Magnum Hunter Resources 10-K/A 2008 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10- K/A

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008 or
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to_________

Commission file number: 001-32997

MAGNUM HUNTER RESOURCES CORPORATION

(Name of registrant as specified in its charter)

DELAWARE	86-0879278
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

777 Post Oak Boulevard, Suite 910, Houston, Texas  77056

(Address of principal executive offices, including zip code)

Registrant’s telephone number including area code:  (832) 369-6986

Securities registered under Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
$0.01 par value Common Stock	NYSE Amex

Securities registered under Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes oNo x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes oNo x

Indicate by check mark if 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 past 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 xNo o

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not  contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Act):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	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 oNo x

State the aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:  $27,075,429.

As of September 10 , 2009, 40,806,872 shares of the registrant’s common stock were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

EXPLANATORY NOTE:  Magnum Hunter Resources Corporation, a Delaware corporation formerly known as Petro Resources Corporation, is filing this second amendment to its Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as originally filed with the Securities and Exchange Commission on March 31, 2009 and as amended on April 29, 2009.  The purpose of this amendment is to replace the sections captioned “Future Net Cash Flows” and “Changes in Standardized Measure of Discounted Future Cash Flows” in Note 14 - Supplemental Oil and Gas Disclosures (Unaudited), which is an unaudited note to Magnum Hunter’s financial statements for the years ended December 31, 2008 and 2007 included in Item 8 Financial Statements and Supplementary Data in the Form 10-K.  More specifically, the 2008 “Future Net Cash Flows” and “Changes in Standardized Measure of Future Net Cash Flows” have been restated to exclude Magnum Hunter’s net operating losses, or NOLs, from the calculation of income tax expense since Magnum Hunter took a full valuation allowance against its deferred tax assets (including the NOLs) after concluding it was more likely then not that it will not generate enough taxable income to offset its existing NOL carry-forwards.  The Form 10-K is otherwise completely unchanged by this amendment.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Report of Independent  Registered Public Accounting Firm	F-1
Balance Sheets at December 31, 2008 and 2007	F-2
Statements of Operations for the years ended December 31, 2008 and 2007	F-3
Statements of Shareholders' Equity for the years ended December 31, 2008 and 2007	F-4
Statements of Cash Flows for the years ended December 31, 2008 and 2007	F-5
Notes to Financial Statements	F-6

36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Petro Resources Corporation

Houston, Texas

We have audited the accompanying consolidated balance sheets of Petro Resources Corporation (the "Company") as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Petro Resources Corporation as of December 31, 2008 and 2007, and the results of operations and cash flows for the two years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ MALONE & BAILEY, PC

www.malone-bailey.com

Houston, Texas

March 30, 2009

F-1

PETRO RESOURCES CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2008			2007
Assets
Current assets
Cash and cash equivalents		6,120,402			15,399,547
Accounts receivable		1,038,973			924,607
Prepaids		75,406			25,519
Derivative assets		2,944,997			-
Deferred financing costs, net of amortization of $1,513,586		-			2,378,492
Total current assets		10,179,778			18,728,165
Property and equipment
Oil and natural gas properties, successful efforts accounting
Unproved		18,562,932			24,676,434
Proved properties, net		27,264,790			18,936,428
Furniture and fixtures, net		110,499			118,354
Total property and equipment		45,938,221			43,731,216
Other assets
Investment in partnership		-			3,892,944
Derivative Assets		4,338,832			-
Deferred financing costs, net of amortization of $129,200		1,197,780			-
Deposit		10,257			10,257
Total other assets		5,546,869			3,903,201
Total Assets		61,664,868			66,362,582
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable		2,617,034			1,525,474
Accrued liabilities		106,592			210,351
Payable on sale of partnership		754,255			-
Stock payable		-			34,068
Note payable		19,527			-
Derivative liability		-			1,159,598
Short-term debt, net of discount of $2,956,206		-			11,344,136
Total current liabilities		3,497,408			14,273,627
Derivative liability		-			672,718
Revolving credit borrowings		6,500,000			-
Term loan		15,000,000			-
Asset retirement obligation		1,589,197			1,434,114
Total liabilities		26,586,605			16,380,459
Minority interest		1,384,909			3,025,375
Redeemable Preferred Stock
Series A Convertible Preferred Stock, $3 stated value, issued 2,410,776 shares;
cumulative, dividend rate 10% per annum with liquidation preferences		-			7,232,329
Shareholders' equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized,
2,410,776 shares of Series A Preferred Stock issued
and outstanding as of December 31, 2007 (reported above)		-			-
Common stock, $0.01 par value; 100,000,000 shares authorized,
36,768,172 and 36,599,372 shares issued and outstanding
as of December 31, 2008 and December 31, 2007 respectively		367,682			365,994
Additional paid in capital		51,311,502			49,723,515
Accumulated deficit		(17,985,830	)		(10,365,090	)
Total shareholders' equity		33,693,354			39,724,419
Total Liabilities and Shareholders' Equity		61,664,868			66,362,582

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

F-2

PETRO RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended
	December 31
	2008			2,007
Revenue
Oil and gas sales		14,486,478		6,920,533
Other income		200,000		100,000
Gain on sale of property		1,196,963		-
		15,883,441		7,020,533
Expenses
Lease operating expenses		5,378,991		3,510,521
Exploration		7,348,778		1,767,898
Impairment of oil & gas properties		1,973,015		95,272
Depreciation, depletion and accretion		7,682,293		1,781,263
General and administrative		3,964,664		2,751,647
Total expenses		26,347,741		9,906,601
Loss from operations		(10,464,300	)	(2,886,068	)
Other income and (expense)
Interest income		188,932		171,557
Interest expense		(2,771,858	)	(743,023	)
Loss on debt extinguishment		(2,790,829	)	-
Gain (loss) on derivative contracts		7,311,255		(2,458,165	)
Loss before minority interest		(8,526,800	)	(5,915,699	)
Minority interest		1,640,466		376,270
Net loss		(6,886,334	)	(5,539,429	)
Dividend on Series A Convertible Preferred		(734,406	)	(510,928	)
Net loss attributable to common stockholders		(7,620,740	)	(6,050,357	)
Earnings per common share
Basic and diluted		(0.21	)	(0.28	)
Weighted average number of common shares outstanding
Basic and diluted		36,714,489		21,253,995

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

F-3

PETRO RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

	Common Stock						Additional						Total
	Number						Paid-in			Accumulated			Shareholders'
	of Shares			Total			Capital			Deficit			Equity
Balance, December 31, 2006		19,677,317			196,773			14,816,718			(4,314,733	)		10,698,758
Exchange of preferred stock for common stock  and warrants		(1,573,800	)		(15,738	)		(4,705,663	)		-			(4,721,401	)
Legal expense on preferred stock		-			-			(14,705	)		-			(14,705	)
Preferred stock dividend		-			-			-			(510,928	)		(510,928	)
Restricted stock issued to Chief Financial Officer		25,000			250			62,750			-			63,000
Shares issued for purchase of property		3,144,655			31,447			10,691,827			-			10,723,274
Stock options issued for consulting services		-			-			58,000			-			58,000
Stock options to board of directors		-			-			913,701			-			913,701
Stock options to Chief Financial Officer		-			-			83,135			-			83,135
Stock issued for cash		15,326,200			153,262			28,353,470			-			28,506,732
Offering costs to issue stock		-			-			(535,718	)		-			(535,718	)
Net loss for the year ended December 31, 2007		-			-			-			(5,539,429	)		(5,539,429	)
Balance, December 31, 2007		36,599,372			365,994			49,723,515			(10,365,090	)		39,724,419
Preferred stock dividend											(734,406	)		(734,406	)
Restricted stock issued to employees and consultants		168,800			1,688			341,782						343,470
Stock options to employees								1,246,205						1,246,205
Net loss											(6,886,334	)		(6,886,334	)
Balance, December 31, 2008		36,768,172			367,682			51,311,502			(17,985,830	)		33,693,354

