TransAtlantic Petroleum (TAT) 10-Q/A 2009 Q2 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

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

For the quarterly period ended: June 30, 2009

OR

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

For the transition period from              to             

Commission file number: 000-31643

TRANSATLANTIC PETROLEUM CORP.

(Exact name of registrant as specified in its charter)

Alberta, Canada	N/A
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Suite 1840, 444 – 5th Ave., S.W., Calgary, Alberta	T2P 2T8
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (403) 262-8556

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant is required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of September 23, 2009, the registrant had 253,636,666 common shares outstanding.

EXPLANATORY NOTE

We filed our Quarterly Report on Form 10-Q for the six months ended June 30, 2009 on August 14, 2009 (the “Original Report”). This Amendment No. 1 on Form 10-Q/A (this “Amendment”) is being filed to make the following changes to “Item 1. Financial Statements”:

• Update the Consolidated Statements of Cash Flows to disclose the acquisition of shares of Incremental Petroleum Limited (“Incremental”) from Mr. Mitchell as a related party transaction on the face of the Consolidated Statements of Cash Flows;

• Update note 4 to state that interim 2008 pro forma information relating to the acquisition of Incremental was not presented because we determined that it was impracticable to provide such information; and

• Update note 10 to state the undiscounted amounts that we may be obligated to pay under the registration rights agreement.

This Amendment is being filed in response to comments we received from the staff of the Division of Corporation Finance of the Securities and Exchange Commission in connection with the staff’s review of the Original Report. We have made no attempt in this Amendment to modify or update the disclosures presented in the Original Report other than as noted in the previous paragraph. In particular, only the Consolidated Statements of Cash Flows and notes 4, 10 and 16 of the notes to the consolidated financial statements have been revised.

Other than as noted above, no other changes have been made to the Original Report. In addition, this Amendment does not reflect events occurring after the filing of the Original Report. Accordingly, this Amendment should be read in conjunction with the Original Report and our other filings subsequent to the filing of the Original Report.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TRANSATLANTIC PETROLEUM CORP.

Consolidated Balance Sheets

(Unaudited)

(Thousands of U.S. Dollars)

	June 30, 2009			Dec. 31, 2008 *
				(restated – note 3)
ASSETS
Current assets:
Cash and cash equivalents	$	79,143		$	30,052
Accounts receivable
Oil and gas sales		6,952			—��
Other		1,629			1,327
Prepaid and other current assets		3,674			3,861
Deferred income taxes		839			—
Total current assets		92,237			35,240
Property and equipment (note 7):
Oil and gas properties (successful efforts method)
Mineral interests:
Proved		69,985			—
Unproved		15,289			1,732
Drilling services and other equipment		70,044			40,886
		155,318			42,618
Less accumulated depreciation, depletion and amortization		(3,836	)		(53	)
Property and equipment, net		151,482			42,565
Other assets:
Restricted cash (note 5)		4,776			3,268
Deferred charges (note 4)		—			181
Total other assets		4,776			3,449
Total assets	$	248,495		$	81,254

* Financial information at December 31, 2008 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 3.

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

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TRANSATLANTIC PETROLEUM CORP.

Consolidated Balance Sheets

(Unaudited)

(Thousands of U.S. Dollars)

	June 30, 2009			Dec. 31, 2008 *
				(restated – note 3)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,586		$	3,962
Accounts payable—related party (note 15)		5,269			1,517
Accrued liabilities		4,150			821
Loans payable (note 9)		2,837			—
Total current liabilities		27,842			6,300
Long-term liabilities:
Loans payable—related party (note 9)		—			—
Loans payable		492			—
Asset retirement obligations (note 8)		6,928			14
Deferred income taxes		12,294			—
Total long-term liabilities		19,714			14
Total liabilities		47,556			6,314
Commitments and contingencies (notes 13 and 14)
Stockholders’ equity (note 10):
Common shares, $0.00 par value, unlimited shares authorized, issued and outstanding – 253,636,666 as of June 30, 2009 and 154,957,781 as of December 31, 2008		—			—
Additional paid in capital		271,298			133,062
Additional paid in capital—warrants		5,435			5,228
Accumulated other comprehensive income (loss)		7,943			—
Accumulated deficit		(83,737	)		(63,350	)
Total stockholders’ equity		200,939			74,940
Total liabilities and stockholders’ equity	$	248,495		$	81,254

* Financial information at December 31, 2008 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 3.

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

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TRANSATLANTIC PETROLEUM CORP.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(Thousands of U.S. Dollars, except for per share amounts)

	Three months ended June 30,						Six months ended June 30,
	2009			2008*			2009			2008*
				(restated – note 3)						(restated – note 3)
Revenues:
Oil and gas sales	$	7,425		$	47		$	8,787		$	61
Total revenues		7,425			47			8,787			61
Costs and expenses:
Production		2,183			17			3,186			46
Exploration, abandonment and impairment		701			—			701			—
Seismic and other exploration		1,178			—			3,568			—
General and administrative		3,142			884			4,814			1,461
International oil and gas activities		2,246			(214	)		5,567			149
Share-based compensation		230			285			551			346
Accretion of asset retirement obligations		47			—			112			—
Depreciation, depletion and amortization		2,487			—			3,783			—
Total costs and expenses		12,214			972			22,282			2,002
Operating loss		4,789			925			13,495			1,941
Other (income) expense:
Interest and other expense		1,698			45			2,358			131
Interest and other income		(88	)		(50	)		(199	)		(77	)
Foreign exchange (gain) loss		(110	)		—			4,238			—
Total other (income) expense		1,500			(5	)		6,397			54
Loss before income taxes		6,289			920			19,892			1,995
Income tax, current		909			—			856			—
Income tax, deferred		(126	)		—			(126	)		—
Net loss	$	7,072		$	920		$	20,622		$	1,995
Non-controlling interest, net of tax		21			—			(235	)		—
Net loss attributable to TransAtlantic Petroleum Corp	$	7,093		$	920		$	20,387		$	1,995
Other comprehensive (gain) loss:
Foreign currency translation adjustment		(8,076	)		—			(7,943	)		—
Comprehensive (gain) loss	$	(983	)	$	920		$	12,444		$	1,995
Basic and diluted net loss per common share attributable to TransAtlantic Petroleum Corp	$	0.04		$	0.01		$	0.13		$	0.04
Basic and diluted weighted average number of shares outstanding (in thousands)		164,874			61,413			159,966			52,342

* Financial information for the three and six months ended June 30, 2008 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 3.

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

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TRANSATLANTIC PETROLEUM CORP.

Consolidated Statement of Stockholders’ Equity (Deficit)

(Unaudited)

(Thousands U.S. Dollars)

	Shares Issued (000’s)	Warrants Issued (000’s)	Paid in Capital			APIC- Warrants		Accumulated Other Comprehensive Income		Accumulated Deficit			Total Comprehensive Loss
Balance as of December 31, 2008 *	154,958	10,000	$	133,062		$	5,228	$	—	$	(63,350	)	$	—
Cumulative translation adjustment	—	—		—			—		7,943		—			7,943
Net loss for the period	—	—		—			—		—		(20,387	)		(20,387	)
Total comprehensive loss													$	(12,444	)
Exercise of stock options	200	—		149			—		—		—
Issuance of common shares and warrants	102	830		71			207		—		—
Issuance of common shares	98,377	—		143,074			—		—		—
Issuance cost	—	—		(5,609	)		—		—		—
Share-based compensation	—	—		551			—		—		—
Balance as of June 30, 2009	253,637	10,830	$	271,298		$	5,435	$	7,943	$	(83,737	)

* Financial information at December 31, 2008 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 3.

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

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TRANSATLANTIC PETROLEUM CORP.

