EGPI FIRECREEK, INC. - Quarter Report: 2008 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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EGPI FIRECREEK, INC.

(Exact name of small business issuer as specified in its charter)

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6564 Smoke Tree Lane Scottsdale, Arizona 85253

 (Address of Principal Executive Office) (Zip Code)

(480) 948-6581

(Issuer’s telephone number, including area code)

Energy Producers, Inc.

(Former name, former address and former fiscal year, if changed since last report)

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EGPI FIRECREEK, INC

f/k/a Energy Producers, Inc.

10-QSB

March 31, 2008

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2008 AND DECEMBER 31, 2007

See the notes to the unaudited consolidated financial statements.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

See the notes to the unaudited consolidated financial statements.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

See the notes to the unaudited consolidated financial statements.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

AS RESTATED

See the notes to the unaudited consolidated financial statements.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

1.

ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING PRINCIPLES

EGPI Firecreek, Inc. (the “Company”) was incorporated in the State of Nevada in October 1995. Effective October 13, 2004, the Company, previously known as Energy Producers Inc., changed its name to EGPI Firecreek, Inc.

The Company is a 50% non controlling owner of three gas wells in Sweetwater County, Wyoming, and owns other controlling oil and gas interests located in Knox and Ward Counties, Texas.

In December 2006, the Company increased its authorized common stock to 1,320,000,000 shares with par value of $.001. Twenty million of these shares are non-voting.  

Consolidation- the accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Firecreek Petroleum, Inc.  All significant inter-company balances have been eliminated.

Use of Estimates- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make reasonable estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses at the date of the consolidated financial statements and for the period they include.  Actual results may differ from these estimates.

Revenue and Cost Recognition- Revenue is recognized from oil and gas sales at such time as the oil and gas is delivered to the buyer. For its producing activities, the Company uses successful efforts costing.  

Properties and Equipment-The Company uses the successful efforts method of accounting for oil and gas producing activities. Under this method, acquisition costs for proved and unproved properties are capitalized when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole drilling costs, are expensed. Development costs, including the costs to drill and equip development wells, and successful exploratory drilling costs to locate proved reserves are capitalized.

Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination of whether a well has found proved reserves is made shortly after drilling is completed. The determination is based on a process which relies on interpretations of available geologic, geophysic, and engineering data. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. If an exploratory well requires a major capital expenditure before production can begin, the cost of drilling the exploratory well will continue to be carried as an asset pending determination of whether proved reserves have been found only as long as: i) the well has found a sufficient quantity of reserves to justify its completion as a producing well if the required capital expenditure is made and ii) drilling of the additional exploratory wells is under way or firmly planned for the near future. If drilling in the area is not under way or firmly planned, or if the well has not found a commercially producible quantity of reserves, the exploratory well is assumed to be impaired, and its costs are charged to expense.

In the absence of a determination as to whether the reserves that have been found can be classified as proved, the costs of drilling such an exploratory well is not carried as an asset for more than one year following completion of drilling. If, after that year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired, and its costs are charged to expense. Its costs can, however, continue to be capitalized if a sufficient quantity of reserves is discovered in the well to justify its completion as a producing well and sufficient progress is made in assessing the reserves and the well’s economic and operating feasibility.

The impairment of unamortized capital costs is measured at a lease level and is reduced to fair value if it is determined that the sum of expected future net cash flows is less than the net book value. The Company determines if impairment has occurred through either adverse changes or as a result of the annual review of all fields. During 2006 and 2005, the Company did not record any impairment.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

1.

ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)

Development costs of proved oil and gas properties, including estimated dismantlement, restoration and abandonment costs and acquisition costs, are depreciated and depleted on a field basis by the units-of-production method using proved developed and proved reserves, respectively. The costs of unproved oil and gas properties are generally combined and impaired over a period that is based on the average holding period for such properties and the Company's experience of successful drilling.

Costs of retired, sold or abandoned properties that make up a part of an amortization base (partial field) are charged to accumulated depreciation, depletion and amortization if the units-of-production rate is not significantly affected. Accordingly, a gain or loss, if any, is recognized only when a group of proved properties (entire field) that make up the amortization base has been retired, abandoned or sold.

Cash- For the purpose of calculating changes in cash flows, cash includes all cash balances and highly liquid short-term investments with original maturity dates of three months or less.

