Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3.
    
    Defaults Upon Senior Securities
    
    
    28Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    29Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits
    
    
    29SIGNATURES
    
    
    31EXHIBIT INDEX
    
    
    32Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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ITEM 1. FINANCIAL STATEMENTS
 
 PYR ENERGY CORPORATION  CONSOLIDATED BALANCE SHEETS
 February 28
    
    
    August 31,2007
    
    
    2006(Unaudited)ASSETSCURRENT ASSETSCash
    
    $
    5,181
    
    
    $
    6,254Oil and gas receivables
    
    
    1,692
    
    
    
    1,846Prepaid expenses and other current assets
    
    
    147
    
    
    
    64Total current assets
    
    
    7,020
    
    
    
    8,164PROPERTY AND EQUIPMENTOil and gas properties under full cost, net
    
    
    21,764
    
    
    
    20,421Furniture and equipment, net
    
    
    52
    
    
    
    4521,816
    
    
    
    20,466OTHER ASSETSDeferred financing costs and other assets
    
    
    27
    
    
    
    29TOTAL ASSETS
    
    $
    28,863
    
    
    $
    28,659LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    158
    
    
    $
    321Amounts due oil and gas property owners
    
    
    20
    
    
    
    38Accrued net profits interest payable
    
    
    
    
    
    
    231Other accrued liabilities
    
    
    401
    
    
    
    1,035Asset retirement obligation
    
    
    907
    
    
    
    907Total current liabilities
    
    
    1,486
    
    
    
    2,532LONG TERM LIABILITIESConvertible notes
    
    
    7,493
    
    
    
    7,310Asset retirement obligation
    
    
    392
    
    
    
    366COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYPreferred stock, $.001 par value; authorized 1,000,000 shares;
issued and outstanding  none
    
    
    
    
    
    
    Junior Participating Preferred Stock, Series A; $.001 par value;
authorized 100,000 shares; issued and outstanding  none
    
    
    
    
    
    
    Common stock, $.001 par value; authorized 75,000,000 shares;
issued and outstanding   37,993,259 at 02/28/07 and
8/31/06, respectively
    
    
    38
    
    
    
    38Capital in excess of par value
    
    
    51,492
    
    
    
    51,292Accumulated deficit
    
    
    (32,038
    )
    
    
    (32,879
    )Total stockholders equity
    
    
    19,492
    
    
    
    18,451TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    28,863
    
    
    $
    28,659
 .
  3




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PYR ENERGY CORPORATION  CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedFebruary 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands, except share and per share data)REVENUESOil and gas revenues
    
    $
    2,369
    
    
    $
    2,069
    
    
    $
    4,988
    
    
    $
    4,072OPERATING EXPENSESLease operating expenses
    
    
    290
    
    
    
    331
    
    
    
    714
    
    
    
    575Production taxes, gathering and transportation
    
    
    190
    
    
    
    141
    
    
    
    383
    
    
    
    265Net profits interest expense
    
    
    (203
    )
    
    
    320
    
    
    
    (141
    )
    
    
    580Depletion, depreciation, amortization and
accretion
    
    
    906
    
    
    
    509
    
    
    
    1,803
    
    
    
    866General and administrative
    
    
    686
    
    
    
    584
    
    
    
    1,312
    
    
    
    1,087Total operating expenses
    
    
    1,869
    
    
    
    1,885
    
    
    
    4,071
    
    
    
    3,373INCOME FROM OPERATIONS
    
    
    500
    
    
    
    184
    
    
    
    917
    
    
    
    699OTHER INCOME (EXPENSE)Interest income
    
    
    44
    
    
    
    68
    
    
    
    100
    
    
    
    115Other income
    
    
    12
    
    
    
    5
    
    
    
    14
    
    
    
    5Interest (expense)
    
    
    (98
    )
    
    
    (89
    )
    
    
    (190
    )
    
    
    (188
    )Other (expense)
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    Total other income (expense)
    
    
    (42
    )
    
    
    (9
    )
    
    
    (76
    )
    
