U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

        For the fiscal year ended December 31, 2005

[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

         For the transition period from _____ to _______


                         Commission file number 0-25455

                            MORGAN CREEK ENERGY CORP.
                              ---------------------
        (Exact name of small business issuer as specified in its charter)

         NEVADA                                                 201777817
--------------------------------------------------------------------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation of organization)                              Identification No.)

                       10120 S. Eastern Avenue, Suite 200
                             Henderson, Nevada 89052
                    -----------------------------------------
                    (Address of Principal Executive Offices)

                                 (702) 566-1307
                                 --------------
                           (Issuer's telephone number)

          Securities registered pursuant to Section 12(b) of the Exchange Act:

                                      None
                             -----------------------
                                (Title of class)

          Securities registered pursuant to Section 12(g) of the Exchange Act:

                         Common Stock, Par Value $0.001
                                (Title of class)

     Indicate  by check  mark  whether  the  issuer  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or for such shorter  period that the issuer
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]


                                       1
<PAGE>

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be  contained,  to the best of issuer's  knowledge,  in  definitive
proxy of information  statements  incorporated  by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ X ]

     Indicate by checkmark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     State  issuer's  revenues for its most recent fiscal year (ending  December
31, 2005): $-0-.

     State the aggregate market value of the voting and non-voting common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was last sold, or the average bid and asked price of such common  equity,
as of the last business day of the registrant's  most recently  completed fiscal
quarter: December 31, 2005: Not applicable.

          Applicable Only to issuers Involved in Bankruptcy Proceedings
                        During the Preceding Five Years.

                                       N/A

     Indicate  by check mark  whether  the issuer  has filed all  documents  and
reports  required  to be filed by  Section  12, 13 and  15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

                                 Yes [ ] No [ ]


                    Applicable Only to Corporate Registrants

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:

          Class                               Outstanding as of March 27, 2006
--------------------------------------------------------------------------------
Common Stock, $.001 par value                          10,167,700

                       Documents Incorporated By Reference

         List hereunder the following documents if incorporated by reference and
the Part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the
document is incorporated: (1) any annual report to security holders; (2) any
proxy or information statement; and (3) any prospectus filed pursuant to Rule
424(b) or (c) under the Securities Act of 1933. The listed documents should be
clearly described for identification purposes (e.g., annual report to security
holders for fiscal year ended December 24, 1980).

         Form SB-2 Registration Statement, SEC Registration No. 333-123989

         Prospectus filed pursuant to Rule 424(b)(1), SEC Registration No.
         333-123989




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<PAGE>


INDEX                                                                    PAGE

ITEM 1. DESCRIPTION OF BUSINESS ........................................... 5

ITEM 2. DESCRIPTION OF PROPERTIES ........................................ 22

ITEM 3. LEGAL PROCEEDINGS ................................................ 22

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............. 22

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
           MATTERS ....................................................... 22

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATION ............................ 23

ITEM 7. FINANCIAL STATEMENTS ............................................. 31

        CONSOLIDATED BALANCE SHEET ....................................... 33

        CONSOLIDATED STATEMENT OF OPERATIONS ............................. 34

        CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY ................... 35

        CONSOLIDATED STATEMENTS OF CASH FLOWS ............................ 36

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ....................... 37

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE ........................... 44

ITEM 8A. CONTROLS AND PROCEDURES ......................................... 44

ITEM 8B. OTHER INFORMATION ............................................... 44

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
           PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
             EXCHANGE ACT ................................................ 45

ITEM 10. EXECUTIVE COMPENSATION .......................................... 48

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT ................................................ 49

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................. 50

ITEM 13. EXHIBITS ........................................................ 50

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES .......................... 41

SIGNATURES ............................................................... 51




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<PAGE>

                           FORWARD LOOKING STATEMENTS

     Statements  made in this Form  10-KSB  that are not  historical  or current
facts  are  "forward-looking  statements"  made  pursuant  to  the  safe  harbor
provisions of Section 27A of the  Securities Act of 1933 (the "Act") and Section
21E of the  Securities  Exchange  Act of 1934.  These  statements  often  can be
identified  by the use of terms  such as  "may,"  "will,"  "expect,"  "believe,"
"anticipate,"  "estimate," "approximate" or "continue," or the negative thereof.
We intend that such  forward-looking  statements  be subject to the safe harbors
for such  statements.  We wish to caution readers not to place undue reliance on
any such forward-looking  statements,  which speak only as of the date made. Any
forward-looking  statements represent  management's best judgment as to what may
occur in the future. However,  forward-looking  statements are subject to risks,
uncertainties  and important  factors beyond our control that could cause actual
results and events to differ  materially from  historical  results of operations
and events  and those  presently  anticipated  or  projected.  We  disclaim  any
obligation  subsequently  to revise any  forward-looking  statements  to reflect
events or  circumstances  after the date of such  statement  or to  reflect  the
occurrence of anticipated or unanticipated events.