Deferred costs- Deferred costs are the costs of obtaining the equity line of credit discussed in Note 10 and are amortized over the life of the loan.

Long Lived Assets- The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.

Income taxes- The Company accounts for income taxes in accordance with the Statement of Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes".  SFAS No. 109 requires an asset and liability approach to financial accounting and reporting for income taxes.  Deferred income tax assets and liabilities are computed annually for differences between financial statement and income tax bases of assets and liabilities that will result in taxable income or deductible expenses in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets and liabilities to the amount expected to be realized.  Income tax expense is the tax payable or refundable for the period adjusted for the change during the period in deferred tax assets and liabilities.

2.

GOING CONCERN

The accompanying unaudited consolidated financial statements have been presented in accordance with generally accepted accounting principals, which assume the continuity of the Company as a going concern.  However, during the quarter  ended March 31, 2008 and the year ended December 31, 2007, the Company generated no material revenues and has relied on borrowings and the issuance of common and preferred stock to raise money for its business operations and plans.  This situation raises the doubt of the Company’s ability to continue as a going concern

Management’s plans with regard to this matter are as follows:

·

Raise interim and long term finance in addition to its present equity line to assist expansion-development and acquisition programs for oil and gas, corporate operations, and for the purpose of building on the current revenue base.

·

Obtain asset based project finance or develop joint ventures to fund work programs for oil and gas projects domestically and overseas.

·

Pursue formation of strategic alliances with more firmly established peer groups to assist acquisition activities.

·

Initiate search for experienced oil and gas personnel to add to our staff.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

3.

NET LOSS PER SHARE

The Company applies SFAS No. 128, “Earnings per Share” to compute net loss per share. In accordance with SFAS No. 128, basic net loss per share has been computed based on the weighted average of common shares outstanding during the years. Diluted net loss per share gives the effect of outstanding common stock equivalents in the form of warrants, convertible preferred stock, and convertible debentures.  

The effects on net loss per share of the common stock equivalents, however, are not included in the calculation of net loss per share since their inclusion would be anti-dilutive.

Net loss per common share has been computed as follows:

4.

COMMON STOCK TRANSACTIONS

During the first quarter of 2007, the Company issued 4,021,500 shares of common stock to pay down the equity line of credit.

5.

PREFERRED STOCK SERIES

Series A preferred stock: Series A preferred stock has a par value of $0.001 per share and no stated dividend preference.  The Series A is convertible into common stock at a conversion ratio of one preferred share for one share of common stock.   Preferred A has liquidation preference over Preferred B stock and common stock.

Series B preferred stock: Series B preferred stock has a par value of $0.001 per share and no stated dividend preference.  The Series B is convertible into common stock at a conversion ratio of one preferred share for one share of common stock.  The Series B has liquidation preference over Preferred C stock and common stock.

Series C preferred stock: The Series C Preferred stock has a stated value of $0.001 and no stated dividend rate and is non-participatory.  One share of preferred is convertible into 10 shares of common stock.  The Series C has liquidation preference over common stock.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

6.

COMMON STOCK WARRANTS

A listing of common stock warrants outstanding is as follows:

7.

FIXED ASSETS- NET

The following is a detailed list of fixed assets:

In January 2008, the Company, through it’s wholly owned subsidiary, Firecreek Petroleum, Inc, purchased a certain 40 acre tract of land and leases  with first right for an additional 40 acre lease located in Ward County, Texas, more commonly known as the J.B. Tubb Leasehold Estate.  The Company paid $1,400,000 for the lease, equipment and a Participation Agreement which provides for turnkey drilling, re-entry and includes multiple wells.

8.

EQUITY CREDIT LINE

The equity line is canceled effectively 12/26/07, but the terms of all equity line promissory notes have not changed.

The following is the schedule of the equity line promissory notes payable at March 31, 2008:

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

8.

EQUITY CREDIT LINE (CONTINUED)

At March 31, 2008, the Company is in default of the equity line promissory note agreement(s).  The equity line agreement provides for interest penalties in the event of a default.  The interest penalties are $1,871,156 at March 31, 2008, however, the lender, Duchess, has agreed not to enforce any of the penalty provisions as of the date of this report.

