ntro

Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

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Nitro Petroleum Incorporated 260-7250 NW Express Way Oklahoma City, OK 73132

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Phone: 405-728-3800 Toll Free (IR): (888) 805-NTRO E-mail: info@nitropetroleuminc.com Website: www.nitropetroleuminc.com

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MARKET DATA

NTRO OTC OB $0.044 $0.16 Speculative Buy Outstanding fully diluted shares 104.65 Million Market Cap. $6.54 Million Average 3-m Volume 251,824 Symbol Exchanges Current Price Price Target Rating

Source: Yahoo Finance, Analyst Estimates

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Company Introduction Nitro Petroleum Incorporated (NTRO) explores and develops oil and natural gas properties in the United States. The Company has interests in three prospects covering 240 acres (the East Moreland, West Moreland, and Farley leases) in Nowata County, Oklahoma.

In addition, NTRO is developing a Barnett Shale joint venture project covering 7,000 mineral acres and located mainly in northeastern Montague and southwestern Cooke counties of Texas. This project consists of 24 operating wells producing approximately 400 barrels of oil and 2.5 million cubic feet of gas per day.

In 2008, NTRO began developing additional projects in Oklahoma through a joint operation agreement with Toro Ventures Inc. for the development of the Crown lease project in Pottawatomie County.

The Company has completed remedial reworks on the Crown #1 and #3 wells and is producing natural gas in pay quantities. Subsequent to the first agreement, NTRO signed a second joint venture contract with Toro for the Quinlan lease project. Drilling has been completed on the Quinlan #3 well, and oil began shipping in July 2008. NTRO has also re-worked the Quinlan #2 well, identifying five potential pay zones (Misener Sandstone, Hunton Limestone, Viola Limestone, Simpson Dolomite and Wilcox Sand), and converted the Quinlan #4 well into a salt-water disposal well.

The Quinlan lease lies on the Hunton Limestone formation, considered to be one of the best producing formations in Oklahoma.

This region has produced in excess of 5.8 million barrels of oil todate valued at over $626 million. The Quinlan lease offers potential for re-working several offset wells in a proven developed field and consistent production. The Quinlan # 1 well produced 334 barrels of oil per in the first 15 hours it was on-line and initial production

Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

from the Quinlan # 2 well was 298 barrels of oil in the first 12 hours. In both cases, no water was produced.

In September 2008, NTRO acquired an interest in four leases located in Pottawatomie County. Since then, the Company has re-worked and commenced oil production from two wells. Two additional wells will be re-worked and are expected to commence production in Q1 FY 2010. Overall, the Company’s oil and gas assets increased more than six-fold in 2008.

Investment Highlights Exploration in major domestic oil and gas basins NTRO owns interests in properties that were developed by major established oil and gas production companies in known producing areas of the U.S. The Company’s strategy is to identify and develop low-risk oil and gas reserves and re-develop mature fields through the use of innovative technologies. At present, the Company is developing two projects: the Barnett Shale in Texas and leases in Nowata and Pottawatomie counties in Oklahoma.

7,000 acres in the largest U.S. natural gas play NTRO’s Barnett Shale project, being developed as a joint venture with REO Energy Ltd., covers 7,000 mineral acres in northeastern Montague and southwestern Cooke counties of Texas. There are 24 wells operating currently and connected to existing pipelines, five drilled wells awaiting completion, and one well in the process of being drilled. REO Energy is presently producing some 400 barrels of oil and 2.5 million cubic feet of gas per day from this property. NTRO has a 10% working interest in four wells (Inglish 4, Inglish 5, Inglish D1 and Inglish D2) and a 5% working interest in two wells (Craig Muncaster 6 and Craig Muncaster 7) drilled by REO Energy on Barnett Shale formation leases.

Barnett Shale is the largest natural gas play in the continental United States, producing 900 MMCF (million cubic feet) of gas per day and considered one of the few domestic areas with sizable, remaining resource potential.

Morgan Stanley estimates reserves in the area could be as high as 150 BCF (billion cubic feet) per 1,000 acres.