Available Information

Morgan  Creek Energy Corp.  files  annual,  quarterly,  current  reports,  proxy
statements,  and other  information with the Securities and Exchange  Commission
(the  "Commission").  You may read and copy documents referred to in this Annual
Report on Form SB-2 that have been filed with the Commission at the Commission's
Public Reference Room, 450 Fifth Street, N.W.,  Washington,  D.C. You may obtain
information  on the  operation  of the  Public  Reference  Room by  calling  the
Commission  at  1-800-SEC-0330.  You can also  obtain  copies of our  Commission
filings by going to the Commission's website at http://www.sec.gov



























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<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS DEVELOPMENT

     Morgan Creek Energy Corp. was  incorporated  under the laws of the State of
Nevada on October 19, 2004 and has been engaged in the  business of  exploration
of oil and gas bearing properties in the United States since its inception.

     Please note that throughout this Annual Report, and unless otherwise noted,
the words "we," "our," "us," the "Company," or "Morgan  Creek," refers to Morgan
Creek Energy Corp.

CURRENT BUSINESS OPERATIONS

Oil and Gas Properties

     We are a natural  resource  exploration  and production  company  currently
engaged  in  the  exploration,  acquisition  and  development  of  oil  and  gas
properties  in the United  States.  On December 17,  2004,  we  consummated  the
acquisition of a 75% working  interest and a 56.25% net revenue  interest in two
separate  petroleum  and natural gas  targeted  leases,  known as the Hurley and
Chapman leases,  in approximately 560 gross acres located in the Arkoma Basin in
the State of Oklahoma for the development and production of coal bed methane gas
(collectively, the "Leases" and, individually, the Hurley Lease originally dated
December 16, 1983 (the "Hurley  Lease"),  and the Chapman Lease originally dated
December  21,  1983 (the  "Hurley  Lease").  The  Leases are  unproved  and were
acquired for a cash  payment of $300,000  and for the issuance to Geneva  Energy
Corp.  ("Geneva") of 6,000,000  shares of our restricted  common stock valued at
$600,000. The Leases are held by production and are validly existing and in good
standing.

     We plan to enter  certain  wellbores on the Leases to test  certain  target
zones for the presence of commercial  quantities of coal bed methane gas ("CBM")
gas, and if testing provides  evidence of gas quality and sufficient  production
quantities,  we plan to  raise  capital  to  undertake  a  drilling  program  to
establish up to six producing wells, and production infrastructure and pipeline.

     Chapman Lease

The Chapman Lease encompasses  approximately 240 acres in Okfuskee County, State
of  Oklahoma.  The  original  owners and  lessors of the  Chapman  Lease are the
Home-Stake   Royalty   Corporation  and  the  Home-Stake  Oil  and  Gas  Company
(collectively,  the "Chapman Lessors").  We have acquired a 75% working interest
and a 56.25% net revenue interest.  The term of the Chapman Lease was originally
for three years,  and is currently held  indefinitely by production.  As long as
the lease produces any oil or gas as demonstrated by any marketed  quantities of
oil or gas, the lease will be deemed to be valid and thus,  "held by production"
and no further costs will be incurred by us as lessee to the Chapman  Lessors of
the Chapman Lease.

     In  the  event  that   demonstrated   marketed   production  ceases  for  a
twelve-month  consecutive  period,  the Chapman  Lease will lapse as it would no
longer be  classified  as held by  production.  Under these  circumstances,  the
Chapman Lease may be retained by us for an additional  cost of $12,000 per annum
($25 per acre x 2 Chapman Lessors x 240 acres). The two $6,000 payments ($25 per
acre x 240  acres = $6,000)  would be made to each of the  Chapman  Lessors.  To
maintain the Chapman  Lease in good  standing in the event of ceased  production
for a  twelve-month  consecutive  period,  it will cost  $12,000  per annum.  If


                                       5
<PAGE>

Chapman Lease - continued

production as  demonstrated  by the sales of any oil or gas in any  twelve-month
month  period is  restored,  the Chapman  Lease would once again be deemed to be
"held by  production"  and the $25 per acre annual shut in charge to each of the
Chapman Lessors would cease.