9. INCOME TAX PROVISION

Note:

The deferred tax benefits arising from the timing differences begin to expire in fiscal years 2007 and 2028 and may not be recoverable upon the purchase of the Company under current IRS statutes.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

10.

RESTATEMENT

During 2007, the Company discovered errors made in its financial statements. The Company adjusted subsequent period financial statements to reflect the following:

Balance Sheet Restatements:

Equity Line Notes Payable:

The equity line notes payable were issued with incentive debentures attached to the host contract.  In accordance with EITF 00-19 and SFAS 133, the derivative liabilities were bifurcated from the host contract at fair market value.  The corresponding debt discount is amortized over the life of the equity line note payable to interest expense on the statements of operations.  As of March 31, 2007, the debt discount associated with the issuance of the incentive debenture and the embedded conversion feature within the incentive debenture were $436,573.  

Convertible Debenture:

The incentive convertible debentures attached to the equity line notes payable were bifurcated at fair market value as of the issuance date.  In accordance with SFAS 133, these debentures are marked to market at each balance sheet date.  As of March 31, 2007, the fair value of the incentive debentures were $856,275.

Derivative Liability:

The Company identified conversion features embedded within the incentive debentures.  In accordance with SFAS 133 and EITF 00-19, these conversion features were bifurcated from the incentive debentures and recorded at fair market value as of the issuance date.  In accordance with SFAS 133, the conversion features are marked to market at each balance sheet date, with the corresponding gain or loss recorded in the statements of operations.  As of March 31, 2007, the fair value of the conversion features are $689,863.

The fair value of the conversion options are estimated at each balance sheet date utilizing the Black Scholes Option Pricing Model utilizing the following assumptions:

Additional Paid in Capital and Other Comprehensive Income

The Company previously misapplied the guidance of EITF 00-19 and SFAS 133 and bifurcated the incentive debentures from the host contract at intrinsic value to paid in capital and other comprehensive income.  The application was reversed and the Company correctly applied the accounting guidance as set forth in EITF 00-19 and SFAS 133.  The change resulted in a ($896,371) decrease to paid in capital for the quarter ended March 31, 2007.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

10.

RESTATEMENT (CONTINUED)

Statements of Operations Restatements:

General and Administrative:

The Company previously recorded the face amount of the incentive debentures to general and administrative expenses during the quarter ended March 31, 2007.  These incentives debentures were reclassified to at fair market value as a debt discount to the equity credit line. The change resulted in a decrease of $159,125 to general and administrative expenses during the quarter ended March 31, 2007.

Interest Expense:

The Company previously misapplied the guidance of EITF 00-19 and SFAS 133.  The Company re-evaluated the application and recorded the incentive debentures and the conversion features at fair market value to debt discount.  The debt discount will be amortized over the life of the equity credit line to interest expense.  This change resulted in a $4,759 increase to interest expense during the quarter ended March 31, 2007.

Gain on Derivative Liability:

The Company accounted for the incentive debentures and conversion features utilizing the accounting guidance in EITF 00-19 and SFAS 133.  Both the incentive debentures and the conversion features were recorded at the fair market value on the date of issuance, and are marked to market on each balance sheet date.  The Company realized a gain on derivative liability in the amount of $14,617 for the quarter ended March 31, 2007.

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

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EGPI FIRECREEK, INC.

(FORMERLY ENERGY PRODUCERS, INC.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE QUARTERS ENDED MARCH 31, 2008 AND MARCH 31, 2007

11.

COMMITMENTS AND CONTINGENCIES

On February 28, 2008, the Company received a Demand for Arbitration (the “Demand”) from Star against the Company and Double Coin Ltd. (“Double Coin”), an entity co-owned in part by Mr. Rupert Johnson, a Director of the Company.  Mr. Johnson was retained and compensated by Star as a consultant in the transaction. The Demand alleges (i) the Company and Double Coin willfully failed to cooperate with Star in conducting its due diligence review in connection with various projects  (ii) that this failure to cooperate with its due diligence review prevented Star from acquiring any rights and interests in the projects and thus amounts to a breach of the Agreement; (iii) that the Company and Double Coin breached an implied duty of good faith and fair dealing; and (iv) that the Company and Double Coin made misrepresentations in connection with the transaction.  Star seeks (i) to have the Agreement declared null and void; (ii) the return of the shares issued to the Company (“Company Shares”); (iii) the Company to return the $100,000 cash payment (“Cash Payment”).