Three producing properties in Nowata County, Oklahoma The Company’s Oklahoma properties contain three separate oil and gas leases. The first lease, East Mooreland, is located in Nowata County. The West Mooreland lease is situated on the south border of Nowata County and the North border of Rogers County. These leases together cover 160 acres. The third lease, Farley, covers 80 acres. NTRO owns a 100% lease interest and a 78% revenue interest in these properties which contain 18 producing wells and four injection wells. These wells are located in the Bartlesville Sand formation and have a 70+ year life expectancy.

Six-fold increase in oil and gas assets last year NTRO increased its oil and gas by 661% in 2008. During 2008, NTRO formed a joint venture with Toro Ventures Inc. to develop Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

the Crown lease project in Pottawatomie County, Oklahoma. The Company has completed remedial re-works on Crown #1 and #3 wells and is producing natural gas in pay quantities. NTRO recently signed a second jointventure contract with Toro for the Quinlan lease project. Drilling of the Quinlan #3 well was completed and oil has been shipping since late July, 2008.

In September 2008, NTRO acquired interests in the Nancy Hubbard, Walker and Krouch #1 & #2 leases, located in Pottawatomie County, Oklahoma. This project is a four well program with one water disposal well.

Extensive reworking program enhances production potential NTRO’s quarterly revenues have ranged between $85,000-127,000 so far in FY 2009. The September 2008 acquisition of leases in Pottawatomie County, as well as the re-work program, will likely add significantly to quarterly revenues in FY 2010.

NTRO completed a full equipment change at the Crown project, which reduces operating costs to below $1,000 per month, and installed a new pumping unit. The Company has also installed flow lines, electric lines, tank pads and new tubing on the Quinlan salt-water disposal well. The Quinlan #4 well has been drilled and converted into a salt-water disposal well. In addition, NTRO has converted the Quinlan #2 salt-water disposal well into a natural gas-producing well. In January 2009, NTRO announced the completion of two wells on the Nancy Hubbard project. A major re-work has been completed and the two wells are now on-line and producing. One well tested at 76 barrels per day in the first 48 hours of operation; the second well is expected to commence commercial production within the next 30 days.

Oil prices expected to recover in 2010 Prices of benchmark West Texas Intermediate (WTI) crude oil are expected to average $43.25 per barrel in 2009 and $54.50 per barrel in 2010, according to the Energy Information Administration (EIA). Industry analysts expect oil prices to rise in 2010 as the global economy improves. In addition, the OPEC countries and Russia have announced plans to reduce oil supplies to support a higher price environment. If the economic recovery gains traction in 2010 and beyond, some analysts expect oil prices to rebound to $80-$90 per barrel in 2011.

Business Model The Company is developing oil and natural gas production from its lease properties in Oklahoma and Texas.

NTRO acquires interests in properties developed by established oil and gas production companies and located in proven producing areas. The Company’s strategy is to identify and develop low-risk oil and gas reserves that can be extracted at minimal costs by redeveloping mature fields. At present, the Company is developing projects in the Barnett Shale and Oklahoma.

The Company’s Nowata County project in Oklahoma consists of three producing leases. NTRO owns a 78% revenue interest in these leases, which contain seven producing wells.

In 2007, NTRO acquired a 25% working interest in several leases owned by privately-held HOCO Oil Inc. The leases are located in Oklahoma and included seven producing wells. In 2008, the Company acquired additional interests in these leases by purchasing oil assets from Buccaneer Energy Corp., which held varying interests in the HOCO Oil leases. Through this acquisition, NTRO acquired 95% to 100% ownership. The Company is now the Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

sole operator of the acquired oilfield leases and is proceeding with remedial work on several wells to enhance production.

In March 2008, NTRO formed a joint venture with Toro Ventures Inc. for an oilfield development project in Pottawatomie County, Oklahoma. The agreement provides Toro with a 60% working interest in the Crown oil and gas leases. Toro paid $250,000 cash and agreed to fund the drilling and completion of new exploration and development wells. In May 2008, the Company completed remedial reworks on the Crown #1 and #3 wells. The rework program also converted a third well into a salt-water disposal well. Since then, the Crown #1 and #3 wells have been producing with no down-time and their oil is being shipped to purchasers. NTRO remains the operator of the project and participates with up to a 40% working interest in each well.