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

F-4

PETRO RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
	December 31
	2008			2007
Cash flows from operating activities
Net loss		(6,886,334	)		(5,539,429	)
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest		(1,640,466	)		(376,270	)
Depletion, depreciation, and accretion		7,682,293			1,781,263
Amortization included in interest expense		1,737,458			468,938
Amortization of insurance expense		-			125,972
Impairment		1,973,015			95,272
Gain on asset retirement obligation		(16,837	)		-
Dry hole costs		7,140,013			1,310,988
Issuance of common stock and stock options for services		1,589,675			1,117,836
Gain on sale of assets		(1,196,963	)		-
Loss on extinguishment of debt		2,790,829			-
Unrealized (gain) loss on derivative contracts		(9,116,145	)		1,832,316
Changes in operating assets and liabilities:
Accounts receivable and accrued revenue		(114,366	)		(833,263	)
Prepaid expenses		(49,887	)		-
Accounts payable		(631,563	)		626,873
Accrued expenses		176,607			243,119
Net cash provided by operating activities		3,437,329			853,615
Cash flows from investing activities
Capital expenditures		(16,222,790	)		(14,266,262	)
Proceeds from sale of assets		7,843,962			-
Acquisition of Williston Basin		-			(14,097,855	)
Investment in partnership		(1,999,800	)		(1,599,840	)
Net cash used in investing activities		(10,378,628	)		(29,963,957	)
Cash flows from financing activities
Proceeds from sale of common stock, net		-			27,971,014
Issuance of preferred stock					2,000,000
Cost to issue preferred stock		-			(14,705	)
Financing costs		(1,326,980	)		(3,892,078	)
Payments for debt refinancing		(144,565	)		-
Redemption of preferred stock		(7,966,735	)		-
Proceeds from debt refinancing		5,128,947			-
Proceeds from note payable		4,225,348			28,534,442
Payments of note payable		(2,253,861	)		(14,373,988	)
Net cash provided by (used in) financing activities		(2,337,846	)		40,224,685
Net increase (decrease) in cash and cash equivalents		(9,279,145	)		11,114,343
Cash and cash equivalents, beginning of period		15,399,547			4,285,204
Cash and cash equivalents, end of period		6,120,402			15,399,547
Supplemental disclosure of cash flow information
Cash paid for interest		1,554,484			1,944,388
Cash paid for federal income taxes		-			-
Non-cash transactions
Common stock issued in acquisition of Williston Basin properties		-			10,723,274
Royalty interest issued in connection with debt		-			4,837,429
Preferred stock dividend paid in preferred shares		-			510,928
Cancellation of common stock in exchange for preferred stock		-			4,721,401
Refinancing of Petrobridge loan		16,239,152			-
Capitalized interest in oil and gas properties		1,080,177			1,675,802
Property and equipment included in accounts payable		1,527,440			681,731

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

F-5

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Petro Resources Corporation is an oil and gas exploration and production company  incorporated in June 1997 in the State of Delaware.

In February 2007, as more fully discussed in Note 4 below, Petro formed a wholly-owned subsidiary, PRC Williston, LLC, a Delaware limited liability company, for the purpose of acquiring working interests in crude oil and natural gas producing properties

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. These estimates are based on information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary significantly from those estimates under different assumptions and conditions.

Critical accounting policies are defined as those significant accounting policies that are most critical to an understanding of a company’s financial condition and results of operation. We consider an accounting estimate or judgment to be critical if (i) it requires assumptions to be made that were uncertain at the time the estimate was made, and (ii) changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.

Successful Efforts Accounting

Petro uses the successful efforts method of accounting for crude oil and natural gas producing activities. Costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells that find proved reserves, to drill and equip development wells and related asset retirement costs are capitalized and amortized on a unit-of-production basis over the remaining life of proved developed reserves and proved reserves on a field basis. Unproved leasehold costs are capitalized pending the results of exploration efforts. Costs to drill exploratory wells that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining unproved properties are charged to expense when incurred.

Principles of Consolidation.

The accompanying consolidated financial statements include Petro Resources Corporation and its wholly−owned subsidiary PRC Williston, LLC. Intercompany accounts and transactions have been eliminated in consolidation.

Cash and cash equivalents

Cash and cash equivalents include cash in banks and highly liquid debt securities that have original maturities of three months or less. Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash deposits.  Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.  At December 31, 2008, the Company had cash deposits in excess of FDIC insured limits at various financial institutions.

Deferred financing costs.

In connection with debt financings in 2008, Petro Resources paid $1,326,980 in fees. These fees were recorded as deferred financing costs and are being amortized over the life of the loans using the effective interest rate method or the straight line method when the debt is in the form of a line of credit. The total amortization of $129,200 was all incurred in 2008.

F-6

Convertible instruments.

We follow SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” and SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as well as EITF Issue No. 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features of Contingency Adjustment Conversion Ratios” in determining if there are any bifurcation or beneficial conversion issues.

Derivative Financial Instruments.

We use commodity derivative financial instruments, typically options and swaps, to manage the risk associated with fluctuations in oil and gas prices. We account for derivatives under the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and related interpretations and amendments. SFAS No. 133, as amended, establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair market value. The statement requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge criteria are met. Special accounting for qualifying hedges allows a derivative’s gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Our oil and gas price derivative contracts are not designated as hedges. In accordance with provisions of SFAS No. 133, these instruments have been marked-to-market through earnings.

Valuation of Property and Equipment

The Company accounts for the impairment and disposition of long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 requires that the Company’s long-lived assets, including its oil and gas properties, be assessed for potential impairment in their carrying values whenever events or changes in circumstances indicate such impairment may have occurred.  An impairment charge to current operations is recognized when the estimated undiscounted future net cash flows of the asset are less than its carrying value. Any such impairment is recognized based on the differences in the carrying value and estimated fair value of the impaired asset.

SFAS 144 provides for future revenue from the Company’s oil and gas production to be estimated based upon prices at which management reasonably estimates such products will be sold. These estimates of future product prices may differ from current market prices of oil and gas. Any downward revisions to management’s estimates of future production or product prices could result in an impairment of the Company’s oil and gas properties in subsequent periods.

The long-lived assets of the Company, which are subject to evaluation, consist primarily of oil and gas properties. Due to the regularly scheduled impairment reviews by management, the Company recognized a non-cash, pre-tax charge against earnings of $1,973,015 and $95,272 in 2008 and 2007, respectively.

Oil and Gas Exploration and Development

Oil and gas exploration and development costs are accounted for using the successful efforts method of accounting.

Property Acquisition Costs

Oil and gas leasehold acquisition costs are capitalized and included in the balance sheet caption property and equipment. Leasehold impairment is recognized based on exploratory experience and management's judgment. Upon discovery of commercial reserves, leasehold costs are transferred to proved properties.

F-7

Exploratory Costs

Geological and geophysical costs and the costs of carrying and retaining undeveloped properties are expensed as incurred. Exploratory well costs are capitalized on the balance sheet pending further evaluation of whether economically recoverable reserves have been found. If economically recoverable reserves are not found, exploratory well costs are expensed as dry holes. If exploratory wells encounter potentially economic quantities of oil and gas, the well costs remain capitalized on the balance sheet as long as sufficient progress assessing the reserves and the economic and operating viability of the project is being made.

Management reviews exploratory well balances quarterly, continuously monitors the results of the additional appraisal drilling and seismic work, and expenses the exploratory well costs as a dry hole when it judges that the potential field does not warrant further investment in the near term.

Development Costs

Costsincurred to drill and equip development wells, including unsuccessful development wells, are capitalized.

Depletion and Amortization

Leasehold costs of producing properties are depleted using the unit-of-production method based on estimated proved oil and gas reserves. Amortization of intangible development costs is based on the unit-of-production method using estimated proved developed oil and gas reserves.

Capitalized Interest

Interest from external borrowings is capitalized on major projects with an expected construction period of one year or longer. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful lives of the assets in the same manner as the underlying assets.

Impairment of Property and Equipment

Property and equipment used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in the future cash flows expected to be generated by an asset group. If, upon review, the sum of the undiscounted pretax cash flows is less than the carrying value of the asset group, the carrying value is written down to estimated fair value and reported as impairments in the periods in which the determination of the impairment is made. Individual assets are grouped for impairment purposes at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets-generally on a field-by-field basis for exploration and production assets. The fair value of impaired assets is determined based on quoted market prices in active markets, if available, or upon the present values of expected future cash flows using discount rates commensurate with the risks involved in the asset group. Long-lived assets committed by management for disposal within one year are accounted for at the lower of amortized cost or fair value, less cost to sell.

The expected future cash flows used for impairment reviews and related fair value calculations are based on estimated future production volumes, prices and costs, considering all available evidence at the date of review. The impairment review includes cash flows from proved developed and undeveloped reserves, including any development expenditures necessary to achieve that production. Additionally, when probable reserves exist, an appropriate risk-adjusted amount of these reserves may be included in the impairment calculation. 

Asset Retirement Obligations and Environmental Costs

We record the fair value of legal obligations to retire and remove long-lived assets in the period in which the obligation is incurred (typically when the asset is installed at the production location). When the liability is initially recorded, we capitalize this cost by increasing the carrying amount of the related property and equipment. Over time the liability is increased for the change in its present value, and the capitalized cost in properties, plants and equipment is depreciated over the useful life of the related asset. See Note 6 - Asset Retirement Obligations and Accrued Environmental Costs, for additional information.