Consolidated Statements of Cash Flows

(Unaudited)

(Thousands of U.S. Dollars)

	Three months ended June 30,						Six months ended June 30,
	2009			2008*			2009			2008*
				(restated – note 3)						(restated –note 3)
Cash provided by (used in):
Net loss attributable to TransAtlantic Petroleum Corp	$	(7,093	)	$	(920	)	$	(20,387	)	$	(1,995	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		230			285			551			346
Foreign exchange gains		21			—			(37	)		—
Deferred tax and other charges		(126	)		—			55			—
Non-controlling interest		21			—			(235	)		—
Depreciation, depletion and amortization		2,487			—			3,783			—
Accretion of asset retirement obligations		47			—			112			—
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable		(2,699	)		1,558			(3,264	)		97
Prepaid expenses		(1,173	)		(231	)		1,066			(201	)
Accounts payable and accrued liabilities		2,655			706			1,922			2,187
Net cash provided by (used in) operating activities		(5,630	)		1,398			(16,434	)		434
Investing activities:
Acquisition of Incremental Petroleum, net of cash (note 4)		(3,039	)		—			(40,463	)		—
Acquisition of Incremental Petroleum shares – related party (note 4)		—			—			(11,182	)		—
Additions to proved oil and gas properties		(1,154	)		—			(1,154	)		—
Additions to unproved oil and gas properties		(5,842	)		(265	)		(7,006	)		(265	)
Additions to drilling services and other equipment		(14,222	)		—			(23,535	)		—
Restricted cash		(2	)		(14	)		(1,508	)		(34	)
Changes in accounts payable and accrued liabilities		13,983			—			13,983			—
Net cash used in investing activities		(10,276	)		(279	)		(70,865	)		(299	)
Financing activities:
Exercise of stock options and warrants		134			391			149			391
Issuance of shares		82,256			—			82,256			—
Issuance of shares – related party (note 10)		60,818			12,010			60,818			12,010
Issuance cost		(5,609	)		—			(5,609	)		—
Loan proceeds – related party (note 9)		5,620			—			64,621			—
Loan repayment		(431	)		—			(431	)		—
Loan repayment – related party (note 9)		(64,621	)		(2,000	)		(64,621	)		(2,000	)
Net cash provided by financing activities		78,167			10,401			137,183			10,401
Effect of exchange rate changes on cash		(718	)		—			(793	)		—
Change in cash and cash equivalents		61,543			11,520			49,091			10,536
Cash and cash equivalents, beginning of period		17,600			1,240			30,052			2,224
Cash and cash equivalents, end of period	$	79,143		$	12,760		$	79,143		$	12,760

* Financial information for the three and six months ended June 30, 2008 has been revised to reflect retrospective application of the successful efforts method of accounting. See Note 3.

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

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TRANSATLANTIC PETROLEUM CORP.

Notes to Consolidated Financial Statements—Unaudited

June 30, 2009

(Tabular amounts in thousands of U.S. Dollars unless otherwise noted)

1. General

Nature of operations

TransAtlantic Petroleum Corp. (together with its subsidiaries, the “Company” or “TransAtlantic”) is a vertically integrated international oil and gas company engaged in the acquisition, exploration for and the development and production of crude oil and natural gas in Morocco, Romania, Turkey and California. Approximately 56% of the Company’s outstanding common shares are beneficially owned by N. Malone Mitchell, 3rd. Mr. Mitchell is the Chairman of the Company’s board of directors.

TransAtlantic was incorporated in 1985 under the laws of British Columbia and continued to Alberta in 1997. In 2008, the Company changed its operating strategy from that of a prospect generator to a vertically integrated project developer.

To execute this new strategy, the Company has:

1. acquired 100% of the issued and outstanding shares of Longe Energy Limited (“Longe”), in consideration for the issuance of 39,583,333 common shares of the Company and 10,000,000 common share purchase warrants (see Note 4);

2. closed a concurrent 35,416,667 common share private placement pursuant to which Dalea Partners, LP (“Dalea”), an entity 100% owned by Mr. Mitchell and his wife, and others invested $42.5 million in the Company. Both the Longe acquisition and the private placement were approved by the Company’s shareholders and closed in December 2008 (see Note 4);

3. acquired 100% of the issued and outstanding shares of Incremental Petroleum Limited (“Incremental”), an international oil and gas company that was publicly traded on the Australian Stock Exchange (see Note 4); and

4. closed a Regulation S offering of common shares outside the United States and a concurrent Regulation D private placement inside the United States in which the Company sold an aggregate of 98,377,300 common shares at a price of Cdn$1.65 per common share, raising gross proceeds of approximately $143.1 million (see Note 10).

Basis of presentation

The Company’s consolidated financial statements are expressed in U.S. Dollars and have been prepared by management in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All amounts in these notes to the consolidated financial statements are in U.S. Dollars unless otherwise indicated. In preparing financial statements, management makes informed judgments and estimates that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management reviews estimates, including those related to impairment of long-lived assets and goodwill, contingencies and income taxes. Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates.

These unaudited consolidated financial statements reflect all normal, recurring adjustments that are, in the opinion of management, necessary for a fair statement of the consolidated financial position of the Company as at June 30, 2009 and for the three and six month periods ended June 30, 2009 and 2008. Certain amounts for prior periods have been revised to reflect retrospective application of the successful efforts method of accounting. The results for the six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the year ending December 31, 2009.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2008, included in the Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission on July 20, 2009.

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2. Significant accounting policies

Basis of preparation

The Company’s reporting standard for the presentation of its consolidated financial statements is U.S. GAAP. The consolidated financial statements include the accounts of the Company and all majority-owned, controlled subsidiaries. All significant inter-company balances and transactions have been eliminated on consolidation.

Cash and cash equivalents

Cash and cash equivalents include term deposits and investments with original maturities of three months or less at the date of acquisition. The Company considers all highly-liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company determines the appropriate classification of its investments in cash and cash equivalents and marketable securities at the time of purchase and reevaluates such designation at each balance sheet date.

Derivative instruments

Statement of Financial Accounting Standards (“SFAS”) No. 133,Accounting for Derivative Instruments and Hedging Activities, requires derivative instruments to be recognized as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of derivative instruments depends on their intended use and resulting hedge designation. For derivative instruments designated as hedges, the changes in fair value are recorded in the balance sheet as a component of accumulated other comprehensive income (loss). Changes in the fair value of derivative instruments not designated as hedges are recorded in the consolidated statements of operations.

Fair value measurements

The Company follows SFAS No. 157,Fair Value Measurements(“SFAS 157”), which became effective for financial assets and liabilities of the Company on January 1, 2008 and non-financial assets and liabilities of the Company on January 1, 2009. This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements but applies to assets and liabilities that are required to be recorded at fair value under other accounting standards. The impact to the Company from the adoption of SFAS 157 in 2009 was not material.

Foreign currency translation

Effective January 1, 2009, the Company determined that the functional currency of its subsidiaries in Morocco, Turkey, and Romania had changed from the U.S. Dollar to the Moroccan Dirham, Turkish New Lira, and the Romanian Ron, respectively. The Company has entered into contractual obligations and commitments that will result in increasingly significant levels of transactions conducted in these currencies. In recognition of these contractual obligations and commitments combined with the resulting increases in future revenues and expenditures in these countries, the Company determined the appropriate functional currency was the local currency for each of these subsidiaries.

SFAS No. 52Foreign Currency Translation, requires the assets, liabilities, and results of operations of a foreign operation to be measured using the functional currency of that foreign operation. Because the functional currency is now the local currency, translation adjustments will result from the process of translating subsidiary financial statements into the U.S. Dollar reporting currency. Translation adjustments will not be included in determining net income but will be reported separately and accumulated in the balance sheet as a component of accumulated other comprehensive income (loss). The accounting basis of the assets and liabilities affected by the change are adjusted to reflect the difference between the exchange rate when the asset or liability arose and the exchange rate on the date of the change. The change in functional currency will have no impact on the Company’s actual foreign-based revenues and expenditures in these countries.