The Company signed another joint venture agreement with Toro for a new drilling project in Pottawatomie County. This agreement replicated the conditions of the first one, with Toro acquiring a 60% working interest in the Quinlan lease for a turnkey investment of $450,000, and NTRO remaining the operator of the wells with a 40% working interest. The Company began its drilling program on the Quinlan lease in April 2008 and, to-date, has completed the Quinlan #3 well, drilling through numerous formations which included the Misener Sandstone, Hunton Limestone, Viola Limestone and Simpson Dolomite. NTRO shipped the first oil from this project on July 30, 2008. The Company also re-equipped the Quinlan #4 well, converting it into a salt- water disposal well, and converted the Quinlan #2 salt-water disposal well into a producing well.

In September of last year, NTRO acquired interests in the Nancy Hubbard, Walker and Krouch #1 and #2 leases, located in Pottawatomie County, Oklahoma. This project is a four-well program and has one salt-water disposal well on the property. The Company has completed two wells (Nancy Hubbard and Krouch #1) and brought these wells online. The two remaining wells will be re-worked and re-equipped to increase oil production.

NTRO’s Barnett Shale project, developed as a joint venture with REO Energy Ltd., covers 7,000 mineral acres and includes 24 wells operating and connected to existing pipelines, five wells that have been drilled and are awaiting completion, and one well currently being drilled. The Company has a 10% working interest in four wells (Inglish 4, Inglish 5, Inglish D1 and Inglish D2) and a 5% working interest in two wells (Craig Muncaster 6 and Craig Muncaster 7) drilled by REO Energy on Barnett Shale formation leases.

Development strategy NTRO uses modern, sophisticated remediation and extraction techniques. The Company also has a large inventory of 3-D seismic data, used to image reservoirs of oil and natural gas and drill horizontal wells more precisely inside targeted shale formations, thus avoiding various underground structural challenges such as karsts and faults.

NTRO’s strategy balances development of existing oil and natural gas reserves with strategic acquisitions. The Company pursues joint venture projects in highly productive areas and redevelops mature fields through the use of innovative technologies. NTRO is also pursuing low-risk development drilling and work-over opportunities with experienced, well-established operators.

Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

Projects Barnett Shale project The first Barnett Shale wells were drilled and completed in the early 1980s by Mitchell Energy of Houston, Texas.

Mitchell Energy began activity in this region with the drilling of hundreds of Barnett Shale wells north of Ft. Worth, Texas. Today, 75 rigs are drilling in this area which has nearly 4,000 completed wells.

Barnett Shale is the largest natural gas play in the continental United States. It produces 900 MMCF of gas per day and is considered one of the few domestic areas with sizable, remaining resource potential. The Barnett Shale is a very thick pay zone and produces at numerous intervals. Each new fracture opens up previously un-accessed intervals, which typically yield additional production and effectively provide three to six additional producing intervals. Morgan Stanley developed an in-depth report on the Barnett Shale and estimated reserves as high as 150 BCF per 1,000 acres.

The Company’s properties cover 7,000 mineral acres. Both locations are within areas characterized by third-party geologists as highly productive with 600 to 1,500 feet of reservoir thickness. NTRO’s joint venture partner, REO Energy, produces approximately 400 barrels of oil and 2.5 million cubic feet of gas per day in the Barnett Shale.

This production is from 18 wells. Four of these wells have sub-par production due to severe retrograde problems, and five wells have been drilled but not yet completed. To-date, REO has spent $12 million to acquire and develop these assets. NTRO plans to raise $15 million to fund further development and expand the number of wells to 300.

Oklahoma project Oil and gas development in Oklahoma began in the early 1900s and continued until the 1950s. Originally, fields were developed only from the Upper Bartlesville Sand at a depth of approximately 350 feet. Old test information indicates that overlying Squirrel Sand at a depth of 200 feet is oil-productive, as is the underlying Lower Bartlesville Sand at a depth of 400 feet. In addition, two underlying Roe Coal seams at 500 feet, the Mississippi Chat at 750 feet, the Mississippi Proper at about 800 feet and the Arbuckle Lime at 1,100 feet have all tested gas-productive in areas surrounding NTRO’s leases.