    
    (68
    )NET INCOME
    
    $
    458
    
    
    $
    175
    
    
    $
    841
    
    
    $
    631NET INCOME PER COMMON
SHARE BASIC AND DILUTED
    
    $
    0.01
    
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    0.02WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING-BASIC
    
    
    37,993
    
    
    
    37,915
    
    
    
    37,993
    
    
    
    36,658DILUTED
    
    
    38,224
    
    
    
    38,623
    
    
    
    38,219
    
    
    
    37,353
   4




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PYR ENERGY CORPORATION  CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended February 28,2007
    
    
    2006(in thousands)CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    841
    
    
    $
    631Adjustments to reconcile net income to
net cash provided by operating activities:Depletion, depreciation, amortization and accretion
    
    
    1,803
    
    
    
    866Amortization of financing costs
    
    
    2
    
    
    
    2Interest expense converted into debt
    
    
    184
    
    
    
    175Stock option expense for non-qualifying options issued
    
    
    
    
    
    
    9Non-cash stock compensation
    
    
    200
    
    
    
    Gain on sale of other assets
    
    
    (4
    )
    
    
    Changes in current assets and liabilities:Decrease in accounts receivable
    
    
    154
    
    
    
    107Increase in prepaids and other current assets
    
    
    (83
    )
    
    
    (59
    )(Decrease) increase in accounts payable
    
    
    (38
    )
    
    
    556(Decrease) increase in amounts due oil and gas property
owners
    
    
    (18
    )
    
    
    148Decrease in net profits interest liability
    
    
    (231
    )
    
    
    (832
    )(Decrease) increase in accrued expenses
    
    
    (261
    )
    
    
    207Net cash provided by operating activities
    
    
    2,549
    
    
    
    1,810CASH FLOWS FROM INVESTING ACTIVITIESAdditions of furniture and equipment
    
    
    (20
    )
    
    
    (21
    )Additions to oil and gas properties
    
    
    (4,419
    )
    
    
    (6,138
    )Proceeds from sale of properties and other assets
    
    
    817
    
    
    
    118Net cash used in investing activities
    
    
    (3,622
    )
    
    
    (6,041
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from sale of common stock
    
    
    
    
    
    
    8,157Offering costs
    
    
    
    
    
    
    (177
    )Other
    
    
    
    
    
    
    30Net cash provided by financing activities
    
    
    
    
    
    
    8,010NET INCREASE (DECREASE) IN CASH
    
    
    (1,073
    )
    
    
    3,779CASH, BEGINNING OF PERIODS
    
    
    6,254
    
    
    
    2,934CASH, END OF PERIODS
    
    $
    5,181
    
    
    $
    6,713
   5




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PYR ENERGY CORPORATION  CONSOLIDATED STATEMENTS OF CASH FLOWS
 SUPPLEMENTAL CASH FLOW INFORMATION:
 Six Months Ended February 28,2007
    
    
    2006(Unaudited)Cash paid for interest and income taxes
    
    $
    5
    
    
    $
    Non-cash financing activities:Net increase in payables for capital expenditures
    
    
    
    
    
    
    144Debt issued for interest
    
    
    184
    
    
    
    175Property sale  proceeds received in third quarter
    
    
    
    
    
    
    280Asset retirement obligation increase
    
    
    19
    
    
    
    1
   6




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PYR ENERGY CORPORATION  Notes to Consolidated Financial Statements
February 28, 2007
 Organization
  Summary Of Significant Accounting Policies
 Basis of Presentation .
  Revenue Recognition and Gas Imbalances.
  Use of Estimates .
   7




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Earnings Per Share
 Six MonthsThree Months Ended
    
    
    EndedFebruary 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    458
    
    
    $
    175
    
    
    $
    841
    
    
    $
    631Basic weighted-average common shares outstanding in period
    
    
    37,993
    
    
    
    37,915
    
    
    
    37,993
    
    
    
    36,658Add dilutive effect of stock options and warrants
    
    
    231
    
    
    
    708
    
    
    
    226
    
    
    
    695Diluted weighted-average common shares outstanding in
period
    
    
    38,224
    
    
    
