Statements contained herein and the information incorporated by reference herein may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements can be identified by the use of forward-looking terminology such as, but not limited to, "may," "will," "expect," "anticipate," "estimate," "would be," "believe," or "continue" or the negative or other variations of comparable terminology. We intend such forward-looking statements to be covered by the safe harbor provisions applicable to forward-looking statements contained in Section 21E of the Exchange Act. Such statements (none of which is intended as a guarantee of performance) are subject to certain assumptions, risks and uncertainties, which could cause our actual future results, achievements or transactions to differ materially from those projected or anticipated. Such risks and uncertainties are set forth herein.

Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, or performance and underlying assumptions and other statements, which are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demands and acceptance, changes in technology, economic conditions, the impact of competition and pricing, and government regulation and approvals. Petrosearch cautions that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Some of the key factors which could cause actual results to vary from those Petrosearch expects include changes in natural gas and oil prices, the timing of planned capital expenditures, availability of acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as our ability to access them, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business.

Our expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis, including without limitation, our examination of historical operating trends, data contained in our records and other data available from third parties. There can be no assurance, however, that our expectations, beliefs or projections will result, be achieved, or be accomplished. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no duty to update these forward-looking statements.

OVERVIEW - CORPORATE STRATEGY

We believe we have been successful over the past few years with our plan of solidifying the financial strength of the Company and improving the quality of our oil and gas assets, some of which have been sold resulting in significant gain to the Company. We have also been able to put financings together to enable us to develop these assets. The sale of our Barnett Shale project has put the Company into a strong financial position with a significant cash balance, no debt, significant reserves and positive retained earnings. Our current asset portfolio is primarily made up of a North Texas Panhandle water flood project (the "Water Flood") that has potential for multiple years of growth.

The Water Flood is a resource play, which will allow us to re-invest our capital into the project to enhance the rate of return, revenue growth and reserve growth. The sale of our Barnett Shale asset has also given us the necessary capital to continue to develop this core project. The development plan for the Water Flood allows for us to effectively align our financing needs with the capital needs of the project, therefore, allowing us to efficiently manage the amount and timing of our capital expenditures. We have also completed the disposition of non-core assets that did not meet our risk/reward parameters. We believe the continued execution of this plan will enable us to continue to focus on the development of our Water Flood, as well as to continue to pursue strategic alternatives for the Company in order to create value for the shareholders. Management believes the development of the Water Flood should have a significant impact on our production, revenues and cash flows in the future.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have primarily financed our operating and investing cash flow needs through private offerings of equity securities, sales of crude oil and natural gas, and the use of debt instruments such as convertible notes and revolving credit facilities. We have also recently sold one of our main projects, the Barnett Shale project, for cash. The proceeds from, and the utilization of, all these methods have been, and Management believes will continue to be, sufficient to keep the operations funded and the business plan moving forward.

Convertible Securities

On November 9, 2007 we executed, with a group of accredited investors, a series of Note and Warrant Purchase Agreements for the sale of $8,100,000, 8% Senior Secured Convertible Promissory Notes and three year warrants to purchase 1,928,571 shares of our common stock at an exercise price of $1.50 per share for total gross proceeds to us of $8,100,000. Upon closing the transaction, we also issued the Convertible Note and the Warrant, and executed a Pledge and Security Agreement and a Registration Rights Agreement. These convertible notes were repaid in full on July 21, 2008. In exchange for cancelling the note and releasing the collateral the note holders were paid the outstanding principal and accrued interest through July 21, 2008. Currently, there is no outstanding debt related to these convertible notes.

On February 1, 2007, we executed a Note and Warrant Purchase Agreement for the sale of a $10,000,000 8% Senior Secured Convertible Promissory Note with RCH Petro Investors, LP ("RCH") and a four year warrant to purchase 5,000,000 shares of our common stock at an exercise price of $1.40 per share for total gross proceeds to us of $10,000,000. We completed the transaction and received funding on February 7, 2007. Upon closing, we issued the Convertible Note and the Warrant, and executed a Pledge and Security Agreement and a Registration Rights Agreement. This convertible note precluded the Company from incurring indebtedness in excess of fifty percent (50%) of the PV-10 value of the Company's total proved reserves, plus the fair market value of the leases and pipeline assets associated with the Company's Barnett Shale assets. This convertible note was repaid in full on July 21, 2008. In exchange for cancelling the note and releasing the collateral the note holder was paid the outstanding principal and accrued interest through July 21, 2008. Currently, there is no outstanding debt related to this convertible note.