Oil and gas properties

In the first quarter of 2009, the Company changed its method of accounting for its oil and gas exploration and development activities from the full cost method to the successful efforts method. In accordance with SFAS No. 154,Accounting Changes and Error Corrections (“SFAS 154”), financial information for prior periods has been revised to reflect retrospective application of the successful efforts method, as prescribed by SFAS No. 19,Financial Accounting and Reporting by Oil and Gas Producing Companies (“SFAS 19”)(see Note 3). Although the full cost method of accounting for oil and gas exploration and development activities continues to be an accepted alternative, the successful efforts method of accounting is the preferred method. The Company believes the successful efforts method provides a more transparent representation of its results of

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operations and the ability to assess the Company’s investments in oil and gas properties for impairment based on their estimated fair values rather than being required to base valuation on prices and costs as of the balance sheet date.

In accordance with the successful efforts method of accounting for oil and gas properties, costs of productive wells, developmental dry holes and productive leases are capitalized into appropriate groups of properties based on geographical and geological similarities. These capitalized costs are amortized using the unit-of-production method based on estimated proved reserves. Proceeds from sales of properties are credited to property costs, and a gain or loss is recognized when a significant portion of an amortization base is sold or abandoned.

Exploration costs, such as exploratory geological and geophysical costs, delay rentals and exploration overhead, are charged to expense as incurred. Exploratory drilling costs, including the cost of stratigraphic test wells, are initially capitalized but charged to exploration expense if and when the well is determined to be nonproductive. The determination of an exploratory well’s ability to produce must be made within one year from the completion of drilling activities. The acquisition costs of unproved acreage are initially capitalized and are carried at cost, net of accumulated impairment provisions, until such leases are transferred to proved properties or charged to exploration expense as impairments of unproved properties.

Drilling services and other equipment

Drilling services and other equipment is stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives (ranging from 3 to 7 years) of the respective assets. The costs of normal maintenance and repairs are charged to expense as incurred. Material expenditures that increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of equipment sold, or otherwise disposed of, and the related accumulated depreciation are removed from the accounts and any gain or loss is reflected in current operations.

Impairment of long-lived assets

Oil and gas properties are evaluated by field for potential impairment. Other properties are evaluated for impairment on a specific asset basis or in groups of similar assets as applicable. An impairment is recognized when the estimated undiscounted future net cash flows of an asset are less than its carrying value. If an impairment occurs, the carrying value of the impaired asset is reduced to fair value.

Joint interest activities

Some of the Company’s exploration, development and production activities are conducted jointly with other entities and accordingly the consolidated financial statements reflect only the Company’s proportionate interest in such activities.

Supplemental disclosure of cash flow information

	Six Months Ended June 30,
	2009		2008
	(In thousands)
Supplemental disclosure of cash paid for interest and income taxes:
Cash paid during the period for interest	$	2,137	$	130
Cash paid during the period for income taxes	$	26	$	—

	Three Months Ended June 30,
	2009		2008
	(In thousands)
Supplemental disclosure of cash paid for interest and income taxes:
Cash paid during the period for interest	$	2,098	$	44
Cash paid during the period for income taxes	$	26	$	—

Asset retirement obligations

The Company recognizes a liability for the present value of all legal obligations associated with the retirement of tangible, long-lived assets and capitalizes an equal amount as a cost of the asset. The cost associated with the abandonment obligation is included in the computation of depreciation, depletion and amortization. The liability accretes until the Company settles the obligation. The Company uses an adjusted risk-free interest rate in its calculation of asset retirement obligations.

8

Revenue recognition

Revenue from the sale of products is recognized upon delivery to the purchaser when title passes. Drilling service revenues are recognized when the related service is performed.

Share-based compensation

The Company follows SFAS No. 123 (revised 2004)Share-Based Payment (“SFAS 123R”), which requires the measurement and recognition of compensation expense for all share-based payment awards, including employee stock options, based on estimated fair values. The value of the portion of the award that is ultimately expected to vest is recognized as an expense on a straight-line basis over the requisite vesting period. SFAS 123R requires the Company to estimate the fair value of stock option awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model (“Black-Scholes Model”) as its method of valuation for share-based awards. The Company’s determination of fair value of share-based payment awards on the date of grant using the Black-Scholes Model is affected by the Company’s stock price, as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, as well as actual and projected exercise and forfeiture activity. The fair value of options granted to consultants, to the extent unvested, are determined on subsequent reporting dates.

Income taxes

The Company follows the asset and liability method prescribed by SFAS No. 109,Accounting for Income Taxes (“SFAS 109”). Under this method of accounting for income taxes, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in enacted tax rates is recognized in income in the period that includes the enactment date.

Pursuant to the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48,Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109 (“FIN 48”), the Company does not have any unrecognized tax benefits other than those for which a valuation allowance has been provided thereon. The Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months. The Company’s policy is that it recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any tax-related interest expense recognized during the six months ended June 30, 2009 or 2008.

Comprehensive (gain) loss

SFAS No. 130,Reporting Comprehensive Income (“SFAS 130”), established standards for reporting and displaying comprehensive income and its components (revenue, expenses, gains and losses) in a full set of general-purpose financial statements. During the three and six months ended June 30, 2009, the Company recorded an unrealized gain on foreign currency translation as other comprehensive gain. There were no differences between net loss and comprehensive loss in 2008.

Business Combinations

In December 2007, the FASB issued SFAS No. 141R,Business Combinations (“SFAS 141R”), and SFAS No. 160,Non-controlling Interests in Consolidated Financial Statements (“SFAS 160”). SFAS 141R requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “fair value.” The statement applies to all business combinations, including combinations among mutual entities and combinations by contract alone. Under SFAS 141R, all business combinations will be accounted for by applying the acquisition method. Accordingly, transactions costs related to acquisitions are to be recorded as a reduction of earnings in the period they are incurred and costs related to issuing debt or equity securities that are related to the transaction will continue to be recognized in accordance with other applicable rules under U.S. generally accepted accounting principles. SFAS 141R is effective for periods beginning on or after December 15, 2008 and has been applied to the Incremental acquisition. SFAS 160 will require non-controlling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. The statement applies to the accounting for non-controlling interests and transactions with non-controlling interest holders in consolidated financial statements. SFAS 160 is effective for periods beginning on or after December 15, 2008 and has been applied prospectively to the non-controlling interests from the Incremental acquisition.

Per share information

Basic per share amounts are calculated using the weighted average common shares outstanding during the period. The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury stock method, only “in the money” dilutive instruments impact the diluted calculations in computing diluted earnings per share. Diluted calculations reflect the weighted average incremental common shares that would be issued upon exercise of dilutive options assuming the proceeds would be used to repurchase shares at average market prices for the period.

3. Accounting changes and recent pronouncements

Changes in accounting principles

Effective January 1, 2009, the Company changed its method of accounting for oil and gas exploration and development activities from the full cost method to the successful efforts method. In accordance with SFAS 154, financial information for prior periods has been revised to reflect retrospective application of the successful efforts method, as prescribed by SFAS 19. In accordance with the successful efforts method of accounting for oil and gas properties, costs of productive wells, developmental dry holes and productive leases are capitalized into appropriate groups of properties based on geographical and geological similarities. These capitalized costs are amortized using the unit-of-production method based on estimated proved reserves. Proceeds from sales of properties are credited to property costs, and a gain or loss is recognized when a significant portion of an amortization base is sold or abandoned.

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Exploration costs, such as exploratory geological and geophysical costs, delay rentals and exploration overhead, are charged to expense as incurred. Exploratory drilling costs, including the cost of stratigraphic test wells, are initially capitalized but charged to exploration expense if and when the well is determined to be nonproductive. The determination of an exploratory well’s ability to produce must be made within one year from the completion of drilling activities. The acquisition costs of unproved acreage are initially capitalized and are carried at cost, net of accumulated impairment provisions, until such leases are transferred to proved properties or charged to exploration expense as impairments of unproved properties.