    38,623
    
    
    
    38,219
    
    
    
    37,353Basic and diluted earnings per common share
    
    $
    0.01
    
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    0.02
 Share Based Compensation
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedFebruary 28, 2006
    
    
    February 28, 2006Net income as reported
    
    $
    175
    
    
    $
    631Deduct total compensation cost
determined under the fair value base
method for all awards
    
    
    (87
    )
    
    
    (318
    )Pro forma net income
    
    $
    88
    
    
    $
    313Net pro forma income (loss) per share:As reported  Basic and Dilutive
    
    $
    0.00
    
    
    $
    0.02Pro forma  Basic and Dilutive
    
    $
    0.00
    
    
    $
    0.01
  8




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Six MonthsEndedFebruary 28,2007
    
    
    2006Expected life
    
    5 years
    
    5 yearsRisk-free interest rate
    
    
    4.7%
    
    
    
    4.4%Dividend yield
    
    
    0.0%
    
    
    
    0.0%Expected volatility
    
    
    85.2%
    
    
    
    91.7%
  Weighted AverageWeighted-
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual Term
    
    
    IntrinsicOptions
    
    Shares
    
    
    Exercise Price
    
    
    (Years)
    
    
    ValueOutstanding at September 1, 2006
    
    
    2,331,750
    
    
    $
    1.07Options granted
    
    
    164,014
    
    
    
    0.99Options forfeited
    
    
    (442,000
    )
    
    
    1.06Outstanding at February 28, 2007
    
    
    2,053,764
    
    
    $
    1.06
    
    
    
    3.1
    
    
    $
    343,332Exercisable at February 28, 2007
    
    
    1,667,345
    
    
    $
    1.05
    
    
    
    2.9
    
    
    $
    26,468
  9




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OptionsOutstandingWeighted
    
    
    Options ExercisableAverageNumber of
    
    
    Remaining
    
    
    Weighted
    
    
    Number of
    
    
    WeightedExercise
    
    Options
    
    
    Contractual Life
    
    
    Average
    
    
    Options
    
    
    AveragePrice Range
    
    Outstanding
    
    
    (in years)
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$0.29 - $0.29
    
    
    275,000
    
    
    
    2.9
    
    
    $
    0.29
    
    
    
    275,000
    
    
    $
    0.29$0.30 - $1.00
    
    
    556,014
    
    
    
    3.4
    
    
    $
    0.89
    
    
    
    426,262
    
    
    $
    0.89$1.01 - $1.20
    
    
    456,000
    
    
    
    3.9
    
    
    $
    1.14
    
    
    
    259,333
    
    
    $
    1.12$1.21 - $1.82
    
    
    766,750
    
    
    
    2.4
    
    
    $
    1.44
    
    
    
    706,750
    
    
    $
    1.422,053,764
    
    
    
    3.1
    
    
    $
    1.05
    
    
    
    1,667,345
    
    
    $
    1.05
 Recently Issued Accounting Pronouncements . Accounting Changes
and Error Corrections
 Accounting for Uncertainty in
Income Taxes  an Interpretation of FASB Statement 109
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements.
 Fair Value Measurements.
 Debt
   10




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Stockholders Equity
      Property Divestitures
  Contingencies
   11




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th
   12




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13




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion contains forward-looking statements that reflect our future plans,
estimates, beliefs and expected performance. The forward-looking statements are dependent upon
events, risks and uncertainties that may be outside our control. Our actual results could differ
materially from those discussed in these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, market prices for natural gas and
oil, economic and competitive conditions, regulatory changes, estimates of proved reserves,
potential failure to achieve production from development projects, capital expenditures and other
uncertainties, as well as those factors discussed below and in our Annual Report on Form 10-KSB for
the year ended August 31, 2006. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed may not occur.
  Overview
  Recent Developments
  Liquidity and Capital Resources
  Cash Flow from Operating Activities
    14




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Capital Expenditures
   Accounting for Asset Retirement Obligations
 Financing Activities
      15