Project Financings

In November 2006, we signed a Securities Purchase Agreement and Secured Term Note with Laurus Master Fund, Ltd to provide financing for the drilling of our Kallina 46 #1 well and payment of the future completion costs for the Kallina 46 #1 well. We formed a subsidiary, Garwood Petrosearch Inc., to hold our interest in the Kallina Lease and the Kallina 46 #1 well. Also, as a part of the financing arrangement, Garwood issued Laurus a Warrant to acquire, upon payout of the Note indebtedness, 45% of Garwood's outstanding common stock such that upon exercise of the Warrant, Garwood would be owned 55% by us and 45% by Laurus.

It was decided in April 2006 that the Kallina 46#1 well was uneconomic and the decision was made that the well needed to be plugged and abandoned. In May 2008 the Company received a full release of all the liens, security interests, rights, claims and benefits of every kind in, on and under the November 2006 Secured Term Note with Laurus Master Fund, Ltd, as well as that same release on all the other collateral documents associated with that financing. The November 2006 financing was specifically recourse to the Kallina 46#1 well and the associated lease acreage only. The debt related to the Laurus financing has been extinguished on the financial statements of the Company in May, 2008 as well as any interest that was charged in relation to the Note has been derecognized in that same period.

As part of this transaction, the Company has conveyed their interest in the Kallina 46#1 well and the associated lease acreage to a third party along with the Company's interest in the Pintail #1 well, Pintail Flats #1 well and the associated acreage of Pintail and Pintail Flats. Also as a part of this transaction, the Company has transferred operatorship of all the existing and future wells in this SW Garwood Prospect to the third party. In exchange for the conveyance of the wells and acreage and the transfer of operatorship, the Company received nominal cash consideration, and the third party has assumed the liability of plugging the Kallina 46#1 well.

Revolving Credit Agreement

As of April 1, 2008 the total outstanding balance of the revolving credit facility became due and a payment of $1,602,500 was paid in full to Fortuna Energy, which closed out the revolving credit facility as of that date. Pursuant to the revolving credit agreement and as part of being paid back in full, Fortuna Energy returned to the Company all of the overriding royalties related to the Company's assets that were issued to Fortuna Energy. The most significant override relates to a 2% override of the Company's net interest in the North Dakota, Gruman project.

As part of the original amended revolving credit agreement terms, we agreed to issue to Fortuna 475,000 warrants with a five year life and a strike price of $0.92 per share. The Warrants contain a "put" provision which allows Fortuna to "put" the warrants to the Company at a price of $0.65 per warrant for two (2) years, which "put" period shall commence 180 days after issuance. Additionally, as part of the transaction, we agreed to issue 100,000 new warrants, which expire 5 years from the date of issue, at a price of $0.92 per share.

Joint Ventures

We continue to strive to develop relationships with institutions to participate in our prospects. Management believes this will reduce our capital risk and increase the diversity of the projects in which we use our own capital. We intend to establish these drilling partnership relationships with terms that are standard in the oil and gas industry.

CURRENT PROJECTS AND CAPITAL REQUIREMENTS

CORE PROPERTIES:

Barnett Shale Project -- In December 2006, through our wholly owned subsidiary, Barnett Petrosearch LLC, we joined in the formation of a partnership, DDJET Limited LLP ("DDJET"), for the development of a natural gas integrated venture to explore and develop assets in the Barnett Shale. We owned a 5.54% interest in DDJET along with partners Metroplex Barnett Shale LLC (a wholly owned subsidiary of Exxon Mobil Corporation), and Cinco County Barnett Shale LLC (a privately held Dallas-based company).