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The following tables present the material reclassifications on the financial statements resulting from the change to the successful efforts method:

	Changes to the Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)	Under Full Cost		Change		As Reported Under Successful Efforts
Three Months Ended June 30, 2009:
Seismic and other exploration and abandonment	$	—	1,879		$	1,879
Net loss attributable to TransAtlantic Petroleum Corp.	$	5,214	1,879		$	7,093
Basic and diluted net loss per share	$	0.03	0.01		$	0.04
Three Months Ended June 30, 2008:
Seismic and other exploration and abandonment	$	—	—			—
Net loss attributable to TransAtlantic Petroleum Corp.	$	920	—		$	920
Basic and diluted net loss per share	$	0.01	—		$	0.01
	Changes to the Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)	Under Full Cost		Change		As Reported Under Successful Efforts
At Six Months Ended June 30, 2009:
Seismic and other exploration and abandonment	$	—	4,269		$	4,269
Net loss attributable to TransAtlantic Petroleum Corp.	$	16,118	4,269		$	20,387
Basic and diluted net loss per share	$	0.10	0.03		$	0.13
At Six Months Ended June 30, 2008:
Seismic and other exploration and abandonment	$	—	—		$	—
Net loss attributable to TransAtlantic Petroleum Corp.	$	1,995	—		$	1,995
Basic and diluted net loss per share	$	0.04	—		$	0.04
	Changes to the Consolidated Balance Sheets
(in thousands)	Under Full Cost		Change		As Reported Under Successful Efforts
June 30, 2009:
Oil and gas properties, unproved	$	29,031	(13,742	)	$	15,289
Property and equipment, net		165,224	(13,742	)		151,482
Accumulated deficit	$	69,995	13,742		$	83,737
December 31, 2008:
Oil and gas properties, unproved	$	11,205	(9,473	)	$	1,732
Property and equipment, net		52,038	(9,473	)		42,565
Accumulated deficit (1)	$	53,877	9,473		$	63,350

(1) The cumulative effect of the change to the successful efforts method on accumulated deficit as of January 1, 2008 was an increase of $1,572.

Recent accounting pronouncements

In December 2007, FASB issued SFAS No. 141R,Business Combinations(“SFAS 141R”), and SFAS No. 160,Non-controlling Interests in Consolidated Financial Statements(“SFAS 160”). SFAS 141R requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “fair value.” The statement applies to all business combinations, including combinations among mutual entities and combinations by contract alone. Under SFAS 141R, all business combinations will be accounted for by applying the acquisition method. SFAS 141R is effective for periods beginning on or after

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December 15, 2008. Accordingly, deferred transactions costs related to acquisitions are to be recorded as a reduction of earnings in the period they are incurred and costs related to issuing debt or equity securities that are related to the transaction will continue to be recognized in accordance with other applicable U.S. GAAP rules. The Company adopted SFAS 141R as of January 1, 2009. SFAS 160 will require non-controlling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. The statement applies to the accounting for non-controlling interests and transactions with non-controlling interest holders in consolidated financial statements. SFAS 160 is effective for periods beginning on or after December 15, 2008 and has been applied prospectively to the non-controlling interests from the Incremental acquisition.

In December 2008, the Securities and Exchange Commission (“SEC”) adopted release no. 34-59192,Modernization of Oil and Gas Reporting, which revised the then-existing Regulation S-K and Regulation S-X oil and gas reporting requirements to align them with current industry practices and technological advances. The release revises a number of definitions relating to oil and gas reserves, permits the disclosure in filings with the SEC of probable and possible reserves and permits the use of new technologies to determine proved reserves if those technologies have been demonstrated empirically to lead to reliable conclusions about reserve volumes. In addition, the new disclosure requirements require a company to (i) disclose its internal control over reserves estimation and report the independence and qualification of its reserves preparer or auditor, (ii) file a report of a third party if the Company represents that the third party prepared reserves estimates or conducted a reserves audit, (iii) report oil and gas reserves using an average price based upon the prior 12-month period rather than period-end prices, and (iv) disclose, in narrative form, the status of proved undeveloped reserves and changes in status of these from period to period. The provisions of this release will become effective for disclosures in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. Management is still evaluating the impact of these changes on its financial statements.

The FASB issued SFAS 165,Subsequent Events (“SFAS 165”), on May 28, 2009. SFAS 165 establishes general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards. The Company has adopted SFAS 165, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, effective for the period ended June 30, 2009.

The Company has reviewed other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operations, financial position and cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on current or future earnings or operations.

4. Acquisitions

Incremental Petroleum

On October 27, 2008, the Company announced its intention to make a cash takeover offer (the “Offer”) through TransAtlantic Australia Pty. Ltd., a wholly-owned subsidiary of the Company, for all of the outstanding common shares of Incremental, an international oil and gas company that was publicly traded on the Australian Stock Exchange. The Offer expired on March 6, 2009. As of March 6, 2009, the Company owned common shares of Incremental, representing approximately 65.4% of Incremental’s outstanding common shares, and had received offers to acquire an additional approximately 11.6% of Incremental’s outstanding common shares. On March 20, 2009, the Company purchased 15,025,528 common shares of Incremental from Mr. Mitchell. The Company acquired these shares from Mr. Mitchell for cash at a price of AUD $1.085 per share, the same price per share and pursuant to the same terms as the shares acquired from Incremental’s other shareholders, none of whom had any relationship with the Company. Incremental was delisted from the Australian Stock Exchange on March 26, 2009. At March 31, 2009, the Company had paid for and owned approximately 96% of the common shares of Incremental. On April 20, 2009, the Company paid for and completed the acquisition of the remaining 4% of Incremental’s common shares through an Australian statutory procedure. These shares were acquired at the same price per share as the previous share purchases. In addition, the Company agreed to purchase all of the outstanding options to acquire common shares of Incremental. On April 8, 2009, in exchange for the assignment of the Incremental options to the Company, the Company paid the Incremental option holders an aggregate of $721,000 in cash and issued them an aggregate of 101,585 common shares of the Company and 829,960 common share purchase warrants of the Company. Each warrant is exercisable through April 2, 2012 and entitles the holder to purchase one common share of the Company at an exercise price of $1.20 per share. The common shares and common share purchase warrants were issued pursuant to an exemption from registration under Regulation S of the Securities Act of 1933, as amended. The acquisition of Incremental was accounted for as a business combination.

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The following tables summarize the consideration paid in the Incremental acquisition, and the preliminary purchase price allocation of assets acquired and liabilities assumed recognized at the acquisition dates, as well as the acquisition-date fair value of the non-controlling interests in Incremental:

Consideration:

	in thousands
Payment of cash amounting to AUD $83,036,483 for the acquisition of 76,532,473 shares of Incremental, translated into U.S. Dollars based on the exchanges rates in effect on the dates of the transactions, ranging from February 18, 2009 through March 20, 2009	$	53,942
Payment of cash to retire share-based payment arrangements of Incremental		721
Total cash consideration		54,663
Issuance of 101,585 common shares of the Company to retire share-based payment arrangements of Incremental		71
Issuance of 829,960 warrants to purchase the Company’s common shares to retire share-based payment arrangements of Incremental		207
Fair value of total consideration transferred	$	54,941

The fair value of the 101,585 common shares of the Company issued as part of the consideration paid in the Incremental acquisition was determined on the basis of the closing market price of the Company’s common shares on the acquisition date, or $0.70 per share. The fair value of the 829,960 warrants of the Company issued as part of the consideration paid in the Incremental acquisition was determined using the Black-Scholes Model using the following assumptions: strike price of $1.20 per share, expected life of three years based on management’s expectation that the warrants will not be exercised until near the end of the 36 month contractual term of the warrants, volatility of 40% based on a third party independent valuation of the warrants offered to the Incremental option holders, a 3.5% risk-free interest rate, and a forecasted dividend rate of 0% based on the Company’s historic dividends and future plans for paying dividends. The assumptions used in the Black-Scholes Model yielded a fair value of $0.25 per warrant.