F-8

Cost Method

Under the guidance of Emerging Issues Task Force D-46, Accounting for Limited Partnership Investments.  Petro uses the cost method to account for its limited partnership and membership interest that represent an ownership interest that exceeds 5% of the applicable entity, but is less than 20% of the applicable entity. Under the cost method of accounting, Petro’s investment is stated at the original investment amount and increased or decreased by subsequent investments or distributions. During fiscal year 2007, as more fully described in Note 5, Petro accounted for its investment in Hall-Houston Exploration II, L.P. under the cost method of accounting.

Revenue Recognition

Revenues associated with sales of crude oil, natural gas, natural gas liquids and petroleum products, and other items are recognized when title passes to the customer, which is when the risk of ownership passes to the purchaser and physical delivery of goods occurs, either immediately or within a fixed delivery schedule that is reasonable and customary in the industry.

Revenues from the production of natural gas and crude oil properties, in which we have an interest with other producers, are recognized based on the actual volumes we sold during the period. Any differences between volumes sold and entitlement volumes, based on our net working interest, which are deemed to be non-recoverable through remaining production, are recognized as accounts receivable or accounts payable, as appropriate. Cumulative differences between volumes sold and entitlement volumes are generally not significant.

Share Based Compensation

The Company accounts for share-based compensation in accordance with the provisions of Statement of Financial Accounting Standards No. FAS 123(R), Share Based Payment requires companies to estimate the fair value of share-based payment awards made to employees and directors, including stock options, restricted stock and employee stock purchases related to employee stock purchase plans, on the date of grant using an option-pricing model.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods.  We estimate the fair value of each share-based award using the Black-Scholes option pricing model. The Black-Scholes model is highly complex and dependent on key estimates by management. The estimates with the greatest degree of subjective judgment are the estimated lives of the stock-based awards and the estimated volatility of our stock price.

Income Taxes

The Company uses the asset liability method in accounting for income taxes. Deferred tax assets and liabilities are recognized for temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities, and are measured using the tax rates expected to be in effect when the differences reverse. Deferred tax assets are also recognized for operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is used to reduce deferred tax assets when uncertainty exists regarding their realization.

On January 1, 2007, the Company adopted the provisions of FIN 48, Accounting for Uncertainty in Income Taxes, and (“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under FIN 48, we recognize tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities.  The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement.  A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.  As of December 31, 2008 and 2007, the Company has determined that no liability is required to be recognized due to adoption of FIN48.

F-9

In May 2007, the FASB issued FSP No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48, (FIN 48-1) which amends FIN 48 and provides guidance concerning how an entity should determine whether a tax position is “effectively,” rather than the previously required “ultimately,” settled for the purpose of recognizing previously unrecognized tax benefits. In addition, FIN 48-1 provides guidance on determining whether a tax position has been effectively settled. The guidance in FIN 48-1 is effective upon the initial January 1, 2007 adoption of FIN 48. Companies that have not applied this guidance must retroactively apply the provisions of this FSP to the date of the initial adoption of FIN 48. The Company has adopted FIN 48-1 and no retroactive adjustments were necessary.

Loss per Common Share

Basic and diluted net loss per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the year. For the years ended December 31, 2008 and 2007, there were no potential common equivalent shares used in the calculation of weighted average common shares outstanding as the effect would be anti-dilutive because of the net loss.

Recently Issued Accounting Pronouncements. 

On December 31, 2008, the Securities and Exchange Commission (SEC) issued the final rule, “Modernization of Oil and Gas Reporting” (“Final Rule”). The Final Rule adopts revisions to the SEC’s oil and gas reporting disclosure requirements and is effective for annual reports on Forms 10-K for years ending on or after December 31, 2009. The revisions are intended to provide investors with a more meaningful and comprehensive understanding of oil and gas reserves to help investors evaluate their investments in oil and gas companies. The amendments are also designed to modernize the oil and gas disclosure requirements to align them with current practices and technological advances. Revised requirements in the Final Rule include, but are not limited to:

· Oil and gas reserves must be reported using a 12-month average of the closing prices on the first day of each of such months, rather than a single day year-end price:

· Companies will be allowed to report, on a voluntary basis, probable and possible reserves, previously prohibited by SEC rules; and

· Easing the standard for the inclusion of proved undeveloped reserves (PUDs) and requiring disclosure of information indicating any progress toward the development of PUDs.

We are currently evaluating the potential impact of adopting the Final Rule. The SEC is discussing the Final Rule with the FASB and IASB staffs to align accounting standards with the Final Rule. These discussions may delay the required compliance date. Absent any change in such date, we will begin complying with the disclosure requirements in our annual report on Form 10-K for the year ended December 31, 2009. Voluntary early compliance is not permitted.

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities. SFAS 161 is effective beginning January 1, 2009 and required entities to provide expanded disclosures about derivative instruments and hedging activities including (1) the ways in which an entity uses derivatives, (2) the accounting for derivatives and hedging activities, and (3) the impact that derivatives have (or could have) on an entity’s financial position, financial performance, and cash flows. SFAS 161 requires expanded disclosures and does not change the accounting for derivatives. Petro is currently evaluating the impact of SFAS 161, but we do not expect the adoption of this standard to have a material impact on our financial results.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 5 1 ("SFAS 160"), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent's ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that require disclosure that clearly identifies and distinguishes between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective on January 1, 2009 and the Company is currently evaluating the potential impact, if any, of the adoption of SFAS 160 on its consolidated financial statements.

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In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value (Fair Value Option). Election of the Fair Value Option is made on an instrument-by-instrument basis and is irrevocable. At the adoption date, unrealized gains and losses on financial assets and liabilities for which the Fair Value Option has been elected would be reported as a cumulative adjustment to beginning retained earnings. Following the election of the Fair Value Option for certain financial assets and liabilities, the Company would report unrealized gains and losses due to changes in fair value in earnings at each subsequent reporting date. The Company adopted SFAS 159 effective January 1, 2008 which did not have a material impact on the Company’s operating results, financial position or cash flows as the Company did not elect the Fair Value Option for any of its financial assets or liabilities.

In  September 2006, the FASB issued SFAS 157, Fair Value Measurements (SFAS 157), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This pronouncement applies to other standards that require or permit fair value measurements. Accordingly, this statement does not require any new fair value measurement. The provisions of SFAS 157 are effective for the Company on January 1, 2008. We have partially adopted FAS 157 as of January 1, 2008 except for those non-recurring measurements for non-financial assets and non-financial liabilities subject to the partial deferral in FASB Statement of Position No. 157-2, Partial Deferral of the Effective Date of Statement 157,” (“FSP 157-2”).  The adoption of FAS 157 did not have an impact on the Company’s consolidated financial position or operating results.   FSP 157-2 delays the effective date of FAS 157 from fiscal years beginning after November 15, 2007 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).  

Reclassification of Prior-Year Balances

Certain prior-year balances in the consolidated financial statements have been reclassified to correspond with current-year classifications.

NOTE 2 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Effective January 1, 2008, the Company adopted the provisions of SFAS No. 157, Fair Value measurements, for all financial instruments. SFAS 157 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

● Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets

● Level 2 — Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable

● Level 3 — Significant inputs to the valuation model are unobservable

The following describes the valuation methodologies we use to measure financial instruments at fair value. 

Derivative Instruments

At December 31, 2008, we had commodity derivative financial instruments in place that do not qualify for hedge accounting under SFAS 133. Therefore, the changes in fair value subsequent to the initial measurement are recorded in income. Although our derivative instruments are valued using public indexes, the instruments themselves are traded with third-party counterparties and are not openly traded on an exchange. As such, our derivative liabilities have been classified as Level 2.

F-11

The following table provides a summary of the fair value of our derivative liabilities measured on a recurring basis under SFAS 157:

	Fair value measurements on a recurring basis December 31, 2008
	Level 1		Level 2		Level 3
Assets
Commodity derivatives	$	-	$	7,283,829	$	-
Liabilities
Commodity derivatives	$	-	$	-	$	-

NOTE 3 - FINANCIAL INSTRUMENTS AND DERIVATIVES

We entered into commodity derivative financial instruments intended to hedge our exposure to market fluctuations of oil prices. As of December 31, 2008, we had commodity swaps for the following oil volumes:

	Barrels per quarter		Barrels per day		Price per barrel
2009
First quarter		9,725		108	$	71.76
Second quarter		8,325		91	$	72.62
Third quarter		8,400		91	$	72.55
Fourth quarter		8,400		91	$	72.55
2010
First quarter		14,825		165	$	93.50
Second quarter		15,000		165	$	105.45
Third quarter		15,000		163	$	105.45
Fourth quarter		15,000		163	$	105.45
2011
First quarter		13,500		150	$	105.45
Second quarter		13,500		148	$	105.45
Third quarter		13,500		147	$	105.45
Fourth quarter		13,500		147	$	105.45

As of December 31, 2008, the fair value of the above commodity swaps  $4,792,629.