On February 29, 2008 we announced that we executed an authorization for the general partner of the Partnership to immediately commence a sales marketing program to interested potential purchasing parties in order to fully assess the current market value of the Partnership. On June 25 we executed a binding agreement for the sale of our limited partnership interest in DDJET to Cinco County Barnett Shale LLC, one of the other two partners in DDJET, for a cash purchase price of $36,000,000. On June 26, 2008 Cinco paid to Barnett Petrosearch the required $1,800,000 non-refundable deposit to be applied to the purchase price and fulfilled all the other necessary requirements to bind both Cinco and Petrosearch to the sale. On July 18, 2008 the Company received the balance of the proceeds of the sale of $30,729,008, the net amount after deducting the $1,800,000 down payment previously received from Cinco and $3,470,992 of costs previously owed by the Company which were assumed by Cinco pursuant to the June 25, 2008 agreement.

North Texas/Panhandle Water Flood Project - In November 2005, we acquired a 100% working interest in 1,755 acres in the Quinduno Field in Roberts County, Texas, in the Anadarko Basin. The project is focused on infill drilling and the implementation of a water flood on the property. Our leases at Quinduno have a large established resource base of over 23 million barrels of original oil in place. Since its discovery in 1953, approximately 5.1 million barrels have been produced using primary production.

One infill well has been drilled to date. We have an ongoing program to enter each of the 19 old wells that have not been plugged. So far, we have entered nine of these older wells to determine their mechanical status and establish potential productivity or injectivity. Two of these wells have been equipped and are now capable of producing and two more have been converted for water injection. Further, two of the plugged wells have been re-entered but we were unable to complete them for water injection. We have prepared a detailed study and development plan for the field. As of December 31, 2007, our independent engineers, Ryder Scott, estimated our net share of proved oil reserves extractable by water flood at 1.5 million barrels of oil equivalent. Slightly deeper than the water flood zone, the Moore County Limestone formation has undrilled exploration potential that may be tested in a future well.

To provide adequate water for injection, in November 2006 we executed a water supply agreement with a landowner in the leasehold, which allows us to draw fresh water from the aquifer underlying the landowner's property. In that same month, we received approval from the Panhandle Groundwater Authority District ("PGAD") to produce up to 5,000 barrels per day from the aquifer for use in the flood. This permit has since expired but we do not expect any difficulty obtaining a new permit prior to initiating water injection in August of this year. We received the approval from the PGAD over the protest filed with the PGAD by the Canadian River Municipal Water Authority ("CRMWA") attempting to preserve the freshwater for local municipal use only in the area in which we own the rights to the fresh water. We also applied to the Texas Railroad Commission to amend a previously granted saltwater injection permit to include fresh water injection. On January 5, 2007 we received a letter from the Texas Railroad Commission ("TRRC") informing us of a protest by CRMWA contesting our application for fresh water injection in the Quinduno Field water flood. However, as of November 7, 2007, CRMWA has withdrawn their protest and request for hearing as part of an agreement with CRMWA that addresses their concerns with our use of fresh water for enhanced oil recovery. This agreement also prevents CRMWA from protesting future efforts to obtain approval from PGAD to produce the underlying fresh water aquifer,

In January 2008 we signed an agreement with Complete Production Services Inc. ("CPS"), an international oilfield service company which provides that CPS, at its sole expense, will design and construct a water treatment facility no later than 90 days from the effective date of the agreement that will be capable of treating all of our production water up to a maximum of 10,000 bbls per day and likewise treat and provide to the Company a minimum of 5,000 bbls per day of production water from third party sources. We, in turn, have committed to be capable of injecting not less than 2,000 bbls of treated water per day derived from third party production water within 30 days after the facility is opened, and have further committed to be capable of injecting not less than 5,000 bbls of treated water per day derived from third party production water within 180 days after the facility opens, in addition to re-injecting our own treated production water from the oil and gas lease it operates. We will be required to pay a scaled management fee to CPS commencing on the date the facility opens on the basis of the volume of treated and re-injected water derived from our production. We have received permits to add a sufficient number of wells to the existing permit to meet our obligation to inject the volumes that CPS will make available. Further, we will continue to apply the appropriate number of wells to the existing flood permit to continue with the development of the flood. We do not anticipate any difficulty with obtaining future approvals.