Acquisition-Related Costs:

Included in general and administrative expenses on the Company’s consolidated statement of operations for the six months ended June 30, 2009, of which $181,000 was incurred in 2008 and recorded as a deferred charge as at December 31, 2008.	$	779
Included in general and administrative expenses on the Company’s consolidated statement of operations for the three months ended June 30, 2009, of which $181,000 was incurred in 2008 and recorded as a deferred charge as at December 31, 2008.	$	316

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed at Acquisition:

Financial assets:
Cash, consisting of approximately AUD $5.5 million and 4.7 million Turkish Lira	$	6,057
Accounts receivable		3,990
Total financial assets		10,047
Deferred income tax assets		759
Other current assets, consisting primarily of prepaid expenses		880
Oil and gas properties
Unproved properties		4,533
Proved properties		60,310
Rigs and related equipment		2,802
Materials and supplies inventories		1,313
Total oil and gas properties		68,958

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Financial liabilities:
Accounts payable, consisting of normal trade obligations		(1,666	)
Accrued liabilities, consisting primarily of accrued compensated employee absences		(101	)
Current portion of long-term debt		(2,543	)
Deferred income taxes		(11,384	)
Long-term debt		(1,217	)
Asset retirement obligations, consisting of future plugging and abandonment liabilities on Incremental’s developed wellbores as of March 5, 2009, based on a third-party estimate of such costs, adjusted for historic Turkish inflation rates ranging from approximately 7% to 11%, and discounted to present value using the Company’s credit-adjusted risk-free rate of 6%		(5,716	)
Other		(315	)
Total financial liabilities		(22,942	)
Total identifiable net assets	$	57,702
Fair value of non-controlling interest in Incremental, based on the Company’s acquisition of such interest on April 20, 2009 for AUD $3,475,399	$	2,761

The fair value of identifiable assets acquired and liabilities assumed as well as the purchase price allocation adjustments are preliminary and subject to changes which may be material. Incremental’s results of operations are included in the Company’s consolidated results of operations beginning March 5, 2009, which is the date the Company first acquired more than 50% of Incremental’s outstanding common shares. The amounts of Incremental’s revenue and earnings included in the Company’s consolidated statement of operations for the six months ended June 30, 2009 is shown below:

	in thousands
	Revenue		Earnings (Loss)
Actual from March 5, 2009 through June 30, 2009	$	8,770	$	2,269

The following table presents pro forma data that reflects revenue, loss before income taxes, net loss and loss per share for the six months ended June 30, 2009 as if the Incremental acquisition had occurred as of January 1, 2009:

	June 30, 2009 (in thousands)
Oil and gas sales	$	12,729
Loss before income taxes		20,706
Net loss		21,606
Basic and diluted loss per share	$	0.13

The Company has not included a pro forma presentation as of June 30, 2008. Incremental was an Australian publicly listed company, was not required to file quarterly financial statements and maintained its historical results of operations in accordance with International Financial Reporting Standards. Accordingly, preparing pro forma information in accordance with U.S. GAAP for the 2008 interim periods is an extremely difficult task, and therefore, the Company determined that it would be impracticable to provide such information.

Longe Energy

On September 19, 2008, the Company entered into a purchase agreement for the acquisition of all of the issued and outstanding shares of Longe from Longfellow Energy, LP, an entity indirectly owned by Mr. Mitchell, his wife and children, and agreed to make a concurrent private placement of common shares of the Company. The transactions closed on December 30, 2008 (the “Closing Date”). At the time of closing, Longe was an exploration stage company whose activity through the Closing Date had been to acquire oilfield service equipment and exploration licenses in Morocco. Longe, a private Bermuda limited company, was incorporated on April 14, 2008 and became an indirect wholly-owned subsidiary of the Company on December 30, 2008. Pursuant to the terms of the purchase agreement, the Company acquired all of the issued and outstanding shares of Longe in consideration for the issuance of 39,583,333 common shares of the Company and 10,000,000 common share purchase warrants. Each warrant entitles the holder to purchase one common share of the Company at an exercise price of $3.00 per share through December 30, 2011. Concurrently with the acquisition, the Company issued 35,416,667 common shares at a price of $1.20 per share in a private

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placement with Dalea, Riata TransAtlantic, LLC (“Riata TransAtlantic”), Matthew McCann, at the time a director of the Company, and other purchasers with business or familial relationships with Mr. Mitchell, resulting in gross proceeds of $42.5 million to the Company. Mr. Mitchell manages Riata TransAtlantic.

The purchase price of the Longe acquisition is as follows:

	(in thousands)
Fair value of TransAtlantic common shares	$	28,104
Fair value of TransAtlantic common share purchase warrants—net		5,228
Transaction costs		484
Total purchase price	$	33,816

The fair value of the Company’s common shares used in determining the purchase price was $0.71 per share based on the closing price of the Company’s common shares on December 30, 2008. The fair value of the 10 million common share purchase warrants was determined using the Black-Scholes Model with the following assumptions: stock price of $0.71; volatility of 169%; dividend rate of 0%; risk-free interest rate of 1.67%; and term of three years.

The allocation of net assets acquired is as follows:

	(in thousands)
Property and equipment	$	32,350
Deposits on equipment		2,508
Other		128
Accounts payable		(1,170	)
Total net assets acquired:	$	33,816

Under the terms of the purchase agreement, the Company assumed Longe’s existing work commitments for drilling and other exploratory activities under its exploration permits in Morocco.

5. Restricted cash

Restricted cash represents cash placed in escrow accounts or in certificates of deposit that are pledged for the satisfaction of liabilities or performance guarantees. At June 30, 2009 and December 31, 2008, restricted cash included: $240,000 for settlement of liabilities in Nigeria; $3.0 million in certificates of deposit supporting a $3.0 million bank guarantee of the Company’s Morocco work program (see Note 14) and $28,000 in a certificate of deposit that is a collateral for a letter of credit in favor of the Oklahoma Tax Commission. In March 2009, a $1.5 million certificate of deposit was pledged to support a bank guarantee for oilfield services in Morocco and Turkey.

6. Discontinued operations held for sale

In 2007, the Company designated certain oil and gas properties as held for sale in conjunction with its plan to sell its proved and undeveloped interests in the United States, primarily in Texas. In November 2007, the Company sold its South Gillock and State Kohfeldt Units, as well as the shallow rights over the South Gillock Unit, for $4.0 million, and the buyer assumed an estimated $2.0 million in plugging and abandonment liability associated with the units. In addition, the Company sold its Jarvis Dome property in October 2007 for $250,000. One property in Oklahoma remained during 2008, the operations of which were reported as discontinued. In connection with the acquisition of Incremental, the Company acquired interests in non-operated properties in California. As a result of acquiring these properties in California, previously reported U.S. discontinued operations are now continuing and the results of operations in 2008 previously reported as discontinued have been reclassified to operating revenues, costs and expenses.

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7. Property and equipment

(a) Oil and gas properties. The following table sets forth the capitalized costs under the successful efforts method for oil and gas properties (in thousands):

	June 30, 2009		December 31, 2008
Oil and gas properties, proved
Turkey	$	69,985	$	—
Oil and gas properties, unproved
Morocco	$	3,051	$	103
Romania		1,434		402
Turkey		10,804		1,227
	$	15,289	$	1,732

Uncertainties affect the recoverability of these costs as the recovery of the costs outlined above are dependent upon the Company obtaining government approvals, obtaining and maintaining licenses in good standing and achieving commercial production or sale.