Although the Company is seeking to resolve this matter in an amicable fashion, the Company strongly disputes the allegations and is prepared to vigorously defend against the claims set forth in the Demand. Further, as stated in Section 3(a) of the Agreement, the Company Shares and the Company Cash were irrevocably issued upon execution of the Agreement. In March 2008, the Company received notice for mediation of the matter, and will proceed accordingly. No provision for a potential liability in regards to the resolution of this matter has been made to the financial statements at March 31, 2008.

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

You should read the following discussion and analysis in conjunction with the Consolidated Financial Statements in Form 10-KSB, as amended, and the other financial data appearing elsewhere in this Form 10-Q Report.

The information set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among others (i) expected changes in the Company’s revenues and profitability, (ii) prospective business opportunities and (iii) the Company’s strategy for financing its business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These forward-looking statements relate to the plans, objectives and expectations of the Company for future operations. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this report should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. In light of these risks and uncertainties, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. The foregoing review of important factors should not be construed as exhaustive. The Company undertakes no obligation to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

The Company is currently focused on oil and gas activities for development of interests acquired in Knox and Ward Counties, Texas and Sweetwater County, Wyoming for the production of oil and natural gas. During 2007 we limited and wound down the pursuit of and potential completion of projects overseas in Central Asian and European countries, but reserve the right to re-enter these activities at a future date.

The Company has been making presentations to asset-based lenders and other financial institutions for the purpose of expanding and supporting our growth potential by development of our oil and gas operations in 2008 with a goal to increase our revenue base and cash flow; however, the Company makes no guarantees and can provide no assurances that it will be successful in these endeavors.  

One of the ways our plans for growth could be altered if current opportunities now available become unavailable:

The Company would need to identify, locate, or address replacing current potential acquisitions or strategic alliances with new prospects or initiate other existing available projects that may have been planned for later stages of growth and the Company may therefore not be ready to activate. This process can place a strain on the Company. New acquisitions, business opportunities, and alliances, take time for review, analysis, inspections and negotiations. The time taken in the review activities is an unknown factor, including the business structuring of the project and related specific due diligence factors.

General

The Company historically derived its revenues primarily from retail sales of oil and gas field inventory equipment, service, and supply items primarily in the southern Arkansas area, and from acquired interests owned in revenue producing oil wells, leases, and equipment located in Olney, Young County, Texas. The Company disposed of these two segments of operations in 2003. The Company acquired a marine vessel sales brokerage and charter business, International Yacht Sales Group, Ltd. of Great Britain in December 2003 later disposing of its operations in late 2005. We accounted for the segments as discontinued operations in the consolidated statements of operations for the related fiscal year.

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Effective July 1, 2004, we acquired Firecreek Petroleum, Inc., and its subsidiary Firecreek Romania, SRL. Firecreek was focused on exploration and development specializing in the niche market of rehabilitation and enhancement of existing oilfields through modern management and state of the art technological applications internationally. Throughout 2004 and 2005, the Firecreek unit developed relationships, pursued and prepared for potential acquisitions in Romania and Libya, and through its strategic alliances developed other potential projects for acquisition located in Russia, Romania, Kazakhstan, Ukraine, and Turkey. Firecreek’s business was subsequently restructured in the first quarter of 2006. This process undertook closing our Firecreek subsidiary Ft. Worth Texas offices, eliminating or lowering many expenses including employees, consultants, telephones, long distance, cellular fees, travel, office supplies, data fees, and other. Books, accounting records and data were transferred to the Parent offices located in Scottsdale Arizona. The restructuring helped to decrease overall operating losses for the year 2006, and also to a lesser extent conserved existing cash flows. Through 2007 and first quarter 2008, Firecreek has focused primarily on development of U.S. based domestic oil and gas operations in Texas and Wyoming.

