The following discussion of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements, which are included elsewhere in this report.

The Company is involved in the exploration and development of oil and gas. The Company's activities are primarily dependent upon available financial resources to fund the costs of drilling and completing wells.

The Company principally operates in the Arkoma Basin in Oklahoma, the Powder River Basin in Wyoming, Uintah County, Utah and in Callahan County, Texas.

On January 1, 2008 the Company sold its remaining oil and gas properties in Kentucky, as well as its gathering systems, pipelines and equipment, for $2,300,000. For the sale of these assets, the Company received a $100,000 deposit and a non-recourse promissory note for $2,200,000. In December 2008 the maker of the non-recourse note filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On February 27, 2009 the Company sold the non-recourse note to an unrelated third party for $950,000.

In April 2008 the Company sold its interest in the Ainsworth #1-33 well, located in Pittsburgh County, OK, for $615,000 and incurred sales expenses of $24,600.

During the year ended January 31, 2009 the Company advanced $660,826 to a third party for drilling and completing a well in Niobrara County, Wyoming. As of August 31, 2009 this well was shut-in.

In November 2008 the Company entered into an agreement with Excalibur, Inc., an unrelated third party, for the exploration and development of oil and gas leases covering 1,560 acres in Callahan County, Texas. The Agreement provides that the Company will pay the costs to drill and complete five wells on the leased acreage.

If any of the five wells are completed as a producing well, Excalibur will receive a 12.5% working interest in the well. When the Company has received net proceeds from the sale of production from a completed well equal to the cost of drilling, completing, equipping, testing and operating the well, in addition to leasehold costs of $39,000, Excalibur will receive an additional 12.5% working interest in the well.

The Company has drilled one well on the leases (the Maurice Snyder #1-141) which as of August 31, 2009 was in the process of completion.

Subsequent to January 31, 2009 the Company acquired a 2% overriding royalty interests in the leases held by an unrelated third party for $161,000, subject to the retention by the third party of a 2% overriding royalty interest in the Maurice Snyder #1-141 well.

In January 2009 the Company acquired Energas Pipeline Company and Energas Corp. from George Shaw, the Company's President, for 6,167,400 shares of the Company's common stock. Energas Pipeline Company operates the natural gas gathering system which is connected to the Company's three wells in Atoka County, Oklahoma. Energas Corp. operates all of the Company's wells and holds the bonds required by state oil and gas regulatory authorities.

In March 2009 the Company acquired a 14 mile natural gas gathering system in exchange for 1,000,000 shares of the Company's common stock. The gathering system, located in Callahan County, Texas, will be used to transport any gas, produced from wells which may be drilled on the Company's leases in Texas to the Enbridge Gas Company pipeline.

In July of 2009, the Company acquired an 85% working interest (62.7598% net revenue interest) in an oil and gas well located in Utah for $40,000 in cash and 1,000,000 shares of its Series A Preferred stock. See Part II, Item 2 of this report for more information concerning the terms of the Series A Preferred shares.

RESULTS OF OPERATIONS

      Material changes of certain items in the Company's Statement of Operations
for the three and six months ended July 31, 2009, as compared to the three and
six months ended July 31, 2008, are discussed below:

                         Increase (I)
Item                   or Decrease (D) Reason
----                   --------------- ------

Oil and gas sales            D         Sale of Company's  Kentucky  oil and gas
                                       properties, sale of Ainsworth #1-33 well,
                                       and decrease in production.

Lease operating expense      D         Sale of Company's Kentucky oil and gas
                                       properties, sale of Ainsworth #1-33 well,
                                       and decrease in production.

General and administrative   I         Expense associated with shares issued for
     Expense                           consulting services

Depreciation, depletion      D         For the six months ended July 31, 2009,
and amortization                       sale of Company's Kentucky oil and gas
                                       properties and sale of Ainsworth #1-33
                                       well.

OIL AND GAS PRICE FLUCTUATIONS

Fluctuations in crude oil and natural gas prices have significantly affected the Company's operations and the value of its assets. As a result of the instability and volatility of crude oil and natural gas prices and at times the market conditions within the oil and gas industry, financial institutions are selective in the energy lending area and have reduced the percentage of existing reserves that may qualify for the borrowing base to support energy loans.