(b) Drilling services and other equipment. The historical cost of drilling services and other equipment, presented on a gross basis with accumulated depreciation is summarized as follows (in thousands):

	June 30, 2009			December 31, 2008
Drilling services and other equipment	$	70,044		$	40,886
Accumulated depreciation		(1,692	)		(53	)
Net drilling services and other equipment	$	68,352		$	40,833

At June 30, 2009, $29.0 million (December 31, 2008-$40.0 million) in drilling services and other equipment was excluded from depreciation as the equipment had not yet been placed in service.

8. Asset retirement obligations

As part of its development of oil and gas properties, the Company incurs asset retirement obligations (“ARO”). The Company’s ARO results from its responsibility to abandon and reclaim its net share of all working interest properties. At June 30, 2009, the net present value of the Company’s total ARO is estimated to be $6.9 million, with the undiscounted value being $14.2 million. Total ARO for the quarter ended June 30, 2009 shown in the table below consists of provisional amounts for future plugging and abandonment liabilities on the Company’s developed wellbores as of June 30, 2009, based on a third-party estimate of such costs, adjusted for historic Turkish inflation rates ranging from approximately 7% to 11% per annum, and discounted to present value using a credit-adjusted risk-free rate of 6.0% per annum.

(in thousands)	Six Months Ended June 30, 2009		Year Ended December 31, 2008
Beginning balance	$	14	$	8
Incremental acquisition (Note 4)		5,716		—
Foreign exchange change		674		—
Increase in liabilities		412		—
Liabilities settled		—		—
Accretion expense		112		6
Ending balance	$	6,928	$	14

9. Loans payable

On November 28, 2008, the Company entered into a credit agreement (the “Credit Agreement”) with Dalea. The purpose of the Credit Agreement was to fund the cash takeover offer by TransAtlantic Australia Pty. Ltd., a wholly-owned subsidiary of the Company (“TransAtlantic Australia”), for all of the outstanding shares of Incremental (see Notes 4 and 15).

Pursuant to the Credit Agreement, as amended, until June 30, 2009, the Company could request advances from Dalea of (i) up to $62,000,000 for the sole purpose of purchasing Incremental common shares in connection with the Offer, plus related transaction costs and expenses; and (ii) up to $14,000,000 for general corporate purposes. Advances under the Credit Agreement related to the Incremental acquisition were

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denominated in U.S. Dollars, but were advanced in Australian Dollars at an agreed upon currency exchange rate of AUD $1.00 to US $0.7024. Advances under the Credit Agreement for general corporate purposes were denominated and advanced in U.S. Dollars.

The aggregate unpaid principal balance, together with all accrued but unpaid interest was immediately due and payable by the Company upon the earliest of (i) April 20, 2010; (ii) the date of any change in ownership of or control or direction over, directly or indirectly, 20% or more of the outstanding voting securities of the Company; and (iii) the occurrence of an event of default.

The total outstanding balance of the advances made under the Credit Agreement accrued interest at a rate of ten percent (10%) per annum, calculated daily and compounded quarterly. Interest was payable by the Company on the first day of each March, June, September, and December during the term of the loan. Following an event of default, the outstanding balance would accrue additional interest at a rate of four percent (4%) per annum until the event of default was cured or waived. The Company could prepay the loan at any time before maturity without penalty.

The Credit Agreement was secured by all of the personal property or assets of the Company’s wholly-owned subsidiary, TransAtlantic (Holdings) Australia Pty. Ltd., including all of the ordinary shares in the capital of TransAtlantic Australia.

There were no amounts outstanding under the Credit Agreement as of December 31, 2008. The Company borrowed an aggregate of $64.6 million under the Credit Agreement and paid $2.0 million in interest during the first six months of 2009. The loan was repaid in full on June 23, 2009, at which time the Credit Agreement was terminated.

On July 5, 2007, Petroleum Exploration Mediterranean International Pty. Ltd. (“PEMI”), a wholly-owned subsidiary of Incremental, entered into a general credit agreement (the “PEMI Credit Agreement”) with Turkiye Garanti Bankasi. PEMI borrowed $5.5 million under the PEMI Credit Agreement in order to fund drilling and development activity in the Selmo oil field. The loan bears interest at a rate of 7.6% per annum, and all outstanding principal and interest under the PEMI Credit Agreement is due August 6, 2010. As of June 30, 2009, $3.3 million in principal is outstanding under the PEMI Credit Agreement, of which $2.8 million is short-term.

The following table details the Company’s outstanding fixed-rate debt:

Fixed Rate Debt	Amount		Rate		Principal Due In
					2009		2010		Thereafter
At December 31, 2008		—				—		—	—
Current
PEMI	$	2,837	7.6	%	$	1,391	$	1,446	—
Long-term
PEMI	$	492	7.6	%	$	—	$	492	—
At June 30, 2009	$	3,329			$	1,391	$	1,938	—

The Company uses the negotiated rates in determining the fair value of the debt.

10. Common shares

June 2009 share issuance

On June 22, 2009, the Company closed a Regulation S offering of common shares outside the United States and a concurrent Regulation D private placement inside the United States. In the aggregate, the Company sold 98,377,300 common shares at a price of Cdn$1.65 per common share, raising gross proceeds of approximately $143.1 million. Of the 98,377,300 common shares sold, 41,818,000 common shares were sold to Dalea.

In connection with these offerings, the Company entered into a registration rights agreement providing for the registration of up to 98,377,300 common shares issued in these offerings (the “Registrable Securities”). Pursuant to the registration rights agreement, on July 20, 2009, the Company filed a registration statement on Form S-1 registering the resale of 55,544,300 common shares. The Company is required to use its commercially reasonable efforts to keep the registration statement effective until all of the Registrable Securities have been sold or may be sold pursuant to Rule 144 of the Securities Act of 1933, as amended, by non-affiliates of the Company.

If this registration statement is not declared effective by October 1, 2009, the Company is required to pay to the holders of the Registrable Securities (other than Dalea) liquidated damages in cash equal to 1% of the purchase price of the Registrable Securities held by the holders on October 1, 2009 (approximately Cdn $916,000 or $840,000), with an additional 1% if the registration statement is not declared effective by October 31, 2009 (approximately Cdn $916,000 or $840,000), and a further 1% if the registration statement is not declared effective by November 30, 2009 (approximately Cdn $916,000 or $840,000). If the Company does not pay the liquidated damages amount in full within seven calendar days after the date payable, interest would accrue on the unpaid amount until paid in full at the rate of 12% per annum.

In addition, the Company will pay the holders of the Registrable Securities liquidated damages in cash equal to 1% of the purchase price of the Registrable Securities held by them on December 20, 2009 (approximately Cdn $916,000 or $840,000), if the Company (a) is not on such date subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (b) has not been for a period of at least 90 days immediately before such date, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; or (c) has not filed all required reports under Section 13 or 15(d) of the Exchange Act, as applicable, during the twelve months preceding such date, other than Form 8-K reports, as a result of which the holders of Registrable Securities who are not affiliates of the Company would not be able to sell their Registrable Securities under Rule 144.

Notwithstanding the foregoing, in no event will Dalea, an entity controlled by the Company’s chairman, Mr. Mitchell, be entitled to receive any liquidated damages under the registration rights agreement. The Company has not recorded a liability for liquidated damage payments under the registration rights agreement.

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Equity issued in connection with the Incremental acquisition

In April 2009, the Company issued 101,585 common shares of the Company and 829,960 warrants to purchase the Company’s common shares at an exercise price of $1.20 per share through April 2, 2012 to retire share-based payment arrangements of Incremental (see Note 4).

December 2008 private placement and Longe acquisition

In December 2008, the Company acquired 100% of the issued and outstanding shares of Longe from Longfellow in consideration for the issuance of 39,583,333 common shares of the Company valued at $0.71 per share, and 10,000,000 common share purchase warrants. Each warrant entitles the holder to purchase one common share of the Company at an exercise price of $3.00 per share through December 30, 2011. Concurrently, the Company issued 35,416,667 common shares at a price of $1.20 per share in a private placement with Dalea, Riata TransAtlantic, Mr. McCann and other purchasers with business or familial relationships with Mr. Mitchell, resulting in gross proceeds of $42.5 million. Mr. Mitchell manages Riata TransAtlantic. Mr. McCann currently serves as the chief executive officer and a director of the Company and, at the time of the private placement, was a director of the Company. The Company recorded $1.1 million in transaction costs for the Longe acquisition and the concurrent private placement.