The Company’s properties consist of three separate oil and gas leases: East Mooreland, located in Section 28, Township 25 North, Range 17 East, Nowata County; West Mooreland, situated on the south border of Nowata County and the North border of Rogers County; and Farley, also located in Nowata County.

The Company hired Well Enhancement Services LLC (WES) to rework the Farley lease. The Farley #2 well is an oil producer from the Bartlesville Sand at a depth of around 350 feet. WES plans to cut four 300-foot lateral legs; each leg will be 1 inch in circumference. This is a new process that has not been attempted at this depth before. However, the technique has had a 76%+ success ratio at depths of 1,000 to 3,000 feet. If WES is successful, oil production may increase significantly and recover over 66% of the oil still left in-place.

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

Oklahoma Oil and Gas Production and Infrastructure

Source: www.wallstreetnewsalert.com/HotStocks/TORO050708/default.aspx

Crown/Quinlan project, Oklahoma The Quinlan lease lies within the NE Shawnee field in Pottawatomie County, approximately 11 miles north and east of Shawnee near the junction of State Highway 9A and Interstate I-40 East. This field was originally discovered in 1937 and has produced in excess of 5.8 million barrels of oil from 19 wells, primarily from the 1st Wilcox Sand and the Hunton Limestone and also from the Simpson Dolomite and Viola Limestone formations.

The Quinlan lease was still producing at 22,000 barrels of oil per year in 1985 when the surface equipment was destroyed by flood waters1.

The Quinlan #1 well was originally an open hole completed in the 1st Wilcox Sand. It produced 334 barrels of oil in 15 hours with no water. Locations in the Simpson Dolomite and the Viola Limestone were tested several years later. The last production from the Quinlan #1 well was documented at 8%-15% oil, meaning eight to 15 barrels of oil were produced from every 100 barrels of liquid volume.

The Quinlan #2 well was originally drilled to the base of the Simpson Dolomite formation and completed in the Hunton Limestone. The Hunton Limestone was perforated from 4,594 feet to 4,604 feet, and produced 298 barrels of oil and 272 MCF of natural gas in 12 hours, with no water present. In 1976, the well was deepened to the 1st Wilcox Sand and perforated in the Viola Limestone and Simpson Dolomite. The last production from the Quinlan #2 well was documented at 5%-10% oil. Field reports from the Quinlan lease indicate the Viola Limestone has never been treated. Examination of the well log and production tests suggest that the Viola Limestone and the Hunton Limestone are good candidates for modern stimulation or fracture treatments. In addition, the Quinlan #2 and Quinlan #1 wells contain enough additional undeveloped reserves to pay for the fracturing treatments.

1. www.toroventuresinc.com/pdf/HuntonFormation.pdf

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

Industry Outlook World energy demand Total world energy consumption is projected to rise 50% from 2005 to 2030. Demand will be fueled by higher GDP growth over the next 25 years. Analysts expect the global economy to produce sustained growth of about 2.7% per year, more than doubling the size of the world economy to $71 trillion (in 2000 dollars) by 2030. More than 70% of increased energy demand will occur in developing nations, led by China and India. These countries will account for 25% of world energy consumption by 2030, versus 18% today.

Over the next 20 years, the world’s population is projected to grow 1.0% per year to about 8.1 billion people. More than 90% of this growth will be outside the developed member nations of the OECD. In addition to population growth, rising standards of living in developing countries will accelerate energy demand. The average person in less-developed countries currently consumes only 1/6 of the energy consumed by the same person in Japan or Western Europe. Doubling of per capita energy consumption in less- developed countries over the next 50 years, combined with population growth, will result in a two- to three-fold increase in world energy consumption2.

Oil demand Through 2030, traditional fossil fuels will remain the most important sources of energy. Oil use will grow 1.4% per year, moderated somewhat by increasing efficiency, particularly in transportation. Oil and gas combined will supply about 60% of the world’s overall energy needs3. Natural gas will remain an important fuel. According to EIA, total natural gas consumption will increases 1.7% per year from 104 trillion cubic feet in 2008 to 158 trillion cubic feet in 20304.