On June 5, 2008, the Company purchased a floor at $110 per barrel for 100 bbls per day for the calendar year 2009 for a price of $363,175. As of  December 31, 2008 the fair value of the floor was $2,052,620.

On October 6, 2008, the Company purchased a floor at $7.75 per MCF for 20,000 MCF per month for the calendar year 2009 for a price of $200,400. As of  December 31, 2008 the fair value of the floor was $438,580.

During the year ended December 31, 2008, we incurred a gain of $7,311,255 related to derivative contracts. Included in this gain was $1,241,315 of realized losses related to settled contracts, and $8,552,570 of unrealized gains related  to unsettled  contracts. Unrealized gain and losses are based on the changes in the fair value of derivative instruments covering positions beyond December 31, 2008.

F-12

NOTE 4 - WILLISTON BASIN ACQUISITION

On February 16, 2007, we closed on the acquisition of an approximate 43% average working interest in 15 fields located in the Williston Basin in North Dakota. Pursuant to the Purchase and Sale Agreement dated December 11, 2006 between Eagle Operating Inc., of Kenmare, North Dakota, and our newly formed wholly-owned subsidiary, PRC Williston, LLC, a Delaware limited liability company, we acquired 50% of Eagle Operating’s working interest in approximately 15,000 acres and 150 wells which produced approximately 350 barrels of oil per day net to PRC Williston’s interest during December 2007. The acquisition was accounted for using the purchase method under SFAS No. 141. Eagle Operating is the operator of the Williston Basin properties.

As consideration for the working interest, our preliminary purchase price included $12,653,648 in cash, which included $2,653,648 of additional well costs incurred by Eagle Operating, and issued 3,144,655 shares of our common stock valued at $10,723,274 (based on the average of the high and low price per share on the closing date) to Eagle Operating. In addition, we incurred $1,744,207 in fees and expenses related to the acquisition and assumed the asset retirement obligation associated with these properties of $1,250,323. Further, we agreed to contribute development capital towards 100% of the mutually agreed upon joint capital costs of the existing secondary recovery and development program and in other joint participations with Eagle Operating over a five year period not to exceed $45 million.

The acquisition was financed by borrowings under a $75 million credit facility.  In connection with obtaining the credit facility, we granted the lender an aggregate 4% overriding royalty interest and we entered into a participation agreement. (see Note 8)

The purchase price allocation of the assets acquired on February 16, 2007 is as follows:

Assets
Oil and gas properties	$	26,371,452
Liabilities and equity
Asset retirement obligation	$	(1,250,323	)
Net	$	25,121,129

The results of this acquisition are included in the consolidated financial statements from the date of acquisition. Unaudited pro forma operating results for Petro Resources, assuming the acquisition occurred at January 1, 2007, are as follows:

	Year ended December 31, 2007
Revenue	$	7,615,876
Net loss		(6,353,774	)
Net loss per common share	$	(.30	)

The unaudited pro forma results are not necessarily indicative of what would have occurred if the acquisition had been in effect for the period presented. In addition, they are not intended to be a projection of future results.

NOTE 5 - INVESTMENT IN LIMITED PARTNERSHIP

In April 2006, Petro Resources agreed to purchase up to $8 million of limited partnership interests in Hall-Houston Exploration II, L.P., a newly formed oil and gas exploration and development partnership that intends to focus primarily offshore in the Gulf of Mexico.  In April 2006, Hall-Houston Exploration II, L.P. received commitments for a total of $150 million from the sale of limited partnership interests.  Petro Resources’ interest in Hall-Houston Exploration II, L. P. represents approximately 5.3% of all interests held by limited partners.  The limited partnership commenced exploration activities in the third quarter of 2006.  Pursuant to the limited partnership agreement, the limited partners of Hall-Houston Exploration II, L. P. are required to fund their investment in the partnership based on calls for capital made by the general partner from time to time.  The general partner can issue a call for capital contributions at any time, and from time to time, over a three year period expiring in April 2009.  As of December 31, 2007, Petro Resources had funded $3,892,944 of its $8 million commitment.

F-13

On September 26, 2008, the Company sold its 5.33% limited partner interest in Hall-Houston Exploration II, L. P. pursuant to a Partnership Interest Purchase Agreement dated September 26, 2008, as amended on September 29, 2008. The interest was purchased by a non-affiliated partnership for a cash consideration of $8.0 million and the purchaser’s assumption of the first $1,353,000 of capital calls subsequent to September 26, 2008.  The Company agreed to reimburse the purchaser for up to $754,255 of capital calls in excess of the first $1,353,000. The Company’s net gain on the sale of the asset of  is subject to future upward adjustment to the extent that some or all of the $754,255 is not called.  As of and for the year ended December 31, 2008, the Company reported a net gain on the sale of the above interest of  $1,113,000 and recognized the liability for the capital calls.  The proceeds of the sale of the limited partnership were used to redeem the Company’s outstanding shares of Series A Preferred Stock.

NOTE 6 - ASSET RETIREMENT OBLIGATIONS

SFAS Interpretation 47 (“FIN 47”), “Accounting for Conditional Asset Retirement Obligations”, an interpretation of SFAS No. 143, clarifies that the term “conditional asset retirement obligation” as used in SFAS No. 143 refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. FIN 47 requires a liability to be recognized for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 was effective for fiscal years ending after December 15, 2005.

	2008			2007
Asset retirement obligation at beginning of period	$	1,434,114		$	30,653
Purchase		-			1,250,323
Liabilities incurred		93,154			42,407
Liabilities settled		(17,012)			-	)
Accretion expense		138,772			111,301
Revisions in estimated liabilities		(59,831	)		(570	)
Asset retirement obligation at end of period	$	1,589,197		$	1,434,114

NOTE 7 - ACCUMULATED PRODUCTION FLOOR PAYMENTS

On February 16, 2007, we acquired from Eagle Operating, Inc. an interest in 15 producing oil fields located in the Williston Basin of North Dakota. For a period of thirty-six months following the acquisition date, Eagle Operating has guaranteed that PRC Williston’s share of gross monthly production revenue from the properties will not be less than the financial equivalent of 300 barrels of oil per day multiplied by the number of days in a given month (the product referred to as the “production floor”). In the event that our net share of gross production for any month is less than the production floor, Eagle Operating is obligated to pay to Petro Resources, in cash, an amount equal to the difference between the production floor and the actual net barrels to our interest multiplied by the average price of crude oil paid for the oil production from the properties for that month (the “production floor payment”). During the thirty-six month period, for any month in which our net share of oil production exceeds the production floor, Eagle Operating shall be entitled to recover a portion of the production floor payments previously made to us, also in the form of a cash payment, not to exceed the amount by which our net share of oil production exceeds the production floor for such month (a “production floor reimbursement”). At the end of the thirty-six month period, we are obligated to repay to Eagle Operating, in cash, the amount of cumulative production floor payments, net of any production floor reimbursements. At December 31, 2008 and 2007, there were no amounts due related to the production floor payments.

F-14

NOTE 8 - NOTES PAYABLE

In connection with the Williston Basin acquisition, we entered into a $75 million credit agreement (the “Credit Facility” or “Petrobridge Note”) pursuant to which the lenders have agreed to initially loan us $20,273,183 for purposes of financing our Williston Basin acquisition, including certain transaction costs and fees, certain costs of drilling and development of oil and gas properties, and general working capital. Any further advances under the Credit Facility are to be used for drilling and development or to fund additional oil and gas property acquisitions, and are subject to certain conditions and the prior approval of the lenders.

All funds borrowed under the Credit Facility bear interest at a rate equal to (x) the greater of the prime rate or 7.5%, plus (y) 2%, with interest payable monthly. The principal amount of advances outstanding under the credit agreement are repayable monthly in an amount approximating 100% of PRC Williston’s cash on hand (from any source) less all permitted costs and expenses paid by PRC Williston for the monthly period.

PRC Williston’s obligations under the credit agreement have been secured by its grant of a first priority security interest and mortgage on all of its assets. Petro Resources has guaranteed the performance of PRC Williston’s obligations under the credit agreement and related agreements and has secured its guarantee by granting to the lenders a first priority security interest in its ownership interest in PRC Williston.