April and May 2008 private placement

In April and May 2008, the Company issued 10,000,000 common shares and 25,000,000 common shares, respectively, to Riata TransAtlantic, Dalea, Mr. McCann and certain friends and family of Mr. Mitchell in connection with a two-stage private placement transaction announced in March 2008. The private placements resulted in gross proceeds of Cdn $12.0 million.

Restricted stock units

On February 9, 2009, the Company’s board of directors approved the TransAtlantic Petroleum Corp. 2009 Long-Term Incentive Plan (the “Incentive Plan”), pursuant to which the Company can award restricted stock units (“RSUs”) or other share-based compensation to certain of its directors, officers, employees and consultants. In addition, on February 9, 2009, the Company’s board of directors approved awards of RSUs to certain directors, officers, employees and consultants. The Incentive Plan was approved at the Company’s annual and special meeting of shareholders on June 16, 2009. Share-based compensation expense of $423,000 with respect to RSU awards was recorded for the six months ended June 30, 2009.

Under the Incentive Plan, RSUs vest over specified periods of time ranging from immediately to four years. RSUs are deemed full value awards and their value is equal to the market price of the Company’s common shares on the grant date. SFAS 123R requires that the Incentive Plan be approved in order to establish a grant date. Under SFAS 123R, the approval date for the Incentive Plan was February 9, 2009, the date the board of directors approved the Incentive Plan.

Each RSU is equal in value to one common share of the Company on the grant date. Upon vesting, an employee is entitled to a number of common shares of the Company equal to the number of vested RSUs. The RSU awards can only be settled in common shares. As a result, RSUs are classified as equity. At the grant date, the Company makes an estimate of the forfeitures expected to occur during the vesting period and adjusts its compensation cost accordingly. The current forfeiture rate is estimated to be 10%. The following table sets forth restricted stock unit activity for the six months ended June 30, 2009:

	Number of units (in thousands)		Weighted average grant date fair value
Unvested restricted stock units outstanding at December 31, 2008	—			—
Granted	1,759		$	0.74
Vested	(172	)		0.74
Canceled	—			—
Unvested restricted stock units outstanding at June 30, 2009	1,587		$	0.74

As of June 30, 2009, the Company had approximately $764,000 of unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted average period of 2.0 years.

Stock option plan

The Company’s Amended and Restated Stock Option Plan (the “Option Plan”) was terminated on June 16, 2009. All outstanding awards issued under the Option Plan will remain in full force and effect. All options presently issued under the Option Plan have a five-year term.

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Under the Black-Scholes Model, the fair value of all outstanding options under the Option Plan is calculated at approximately $128,000 and $346,000 recognized as share-based compensation expense for the six months ended June 30, 2009 and 2008, respectively. At June 30, 2009, the unamortized amount of share-based compensation expense was $69,000, which is expected to be recognized over a weighted average period of less than one year. The following table sets forth stock option activity for the six months ended June 30, 2009:

(Shares in thousands)	Number of options		Weighted average exercise price
Outstanding at January 1, 2009	4,413		$	0.85
Granted	—			—
Expired	(310	)		(0.90	)
Exercised	(200	)		(0.75	)
Outstanding at June 30, 2009	3,903		$	0.86
Exercisable at June 30, 2009	3,507		$	0.85

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11. Segment information

In accordance with SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information(“SFAS 131”), the Company has two reportable operating segments, exploration and production of oil and natural gas (“E&P”) and drilling services, within three reportable geographic segments: Romania, Turkey and Morocco. Segment assets, net revenues and net loss in each of its reportable segments are as follows:

	Corporate and Other		Romania		Turkey			Morocco			Total
	(in thousands)
2009
Segment assets as at June 30,	$	74,478	$	12,899	$	118,211		$	42,907		$	248,495
Three months ended June 30,
Total revenues		14		—		7,411			—			7,425
Net loss (profit)		990		4,657		(1,149	)		2,595			7,093
Six months ended June 30,
Total revenues		19		—		8,768			—			8,787
Net loss		7,936		4,950		2,091			5,410			20,387
2008
Segment assets as at December 31,	$	39,480	$	3,953	$	10,230		$	27,591		$	81,254
Three months ended June 30,
Total revenues		47		—		—			—			47
Net loss (profit)		1,439		229		—			(748	)		920
Six months ended June 30,
Total revenues		61		—		—			—			61
Net loss (profit)		2,309		393		—			(707	)		1,995

	E&P		Drilling Services		Corporate and Other		Total
	(in thousands)
2009
Segment assets as at June 30,	$	128,554	$	45,361	$	74,580	$	248,495
Three months ended June 30,
Total revenues		7,425		—		—		7,425
Net loss		1,539		2,354		3,200		7,093
Six months ended June 30,
Total revenues		8,787		—		—		8,787
Net loss		9,046		3,405		7,936		20,387
2008
Segment assets as at December 31,	$	14,334	$	35,749	$	31,171	$	81,254
Three months ended June 30,
Total revenues		47		—		—		47
Net loss		282		—		638		920
Six months ended June 30,
Total revenues		61		—		—		61
Net loss		588		—		1,407		1,995

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12. Financial instruments

Cash and cash equivalents, receivables, accounts payable and accrued liabilities were each estimated to have a fair value approximating the carrying amount due to the short maturity of those instruments.

Interest rate risk

The Company is exposed to interest rate risk as a result of its fixed rate note and its variable rate short-term cash holdings. Interest rate changes would result in gains or losses in the market value of the Company’s fixed rate debt due to differences between the current market interest rates and the rates governing this note.

Foreign currency risk

The Company has underlying foreign currency exchange rate exposure. The Company’s currency exposures relate to transactions denominated in the Australian Dollar, Canadian Dollar, British Pound, European Union Euro, Romanian Ron, Moroccan Dirham and Turkish New Lira. Foreign currency forward contracts have not been used to manage exchange rate fluctuations. The Company agreed to a fixed currency exchange rate of AUD $1.00 to US $0.7024 in the Credit Agreement with Dalea (see Note 9). During the three months ended June 30, 2009, the loan was repaid in its entirety and the Credit Agreement was terminated. The resulting realized exchange loss was $4.2 million for the six months ended June 30, 2009. In June 2009, the Company sold 98,377,300 common shares, raising gross proceeds of approximately $143.1 million. At June 30, 2009, the Company had Cdn $77.0 million in cash and cash equivalents, which exposes the Company to exchange rate risk based on fluctuations in the value of the Canadian dollar.

Concentration of credit risk

The majority of the Company’s receivables are within the oil and gas industry, primarily from its industry partners and from government agencies. Included in receivables are amounts due from the national oil company of Turkey, which purchases all of the Company’s oil production in Turkey. The receivables are not collateralized. To date, the Company has experienced minimal bad debts, and has no allowance for doubtful accounts. The majority of the Company’s cash and cash equivalents are held by three financial institutions in the U.S. and Turkey.

Commodity price risk

Realized pricing of the Company’s oil and gas production in Turkey and the U.S. is primarily driven by the prevailing worldwide price of oil, subject to gravity and other adjustments for the actual product sold. Historically, oil and gas prices have been volatile and unpredictable. Price volatility relating to the Company’s production is expected to continue in the foreseeable future. The Company does not currently engage in any hedging activities to protect itself against market risks associated with oil and gas price fluctuations, although the Company may elect to do so in the future.

13. Contingent liabilities

Incremental has been involved in litigation with persons who claim ownership of a portion of the surface at the Selmo field in Turkey. These cases are being vigorously defended by Incremental and Turkish government authorities. The Company does not have enough information to estimate the value of the purported surface owners’ claims.