Effective November 15, 2005, Firecreek purchased a 50% undivided working interest in leases, wells, equipment, gas and to a lesser extent oil reserves, and other rights, located in Green River Basin, Sweetwater County, Wyoming. The project is listed under the prospect name “Ten Mile Draw” (“TMD”). Through our operator Newport Oil Corporation (“Newport”) having completed a successful workover program we commenced with gas production from two wells, the 16-1 and 7-16, in the first and second quarters of 2006, and subsequently began a workover program for a third well, the 13-9, in July of 2006 thereof. Experiencing technical difficulties and weather conditions Newport completed the 13-9 well in March of 2007. In the second quarter 2007 the 13-9 was taken off production as notified by our operator, for the purpose of removing water and fracing fluid build up and for the purpose of increasing the overall potential for future production. In late October of 2007 the Company approved an authorization for expenditure related to the 13-9 well (packer workover) to separate the Almond formation from the Lewis formation. Operations then attempted to reduce the water believed coming from the Almond formation, with goal to produce the Lewis sand formation on a commercial level. Due to the winter months creating difficulties for location work, our operator elected to delay further attempt to kick the well off until the spring of 2008 to see if the 13-9 can reach a commercial production level. At the time of filing of this report the Company awaits operations update as to status of the 13-9 well. Depending on the economics in the Wyoming area, the Company continues to contemplate one or more additional drilling programs for future development in the TMD.

Effective July 1, 2007, Firecreek purchased a 100% working interest and related 75% net revenue interest in leases, wells, equipment, and oil reserves located in Knox County, Texas. The project is listed as the Fant Ranch Unit. Through our operator Success Oil Co. Inc., we took over operations, commenced with oil production in the third and fourth quarter of 2007, and implemented a phase one program to rehabilitate and bring two additional wells on line in the Fant Unit. The Company, subsequent to December 31, 2007 has commenced with enhancement and rehabilitation for the majority of the producing wells in the Fant Unit which the Company believes will improve and stabilize mechanical aspects and performance levels for the wells, equipment, and overall production. For additional information please see our Report on Form 8-K filed on July 16, 2007 incorporated herein by reference.

On August 3, 2007, the Company through its Firecreek unit concluded a transaction for the sale of rights and opportunities for development works and projects located in the Ukraine. Through the agreement the purchaser acquired the rights to acquire licenses, permits and permissions to explore for and extract oil, natural gas or other natural resources on the territories referenced in the agreement. For additional information please see information and exhibits to a Report on Form 8-K filed on August 13, 2007, incorporated herein by reference. Please also see Item 1, Legal Proceedings in this report for updated status.

In January, 2008, Firecreek commenced with an enhancement/rehabilitation phase 2 program for the Fant Ranch Unit located in Knox County, Texas. The program includes cleaning out casing perforations, maintenance, paraffin removal, repair and acid stimulation for a majority of the oil wells in the unit. The purpose of the program has been to maintain the existing wells regularly, and to increase the overall well efficiency and production for the field. The Company has received indications from its operator that the program has been successful.

In January, 2008, Firecreek entered into an Assignment and Bill of Sale (the “Assignment”) with Success Oil Co., Inc. (“SOC”) relating to the purchase and sale of 75% working interests along with 56.25% corresponding net revenue in certain 40 acre tract of land and leases (the “North 40”), with and including a first right for an additional 40 acre lease (the “South 40”), located in Ward County, Texas, more commonly known as the J.B. Tubb leasehold estate (the “Tubb Lease”). The Company participated in a workover, drilling and development program,

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and has recently brought three wells online as a result. The Company paid $1,400,000 for the lease, equipment and a Participation Agreement which provided for turnkey drilling, re-entry, and included multiple wells on the North 40 Acres. Firecreek has subsequently acquired assignment of one Lower Clearfork formation in the Highland 2 Wellbore which is located on the South 40 of the J.B. Tubb Leasehold Estate (also see information contained in Current Report on Form 8-K/A filed on April 30, 2008). The Tubb Lease workover, drilling and development programs, have recently brought three wells online as a result, with two of the three wells effectively producing and selling oil and gas at the date of this report. For further information please see our Current Report on Form 8-K, as amended, originally filed on January 9, 2008, and amended and filed on April 30, 2008, incorporated herein by reference.

The Company expects to incur an increase in operating expenses during the next year from commencing activities related to its plans for the Company and Firecreek oil and gas operations. The amount of net losses and the time required for the Company to reach and maintain profitability are uncertain at this time. There is a likelihood that the Company will encounter difficulties and delays encountered with business subsidiary operations, including, but not limited to uncertainty as to development and the time and timing required for the Company’s plans to be fully implemented, governmental regulatory responses to the Company’s plans, fluctuating markets and corresponding spikes, or dips in our products demand, currency exchange rates between countries, acquisition and development pricing, related costs, expenses, offsets, increases, and adjustments. There can be no assurance that the Company will ever generate significant revenues or achieve profitability at all or on any substantial basis.