In 2009, world oil consumption has been revised downward in response to the global economic slowdown. According to EIA, global consumption remained basically unchanged in 2008 but will decline by around 800,000 barrels per day in 2009. Total world oil consumption is expected to rise by 880,000 barrels per day in 2010 from year-earlier levels, as the economic recovery takes hold. Oil consumption growth will be concentrated in countries outside of the OECD, particularly China, the Middle East and Latin America.

Oil demand, million barrels per day

Total OECD North America Europe Other Total non-OECD Former Soviet Union China Other Asia Other non-OECD Overall total

2006

2007

2008

2009e

49.6 23.3 15.7 10.6 35.4 4.2 7.2 8.8 15.2 85.0

49.1 23.4 15.3 10.4 36.8 4.2 7.6 9.1 15.9 85.9

47.7 22.1 15.2 10.4 38.2 4.3 8.0 9.2 16.7 85.9

46.4 21.7 14.7 10.0 38.7 4.3 8.3 9.1 17.0 85.1

2010e 46.4 22.0 14.7 9.7 39.6 4.3 8.5 9.1 17.7 86.0

Source: www.eia.doe.gov/emeu/steo/pub/3tab.html

2. www.fusion.org.uk/susdev/energy.htm 3. www.redorbit.com/news/science/384897/exxonmobil_energy_demand_to_increase_50_by_2030 4. www.eia.doe.gov/oiaf/ieo/world.html

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

In the U.S., high prices and a slowing economy led to a decline in petroleum consumption of around 1.2 million barrels per day, or 5.7% in 2008. Domestic GDP is forecast to fall 2% in 2009, leading to a nearly 400,000 barrels per day or 2% decline in consumption.

Oil supply Following skyrocketing oil prices in the first half of 2008, OPEC pushed its oil production to the highest level in its 48-year history, even as demand was falling in the U.S. and Europe. Reduced oil demand resulting from the economic slowdown caused oil prices to fall in late 2008. OPEC, whose members produce about 40% of the world’s oil, agreed in November 2008 to cut oil production by 1.5 million barrels per day. Following a production cut in December 2008, OPEC announced its intention to cut oil production again by 2.2 million barrels a day beginning in January 2009. EIA projects that total OPEC crude oil production (including Iraq) will fall more than 2 million barrels per day, from 31.4 million barrels per day in September 2008, to 29.3 million barrels per day in early 2009. OPEC crude oil production is expected to average 30.0 million barrels per day in 2009 and 30.7 million barrels per day in 2010.

Supply growth in countries such as the United States, Brazil and Azerbaijan is expected to more than compensate for continued declines in many non-OPEC nations, particularly Mexico, the North Sea and Russia5.

Oil: supply, million barrels per day

Total Non-OPEC North America Other OECD Former Soviet Union China Others OPEC Overall total

2006

2007

2008

2009e

2010e

49.8 15.3 6.3 12.1 3.8 12.3 34.7 84.5

50.0 15.4 6.1 12.6 3.9 12.0 34.4 84.4

49.7 15.0 5.8 12.5 3.0 13.4 35.8 85.5

49.9 15.2 5.5 12.6 4.0 12.6 35.0 84.9

50.0 15.2 5.2 12.8 4.0 12.8 36.6 86.6

Source: http://www.eia.doe.gov/emeu/steo/pub/3tab.html

In 2008, U.S. crude oil production averaged 4.9 million barrels per day, down by 140,000 barrels per day from 2007. In 2009, domestic output is projected to increase to 5.25 million barrels per day, the first increase in production since 1991.

Oil inventories As demand has fallen during the economic downturn, oil inventories in OECD countries have risen sharply.

Inventories at the end of November 2008 equaled 56.4 days of cover, compared with 56.8 days at the end of October. On the basis of days of forward cover, OECD commercial inventories are well above average historic levels, and EIA projects that they will remain high through the end of 2010.

According to the International Energy Agency, production cuts by OPEC, which have totaled 4.2 million barrels per day since September, could reduce stockpiles, as output lags projected demand for crude oil6.