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Off-Balance Sheet Arrangements
    Summary of Development and Exploration Projects
   Rocky Mountain Region
 Mallard Project.
  North Stockyard Project
  16




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Texas and Gulf Coast Region
 Nome Field
  th
  Madison Prospect
 th
  17




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West Westbury Prospect
 Bayou Duralde Project
 California
   18




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Results of Operations
  Three Months Ended February 28, 2007 Compared to Three Months Ended February 28, 2006
  Three Months EndedFebruary 28,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percent($ in thousands, except for per unit prices and costs)Operating Results:RevenuesGas production revenues
    
    $
    1,403
    
    
    $
    1,250
    
    
    $
    153
    
    
    
    12
    %Oil production revenues
    
    
    815
    
    
    
    816
    
    
    
    (1
    )
    
    
    0
    %Natural gas liquids revenues
    
    
    123
    
    
    
    3
    
    
    
    120
    
    
    
    4000
    %Other products
    
    
    28
    
    
    
    
    
    
    
    28
    
    
    
    100
    %Total revenues
    
    $
    2,369
    
    
    $
    2,069
    
    
    $
    300
    
    
    
    14
    %Interest income
    
    $
    44
    
    
    $
    68
    
    
    
    ($24
    )
    
    
    (35
    %)Operating ExpensesLease operating expense
    
    $
    290
    
    
    $
    331
    
    
    
    ($41
    )
    
    
    (12
    %)Production taxes, gathering and transportation
expense
    
    
    190
    
    
    
    141
    
    
    
    49
    
    
    
    35
    %Net profits expense
    
    
    (203
    )
    
    
    320
    
    
    
    (523
    )
    
    
    (163
    %)Depletion, depreciation, amortization and accretion
    
    
    906
    
    
    
    509
    
    
    
    397
    
    
    
    78
    %General and administrative:General and administrative(1)
    
    
    544
    
    
    
    584
    
    
    
    (40
    )
    
    
    (7
    %)Non-cash stock-based compensation
    
    
    142
    
    
    
    
    
    
    
    142
    
    
    
    100
    %Total operating expenses
    
    $
    1,869
    
    
    $
    1,885
    
    
    
    ($16
    )
    
    
    (1
    %)Interest Expense
    
    $
    98
    
    
    $
    89
    
    
    $
    9
    
    
    
    10
    %Production Data:Natural gas (Mcf)
    
    
    240,381
    
    
    
    174,903
    
    
    
    65,478
    
    
    
    37
    %Oil (Bbls)
    
    
    15,348
    
    
    
    13,477
    
    
    
    1,871
    
    
    
    14
    %Natural gas liquids (Bbls)
    
    
    3,675
    
    
    
    73
    
    
    
    3,602
    
    
    
    4934
    %Combined volumes (Mcfe)
    
    
    354,519
    
    
    
    256,203
    
    
    
    98,316
    
    
    
    38
    %Daily combined volumes (Mcfe/d)
    
    
    3,939
    
    
    
    2,847
    
    
    
    1,092
    
    
    
    38
    %Average Prices:Natural gas (per Mcf)
    
    $
    5.84
    
    
    $
    7.15
    
    
    
    ($1.31
    )
    
    
    (18
    %)Oil (per Bbl)
    
    
    53.10
    
    
    
    60.53
    
    
    
    (7.43
    )
    
    
    (12
    %)Natural gas liquids (per Bbl)
    
    
    33.58
    
    
    
    38.55
    
    
    
    (4.97
    )
    
    
    (13
    %)Combined (per Mcfe)
    
    
    6.71
    
    
    
    8.08
    
    
    
    (1.37
    )
    
    
    (17
    %)Average Costs (per Mcfe):Lease operating expense
    
    $
    0.82
    
    
    $
    1.29
    
    
    
    ($0.47
    )
    
    
    (36
    %)Production taxes, gathering and transportation
expense
    
    
    0.54
    
    
    
    0.55
    
    
    
    (0.01
    )
    
    
    (2
    %)Net profit expense
    
    
    (0.57
    )
    
    
    1.25
    
    
    
    (1.82
    )
    
