UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*

Cano Petroleum, Inc.
(Name of Issuer)

Common Stock, par value $0.0001 per share
(Title of Class of Securities)

137801106
(CUSIP Number)

Steven J. Pully, Esq.
Carlson Capital, L.P.
2100 McKinney Avenue, Suite 1600
Dallas, TX 75201
(214) 932-9600

with a copy to

Peter Halasz
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
(212) 756-2000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

September 5, 2008
(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ]

NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 

CUSIP NO. 137801106 SCHEDULE 13D PAGE 1 OF 8 PAGES
--------------------- ------------------

 1 NAMES OF REPORTING PERSONS

 Double Black Diamond Offshore Ltd.
--------------------------------------------------------------------------------
 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 (a) [ ]
 (b) [ ]
--------------------------------------------------------------------------------
 3 SEC USE ONLY
--------------------------------------------------------------------------------
 4 SOURCE OF FUNDS (SEE INSTRUCTIONS)

 WC
--------------------------------------------------------------------------------
 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
 TO ITEMS 2(d) OR 2(e)

 [ ]
--------------------------------------------------------------------------------
 6 CITIZENSHIP OR PLACE OF ORGANIZATION

 Cayman Islands
--------------------------------------------------------------------------------
 7 SOLE VOTING POWER

 NUMBER OF 2,081,366
 -------------------------------------------------------------
 SHARES 8 SHARED VOTING POWER
 BENEFICIALLY
 OWNED BY -0-
 -------------------------------------------------------------
 EACH 9 SOLE DISPOSITIVE POWER
 REPORTING
 PERSON 2,081,366
 -------------------------------------------------------------
 WITH 10 SHARED DISPOSITIVE POWER

 -0-
--------------------------------------------------------------------------------
 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 2,081,366
--------------------------------------------------------------------------------
 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
 SHARES (SEE INSTRUCTIONS)

 [ ]
--------------------------------------------------------------------------------
 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

 4.5%
--------------------------------------------------------------------------------
 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

 CO
--------------------------------------------------------------------------------


CUSIP NO. 137801106 SCHEDULE 13D PAGE 2 OF 8 PAGES
--------------------- ------------------

 1 NAMES OF REPORTING PERSONS

 Black Diamond Offshore Ltd.
--------------------------------------------------------------------------------
 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 (a) [ ]
 (b) [ ]
--------------------------------------------------------------------------------
 3 SEC USE ONLY
--------------------------------------------------------------------------------
 4 SOURCE OF FUNDS (SEE INSTRUCTIONS)

 WC
--------------------------------------------------------------------------------
 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
 TO ITEMS 2(d) OR 2(e)

 [ ]
--------------------------------------------------------------------------------
 6 CITIZENSHIP OR PLACE OF ORGANIZATION

 Cayman Islands
--------------------------------------------------------------------------------
 7 SOLE VOTING POWER

 NUMBER OF 110,177
 -------------------------------------------------------------
 SHARES 8 SHARED VOTING POWER
 BENEFICIALLY
 OWNED BY -0-
 -------------------------------------------------------------
 EACH 9 SOLE DISPOSITIVE POWER
 REPORTING
 PERSON 110,177
 -------------------------------------------------------------
 WITH 10 SHARED DISPOSITIVE POWER

 -0-
--------------------------------------------------------------------------------
 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 110,177
--------------------------------------------------------------------------------
 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
 SHARES (SEE INSTRUCTIONS)

 [ ]
--------------------------------------------------------------------------------
 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

 0.2%
--------------------------------------------------------------------------------
 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

 CO
--------------------------------------------------------------------------------


CUSIP NO. 137801106 SCHEDULE 13D PAGE 3 OF 8 PAGES
--------------------- ------------------

 1 NAMES OF REPORTING PERSONS

 Black Diamond Relative Value Offshore Ltd.
--------------------------------------------------------------------------------
 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 (a) [ ]
 (b) [ ]
--------------------------------------------------------------------------------
 3 SEC USE ONLY
--------------------------------------------------------------------------------
 4 SOURCE OF FUNDS (SEE INSTRUCTIONS)