5. www.eia.doe.gov/emeu/steo/pub/ 6. www.newsdaily.com/stories/tre50f28g-us-iea/

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

Inventories in three major OECD markets

Source:

www.neb.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/nrgytlk/tlkwntr/tlkwntrprsnttn-eng.htmll

Oil prices Continued low surplus production capacity, weak petroleum inventories, and strong demand worldwide all contributed to the increase in crude oil prices in recent years. WTI crude oil prices began 2008 at around $100 a barrel, and jumped to a record price of $147 a barrel in July before dropping to $31.41 per barrel in late 2008 - its lowest level in more than five years. Crude oil prices rose to around $50 per barrel in early January, supported by cold weather, fighting in Gaza and the Russian/Ukrainian gas crisis, but continue to fluctuate.

Many analysts think inventories will likely increase in the coming months. Falling demand, in combination with rising inventories, could put further downward pressure on crude prices. On the other hand, OPEC supply cuts aimed at bolstering crude prices have begun to take effect. Analysts expect that, eventually, OPEC production cuts will rebalance the market.

Source: http://www.wtrg.com/daily/crudeoilprice.html

Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

Oil prices have become increasingly volatile and more difficult to predict. Crude oil prices are expected to average $50 - $75 per barrel over the next few months. Overall, WTI prices are expected to average $43.25 per barrel in 2009 and $54.50 per barrel in 2010, according to EIA. Natural gas Global natural gas consumption is expected to rise 1.9% annually from 99.6 trillion cubic feet in 2004 to 129.0 trillion cubic feet in 2015 and 163.2 trillion cubic feet in 2030.

According to EIA, U.S. natural gas consumption will likely rise from 21.8 trillion cubic feet in 2006 to 24.3 trillion cubic feet by 2016, and then gradually decline to 23.4 trillion cubic feet in 2030. Rising natural gas demand is attributable to increases in the residential, commercial and electric power sectors. U.S. marketed natural gas production was estimated to have increased 1.6% in 2008 as a result of the start-up of new deep water gas projects in the Gulf of Mexico.

U.S. natural gas supply and consumption, 2004-2009 (BCF per day)

Source: http://tonto.eia.doe.gov/cfapps/STEO_Query/steotables.cfm?periodType=Annual&startYear=2004&startQuarter=1&startMonth=1&endYear=2009&endQuarte r=4&endMonth=12&tableNumber=15

Declining gas prices At the NYMEX, prices for natural gas delivery contracts are showing considerable weakness in 2009, declining to $4.795 in late January. In addition to increased onshore natural gas production and plentiful levels of working gas in storage, key factors contributing to the softness in natural gas prices include reduced industrial demand as a result of the economic downturn and low crude oil prices.

Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

Source: www.wtrg.com/daily/ngspot.gif

Financial Analysis The Company’s Oklahoma properties are already producing oil and gas. NTRO reported revenues of $293,911 for the first nine month of FY 2009. Operating costs for the nine months ended October 31, 2008, were $1,115,957 and NTRO reported a nine-month FY 2009 net loss of $819,695.

We expect the Company to report substantially higher revenues in FY 2010 as a result of additional wells coming online in Q4 FY 2009.

Income statement, $

Revenues Total Expenses, including

Lease operating

Production taxes

Depreciation, depletion and amortization

Interest expense

General and administrative Net Loss Diluted EPS

FY 2007

FY 2008

93,346 1,266,629 21,532 458,100 437,292 349,705 -1,173,283 -0.01

127,844 1,722,392 94,578 8,369 835,938 446,916 336,591 -1,594,548 -0.01

% Chg

9 months FY 2008

37.0% 36.0% 339.2% n/m 82.5% 2.2% -3.8% n/m n/m

166,582 655,008 63,467 11,211 334,269 246,061 -488,426 -0.01

9 months FY 2009

% Chg

296,262 1,115,957 261,986 20,060 36,958 336,314 460,639 -819,695 -0.02

77.8% 70.4% 312.8% n/m 229.7% 0.6% 87.2% n/m n/m

Source: SEC Filings, FY ending January 31.

Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

The Company is not yet profitable and relies on external financing to fund acquisitions and exploration activities. As of October 31, 2008, NTRO had cash of $37,724 and a working capital deficit of $178,745. The Company has no long-term debt; its only liabilities are related to current operations.