General Statement:  Factors that may affect future results:

With the exception of historical information, the matters discussed in Management’s Discussion and Analysis or Plan of Operation contain forward looking statements under the 1995 Private Securities Litigation Reform Act that involve various risks and uncertainties.  Typically, these statements are indicated by words such as “anticipates”, “expects”, “believes”, “plans”, “could”, and similar words and phrases.  Factors that could cause the company’s actual results to differ materially from management’s projections, forecasts, estimates and expectations include but are not limited to the following:

–

Inability of the company to secure additional financing.

–

Unexpected economic changes in the United States.

–

The imposition of new restrictions or regulations by government agencies that affect the Company’s business activities.

To the extent possible, the following discussion will highlight the Company’s business activities for the quarters ended March 31, 2008 and March 31, 2007.

Results of Operations

Three months ended March 31, 2008 vs. three months ended March 31, 2007.

There was $219,971 in revenues generated from the Company’s gas and oil lease production activities for Q1 2008 compared to $33,883 in revenues in Q1 2007. Revenues were attributed to i) the Wyoming gas well production ii) from producing oil wells in the Company’s Fant Ranch Unit interests, located in Knox County, Benjamin, Texas, and iii) from the recently acquired oil and gas interests the Company owns in the J.B. Tubb Leasehold Estate, located in  Amoco Crawar Field, Ward County, Texas. Operating costs were $163,485 in the first quarter of 2008 and $29,905 in the first quarter of 2007, producing gross profits of $56,485 for first quarter 2008 compared with $3,978 in the first quarter 2007.

General and administrative expense for Q1 2008 increased to $492,376 from $298,393 in Q1 2007. The increase was attributed to $325,000 in well enhancement/rehabilitation costs for wells in the Fant Ranch Unit.    

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Detail of general & administrative expenses:

Consulting fees of $36,040 were incurred for business advisory services.

Professional fees of $107,468 were incurred in regards to management advisory, legal costs, accounting, financial modeling.

Well workover costs of $325,000 were paid toward charges related to the Company’s interests owned in the Fant Ranch oil wells.

After deducting general and administrative costs, the Company experienced a loss from operations of $435,891 for the three months ended March 31, 2008 compared to an operating loss of $294,395 for the same period last year.

Interest expense increased in the three months ended March 31, 2008 to $460,496 compared to $187,656 for the same period last year. The increase of interest was due to the amortization of the debt discount associated with prior and new debentures and accrued interest on outstanding notes and debentures.

ITEM 3 – QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Consulting and professional fees increased approximately $18,508 to $143,508 in Q1 2008 from $125,000 Q1 2007.

Net loss for Q1 2008 was $1,072,195 or $0.00 per share compared to a loss of $467,436, or $0.00 per share for Q1 2008.

Discussion of Financial Condition:  Liquidity and Capital Resources

At March 31, 2008 cash on hand was $111,073 as compared with $2,009,734 at December 31, 2007.   

At March 31, 2008, the Company had working capital deficit of $5,448,530 compared to a working capital deficit of $3,519,638 at December 31, 2007.  Working capital decreased mainly as a result of operating losses and financing costs.

Total assets at March 31, 2008 were $4,034,150 as compared to $4,833,885 at December 31, 2007.

The Company’s total stockholders’ deficit increased from $3,784,037 at December 31, 2007 to $5,070,432 at March 31, 2008.  Stockholders’ equity decreased $1,072,195 from operating losses incurred in Q1 2008 which includes loss from operations of $435,891 along with the balance of operating losses which are attributed to increases during the period on the derivative liability and interest on notes payable and incentive debentures.