We have recently commenced the first phase of the water flood project which entails the conversion to water injection of two existing wells (work now completed) and the attempted re-entry of two previously plugged wells. The two re-entries were unsuccessful. Two additional existing wells will be converted in their place. These conversions will allow us to begin enhanced oil recovery and to satisfy our water injection obligations pursuant to the agreement signed with CPS that is finalizing construction of the water treatment and supply facility on our lease. That agreement requires us to be capable of injecting 2,000 barrels of treated water within 30 days of the water treatment facility being completed.

SW Garwood, Colorado County, Texas - In May 2008 (as discussed herein) we conveyed our interest in the three drilled wells and the associated acreage in this SW Garwood prospect to an unaffiliated third party. As a part of that transaction, we also transferred operatorship of all the existing and future wells in this SW Garwood prospect to that third party. In exchange for the conveyance of the wells and acreage and the transfer of operatorship, the Company received nominal cash consideration as well as the third party's assumption of the liability of plugging the Kallina 46 #1 well.

OTHER PROJECT AREAS:

Gruman Prospect, Stark County, North Dakota - On March 28, 2006, we spudded the Gruman 18-3 well intended to be either an increased density well if it proved to be up dip of the Gruman 18-1 producing well or a water injection well if it was down dip. The well reached total depth of 9,890 feet on April 14, 2006, and was completed as an injection well. In October 2006, we undertook certain remedial work on the Gruman 18-1 which improved the production on the well.

On February 1, 2007, we began injecting produced water into the Gruman 18-3 well. The result has been to reduce the cost of operating the Gruman 18-1 by eliminating the need to truck produced water to a disposal facility. We are considering supplementing this injection with water from the Dakota formation for pressure maintenance in the mound. We have established that the Gruman 18-3 is in pressure communication with the Gruman 18-1 and both wells appear to be affected by activities in one or more of the surrounding fields also producing from the same formation. These third party activities appear to have resulted in a rapid decline of reservoir pressure making further testing or stimulation of the Gruman 18-3 necessary to achieve the desired future injection rates to support further recovery of oil from the Gruman 18-1. Proved developed reserves in the prospect to our share of the well as of December 31, 2007, were 215 Mbo and 68 MMcf of natural gas, as estimated by a third party engineering firm, McCartney Engineering, LLC.

Mississippi Tuscaloosa Prospects -- We have identified five Tuscaloosa oil prospects in the Mississippi Inland Salt Basin, in Yazoo County, comprising a maximum of 2,295 acres and up to 18 potential drilling locations. Approximately 55% of the entire prospect acreage has been leased. We have signed a farm-out agreement with an industry partner to co-develop these prospects with us. The farm-out agreement requires the operator, our industry partner, to commence drilling of the first well in the prospect prior to October 1 2008. We will receive a carried interest for 12.5% through casing point of the first well, at which time we will have the option to purchase up to another 12.5% interest in the well at cost. For all future wells, we will have the same working interest as we choose on the first well. It is contemplated that there will be 2-3 wells drilled in this prospect.

RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes and the other financial information appearing elsewhere in this filing.

The factors that most significantly affect our results of operations are: (i) the sale prices of crude oil and natural gas; (ii) the amount of production sales; and (iii) the amount of lease operating expenses. Sales of production and level of borrowings are significantly impacted by our ability to maintain or increase production and reserves from existing oil and gas properties through exploration and development activities.

For the three months ended June 30, 2008 compared to the three months ended June 30, 2007

Revenues

Consolidated oil and gas production revenue for the three months ended June 30, 2008 was $545,465 versus $373,544 for the three months ended June 30, 2007. This represents a 46% increase in revenue in the first quarter of 2008 over the first quarter of 2007. As expected, this increase was the result of an increase in revenue from our Barnett Shale project of $269,671 over those periods, which was partially offset by decreased production in our Gruman - North Dakota well, and our SW Garwood project. The Gruman well continues to have pump and motor assembly issues. This, along with the unexpected decline in reservoir pressure previously discussed, has severely affected our ability to produce the well during the quarter. Various water source alternatives are being considered to supplement the injection well volume which is expected to return the Gruman 18-1 wells to rates on the order of 100 bopd or more.