On December 5, 2008, NTRO entered into an agreement with holders of its outstanding demand promissory notes, pursuant to which NTRO issued shares of common stock to the holders as full payment of principal and accrued and unpaid interest due October 31, 2008. As a result, all demand promissory notes were terminated and cancelled. On December 5, 2008, NTRO issued 49,603,102 shares of common stock to the holders of the demand notes, paying off in aggregate $2,480,155.14 representing unpaid principal and accrued and unpaid interest due.

Balance Sheet, $ 31-Jan-08

31-Oct-08

Cash and equivalents Accounts receivable Total Current Assets

242,077 13,001 255,078

37,724 407,996 445,720

Oil and gas properties Property and equipment Other assets Total Assets

291,632 1,390 25,000 573,100

814,239 56,754 26,152 1,342,865

2,448,997 2,234,581 -1,875,897

624,465 24,804 718,400

Total Current Liabilities, including Debt Total Stockholders’ Equity (Deficit)

Source: SEC Filings, FY ending January 31.

NTRO will likely rely on equity sales to finance a portion of its business operations in FY 2010.

Valuation NTRO has undertaken an extensive rework program at its Oklahoma properties to increase production and reduce operating costs. An equipment change at the Crown project has reduced operating costs to less than $1,000 per month. In addition, converting the Quinlan #4 well into a salt-water disposal well should enable increased production from the Quinlan #3 well. Also, NTRO has converted the Quinlan #2 salt-water disposal well into a producing well.

In January 2009, NTRO completed two wells on the Nancy Hubbard project in Pottawatomie County. This project involves four wells and one salt-water disposal well. The first well, the Nancy Hubbard well, was fractured at a depth of 5,300 feet in the Hunton Limestone formation, which is a very prolific pay zone in this area. A second well, Krouch #1, was also fractured and is now on-line and producing. This well tested at 76 barrels per day in the first 48 hours. The remaining two wells, Krouch # 2 and the Walker well, are also being re-worked and expected to commence production within the next 30 days.

At the Barnet Shale project, the Company is producing in partnership with REO Energy at approximately 400 barrels of oil and 2.5 million cubic feet of gas per day. This production is from 24 wells. In the future, NTRO may Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

attempt to re-enter the well bore on four sub-par wells to access different zones that might be more prolific. Five additional wells have been drilled and are scheduled to begin production in the next 30 days.

Quarterly revenues, $ thousands

Source: SEC Filings, FY ending January 31.

NTRO estimates its reserve potential in a range of 25-30 BCF of natural gas from each of its Oklahoma leases. Cumulative reserve potential for the Oklahoma leases is estimated at 180-200 BCF of gas. The Company targets 45% working interests in these leases, so we estimate NTRO’s share at 80 BCF of natural gas.

The Company also holds 5%-10% working interests in 7,000 acres in the highly prolific Barnett Shale. We estimate the Company’s share of Barnett Shale’s reserves at around 30 BCF of natural gas.

Altogether, we estimate NTRO’s reserves at approximately 110 BCF of natural gas, worth around $500 million at today’s natural gas prices.

We make the following assumptions in deriving a share price target for NTRO: Recoverable Reserves: 110 BCF of gas Investment required: $35 million for 15-20 wells producing approximately 2000 MCF of gas per day Natural Gas Price: $4.50 per MCF Free cash flow rate: 35% Well life: 10 years Production begins: 2011 In addition, the Company anticipates a 20% royalty on its leases.

We discount our free cash flow stream at 15% and subtract the present value of required investment to obtain a $25 million value for NTRO and a share price target of $0.16. We believe our valuation case is conservative, since we consider only natural gas reserves and ignore the value of oil production beginning in 2010.

Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

Recognizing the huge reserve potential of both the Barnet Shale and the Company’s Oklahoma properties as well as the progress the Company has made to-date in negotiating joint ventures and reworking existing wells, we are initiating coverage of NTRO with a Speculative Buy rating and a $0.16 price target. However, readers should consider the following risk factors before investing in these shares.

Risk Factors

Oil and gas reserves not proven NTRO’s success depends upon its ability to find and develop oil and gas reserves that are economically recoverable. Without successful exploration and exploitation activities, the Company will not be able to generate revenues. However, no assurance can be given that reserve estimates are accurate or that production can be developed on acceptable economic terms.