    
    (146
    %)Depletion, depreciation, amortization and accretion
    
    
    2.55
    
    
    
    1.99
    
    
    
    0.56
    
    
    
    28
    %General and administrative(1)
    
    
    1.53
    
    
    
    2.28
    
    
    
    (0.75
    )
    
    
    (33
    %)Interest Expense
    
    
    0.28
    
    
    
    0.35
    
    
    
    (0.07
    )
    
    
    (20
    %)
 (1)
    
    Excluding non-cash stock based compensation.
  19




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Oil and Gas Revenues.
   Three Months Ended February 28, 2007
    
    
    Three Months Ended February 28, 2006Oil & NGLs(Bbls)
    
    
    Natural Gas(Mcf)
    
    
    Total(Mcfe)
    
    
    Oil & NGLs(Bbls)
    
    
    Natural Gas(Mcf)
    
    
    Total(Mcfe)Oklahoma
    
    
    1,380
    
    
    
    100,152
    
    
    
    108,432
    
    
    
    1,705
    
    
    
    77,757
    
    
    
    87,987Texas
    
    
    7,997
    
    
    
    98,372
    
    
    
    146,354
    
    
    
    9,385
    
    
    
    94,865
    
    
    
    151,175Utah
    
    
    4,818
    
    
    
    730
    
    
    
    29,638
    
    
    
    1,889
    
    
    
    388
    
    
    
    11,722Wyoming
    
    
    4,304
    
    
    
    40,979
    
    
    
    66,803
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    524
    
    
    
    148
    
    
    
    3,292
    
    
    
    571
    
    
    
    1,893
    
    
    
    5,319Total
    
    
    19,023
    
    
    
    240,381
    
    
    
    354,519
    
    
    
    13,550
    
    
    
    174,903
    
    
    
    256,203
 Lease Operating Expenses
 Production Taxes, Gathering and Transportation Expenses.
 Net Profits Expense.
  20




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Depletion, Depreciation, Amortization and Accretion Expense.
 General and Administrative Expenses.
  Interest Income.
 Interest Expense.
  21




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Six Months Ended February 28, 2007 Compared to Six Months Ended February 28, 2006
  Six Months EndedFebruary 28,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percent($ in thousands, except for per unit prices and costs)Operating Results:RevenuesGas production revenues
    
    $
    3,134
    
    
    $
    2,492
    
    
    $
    642
    
    
    
    26
    %Oil production revenues
    
    
    1,655
    
    
    
    1,576
    
    
    
    79
    
    
    
    5
    %Natural gas liquids revenues
    
    
    162
    
    
    
    4
    
    
    
    158
    
    
    
    3950
    %Other products
    
    
    37
    
    
    
    
    
    
    
    37
    
    
    
    100
    %Total revenues
    
    $
    4,988
    
    
    $
    4,072
    
    
    $
    916
    
    
    
    22
    %Interest income
    
    $
    100
    
    
    $
    115
    
    
    
    ($15
    )
    
    
    (13
    %)Operating ExpensesLease operating expense
    
    $
    714
    
    
    $
    575
    
    
    $
    139
    
    
    
    24
    %Production taxes, gathering and transportation
expense
    
    
    383
    
    
    
    265
    
    
    
    118
    
    
    
    45
    %Net profits expense
    
    
    (141
    )
    
    
    580
    
    
    
    (721
    )
    
    
    (124
    %)Depletion, depreciation, amortization and accretion
    
    
    1,803
    
    
    
    866
    
    
    
    937
    
    
    
    108
    %General and administrative:General and administrative(1)
    
    
    1,112
    
    
    
    1,087
    
    
    
    25
    
    
    
    2
    %Non-cash stock-based compensation
    
    
    200
    
    
    
    
    
    
    
    200
    
    
    
    100
    %Total operating expenses
    
    $
    4,071
    
    
    $
    3,373
    
    
    $
    698
    
    
    
    19
    %Interest Expense
    
    $
    190
    
    
    $
    188
    
    
    $
    2
    
    
    
    1
    %Production Data:Natural gas (Mcf)
    