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ITEM 4(T) – CONTROLS AND PROCEDURES

EGPI Firecreek, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. EGPI Firecreek, Inc. internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

EGPI Firecreek, Inc. management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2008. Management has attempted designed such disclosure controls and procedures as defined under Rule 13a-13(e) promulgated under the Securities and Exchange Act of 1934 as amended, to ensure that material information is made known to them, particularly during the period in which this report was prepared. During fiscal year 2007, management discovered certain errors made to the Company’s consolidated financial statements for the fiscal years ended December 31, 2006 and 2005. Such errors, as more fully described in this annual report, in the Company’s consolidated financial statements are deemed by management to have occurred due to material weaknesses in the Company’s controls and procedures. Accordingly, based on our assessment we have concluded that, as of December 31, 2007, the Company’s internal control over financial reporting were not effective based on those criteria outlined under the Securities Exchange Act. The Company has taken steps to remediate these material weaknesses, including engaging an outside consulting firm to assist with certain complex accounting of the Company’s convertible securities.

The Company’s President and Chief Financial Officer, the (“Certifying Officer”) has evaluated the effectiveness of the Company’s disclosure controls and procedures within 90 days of the date of this report and believe that the Company’s disclosure controls and procedures were not effective based on the required evaluation as of the date of this Report.

There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses with the exception of the need for obtaining and implementing controls around complex accounting transactions, such as accounting for derivative liabilities, management has subsequently engaged an outside accounting firm to oversee the function.

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PART II.  OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

Texas Litigation

Hickman Investments, Ltd.

On July 23, 2007, the Company received notice from the Secretary of State of Texas that Hickman Investments, Ltd. (“Hickman”) filed a Plaintiff’s First Amended Orginal Petition against the Company’s wholly-owned subsidiary Fircreek Petroleum, Inc. (“FPI”), in Tarrant County, Texas (Cause No. 06-048109-3) seeking judgment against FPI for breach of lease, foreclosure of Hickman’s liens on FPI’s property, attorney’s fees, cost of court, pre-judgment interest, and interest on the judgment from date until paid (the “Hickman Petition”).  The Company strongly believes that the Hickman Petition is wholly unmeritorious and procedurally flawed. The Company will vigorously challenge and defend against all claims contained in the Hickman Petition. With respect to the matters in the filing: on August 9, 2007, the Company filed a general denial with the Tarrant County Court At Law, with the matter then held in abeyance pending further clarifications and discussions. In March 2008 the Company received request for interrogatories, has answered said interrogatories by May 2008, and has filed interrogatories on Hickman, is awaiting their answers, and is in preparation for an upcoming mediation hearing. (Please also see information contained in current Report on Form 8-K filed on July 27, 2007, incorporated herein by reference.)

New York Litigation

Star Energy Corp. Transaction Background

As previously reported by EGPI Firecreek, Inc. in its Current Report on Form 8-K, dated August 9, 2007, the Company through Firecreek entered into a Letter Agreement with Star Energy Corp. (“Star”) relating to the purchase and sale of all of the Company’s rights to and interest in certain projects in Ukraine (the “Agreement”). Such rights and interests in the Ukraine projects included, but were not limited to: (1) any right to acquire shares or other interests in any entities to whom licenses, permits or permissions to explore for or extract oil, natural gas or other natural resources on any territories referenced in the exhibits to the Agreement have been issued by any government authority having jurisdiction over such territories; (2) any direct right to acquire licenses, permits or permissions to explore for or extract oil, natural gas or other natural resources on any territories referenced in the exhibits to the Agreement issued or to be issued by any government authority having jurisdiction over such territories; (3) interests currently held by the Company in any joint ventures, partnerships, consortiums, or industry groups that currently have rights to any Ukraine project or any other arrangements pertaining to any Ukraine project in which the Company currently has an interest, and (4) any business opportunities related to the Projects.  Pursuant to the Agreement, the Company received 2,100,000 shares of Star’s restricted Common Stock and one hundred thousand dollars ($100,000) in cash upon execution of the Agreement.

Demand for Arbitration

On February 28, 2008, the Company received a Demand for Arbitration (the “Demand”) from Star against the Company and Double Coin Ltd. (“Double Coin”), an entity co-owned in part by Mr. Rupert Johnson, a Director of the Company.  Mr. Johnson was retained and compensated by Star as a consultant in the transaction. The Demand alleges (i) the Company and Double Coin willfully failed to cooperate with Star in conducting its due diligence review in connection with various projects  (ii) that this failure to cooperate with its due diligence review prevented Star from acquiring any rights and interests in the projects and thus amounts to a breach of the Agreement; (iii) that the Company and Double Coin breached an implied duty of good faith and fair dealing; and (iv) that the Company and Double Coin made misrepresentations in connection with the transaction.  Star seeks (i) to have the Agreement declared null and void; (ii) the return of the 2,100,000 shares issued to the Company (“Company Shares”); (iii) the Company to return the $100,000 cash payment (“Cash Payment”).