 WC
--------------------------------------------------------------------------------
 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
 TO ITEMS 2(d) OR 2(e)

 [ ]
--------------------------------------------------------------------------------
 6 CITIZENSHIP OR PLACE OF ORGANIZATION

 Cayman Islands
--------------------------------------------------------------------------------
 7 SOLE VOTING POWER

 NUMBER OF 990,548
 -------------------------------------------------------------
 SHARES 8 SHARED VOTING POWER
 BENEFICIALLY
 OWNED BY -0-
 -------------------------------------------------------------
 EACH 9 SOLE DISPOSITIVE POWER
 REPORTING
 PERSON 990,548
 -------------------------------------------------------------
 WITH 10 SHARED DISPOSITIVE POWER

 -0-
--------------------------------------------------------------------------------
 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 990,548
--------------------------------------------------------------------------------
 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
 SHARES (SEE INSTRUCTIONS)

 [ ]
--------------------------------------------------------------------------------
 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

 2.1%
--------------------------------------------------------------------------------
 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

 CO
--------------------------------------------------------------------------------


CUSIP NO. 137801106 SCHEDULE 13D PAGE 4 OF 8 PAGES
--------------------- ------------------

 1 NAMES OF REPORTING PERSONS

 Carlson Capital, L.P.
--------------------------------------------------------------------------------
 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 (a) [ ]
 (b) [ ]
--------------------------------------------------------------------------------
 3 SEC USE ONLY
--------------------------------------------------------------------------------
 4 SOURCE OF FUNDS (SEE INSTRUCTIONS)

 AF
--------------------------------------------------------------------------------
 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
 TO ITEMS 2(d) OR 2(e)

 [ ]
--------------------------------------------------------------------------------
 6 CITIZENSHIP OR PLACE OF ORGANIZATION

 Delaware
--------------------------------------------------------------------------------
 7 SOLE VOTING POWER

 NUMBER OF 3,324,218
 -------------------------------------------------------------
 SHARES 8 SHARED VOTING POWER
 BENEFICIALLY
 OWNED BY -0-
 -------------------------------------------------------------
 EACH 9 SOLE DISPOSITIVE POWER
 REPORTING
 PERSON 3,324,218
 -------------------------------------------------------------
 WITH 10 SHARED DISPOSITIVE POWER

 -0-
--------------------------------------------------------------------------------
 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 3,324,218
--------------------------------------------------------------------------------
 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
 SHARES (SEE INSTRUCTIONS)

 [ ]
--------------------------------------------------------------------------------
 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

 7.2%
--------------------------------------------------------------------------------
 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

 PN
--------------------------------------------------------------------------------


CUSIP NO. 137801106 SCHEDULE 13D PAGE 5 OF 8 PAGES
--------------------- ------------------

 1 NAMES OF REPORTING PERSONS

 Asgard Investment Corp.
--------------------------------------------------------------------------------
 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 (a) [ ]
 (b) [ ]
--------------------------------------------------------------------------------
 3 SEC USE ONLY
--------------------------------------------------------------------------------
 4 SOURCE OF FUNDS (SEE INSTRUCTIONS)

 AF
--------------------------------------------------------------------------------
 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
 TO ITEMS 2(d) OR 2(e)

 [ ]
--------------------------------------------------------------------------------
 6 CITIZENSHIP OR PLACE OF ORGANIZATION

 Delaware
--------------------------------------------------------------------------------
 7 SOLE VOTING POWER

 NUMBER OF 3,324,218
 -------------------------------------------------------------
 SHARES 8 SHARED VOTING POWER
 BENEFICIALLY
 OWNED BY -0-
 -------------------------------------------------------------
 EACH 9 SOLE DISPOSITIVE POWER
 REPORTING
 PERSON 3,324,218
 -------------------------------------------------------------
 WITH 10 SHARED DISPOSITIVE POWER