Under the credit agreement, Petro Resources was required to make an equity contribution of at least $5 million to PRC Williston within one hundred eighty days of February 16, 2007, the proceeds of which were to be used to pay down the outstanding principal under the credit agreement. In connection with the acquisition, we entered into equity participation agreements with the lenders pursuant to which we agreed to pay to the lenders an aggregate of 12.5% of all distributions paid to the owners of PRC Williston, which at this time is 100% owned by Petro Resources. PRC Williston also granted the lenders a 4% overriding royalty interest, proportionally reduced by our net revenue interest, in its oil and gas leases. The participation and overriding royalty interest was valued at $4,537,826 and the loan origination fee of $299,604 is included in the notes payable discount. Also in connection with debt financings in 2007, Petro Resources paid $3,892,078 in fees, of which approximately $1.0 million was related to waivers and additional financing of $7.4 million. These fees were recorded as deferred financing costs. Both the discount and the deferred financing costs are being amortized over the life of the loans using the straight line method due to the fact that the credit facility is structured as a line of credit.

The credit agreement obligates PRC Williston to comply with certain financial covenants calculated as of the last day of each fiscal quarter, including a minimum current ratio beginning with the quarter ending on June 30, 2007, a minimum interest coverage ratio and debt coverage ratios based on earnings and petroleum reserves, as such ratios are defined in the agreement. In addition, the credit agreement also provides for restrictions on additional borrowings, payments to members, investments and capital expenditures. PRC Williston was in violation of certain of these covenants and entered into an agreement with the lender waiving the required calculation of the financial covenants through December 31, 2007.  As a result of this default, the entire credit agreement amount was classified to current liabilities as of December 31, 2007.

 On March 1, 2007, Petro Resources signed a promissory note with a finance company to finance its various insurance policies. The interest rate on the note is 7.90% with payments of $13,225 per month beginning April 1, 2007 and the final payment due February 1, 2008. The note is secured by the insurance policies. At December 31, 2007, the outstanding balance on the note was $13,150.  The note was fully paid  on February 1, 2008.

On September 9, 2008, the Company entered into (1) a $50 million Credit Agreement (the "Credit Agreement") with certain lenders named in the agreement and CIT Capital USA Inc., as administrative agent for the lenders and (2) a $15 million Second Lien Term Loan Agreement (the "Second Lien Term Loan Agreement") with certain lenders named in the agreement and CIT Capital USA Inc., as administrative agent for the lenders.

The Credit Agreement provides for a $50 million first lien revolving credit facility, with an initial borrowing base availability of $17 million.  The first lien facility may be used for loans and, subject to a $500,000 sublimit, letters of credit.  Borrowings under the Credit Agreement may be used to provide working capital for exploration and production purposes, to refinance existing debt, and for general corporate purposes.  The maturity date of the Credit Agreement is September 9, 2011.

F-15

Borrowings under the Credit Agreement bear interest, at the Company's option, at either a fluctuating base rate or a rate equal to LIBOR plus, in each case, a margin determined based on the Company's utilization of the borrowing base.  If an event of default occurs and is continuing, the lenders may increase the interest rate then in effect by an additional 2% per annum.  The Credit Agreement contains covenants that, among others things, restrict the ability of the Company to, with certain exceptions: (1) incur indebtedness; (2) grant liens; (3) acquire other companies or assets; (4) dispose of all or substantially all of its assets or enter into mergers, consolidations or similar transactions; (5) make restricted payments; (6) enter into transactions with affiliates; and (7) make capital expenditures.  The Credit Agreement also requires the Company to satisfy certain financial covenants, including maintaining (1) a ratio of EBITDAX to Interest Expense (as each term is defined in the Credit Agreement) of not less than 2.5:1.0; (2) a ratio of Net Debt (as such term is defined in the Credit Agreement) to EBITDAX of not more than (a) 4.5:1.0 for the fiscal quarters ending December 31, 2008, March 31, 2009, June 30, 2009 and September 30, 2009, and (b) 3.5:1.0 for each fiscal quarter ending thereafter; and (3) a ratio of consolidated current assets to consolidated current liabilities of not less than 1.0:1.0.  The Company is also required to enter into certain swap agreements pursuant to the terms of the Credit Agreement.

PRC Williston LLC, the Company's wholly owned subsidiary ("PRC Williston"), has guaranteed the performance of all of the Company's obligations under the Credit Agreement and related agreements pursuant to a Guaranty and Collateral Agreement dated as of September 9, 2008 (the "Guaranty and Collateral Agreement").  Subject to certain permitted liens, the Company's obligations have been secured by the grant of a first priority lien on no less than 80% of the value of the Company's and PRC Williston's existing and to-be-acquired oil and gas properties and the grant of a first priority security interest in related personal property of the Company and PRC Williston.  The Company has also granted a first priority security interest in its ownership interest in PRC Williston, subject only to certain permitted liens.

The Second Lien Term Loan Agreement provides for a $15 million second lien term loan facility.  All term loans available under the second lien term loan facility were advanced to the Company on September 9, 2008 and were used to refinance existing debt.  The maturity date of the Second Lien Term Loan Agreement is September 9, 2012.  Under certain circumstances, the Company is permitted to repay the term loans prior to the maturity date; however, any payments made on or prior to September 9, 2009 are subject to a prepayment penalty equal to 2% of the amount prepaid, and any payments made after September 9, 2009 but on or before September 9, 2010 are subject to a prepayment penalty equal to 1% of the amount prepaid.

Borrowings under the Second Lien Term Loan Agreement bear interest, at the Company's option, at either a fluctuating base rate plus 6.50% per annum or a rate equal to LIBOR plus 7.50% per annum.  If an event of default occurs and is continuing, the lenders may increase the interest rate then in effect by an additional 2% per annum.  The Second Lien Term Loan Agreement contains covenants that, among others things, restrict the ability of the Company to, with certain exceptions: (1) incur indebtedness; (2) grant liens; (3) acquire other companies or assets; (4) dispose of all or substantially all of its assets or enter into mergers, consolidations or similar transactions; (5) make restricted payments; (6) enter into transactions with affiliates; and (7) make capital expenditures.  The Second Lien Term Loan Agreement also requires the Company to satisfy certain financial covenants, including maintaining (1) a ratio of Total Reserve Value to Debt (as each term is defined in the Second Lien Term Loan Agreement) of not less than 1.75:1.0; and (2) a ratio of Net Debt to EBITDAX (as each term is defined in the Second Lien Term Loan Agreement) of not more than (a) 4.5:1.0 for the fiscal quarters ending December 31, 2008, March 31, 2009, June 30, 2009 and September 30, 2009, and (b) 4.0:1.0 for each fiscal quarter ending thereafter.

PRC Williston LLC has guaranteed the performance of all of the Company's obligations under the Second Lien Term Loan Agreement and related agreements pursuant to a Second Lien Guaranty and Collateral Agreement dated as of September 9, 2008 (the " Second Lien Guaranty and Collateral Agreement").  Subject to certain permitted liens (including, without limitation, the liens and security interests granted in connection with the Credit Agreement referenced above), the Company's obligations under the Second Lien Term Loan Agreement have been secured by the grant of a first priority lien on no less than 80% of the value of the Company's and PRC Williston's existing and to-be-acquired oil and gas properties and the grant of a first priority security interest in related personal property of the Company and PRC Williston.  The Company has also granted a first priority security interest in its ownership interest in PRC Williston, subject only to certain permitted liens (including, without limitation, the security interest granted in connection with the Credit Agreement).

F-16

The Credit Agreement was amended effective as of March 25, 2009 because we were unable to comply with the interest and debt coverage covenants under the terms of the original Credit Agreement and Second Lien Term Loan Agreement for the fiscal quarter ended December 31, 2008. Pursuant to the amendments, the administrative agent and the lenders have agreed to waive these defaults. In connection with the semi-annual review of our borrowing base, lower commodity prices have resulted in our borrowing base for the Credit Agreement being reduced from $17M to $12M. The terms of the Credit Agreement and Second Lien Term Loan Agreement as amended are as follows.

Under the amended Credit Agreement, the Company must have (A) a ratio of EBITDAX to Interest Expense (as each term is defined in the Credit Agreement) of not less than 2.0:1.0 for the first and second fiscal quarters of 2009, 2.25:1.0 for the third and fourth fiscal quarters of 2009, and 2.5:1.0 for each fiscal quarter thereafter; (B) a ratio of Net Debt (as such term is defined in the Credit Agreement) to EBITDAX of not more than 6.5:1.0 for the fiscal quarters of 2009, 6.0:1.0 for the fiscal quarters of 2010, and 5.0:1 for each fiscal quarter thereafter; and (C) a ratio of First Lien debt to EBITDAX of not more than 2.75:1.0 for each fiscal quarter. Borrowings under the Credit Agreement bear interest, at our option, at either a fluctuating base rate or a rate equal to LIBOR (with a LIBOR floor of 2.50%) plus, in each case, a margin determined based on our utilization of the borrowing base. The amendment includes an increase in the margin of 50 basis points.