    
    504,487
    
    
    
    305,147
    
    
    
    199,340
    
    
    
    65
    %Oil (Bbls)
    
    
    30,083
    
    
    
    26,019
    
    
    
    4,064
    
    
    
    16
    %Natural gas liquids (Bbls)
    
    
    4,445
    
    
    
    133
    
    
    
    4,312
    
    
    
    3242
    %Combined volumes (Mcfe)
    
    
    711,655
    
    
    
    462,059
    
    
    
    249,596
    
    
    
    54
    %Daily combined volumes (Mcfe/d)
    
    
    3,932
    
    
    
    2,553
    
    
    
    1,379
    
    
    
    54
    %Average Prices:Natural gas (per Mcf)
    
    $
    6.21
    
    
    $
    8.17
    
    
    
    ($1.96
    )
    
    
    (24
    %)Oil (per Bbl)
    
    
    55.01
    
    
    
    60.57
    
    
    
    (5.56
    )
    
    
    (9
    %)Natural gas liquids (per Bbl)
    
    
    36.49
    
    
    
    33.98
    
    
    
    2.51
    
    
    
    7
    %Combined (per Mcfe)
    
    
    7.01
    
    
    
    8.81
    
    
    
    (1.80
    )
    
    
    (20
    %)Average Costs (per Mcfe):Lease operating expense
    
    $
    1.00
    
    
    $
    1.24
    
    
    
    ($0.24
    )
    
    
    (19
    %)Production taxes, gathering and transportation
expense
    
    
    0.54
    
    
    
    0.57
    
    
    
    (0.03
    )
    
    
    (5
    %)Net profit expense
    
    
    (0.20
    )
    
    
    1.25
    
    
    
    (1.45
    )
    
    
    (116
    %)Depletion, depreciation, amortization and accretion
    
    
    2.52
    
    
    
    1.87
    
    
    
    0.65
    
    
    
    35
    %General and administrative(1)
    
    
    1.56
    
    
    
    2.35
    
    
    
    (0.79
    )
    
    
    (34
    %)Interest Expense
    
    
    0.27
    
    
    
    0.41
    
    
    
    (0.14
    )
    
    
    (34
    %)
 (1)
    
    Excluding non-cash stock based compensation.
 Oil and Gas Revenues.
  22




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##### Table of Contents



Six Months Ended February 28, 2006
    
    
    Six Months Ended February 28, 2007Oil & NGLs(Bbls)
    
    
    Natural Gas(Mcf)
    
    
    Total(Mcfe)
    
    
    Oil & NGLs(Bbls)
    
    
    Natural Gas(Mcf)
    
    
    Total(Mcfe)Oklahoma
    
    
    3,051
    
    
    
    231,125
    
    
    
    249,436
    
    
    
    3,440
    
    
    
    131,665
    
    
    
    152,305Texas
    
    
    14,368
    
    
    
    198,240
    
    
    
    284,453
    
    
    
    17,776
    
    
    
    170,858
    
    
    
    277,514Utah
    
    
    10,876
    
    
    
    1,333
    
    
    
    66,594
    
    
    
    3,833
    
    
    
    608
    
    
    
    23,606Wyoming
    
    
    5,163
    
    
    
    73,529
    
    
    
    104,512
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    1,066
    
    
    
    260
    
    
    
    6,660
    
    
    
    1,103
    
    
    
    2,016
    
    
    
    8,634Total
    
    
    34,528
    
    
    
    504,487
    
    
    
    711,655
    
    
    
    26,152
    
    
    
    305,147
    
    
    
    462,059
 Lease Operating Expenses
 Production Taxes, Gathering and Transportation Expenses.
 Net Profits Expense.
 Depletion, Depreciation, Amortization and Accretion Expense.
 General and Administrative Expenses.
   23




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##### Table of Contents



Interest Income.
 Interest Expense.
 Critical Accounting Policies And Estimates
  Reserve Estimates:
   Property, Equipment and Depreciation:
   24




