Analyst: Victor Sula, Ph.D.

Initial Report
February 2nd, 2009

1/30/09
NTRO daily
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Nitro Petroleum Incorporated
260-7250 NW Express Way 0.03

Oklahoma City, OK 73132 0.02

volume © BigCharts.com
Phone: 405-728-3800 2

Toll Free (IR): (888) 805-NTRO 1.5

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E-mail: info@nitropetroleuminc.com 1

Website: www.nitropetroleuminc.com 0.5

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MARKET DATA Company Introduction

Nitro Petroleum Incorporated (NTRO) explores and develops oil
and natural gas properties in the United States. The Company has
Symbol NTRO interests in three prospects covering 240 acres (the East Moreland,
Exchanges OTC OB
West Moreland, and Farley leases) in Nowata County, Oklahoma.
Current Price $0.044
Price Target $0.16 In addition, NTRO is developing a Barnett Shale joint venture proj-
Rating Speculative Buy ect covering 7,000 mineral acres and located mainly in northeastern
Outstanding fully diluted shares 104.65 Million Montague and southwestern Cooke counties of Texas. This project
Market Cap. $6.54 Million consists of 24 operating wells producing approximately 400 barrels
Average 3-m Volume 251,824 of oil and 2.5 million cubic feet of gas per day.

Source: Yahoo Finance, Analyst Estimates
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. Subse-
quent 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 con-
verted the Quinlan #4 well into a salt-water disposal well.

The Quinlan lease lies on the Hunton Limestone formation, con-

sidered to be one of the best producing formations in Oklahoma.
This region has produced in excess of 5.8 million barrels of oil to-
date 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) 1
 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 Okla-
homa.

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 cur-
rently 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 expec-
tancy.

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) 2

 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 joint-
venture 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 acquisi-
tion 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 proj-
ect. 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 ex-
pect 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% rev-
enue 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) 3

 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 opera-
tor 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 Sand-
stone, 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 await-
ing 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 seis-
mic data, used to image reservoirs of oil and natural gas and
drill horizontal wells more precisely inside targeted shale for-
mations, thus avoiding various underground structural chal-
lenges 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 tech-
nologies. NTRO is also pursuing low-risk development drill-
ing and work-over opportunities with experienced, well-estab-
lished operators.

Nitro Petroleum Incorporated (OTCOB: NTRO) 4

 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 Bartles-
ville 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 Far-
ley, also located in Nowata County.

The Company hired Well Enhancement Services LLC (WES) to re-

work 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. How-
ever, 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 signifi-
cantly and recover over 66% of the oil still left in-place.

Nitro Petroleum Incorporated (OTCOB: NTRO) 5

 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 Lime-
stone 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 treat-
ments.
1. www.toroventuresinc.com/pdf/HuntonFormation.pdf

Nitro Petroleum Incorporated (OTCOB: NTRO) 6

 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. Ac-
cording 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

2006 2007 2008 2009e 2010e

Total OECD 49.6 49.1 47.7 46.4 46.4
North America 23.3 23.4 22.1 21.7 22.0
Europe 15.7 15.3 15.2 14.7 14.7
Other 10.6 10.4 10.4 10.0 9.7
Total non-OECD 35.4 36.8 38.2 38.7 39.6
Former Soviet Union 4.2 4.2 4.3 4.3 4.3
China 7.2 7.6 8.0 8.3 8.5
Other Asia 8.8 9.1 9.2 9.1 9.1
Other non-OECD 15.2 15.9 16.7 17.0 17.7
Overall total 85.0 85.9 85.9 85.1 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

Nitro Petroleum Incorporated (OTCOB: NTRO) 7

 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 produc-
tion 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 mil-
lion barrels per day in 2010.

Supply growth in countries such as the United States, Brazil and Azerbaijan is expected to more than compen-
sate for continued declines in many non-OPEC nations, particularly Mexico, the North Sea and Russia5.
Oil: supply, million barrels per day

2006 2007 2008 2009e 2010e

Total Non-OPEC 49.8 50.0 49.7 49.9 50.0

North America 15.3 15.4 15.0 15.2 15.2
Other OECD 6.3 6.1 5.8 5.5 5.2
Former Soviet Union 12.1 12.6 12.5 12.6 12.8
China 3.8 3.9 3.0 4.0 4.0
Others 12.3 12.0 13.4 12.6 12.8
OPEC 34.7 34.4 35.8 35.0 36.6
Overall total 84.5 84.4 85.5 84.9 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 produc-
tion 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 Octo-
ber. 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/

Nitro Petroleum Incorporated (OTCOB: NTRO) 8

 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 con-
tributed 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) 9

 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 aver-
age $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 tril-
lion 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 proj-
ects 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) 10

 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, $
9 months 9 months
FY 2007 FY 2008 % Chg FY 2008 FY 2009 % Chg

Revenues 93,346 127,844 37.0% 166,582 296,262 77.8%

Total Expenses, including 1,266,629 1,722,392 36.0% 655,008 1,115,957 70.4%
Lease operating 21,532 94,578 339.2% 63,467 261,986 312.8%
Production taxes - 8,369 n/m - 20,060 n/m
Depreciation, depletion and amortization 458,100 835,938 82.5% 11,211 36,958 229.7%
Interest expense 437,292 446,916 2.2% 334,269 336,314 0.6%
General and administrative 349,705 336,591 -3.8% 246,061 460,639 87.2%
Net Loss -1,173,283 -1,594,548 n/m -488,426 -819,695 n/m
Diluted EPS -0.01 -0.01 n/m -0.01 -0.02 n/m

Source: SEC Filings, FY ending January 31.

Nitro Petroleum Incorporated (OTCOB: NTRO) 11

 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 activi-
ties. 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 242,077 37,724

Accounts receivable 13,001 407,996
Total Current Assets 255,078 445,720

Oil and gas properties 291,632 814,239

Property and equipment 1,390 56,754
Other assets 25,000 26,152
Total Assets 573,100 1,342,865

Total Current Liabilities, including 2,448,997 624,465

Debt 2,234,581 24,804
Total Stockholders’ Equity (Deficit) -1,875,897 718,400

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 re-
duce 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 proj-
ect 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 ex-
pected 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) 12

 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. Cu-
mulative 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) 13

 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 recov-
erable. 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 produc-
tion 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) 14

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

Management

Larry Wise Mr. Wise worked as a junior field engineer for Phillips Petroleum Company from 1977 to 1979. From 1979-
1982, he served as completion superintendent for Jerry Scott Company, overseeing 14 drilling rigs and
President 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 engi-
neering consultant to Morris E. Stewart Oil Company, OKC Oil, Kirrie Oil Company, HOCO Oil Company
and Buccaneer Energy Corporation.

Bill Thomas 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
Director Maynard Oil in Dallas, Texas, and president of Safari Exploration, also in Dallas. He has also advised nu-
merous 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 super-
visor, and received a perfect score on his certification exam. He received his BOP and H2S certifications in
2000.

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

Sharon Farris 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
Secretary 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 experi-
ence, including five years as a Certified Manager Trainer. She has a family background in the oil and gas
industry

Nitro Petroleum Incorporated (OTCOB: NTRO) 15

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

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ments 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 ma-
terially 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 com-
pleteness 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
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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 Produc-
tivity 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) 16