Under the amended Second Lien Term Loan Agreement, the Company must have a ratio of Net Debt to EBITDAX (as each term is defined in the Second Lien Term Loan Agreement) of not more than 6.5:1.0 for the fiscal quarters of 2009 and 2010 and 5.5:1 for the fiscal quarters of 2011 each fiscal quarter ending thereafter. Borrowings under the Second Lien Term Loan Agreement bear interest, at our option, at either a fluctuating base rate plus 6.50% per annum or a rate equal to LIBOR (with a LIBOR floor of 2.50%) plus 7.50% per annum.

The Company incurred approximately $1.3 million of deferred financing cost on the above notes and on September 9 and October 14, 2008 , the Company borrowed $6.5 million by drawing down $15 million on its Second Lien Term Loan Agreement and $6.5 million on its Credit Agreement.  The Company then paid off the Petrobridge Note of $16.2 million and also incurred $2.8 million of debt extinguishment costs. The debt extinguishment costs consisted principally of the write off of the note discount and deferred financing costs related to the Petrobridge note.

On April 1, 2008  Petro Resources signed a promissory note with a finance company to finance its various insurance policies. The interest rate on the note is 4.057% with payments of $19,593 per month beginning May 1, 2008 and the final payment due January 1, 2009. The note is secured by the insurance policies. At December 31, 2008, the outstanding balance on the note was $19,527.

NOTE 9 - MINORITY INTEREST

 In connection with the Williston Basin acquisition, we entered into equity participation agreements with the lenders pursuant to which we agreed to pay to the lenders an aggregate of 12.5% of all distributions paid to the owners of PRC Williston, which at this time is 100% owned by Petro Resources. The equity participation agreements were valued at $3,401,655 and accounted for as a minority interest in PRC Williston.

	2008		2007
Minority interest at beginning of period	$	3,025,375	$	3,401,645
Loss to minority interest		(1,640,466)		(376,270	)
Minority interest at end of period	$	1,384,909	$	3,025,375

F-17

NOTE 10 - SERIES A PREFERRED STOCK

On April 3, 2007, we completed the sale of 2,240,467 shares of our Series A Convertible Preferred Stock (“Series A Preferred Stock”) to two funds managed by Touradji Capital Management, LP in consideration for (i) payment of $2 million; (ii) return of 1,573,800 shares of its common stock; and (iii) the return of 160,000 common stock purchase warrants with a deemed aggregate value of $4,721,400, or $3.00 per common share. The total aggregate value of the Series A Preferred Stock recorded was $6,721,401 which represents the fair market value of the instrument. The Series A Preferred Stock was recorded as a temporary equity in accordance with SFAS No. 150  for  mandatorily redeemable preferred stock with contingency features. During 2007, we issued 170,309 shares of our Series A Preferred Stock, valued at $3 per share as agreed upon in the Preferred Stock Purchase Agreement, in lieu of cash payments in satisfaction of the Preferred Stock dividend requirement.

Petro Resources has cancelled both the returned common shares and the warrants. The Series A Preferred Stock is convertible into Petro Resources’ common stock at a conversion price of $4.50 per share. Both the stated value and conversion price are subject to adjustment in the event of any stock splits, stock dividends, combinations or the like affecting the Series A Preferred Stock or common stock, or any fundamental transactions. Each share of Series A Preferred Stock is entitled to dividends on the stated value at the rate of 10% per annum, provided that the dividend rate will increase to 15% on April 3, 2008. Dividends are payable quarterly in cash or, at Petro Resources’ option, in additional shares of Series A Preferred Stock. The Series A Preferred Stock is entitled to vote with the common stock on an as converted basis. If Petro Resources is liquidated, each outstanding share of Series A Preferred Stock will be entitled to a liquidation payment in an amount equal to the greater of (x) the stated value, plus any accrued and unpaid dividends, and (y) the amount payable per share of common stock which a holder of Series A Preferred Stock would have received if the holder had converted to common stock immediately prior to the liquidation event, plus any accrued and unpaid dividends. Petro Resources is required (Mandatory Redemption) to redeem all outstanding shares of Series A Preferred Stock on October 2, 2008 at a redemption price equal to the stated value, plus any accrued and unpaid dividends. Petro Resources has the option to redeem the Series A Preferred Stock at any time, subject to 30 days prior written notice, at the same redemption price. Petro Resources also provided the Touradji funds with registration rights requiring that Petro Resources use its reasonable best efforts to file a registration statement with the SEC by April 30, 2007 for purposes of registering the resale of the shares of common stock underlying the Series A Preferred Stock and the 240,000 warrants still held by the Touradji funds. Petro Resources filed a registration statement relating to the Touradji funds’ shares of common stock on October 18, 2007. There were no penalties associated with the Registration Rights.

On September 26, 2008, the Company redeemed 2,563,712 shares of the Company's outstanding Series A Preferred Stock at an aggregate redemption price of $7,966,735. The shares were held by investment funds managed by Touradji Capital Management. Pursuant to the terms of the Preferred Stock Purchase Agreement, the Company was required to redeem all Series A Preferred Stock no later than October 2, 2008. After giving effect to the redemption, there are no shares of Series A Preferred Stock outstanding at December 31, 2008.

NOTE 11 - SHARE BASED COMPENSATION

In March 2006, Petro Resources adopted the 2006 Stock Incentive Plan. Under the Plan, options may be granted to key employees and other persons who contribute to the success of Petro. Petro Resources originally reserved 1,500,000 shares of common stock for the Plan.  In June 2007, Petro increased the authorized shares to 3,000,000.  No options were exercised during the years ended December 31, 2008 and 2007.

Petro accounts for stock based compensation arrangements in accordance with the provisions of SFAS No. 123R, “Share-Based Payment,” which revised SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 123R supersedes APB Opinion 25, “Accounting for Stock Issued to Employees” and amends SFAS No. 95, “Statement of Cash Flows.” SFAS No. 123R requires measurement and recording to the financial statements of the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. Petro has implemented SFAS 123R effective January 1, 2006.

As allowed by SFAS 123(R), the Company utilizes the Black-Scholes option pricing model to measure the fair value of stock options and stock settled stock appreciation rights.

F-18

On March 15, 2007, we granted a consultant options to purchase 25,000 shares of Petro Resources’s common stock at $3.80 per share. We recorded $58,000 of expense, equal to the fair value of the options granted, in connection with this issuance. The options were valued using the Black-Scholes model with the following assumptions: $2.99 quoted stock price; $3.80 exercise price; 110.05% volatility; 2.5 year estimated life; zero dividend; and 4.54% discount rate.

On June 1, 2007, we granted 100,000 stock options to our new Chief Financial Officer. The options have an exercise price of $2.50 per share. 25,000 options vested immediately and the remaining 75,000 options will be issued and will vest annually on June 1, 2008, 2009 and 2010. The stock options have a 5 year term expiring on June 1, 2012. The options were valued using the Black-Scholes model with following assumption: $2.50 quoted stock price; $2.50 exercise price; 119.41% volatility; 3.25 year estimated life; zero dividend; 5.0% discount rate.

In June 2007 we also issued 25,000 shares of restricted common stock, which vested immediately, to our new Chief Financial Officer. In connection with this issuance, we recorded $63,000 as compensation expense based on the closing price of our common stock on June 1, 2007. We also agreed to issue 25,000 additional restricted common shares on June 1, 2008, 2009 and 2010, which vest immediately upon each respective issuance, for an aggregate of 75,000 shares. Compensation expense related to these shares is accrued monthly.

On January 9, 2008 we granted 200,000 stock options to our President. The options have an exercise price of $2.00 per share. Fifty thousand options vested on January 9, 2008 and the remaining 150,000 options vest annually on January 10, 2009, 2010 and 2011. The stock options have a 5 year term expiring on January 10, 2013. The options were valued using the Black-Sholes model with the following assumption: $2.15 quoted stock price; $2.00 exercise price; 104.83% volatility; 3.25 year estimated life; zero dividend; 2.69% discount rate. The fair value of these options was $293,364.

Also, on January 9, 2008 we granted 10,000 stock options to our Director of Information Services. The options have an exercise price of $2.00 per share. Twenty five hundred options vested on January 10, 2008 and the remaining 7,500 options will vest annually on January 10, 2009, 2010 and 2011. The stock options have a 5 year term expiring on January 10, 2013. The options were valued using the Black-Sholes model with the following assumption: $2.15 quoted stock price; $2.00 exercise price; 104.83% volatility; 3.25 year estimated life; zero dividend; 2.69% discount rate. The fair value of these options was $14,668.