Oil and gas exploration risk Oil and gas exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing properties. Production inevitably declines as wells mature and production may be adversely impacted by changes in geological conditions or other factors that cannot be foreseen or remedied.

Going concern The Company has accrued net losses of $3.7 million since its inception and relies on outside financing for its drilling projects. NTRO’s future depends on its ability to obtain financing and profitably develop its oil and natural gas leases in Oklahoma and Texas.

Volatility of oil prices Market prices for oil and natural gas fluctuate widely, depending on international demand, production and other factors that cannot be foreseen. Declining prices may render a discovery uneconomic and funds spent to develop the project may not be recoverable, leading to financial losses.

2009

Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

Management Larry Wise President

Mr. Wise worked as a junior field engineer for Phillips Petroleum Company from 1977 to 1979. From 19791982, he served as completion superintendent for Jerry Scott Company, overseeing 14 drilling rigs and 300+ producing properties. He served as president, fund raiser and chief operating officer for JOMC Oil from 1982-1988; Texas United Petroleum from 1988-1993 and Pottawatomie County Energy from 1993-1999.

From 1999 through 2006, he operated Wise Oil and Gas Company LLC and served as an independent engineering consultant to Morris E. Stewart Oil Company, OKC Oil, Kirrie Oil Company, HOCO Oil Company and Buccaneer Energy Corporation.

Bill Thomas Director

Mr. Thomas has 25 years experience in oil and gas exploration and drilling. He has served as executive vice-president of Santa Fe Natural Resources & Durango Pipeline LLC of Midland, TX, vice-president of Maynard Oil in Dallas, Texas, and president of Safari Exploration, also in Dallas. He has also advised numerous E&P companies in both Texas and Oklahoma, including Patina Oil & Gas (where he was retained directly by the chairman), COSCO Capital, Forest Oil, Cordillera Energy and Blue Star Oil & Gas, among many others. His extensive field experience also includes roles as production manager and operations superintendent. He studied at Oklahoma State University’s School of Engineering, is a certified well supervisor, and received a perfect score on his certification exam. He received his BOP and H2S certifications in 2000.

Gunther J. Weisbrich Director

Mr. Weisbrich graduated with a master’s degree in geology from Boston College and a Bachelor of Science in geology from Susquehanna University. He has served as a production geologist for Exxon Company USA in Louisiana, and as a senior exploration geologist with Hunt Oil Company. He also served as senior international exploration geologist for Yemen Hunt Oil Company/ Jannah Hunt Oil Company. His exploration successes include the discovery and appraisal of the following fields: Al Nasr (120 million barrels of oil), Dhahab (40 million barrels of oil), Jabal Habah (241 billion cubic feet of natural gas), Wadi Bana (80 billion cubic feet of natural gas and 16 million barrels of oil).

James Kirby Director

Mr. Kirby has direct oil industry experience and an extensive banking background, working for First National Bank of Shawnee, Liberty Bank & Trust, Chocataw State Bank, The Republic Bank of Tecumseh and more. He has held numerous positions within these companies, including vice president, banking center manager, compliance officer and bank security officer.

Sharon Farris Secretary

Ms. Farris has been working in the oil and gas industry for several years. She worked for Buccaneer Energy Corporation and HOCO Inc., interfacing with the Oklahoma Corporation Commission, the Oklahoma Tax Commission, petroleum engineers, geologist, landowners, attorneys, oil and gas purchasers, and oil field workers. She is a graduate of the University of Oklahoma and has more than 15 years management experience, including five years as a Certified Manager Trainer. She has a family background in the oil and gas industry

Nitro Petroleum Incorporated (OTCOB: NTRO)

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Analyst: Victor Sula, Ph.D. Initial Report February 2nd, 2009

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Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Subscribers are cautioned not to place undue reliance upon these forward looking statements. These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www. finra.org.

All decisions are made solely by the analyst and independent of outside parties or influence.

I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report.

Victor Sula, Ph.D. - Senior Analyst Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

Nitro Petroleum Incorporated (OTCOB: NTRO)

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