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##### Table of Contents



Revenue Recognition:
  Deferred Tax Allowance:
  Recent Accounting Pronouncements
 Accounting Changes and Error Corrections
 Accounting for Uncertainty in
Income Taxes  an Interpretation of FASB Statement 109
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements.
 Fair Value Measurements.
  25




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Commodity Price Risk
   Interest Rate Risks
  
 ITEM 4. CONTROLS AND PROCEDURES
   26




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##### Table of Contents



PART II.
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   th
  27




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##### Table of Contents



ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
   28




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
 Recent Developments
  
 ITEM 6. EXHIBITS
 Exhibit IndexNumber
    
    Description3.1
    
    Articles of Incorporation, filed with the Maryland Secretary of State on June 18, 2001 (1)3.2
    
    Articles of Merger, filed with the Maryland Secretary of State on July 3, 2001 (1)3.3
    
    Bylaws (1)3.4
    
    Articles Supplementary of junior Participating Preferred Stock, Series A (2)4.1
    
    Specimen Common Stock Certificate (3)4.2
    
    Subscription and Registration Rights Agreement between Wellington parties and the
Company, September 2005 (4)4.3
    
    Rights Agreement, dated as of January 31, 2007 (2)10.1
    
    Letter Purchase Agreement, dated as of February 2, 2007, between the Company and Neilson
& Associates, Inc. (5)10.2
    
    Credit Agreement, dated as of February 14, 2007 (6)31.1
    
    Rule 13a-14(a) Certifications of Chief Executive Officer (7)31.2
    
    Rule 13a-14(a) Certifications of Chief Financial Officer (7)32
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (7)
 (1)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB for the year ended
August 31, 2001 (File No. 001-15511).(2)
    
    Incorporated by reference from the Companys Form 8-A filed on February 2, 2007 (File No.
001-15511).(3)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB/A1 for the year
ended August 31, 1997 (File No. 000-20879).(4)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on October 8,
2005 (File No. 001-15511).(5)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on February 8,
2007 (File No. 001-15511).(6)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on February
20, 2007 (File No. 001-15511).(7)
    
    Filed herewith.
  29




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##### Table of Contents



SIGNATURES
  Signatures
    
    Title
    
    Date/s/ Kenneth R. Berry Jr.

Kenneth R. Berry Jr.
    
    President and Chief Executive Officer
    
    April 9, 2007/s/ Jane M. Richards

Jane M. Richards
    
    Chief Financial Officer
    
    April 9, 2007
  30




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##### Table of Contents



EXHIBIT INDEX
 Exhibit IndexNumber
    
    Description3.1
    
    Articles of Incorporation, filed with the Maryland Secretary of State on June 18, 2001(1)3.2
    
    Articles of Merger, filed with the Maryland Secretary of State on July 3, 2001(1)3.3
    
    Bylaws (1)3.4
    
    Articles Supplementary of Junior Participating Preferred Stock, Series A (2)4.1
    
    Specimen Common Stock Certificate (3)4.2
    
    Subscription and Registration Rights Agreement between Wellington parties and the
Company, September 2005 (4)4.3
    
    Rights Agreement, dated as of January 31, 2007 (2)10.1
    
    Letter Purchase Agreement, dated as of February 2, 2007, between the Company and Neilson
& Associates, Inc. (5)10.2
    
    Credit Agreement, dated as of February 14, 2007 (6)31.1
    
    Rule 13a-14(a) Certifications of Chief Executive Officer (7)31.2
    
    Rule 13a-14(a) Certifications of Chief Financial Officer (7)32
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (7)
 (1)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB for the year ended
August 31, 2001 (File No. 001-15511).(2)
    
    Incorporated by reference from the Companys Form 8-A filed on February 2, 2007 (File No.
001-15511).(3)
    
    Incorporated by reference from the Companys Annual Report on Form 10-KSB/A1 for the year
ended August 31, 1997 (File No. 000-20879).(4)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on October 8,
2005 (File No. 001-15511).(5)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on February 8,
2007 (File No. 001-15511).(6)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on February
20, 2007 (File No. 001-15511).(7)
    
    Filed herewith.
  31