On March 1, 2008 we granted 100,000 stock options to our new Chief Operating Officer. The options have an exercise price of $1.70 per share. Twenty five thousand options vested on March 1, 2008 and the remaining 75,000 options will be issued and will vest annually on March 1, 2009, 2010 and 2011. The stock options have a 5 year term expiring on March 1, 2013. The options were valued using the Black-Sholes model with the following assumption: $1.70 quoted stock price; $1.70 exercise price; 104% volatility; 3.25 year estimated life; zero dividend; 1.87% discount rate. The fair value of these options was $112,381.

On January 9, 2008, we granted 100,000 shares of restricted common stock to our President. These common shares vest at 25,000 immediately and 25,000 each on January 10, 2009, 2010 and 2011. These shares were valued at $2.15 per share, based on the quoted market value on the date of grant, and $107,500 of expense was recognized as of December 31, 2008. The remaining $107,500 will be recognized over the remaining service term.

On March 1, 2008 we also granted 130,000 shares of restricted common stock to our new Chief Operating Officer. These common shares vest at 40,000 immediately and the remaining shares vest annually at 30,000 shares annually on March 1, 2009, 2010 and 2011. These shares were valued at $1.70 per share, based on the quoted market value on the date of grant, and $119,000 of expense was recognized as of December 31, 2008. The remaining $102,000 will be recognized over the remaining service term.

Petro Resources recognized stock compensation expense of $1,589,675 and $1,117,836 for the year ended December 31, 2008 and 2007 respectively.

F-19

A summary of option activity for the year ended December 31, 2008 is presented below:

	Shares			Weighted- Average Exercise Price
Outstanding at December 31, 2007		1,125,000		$	3.68
Granted		310,000			1.90
Exercised, forfeited, or expired		(400,000	)		3.80
Outstanding at December 31, 2008		1,035,000			3.11
Exercisable at December 31, 2007		550,000			3.74
Exercisable at December 31, 2008		902,500		$	3.56

A summary of Petro Resources non-vested options as of December 31, 2008 is presented below.

Non-vested Options	Shares
Non-vested at December 31, 2007		575,000
Granted		310,000
Vested		(352,500	)
Forfeited		(400,000)
Non-vested at December 31, 2008		132,500

Total unrecognized compensation cost related to non-vested options granted under the Plan was $309,700 and $1,334,530 as of December 31, 2008 and 2007 respectively. The cost at December 31, 2008 is expected to be recognized over a weighted-average period of 1.18 years. The aggregate intrinsic value for options was $0; and the weighted average remaining contract life was 2.9 years.

As allowed by SFAS 123(R), the Company utilizes the Black-Scholes option pricing model to measure the fair value of stock options and stock settled stock appreciation rights.

The assumptions used in the fair value method calculation for the year ended December 31, 2008 and 2007 are disclosed in the following table:

	Year Ended  December 31,
	2008 (1)		2007
Weighted average value per option granted during the period (2)	$	1.36	$	1.77
Assumptions (3):
Stock price volatility		104-105%		110-119%
Risk free rate of return		1.87-2.69%		4.54-5.0%
Expected term	3.25 years		2.5-5.0 years

(1)	Our estimated future forfeiture rate is zero.
(2)	Calculated using the Black-Scholes fair value based method.
(3)	We do not pay dividends on our common stock.

F-20

A summary of warrant activity for the year ended December 31, 2008 is presented below:

	Shares	Weighted- Average Exercise Price
Outstanding at December 31, 2007	6,838,962	$	2.15
Granted	-		-
Exercised, forfeited, or expired	-		-
Outstanding at December 31, 2008	6,838,962	$	2.15
Exercisable at December 31, 2007	6,838,962	$	2.15
Exercisable at December 31, 2008	6,838,962	$	2.15

The aggregate intrinsic value for warrants was $0; and the weighted average remaining contract life was 1.91 years.

NOTE 12 - SHAREHOLDERS’ EQUITY

On November 2, 2007, we closed our public offering of 14,000,000 shares of common stock generating approximately $25.5 million in net proceeds.  Additionally, the underwriters purchased an additional 1,326,200 shares of common stock for approximately $2.5 million.  

On February 16, 2007, we issued 3,144,655 shares of common stock to Eagle Operating in connection with the purchase of the Williston Basin properties. The shares were valued at $10,723,274 based on the average of the high and low price per share on the closing date.

In connection with the issuance of preferred stock, we received and cancelled 1,573,800 shares of common stock and recorded a reduction in common stock and additional paid in capital totaling $4,721,401. (See Note 10) In addition, we recorded a reduction of $14,705 in additional paid in capital associated with the costs of issuing the preferred shares.

In June 2007, Petro Resources increased its authorized common stock (.01 par value) from 50 million to 100 million shares.

NOTE 13 - INCOME TAXES

Reconciliation between the actual tax expense (benefit) and income taxes computed by applying the U.S. federal income tax rate to income from continuing operations before income taxes is as follows:

	2008		2007
Computed at U.S. statutory rate at 34%	$	(2,341,354)	$	(1,883,407	)
Permanent differences		543,890		383,620
Changes in valuation allowance		1,797,464		1,499,787
Total	$	0	$	0

F-21

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred liabilities are presented below.

	2007			2006
Deferred tax assets:
Net operating loss carryforwards	$	13,460,116		$	2,513,904
Derivatives		-			622,987
Less valuation allowance		(4,154,379	)		(1,094,375	)
		9,305,737			2,042,516
Deferred tax liabilities:
Oil and gas properties:		(7,020,851	)		(2,042,516
Derivatives		(2,284,886	)		-
		(9,305,737)			(2,042,516)
	$	-		$	-

At December 31, 2008, Petro had net operating loss carryforwards for federal income tax purposes of approximately $39,588,575  that may be offset against future taxable income. Petro has established a valuation allowance for the full amount of the deferred tax assets as management does not currently believe that it is more likely than not that these assets will be recovered in the foreseeable future. To the extent not utilized, the net operating loss carryforwards will expire in 2028.

NOTE 14 - SUPPLEMENTAL OIL AND GAS DISCLOSURES (UNAUDITED)

The following table sets forth the capitalized costs and associated accumulated depreciation, depletion and amortization, including impairments, related to Petro’s oil and gas production, exploration and development activities:

	2008			2007
Unproved oil and gas properties	$	18,562,932		$	24,676,434
Proved oil and gas properties		39,414,361			21,606,881
		57,977,293			46,283,315
Accumulated depletion, depreciation and impairment		(12,149,571	)		(2,670,453	)
	$	45,827,722		$	43,612,862

The following table sets forth the costs incurred in oil and gas property acquisition, exploration, and development activities.

	2008		2007
Purchase of non-producing leases	$	1,410,023	$	16,791,029
Purchase of producing properties		0		4,551,382
Exploration costs		5,796,608		3,081,058
Development costs		11,607,005		16,704,232
Asset retirement obligation		93,153		1,403,461
	$	18,906,789	$	42,531,162

Oil and Gas Reserve Information

Proved oil and gas reserve quantities are based on estimates prepared by Cawley, Gillespie & Associates, Inc. and DeGolyer & MacNaughton, Petro’s engineers. There are numerous uncertainties inherent in estimating quantities of proved reserves and projecting future rates of production and timing of development expenditures. The following reserve data only represent estimates and should not be construed as being exact.

F-22

Total Proved Reserves

	Crude oil and Condensate (Thousands of Barrels)			Natural Gas (Millions of Cubic Feet)
Balance December 31, 2006		7.9		116.1
Extensions, discoveries and other additions		362.9		1,265.0
Revisions of previous estimates		19.8		(211.8	)
Purchase of reserves in place		1,370.0		1,064.3
Improved recovery		708.5		0
Production		(99.4	)	(151.6	)
Balance December 31, 2007		2,369.7		2,082.0
Extensions, discoveries and other additions		698.0		2,655.9
Revisions of previous estimates		(506.6	)	(143.8	)
Production		(151.8	)	(341.1	)
Balance December 31, 2008		2,409.3		4,253.0

Developed reserves, included above
December 31, 2007	1,411.8	1,069.9
December 31, 2008	1,394.3	2,549.5

Future Net Cash Flows

Future cash inflows are based on year-end oil and gas prices except in those instances where future natural gas or oil sales are covered by physical contract terms providing for higher or lower amounts. Operating costs, production and ad valorem taxes and future development costs are based on current costs with no escalation.

The following table sets forth unaudited information concerning future net cash flows for oil and gas reserves, net of income tax expense. Income tax expense has been computed using expected future tax rates and giving effect to tax deductions and credits available, under current laws, and which relate to oil and gas producing activities. This information does not purport to present the fair market value of Petro’s oil and gas assets, but does present a standardized disclosure concerning possible future net cash flows that would result under the assumptions used.