The Company's principal source of cash flow is the production and sale of its crude oil and natural gas reserves which are depleting assets. Cash flow from oil and gas production sales depends upon the quantity of production and the price obtained for such production. An increase in prices permits the Company to finance its operations to a greater extent with internally generated funds, may allow the Company to obtain equity financing more easily or on better terms, and lessens the difficulty of attracting financing from industry partners and non-industry investors. However, price increases heighten the competition for Leases and Prospects, increase the costs of exploration and development activities, and, because of potential price declines, increase the risks associated with the purchase of Producing Properties during times that prices are at higher levels.

A decline in oil and gas prices (i) reduces the cash flow internally generated by the Company which in turn reduces the funds available for servicing debt and exploring for and replacing oil and gas reserves, (ii) increases the difficulty of obtaining equity and debt financing and worsens the terms on which such financing may be obtained, (iii) reduces the number of Leases and Prospects which have reasonable economic terms, (iv) may cause the Company to permit Leases to expire based upon the value of potential oil and gas reserves in relation to the costs of exploration, (v) results in marginally productive oil and gas wells being abandoned as non-commercial, and (vi) increases the difficulty of attracting financing from industry partners and non-industry investors. However, price declines reduce the competition for Leases and Prospects and correspondingly reduce the prices paid for Leases and Prospects. Furthermore, exploration and production costs generally decline, although the decline may not be at the same rate as that of oil and gas prices.

The Company's results of operations are somewhat seasonal due to seasonal fluctuations in the sales prices for natural gas. Although in recent years crude oil prices have been generally higher in the third and fourth fiscal quarters, these fluctuations are not believed to be seasonal. Natural gas prices have been generally higher in the fourth fiscal quarter.

Other than the foregoing the Company does not know of any trends, events or uncertainties that have had or are reasonably expected to have a material impact on the Company's net sales, revenues or expenses.

CAPITAL RESOURCES AND LIQUIDITY

    The Company's material sources and uses of cash during the six months ended
July 31, 2009 and 2008 were:

                                                          2009           2008
                                                          ----           ----

      Cash used in operations                        $  (208,889)   $  (551,883)
      Acquisition and development of oil and
        gas properties                                  (745,260)        (2,611)
      Collections on note receivable                     950,000             --
      Sale of oil and gas properties                          --        590,400
      (Payments to) advances from related parties        (40,431)        10,000
      Other                                                 (688)            --
                                                     ------------   ------------
      Increase (decrease) in cash                        (45,268)        45,906
                                                     ============   ============

As a result of the Company's continued losses and lack of cash there is substantial doubt as to the Company's ability to continue operations. The Company plans to generate profits by drilling productive oil or gas wells. However, the Company will need to raise the funds required to drill new wells from third parties willing to pay the Company's share of drilling and completing the wells. The Company may also attempt to raise needed capital through the private sale of its securities or by borrowing from third parties. The Company may not be successful in raising the capital needed to drill oil or gas wells. In addition, any future wells which may be drilled by the Company may not be productive of oil or gas. The inability of the Company to generate profits may force the Company to curtail or cease operations.

Contractual Obligations

Except as shown in the following table, as of July 31, 2009, the Company did not have any material capital commitments, other than funding its operating losses and repaying outstanding debt. It is anticipated that any capital commitments that may occur will be financed principally through borrowings from institutional and private lenders (although such additional financing has not been arranged) and the sale of shares of the Company's common stock or other equity securities. However, there can be no assurance that additional capital resources and financings will be available to the Company on a timely basis, or if available, on acceptable terms.

Future payments due on the Company's contractual obligations as of July 31, 2009 are as follows:

                         Total     2009     2010     2011     2012    Thereafter
                         -----     ----     ----     ----     ----    ----------

Office equipment leases  $9,488   $2,860   $2,655   $2,109  $1,864         --
Drilling obligation    $156,000  $39,000  $78,000  $39,000      --         --

Critical Accounting Policies

See Note 3 to the financial statements included as part of this report.