See below for revenue detail by property from the first quarter of 2008 compared to the first quarter of 2007.

                            2008         % of        2007         % of
                           2nd Qtr      Total       2nd Qtr      Total

Barnett Shale             $ 455,457         83 %   $ 185,786         50 %
Gruman - North Dakota        23,760          4 %      59,630         16 %
SW Garwood                   14,635          3 %      70,341         19 %
Panhandle - Water Flood           -          0 %       4,286          1 %
Oklahoma                     47,218          9 %      31,649          8 %
Other                         4,395          1 %      21,852          6 %
         Total            $ 545,465        100 %   $ 373,544        100 %

To further explain the increase in revenue from the first quarter of 2007 to the first quarter of 2008, we have provided the following break-out of production and prices for the two years.

                                    2Q 2008       2Q 2007

Barrels of Oil                          678         1,547
Price per Barrel                  $  116.70     $   63.33

MCF of Gas                           49,396        37,335
Price per MCF                     $    9.33     $    6.94

Total Barrels of Oil Equivalent       8.910         7,769

As noted in the above table, the increase in oil and gas prices also played a role in the increase in revenue since 2007. The total effect on revenue from the price increases was approximately $172,202.

Lease Operating and Production Tax Expense Lease operating and production tax expenses for the quarters ended June 30, 2008 and 2007 were $220,405 and $265,598, respectively. These expenses relate to the costs that are incurred to operate and maintain our wells and related production equipment, including the costs applicable to the operating costs of support equipment and facilities. Lease operating expenses decreased due to the fact that there were expenses in the second quarter of 2007 related to the Gruman 18-1 well that were not needed in that same period in 2008. This explains why although revenue for the second quarter of 2008 was significantly higher than revenue for the second quarter of 2007, the lease operating expenses for that same period in 2008 were lower than in 2007.

Depletion, Depreciation and Amortization

Costs for depletion, depreciation and amortization for the quarters ended June 30, 2008 and 2007, were $203,265 and $194,142, respectively. The increase is mainly due to an increase in total barrels of oil equivalent production during the quarter ended June 30, 2008 as compared to the same period in 2007. Given the fact that depletion is calculated by multiplying the net amortizable costs times the units of production in the related period relative to the total proved reserves, the depletion amount for the second quarter of 2008 was higher than the depletion for the same period in 2007.

General and Administrative Expenses

General and administrative expenses for the quarters ended June 30, 2008 and
2007, were $568,657 and $701,382, respectively. The decrease in total general
and administrative expense was mainly due to the decrease in legal expenses. The
decrease in general and administrative expenses was also due to a slight
decrease in travel costs, corporate expenses related to investor relations,
third party contractors and office expenses. A summary listing of general and
administrative expenses is provided below.

                                            2nd Quarter       2nd Quarter
                                               2008              2007

Personnel Costs                            $     298,488     $     287,788
Travel, Meals, and Entertainment                   7,044            25,250
Corporate Expenses                                60,069            96,647
Accounting, Legal, and Professional Fees          78,897           153,636
Third Party Consultants and Contractors           54,942            61,038
Office Expenses                                   42,639            50,901
Other                                             26,578            26,122

Total General and Administrative           $     568,657     $     701,382

Operating Loss

We generated an operating loss of $(446,862), or $(0.01) per share, for the quarter ended June 30, 2008, compared to an operating loss of $(787,578), or $(0.02) per share, for the quarter ended June 30, 2007. The $340,716 variance is related mainly to a significant increase in revenues, coupled with a decrease in lease operating expenses and general and administrative expenses.

Other Income (Expense)

The $22,695,468 increase from $(842,656) in other expense for the quarter ended June 30, 2007 to $21,852,812 in other income for the quarter ended June 30, 2008 is due mainly to the gain of $21,814,753 related to the sale of the DDJET interest in the Barnett Shale. There was also a $1,097,252 gain on the extinguishment of debt related to the forgiveness of the non-recourse project . . .