	2008 Previously Reported			2008 As Restated			2007
Cash inflows	$	109,100,043		$	109,100,043		$	208,181,173
Production costs		(48,971,580	)		(48,971,580	)		(76,758,323	)
Development costs		(15,341,803	)		(15,341,803	)		(12,312,808	)
Income tax expense		-			(11,541,162	)		(35,384,592	)
10 percent discount rate		(23,742,386	)		(17,624,164	)		(43,613,756	)
Discounted future net cash flows	$	21,044,274		$	15,621,334		$	40,111,694

Changes in Standardized Measure of Discounted Future Cash Flows

	2008 Previously Reported		2008 As Restated			2007
Beginning balance	40,111,694			40,111,694			579,836
Purchases	-			-			24,039,320
Extensions, discoveries and improved recoveries	10,334,289			10,334,289			26,551,353
Sales of oil and gas produced	(9,107,489	)		(9,107,489	)		(3,410,012	)
Development cost incurred during the year	8,738,286			8,738,286			3,129,601
Changes in estimated development costs	(9,458,282	)		(9,458,282	)		(9,066,693	)
Net changes in prices and production costs	(35,731,111	)		(35,731,111	)		10,293,567
Revisions of previous quantity estimates	(4,806,546	)		(4,806,546	)		(26,218	)
Accretion of discount	4,011,169			4,011,169			2,230,129
Net change in income taxes	16,952,264			11,529,324			(14,209,189	)
Ending balance	21,044,274			15,621,334			40,111,694

F-23

Item 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial statements

Reference is made to the Index and Financial Statements under Item 8 in this Form 10-K/A.

(b) Financial statement schedules

All schedules are omitted because they are inapplicable or because the required information is contained in the financial statements or included in the notes thereto 

(c) Exhibits

The following exhibits are either filed herewith or incorporated herein by reference:

(c) Exhibits

The following exhibits are either filed herewith or incorporated herein by reference:

Exhibit Number	Description
3.1 (1)	Certificate of Incorporation of the Registrant, as amended
3.1.1 (6)	Certificate of Amendment to Certificate of Incorporation of the Registrant dated May 10, 2007
3.2 (1)	Amended and Restated Bylaws of the Registrant dated April 14, 2006
3.2.1 (2)	Amendment to Bylaws of the Registrant
3.2.2 (7)	Amendment to Bylaws of the Registrant dated October 12, 2006
4.1 (3)	Certificate of Designations of Preferences and Rights of Series A Preferred Stock
10.1 (1)	Form of Registration Rights Agreement dated August 1, 2005
10.2 (1)	Form of Warrant sold as part of August 2005 private placement
10.3 (1)	Lease Purchase Agreement dated January 10, 2006 between Petro Resource Corporation  and The Meridian Resource & Exploration, LLC
10.4 (1)	2006 Stock Incentive Plan*
10.5 (1)	Form of Registration Rights Agreement dated February 17, 2006
10.6 (1)	Form of Warrant sold as part of February 2006 private placement
10.7 (2)	Subscription Agreement for Hall-Houston Exploration II, L.P.
10.8 (2)	Amended and Restated Agreement of Limited Partnership dated as of April 21, 2006 for Hall-Houston Exploration II, L.P.
10.9 (4)	Purchase and Sale Agreement dated December 11, 2006 with Eagle Operating, Inc.
10.10 (4)	Credit Agreement dated February 16, 2007 between PRC Williston LLC and D.B. Zwirn Special Opportunities Fund, L.P., as administrative agent
10.11 (4)	Security Agreement dated February 16, 2007 Between PRC Williston, LLC and D.B. Zwirn Special Opportunities Fund, L.P., as administrative agent
10.12 (4)	Guaranty and Pledge Agreement dated February 16, 2007 between Petro Resource Corporation  and D.B. Zwirn Special Opportunities Fund, L.P., as administrative agent
10.13 (4)	Lease dated September 30, 2006 with Gateway Ridgecrest Inc.
10.14 (3)	Securities Purchase Agreement dated April 3, 2007
10.15 (3)	Registration Rights Agreement dated April 3, 2007
10.16 (5)	Letter Agreement dated May 25, 2007 between Petro Resource Corporation  and Harry Lee Stout*
10.17 (6)	Letter Agreement dated August 14, 2007 between PRC Williston LLC and D.B. Zwirn Special Opportunities Fund, L.P., as administrative agent
10.18 (7)	Letter Agreement dated September 19, 2007 between PRC Williston LLC and D.B. Zwirn Special Opportunities Fund, L.P., as administrative agent

10.19 (8)	First Amendment dated May 13, 2008 to Credit Agreement dated February 16, 2007 between PRC Williston LLC and D.B. Zwirn Special Opportunities Fund, L.P., as administrative agent
10.20 (9)	Credit Agreement dated as of September 9, 2008 among Petro Resources Corporation, CIT Capital USA Inc., as administrative agent, and the lenders party thereto
10.21 (9)	Second Lien Term Loan Agreement dated as of September 9, 2008 among Petro Resources Corporation, CIT Capital USA Inc., as administrative agent, and the lenders party thereto
10.22 (9)	Guaranty and Collateral Agreement dated as of September 9, 2008 among Petro Resources Corporation, PRC Williston LLC, and CIT Capital USA Inc., as administrative agent
10.23 (9)	Second Lien Guaranty and Collateral Agreement dated as of September 9, 2008 among Petro Resources Corporation, PRC Williston LLC, and CIT Capital USA Inc., as administrative agent
10.24 (10)	Partnership Interest Purchase Agreement dated September 26, 2008, as amended on September 29, 2008, between Petro Resources Corporation and PRC HHEP II, LP
10.25 (11)	Employment Agreement dated May 27, 2008 between Petro Resources Corporation and Wayne P. Hall.*
10.26 (11)	Employment Agreement dated May 27, 2008 between Petro Resources Corporation and Donald L. Kirkendall.*
10.27 (11)	Employment Agreement dated May 27, 2008 between Petro Resources Corporation and Harry Lee Stout. *
10.28 (11)	Employment Agreement dated May 27, 2008 between Petro Resources Corporation and James W. Denny. *
10.29 (11)	Employment Agreement dated May 27, 2008 between Petro Resources Corporation and Allen R. McGee. *
10.30 (11)	First Amendment to Credit Agreement dated March 19, 2009 among Petro Resources Corporation, CIT Capital USA Inc., as administrative agent, and the lenders party thereto
10.31 (11)	First Amendment to Second Lien Term Loan Agreement dated March 19, 2009 among Petro Resources Corporation, CIT Capital USA Inc., as administrative agent, and the lenders party thereto
21.1 (4)	List of Subsidiaries
23.1 (11)	Consent of Malone & Bailey, PC
23.2 (11)	Consent of Cawley Gillespie & Associates, Inc
23.3 (11)	Consent of DeGolyer & MacNaughton
23.4 (11)	Consent of Netherland, Sewell and Associates, Inc.
23.5 (11)	Consent of W.D. Von Gonten & Co.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer and Chief Financial Officer provided pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* The referenced exhibit is a management contract, compensatory plan or arrangement.

(1)	Incorporated by reference from Petro Resource Corporation’s Registration Statement on Form SB-2 filed on March 21, 2006.
(2)	Incorporated by reference from Petro Resource Corporation’s Amendment No. 1 to Registration Statement on Form SB-2 filed on June 9, 2006.
(3)	Incorporated by reference from Petro Resources Corporation’s current report on Form 8-K filed on April 4, 2007.
(4)	Incorporated by reference from Petro Resources Corporation’s annual report on Form 10-KSB for the year ended December 31, 2006, filed on April 2, 2007.
(5)	Incorporated by reference from Petro Resources Corporation’s current report on Form 8-K filed on June 1, 2007.
(6)	Incorporated by reference from Petro Resources Corporation’s quarterly report on Form 10-QSB filed on August 14, 2007.
(7)	Incorporated by reference from Petro Resources Corporation’s Amendment No. 1 to Registration Statement on Form SB-2 filed on September 21, 2007.
(8)	Incorporated by reference from the Petro Resources Corporation’s quarterly report on Form 10-Q filed on May 15, 2008.
(9)	Incorporated by reference from Petro Resources Corporation’s current report on Form 8-K filed on September 11, 2008.
(10)	Incorporated by reference from Petro Resources Corporation’s quarterly report on Form 10-Q filed on November 13, 2008.
(11)	Incorporated by reference from Petro Resources Corporation's annual report on Form 10-K filed on March 31, 2009.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	MAGNUM HUNTER RESOURCES CORPORATION
Date: September 11 , 2009	By:	/s/ Gary C. Evans
		Gary C. Evans
		Chairman of the Board and Chief Executive Officer (Authorized Signatory)