 -0-
--------------------------------------------------------------------------------
 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 3,324,218
--------------------------------------------------------------------------------
 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
 SHARES (SEE INSTRUCTIONS)

 [ ]
--------------------------------------------------------------------------------
 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

 7.2%
--------------------------------------------------------------------------------
 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

 CO
--------------------------------------------------------------------------------


CUSIP NO. 137801106 SCHEDULE 13D PAGE 6 OF 8 PAGES
--------------------- ------------------

 1 NAMES OF REPORTING PERSONS

 Clint D. Carlson

--------------------------------------------------------------------------------
 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 (a) [ ]
 (b) [ ]
--------------------------------------------------------------------------------
 3 SEC USE ONLY
--------------------------------------------------------------------------------
 4 SOURCE OF FUNDS (SEE INSTRUCTIONS)

 AF
--------------------------------------------------------------------------------
 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
 TO ITEMS 2(d) OR 2(e)

 [ ]
--------------------------------------------------------------------------------
 6 CITIZENSHIP OR PLACE OF ORGANIZATION

 USA
--------------------------------------------------------------------------------
 7 SOLE VOTING POWER

 NUMBER OF 3,324,218
 -------------------------------------------------------------
 SHARES 8 SHARED VOTING POWER
 BENEFICIALLY
 OWNED BY -0-
 -------------------------------------------------------------
 EACH 9 SOLE DISPOSITIVE POWER
 REPORTING
 PERSON 3,324,218
 -------------------------------------------------------------
 WITH 10 SHARED DISPOSITIVE POWER

 -0-
--------------------------------------------------------------------------------
 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 3,324,218
--------------------------------------------------------------------------------
 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
 SHARES (SEE INSTRUCTIONS)

 [ ]
--------------------------------------------------------------------------------
 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

 7.2%
--------------------------------------------------------------------------------
 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

 IN
--------------------------------------------------------------------------------


CUSIP NO. 137801106 SCHEDULE 13D PAGE 7 OF 8 PAGES


 The Schedule 13D filed on August 25, 2008 (the "Schedule 13D") by
Double Black Diamond Offshore Ltd., a Cayman Islands exempted company, Black
Diamond Offshore Ltd., a Cayman Islands exempted company, Black Diamond Relative
Value Offshore Ltd., a Cayman Islands exempted company, Carlson Capital, L.P., a
Delaware limited partnership, Asgard Investment Corp., a Delaware corporation
and Clint D. Carlson (together, the "Reporting Persons"), relating to the shares
("Shares") of common stock, par value $0.0001 per share, of Cano Petroleum, Inc.
(the "Issuer"), is hereby amended as set forth below by this Amendment No.1 to
the Schedule 13D.

Item 3. Source and Amount of Funds or Other Consideration.

Item 3 of the Schedule 13D is hereby amended and restated as follows:

 The Shares reported herein were acquired at an aggregate purchase
price of approximately $15,271,543.68 including commissions. The Shares were
acquired with working capital of the Funds and the Account.

ITEM 5. INTEREST IN SECURITIES OF THE ISSUER

Paragraphs (a), (b) and (c) of Item 5 of the Schedule 13D are hereby amended and
restated as follows:

 (a) As of the close of business on September 5, 2008, the Reporting
Persons beneficially owned an aggregate of 3,324,218 Shares, constituting
approximately 7.2% of the Shares outstanding.

 The aggregate percentage of Shares beneficially owned by the Reporting
Persons is based upon 46,243,015 Shares outstanding, which is the total number
of Shares issued and outstanding as of June 26, 2008 as reported by the Issuer
in its Prospectus Supplement dated June 26, 2008, filed on June 26, 2008.

 (b) Carlson Capital, Asgard and Mr. Carlson have the power to vote
and direct the disposition of (i) the 110,177 Shares reported herein as owned
by Offshore Ltd., (ii) the 2,081,366 Shares reported herein as owned by Double
Offshore Ltd., (iii) the 990,548 Shares reported herein as owned by Relative
Value Offshore Ltd., and (iv) an additional 142,127 Shares held in the Account.