Although the Company is seeking to resolve this matter in an amicable fashion, the Company strongly disputes the allegations and  is prepared to vigorously defend against the claims set forth in the Demand. Further, as stated in Section 3(a) of the Agreement, the Company Shares and the Company Cash were irrevocably issued upon execution of the Agreement. In March 2008, the Company received notice for mediation of the matter, and will proceed accordingly.

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ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Required information has been furnished in current Report on Form 8-K filings and other reports, as amended, during the period covered by this Report and additionally as listed and following.

On March 27 and December 26 of 2007, the Company issued to Dutchess two convertible debentures one with a face value of $140,000 and the other with a face amount $500,000, to pay an incentive fee to the holder of the equity credit line. The debentures became convertible at the date of the issuances and mature in March 27, 2012 and December 26, 2014, respectively. The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”) for the private placement of these securities pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering, the Investor is an “accredited investor” and/or qualified institutional buyer, the Investor has access to information about the Company and its investment, the Investor will take the securities for investment and not resale, and the Company is taking appropriate measures to restrict the transfer of the securities. For terms of the debentures please see information furnished in our Current Reports and Exhibits thereto on Form 8-K filed on March 29, 2007 and January 7, 2008, respectively, incorporated herein by reference.  

On June 11, 2007 the Company issued to Dutchess a debenture in the face amount of $2,000,000 for acquisitions and working capital. The Debenture bears interest at 12% per annum and matures on June 11, 2014. For terms of the debenture please see information furnished in our Current Report on Form 8-K, and Exhibits thereto filed on Jun 11, 2007, incorporated herein by reference.

On December 26, 2007, EGPI Firecreek, Inc. the Company issued to Dutchess a debenture in the face amount of $2,100,000. The Debenture bears interest at 12% per annum and matures on December 26, 2014. The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering, the Investor is an “accredited investor” and/or qualified institutional buyer, the Investor has access to information about the Company and its investment, the Investor will take the securities for investment and not resale, and the Company is taking appropriate measures to restrict the transfer of the securities. For terms of the debenture please see information furnished in our Current Report on Form 8-K, and Exhibits thereto filed on January 7, 2008, incorporated herein by reference.

 On April 21 and June 29 of 2006, the Company issued to Dutchess convertible debentures with a face value of $171,875 and $300,000 respectively, to pay an incentive fee to the holder of the equity credit line. The debentures became convertible at the date of the issuances and mature in April and June of 2011. The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering, the Investor is an “accredited investor” and/or qualified institutional buyer, the Investor has access to information about the Company and its investment, the Investor will take the securities for investment and not resale, and the Company is taking appropriate measures to restrict the transfer of the securities. For terms of the debentures please see information furnished in Exhibit “A” to each of Exhibits 99.1 and 99.2 to our Current Reports on Form 8-K filed on April 27, 2006 and June 7, 2006, respectively, incorporated herein by reference.  

On November 14 and December 15 of 2005, the Company issued to Dutchess convertible debentures with a face value of $375,000 and $82,500, respectively, to pay an incentive fee to the holder of the equity credit line. The debentures became convertible at the date of the issuances and mature in November and December 2010. The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering, the Investor is an “accredited investor” and/or qualified institutional buyer, the Investor has access to information about the Company and its investment, the Investor will take the securities for investment and not resale, and the Company is taking appropriate measures to restrict the transfer of the securities. For terms of the debentures please see information furnished in Exhibit “A” to each of Exhibits 10.3, and 99.1 to our Current Reports on Form 8-K filed on November and December 16, 2005, respectively, incorporated herein by reference.

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ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5 – OTHER INFORMATION

The Company and its Firecreek unit are presently in different stages of review and discussion, gathering data and information, and any available reports on other potential acquisitions in Texas, and other productive regions and areas in the U.S.

From time to time Management will examine oil and gas operations in other geographical areas for potential acquisition and joint venture development.

ITEM 6 – EXHIBITS

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SIGNATURE

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

Date:  May 15, 2008

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