14. Commitments and contingencies

The Company has remaining work program commitments of $2.0 million under its Guercif exploration permits and $1.0 million under its Tselfat exploration permit in Morocco that are supported by fully-funded bank guarantees. The bank guarantees are reduced periodically based on work performed. In the event the Company fails to perform the required work commitments, the remaining amount of the bank guarantees would be forfeited.

On March 3, 2009, the Company amended the lease for its Dallas, Texas office space extending the term to December 31, 2013. The Company has entered into three-year leases for two offices and an apartment, along with one-year leases for an apartment and an operations yard in Morocco as well as one-year leases for an office and apartment in Romania. The Company has entered into a five-year lease for an operations yard and a one-year lease for apartments and office space at a hotel in Turkey. The Company’s aggregate annual commitments as of June 30, 2009 are as follows:

	Payments due by year (in thousands)
	Total		2009		2010		2011		2012		Thereafter
Leases	$	3,022	$	535	$	653	$	609	$	611	$	614
Permits		10,861		8,280		2,581		—		—		—
Contracts		16,100		10,550		5,500		50		—		—
Total debt, including interest		3,473		1,488		1,985		—		—		—
	$	33,456	$	20,853		10,719	$	659	$	611	$	614

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Normal purchase arrangements are excluded from the table as they are discretionary and/or being performed under contracts which are cancelable immediately or with a 30-day notification period.

The Company’s commitments under its permits and contracts require the Company to complete certain work projects on the relevant permit or license within a specified period of time. The Company’s current commitments under its permits and contracts are due in 2009 and 2010. If the Company fails to complete a work project by the specified deadline, the Company would lose its rights in such license or permit, and in the case of the Tselfat and Guercif permits, any remaining amount of the bank guarantees would be forfeited.

The Company’s commitments for permits as of June 30, 2009 included commitments to:

• Drill one well on the Tselfat permit in Morocco;

• Drill one well on one of the Guercif permits in Morocco;

• Drill one well on the Vanatori permit in Romania;

• Drill one well on the Marsa permit in Romania;

• Drill three wells on the Izvoru permit in Romania; and

• Conduct miscellaneous exploratory activities on several of the Company’s Turkish licenses.

The Company’s commitments for contracts as of June 30, 2009 included commitments to:

• Drill three wells on the Ouezzane-Tissa permits in Morroco in accordance with the Company’s farm-out agreement with Direct;

• Drill three wells on the Sud Craiova license in Romania in accordance with the Company’s farm-out agreement with Sterling; and

• Drill one well on license 4325 in Turkey in accordance with the Company’s agreement with Selsinsan Petrol Maden.

15. Related party transactions

Effective May 1, 2008, the Company entered into a service agreement, as amended (the “Service Agreement”), with Longfellow, Viking Drilling, LLC, Longe, MedOil Supply, LLC and Riata Management, LLC (“Riata”). Mr. Mitchell and his wife own 100% of Riata. In addition, Mr. Mitchell, his wife and children indirectly own 100% of Longfellow. Prior to the Company’s acquisition of Longe, Longe was owned 100% by Longfellow. Riata owns 100% of MedOil Supply, LLC. Dalea owns 85% of Viking Drilling, LLC. Under the terms of the Service Agreement, the Company pays, or is paid, for the actual cost of the services rendered plus the actual cost of reasonable expenses on a monthly basis. The Company recorded expenditures for the three and six months ended June 30, 2009 of $6.1 million and $8.7 million, respectively, for goods and services provided to the Company under the Service Agreement, of which $5.3 million was payable at June 30, 2009. The Company recorded expenditures for the three and six months ended June 30, 2008 of $13,000 for goods and services provided to the Company under the Service Agreement. Payables in the amount of $1.1 million due under the Service Agreement at March 31, 2009 were settled in cash during the second quarter of 2009. There were no amounts payable to the Company under the Service Agreement as of June 30, 2009.

On November 28, 2008, the Company entered into the Credit Agreement with Dalea. The purpose of the Credit Agreement was to fund the Offer for Incremental. Pursuant to the Credit Agreement, as amended, until June 30, 2009, the Company could request advances from Dalea of (i) up to $62,000,000 for the sole purpose of purchasing Incremental common shares in connection with the Offer, plus related transaction costs and expenses; and (ii) up to $14,000,000 for general corporate purposes. There were no amounts outstanding under the Credit Agreement as of December 31, 2008. The Company borrowed an aggregate of $64.6 million under the Credit Agreement and paid interest of $2.0 million during the first six months of 2009. The loan was repaid in full on June 23, 2009, at which time the Credit Agreement was terminated (see Note 9).

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On March 20, 2009, TransAtlantic Australia purchased 15,025,528 common shares of Incremental from Mr. Mitchell. The Company acquired these shares from Mr. Mitchell for cash at a price of AUD $1.085 per share, the same price per share and pursuant to the same terms as the shares acquired from Incremental’s other shareholders, none of whom had any relationship with the Company. Mr. Mitchell had purchased the Incremental shares between October 27, 2008 and December 23, 2008 at an average price of AUD $0.99 per share.

Effective January 1, 2009, the Company’s subsidiary, TransAtlantic Turkey, Ltd. (“TransAtlantic Turkey”), entered into a lease agreement under which it leases rooms, flats and office space at a resort hotel owned by a Turkish company controlled by Mr. Mitchell. Under the lease agreement, TransAtlantic Turkey pays the Turkish New Lira equivalent of $5,000 per month base rent and up to 45,000 Turkish New Lira per month (approximately $26,000 per month) in operating expense reimbursement. The lease agreement has a one-year term. The amounts paid under the lease agreement are included in amounts paid under the Service Agreement.

16. Subsequent events

The Company has evaluated events and transactions that occurred after the balance sheet date of June 30, 2009 through August 13, 2009 and disclosed the material events below.

Continuance

On July 14, 2009, the Company’s shareholders approved a plan of arrangement under theBusiness Corporations Act (Alberta), involving the Company and its shareholders, pursuant to which the Company would be continued under theCompanies Act 1981 of Bermuda under the name “TransAtlantic Petroleum Ltd.” The Company expects the continuance to be completed in the fourth quarter of 2009.

Energy Operations Turkey Acquisition

On July 23, 2009, the Company’s wholly-owned subsidiary, TransAtlantic Worldwide Ltd., acquired all of the ownership interests in Energy Operations Turkey, LLC (“EOT”) for total consideration of $7.8 million. EOT’s assets include a 50% interest in License 3118 in southeastern Turkey, interests in ten other exploration licenses in southern and southeastern Turkey, inventory and seismic data. In connection with the purchase of EOT, TransAtlantic Worldwide Ltd. entered into a promissory note with the sellers in the amount of $1.5 million due July 23, 2010. The note bears interest at a fixed rate of 3% per annum.

Rig Purchase

On July 27, 2009, the Company’s wholly-owned subsidiary, Viking International Limited (“Viking International”), purchased a drilling rig and associated equipment from Viking Drilling, LLC (“Viking Drilling”). Dalea owns 85% of Viking Drilling. Viking International paid $1.5 million in cash for the drilling rig and entered into a note to Viking Drilling in the amount of $5.9 million. The note is due and payable on August 1, 2010, bears interest at a fixed rate of 10% per annum and is secured by the drilling rig and associated equipment. Interest under the note is payable quarterly on November 1, 2009, February 1, 2010, May 1, 2010 and August 1, 2010.

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Part II

Item 6. Exhibits

31.1	Certification of the Chief Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer and Chief Financial Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

By:	/s/ Matthew McCann
	Matthew McCann
	Chief Executive Officer
By:	/s/ Hilda Kouvelis
	Hilda Kouvelis
	Chief Financial Officer
Date: September 24, 2009

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INDEX TO EXHIBITS

31.1	Certification of the Chief Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer and Chief Financial Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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