 (c) Information concerning transactions in the Shares effected by the
Reporting Persons since the filing of the Schedule 13D is set forth in
Appendix A hereto and is incorporated herein by reference.


CUSIP NO. 137801106 SCHEDULE 13D PAGE 8 OF 8 PAGES

 SIGNATURE

 After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.

DATED: September 9, 2008

 BLACK DIAMOND OFFSHORE LTD.

 By: Carlson Capital, L.P., its investment
 manager

 By: Asgard Investment Corp., its general
 partner

 By: /s/ Clint D. Carlson
 ------------------------------
 Name: Clint D. Carlson
 Title: President

 DOUBLE BLACK DIAMOND OFFSHORE LTD.

 By: Carlson Capital, L.P., its investment
 manager

 By: Asgard Investment Corp., its general
 partner

 By: /s/ Clint D. Carlson
 ------------------------------
 Name: Clint D. Carlson
 Title: President

 BLACK DIAMOND RELATIVE VALUE OFFSHORE LTD.

 By: Carlson Capital, L.P., its investment
 manager

 By: Asgard Investment Corp., its general
 partner

 By: /s/ Clint D. Carlson
 ------------------------------
 Name: Clint D. Carlson
 Title: President

 CARLSON CAPITAL, L.P.

 By: Asgard Investment Corp., its general
 partner

 By: /s/ Clint D. Carlson
 ------------------------------
 Name: Clint D. Carlson
 Title: President

 ASGARD INVESTMENT CORP.

 By: /s/ Clint D. Carlson
 -----------------------------------
 Name: Clint D. Carlson
 Title: President

 /s/ Clint D. Carlson
 ------------------------------------------
 Clint D. Carlson

APPENDIX A

TRANSACTIONS IN THE SHARES EFFECTED BY THE
REPORTING PERSONS SINCE THE FILING OF THE SCHEDULE 13D

(UNLESS OTHERWISE STATED, ALL TRANSACTIONS WERE EFFECTED IN
THE OPEN MARKET)

Black Diamond Relative Value Offshore Ltd. 

Date of Trade Shares Purchased (Sold) Price per Share
------------ ---------------------- ---------------
 8/22/08 9,695 $3.22
 8/25/08 29,165 3.00
 8/26/08 15,075 3.07
 8/27/08 14,580 3.28
 8/29/08 5,830 3.18
 9/3/08 28,238 3.00
 9/4/08 14,580 2.96
 9/4/08 7,610 2.84
 9/5/08 12,335 3.03

Black Diamond Offshore Ltd. 

Date of Trade Shares Purchased (Sold) Price per Share
------------- ----------------------- ----------------
 8/22/08 1,055 $3.22
 8/25/08 3,285 3.00
 8/26/08 1,695 3.07
 8/27/08 1,640 3.28
 8/29/08 655 3.18
 9/3/08 3,182 3.00
 9/4/08 1,640 2.96
 9/4/08 855 2.84
 9/5/08 1,390 3.03

Double Black Diamond Offshore Ltd. 

Date of Trade Shares Purchased (Sold) Price per Share
------------- ---------------------- ---------------
 8/22/08 20,260 $3.22
 8/25/08 63,060 3.00
 8/26/08 32,610 3.07
 8/27/08 31,535 3.28
 8/29/08 12,620 3.18
 9/3/08 61,051 3.00
 9/4/08 31,535 2.96
 9/4/08 16,465 2.84
 9/5/08 26,680 3.03

Carlson Capital on behalf of the Account 

Date of Trade Shares Purchased (Sold) Price per Share
------------- ----------------------- ----------------
 8/22/08 1,490 $3.22
 8/25/08 4,490 3.00
 8/26/08 2,320 3.07
 8/27/08 2,245 3.28
 8/29/08 895 3.18
 9/3/08 4,347 3.00
 9/4/08 2,245 2.96
 9/4/08 1,170 2.84
 9/5/08 1,895 3.03

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