     The  unitization  of the  Chapman  Lease is the spacing of wells in any 640
acre section of land. The  unitization of the Chapman Lease is currently one gas
well for each 640 acres and one oil well for each 80 acres.  The  Chapman  Lease
includes all potential oil or gas producing  zones extending from the surface to
and including the Senora Sand zones.

     We obtained a Reserve and Economic  Evaluation  letter  dated  December 21,
2004  prepared by Fletcher  Lewis  Engineering,  Inc. (the "Reserve and Economic
Evaluation"), which provides information relating to work to be conducted on the
Chapman  Lease and the fact that the Chapman  Lease has had no proved  developed
producing  reserves.  As a  result,  our  future  revenues  may  be  limited  or
non-existent.  Below is a summary of the key points addressed in the Reserve and
Economic Evaluation:

     o    Henryetta  Coal located  throughout the leases at  approximately  1701
          feet deep and a thickness of approximately 2 to 3 feet;
     o    Henryetta Coal is stratigraphically equivalent to the Croweburg Coal;
     o    Croweburg  Coal  successfully  completed  60 miles  northeast  of this
          location;
     o    Croweburg  Coal is  typically  1.5 to 3 feet thick with  initial  test
          rates of 30 to 50 mcf per day;
     o    No tests  available  to confirm  whether  the  Henryetta  Coal will be
          productive;
     o    Recompletion cost of $50,000 without frac makes Chapman Lease ideal to
          test productive capability of Henryetta Coal; and
     o    Insufficient data exists regarding potential of deeper rights.

     Hurley Lease

The Hurley Lease encompasses  approximately 320 acres in Okfuskee County,  State
of  Oklahoma.  The  original  owners and  lessors  of the Hurley  Lease are Lynn
McEvers,  Rick Hurley,  Robert A Dolton and Pearl E. Dolton,  and Mary K. Hurley
(collectively,  the "Hurley  Lessors").  We have acquired a 75% working interest
and a 56.25% net revenue  interest.  The term of the Hurley Lease was originally
for one year, and is currently held  indefinitely by production.  As long as the
lease produces any oil or gas as demonstrated  by marketed  quantities of oil or
gas, the Hurley  Lease will be deemed to be valid and thus "held by  production"
and no further costs will be incurred by us to the owners of the Hurley Lease.

     In  the  event  that   demonstrated   marketed   production  ceases  for  a
twelve-month  consecutive  period,  the  Hurley  Lease will lapse as it would no
longer be  classified  as held by  production.  Under these  circumstances,  the
Hurley  Lease may be retained by us for an  additional  cost of $1,280 per annum
($1 per acre x 4 Hurley  Lessors x 320 acres).  The four $320  payments  ($1 per
acre x 320  acres = $320)  would  be made  to  each of the  Hurley  Lessors.  To
maintain the Hurley Lease in good standing in the event of ceased production for
a twelve-month  consecutive period, it will cost $1,280 per annum. If production
as  demonstrated  by the sales of any oil or gas in any  twelve-month  period is
restored, the Hurley Lease would once again be deemed to be "held by production"
and the $1 per acre  annual shut in charge to each of the Hurley  Lessors  would
cease.

                                       6
<PAGE>

Hurley Lease - continued

     The unitization of the Hurley Lease is the spacing of wells in any 640 acre
section of land.  The  unitization of the Hurley Lease is currently one gas well
for each 640 acres and one oil well for each 80 acres. The Hurley Lease includes
all  potential  oil or gas  producing  zones  extending  from the surface to and
including the Senora Sand zones.

Proposed Future Business Operations

     Our strategy is to complete the further  acquisition of additional coal bed
methane  prospects  and other oil and gas  opportunities  that fall  within  the
criteria of providing a geological basis for development of drilling initiatives
that  can  provide  near  term  revenue  potential  and  fast  drilling  capital
repatriation  from  production  cash  flows to  create  expanding  reserves.  We
anticipate  that  our  ongoing  efforts,   subject  to  adequate  funding  being
available,  will continue to be focused on successfully  concluding negotiations
for  additional  tracts of prime  acreage in the coal bed  methane and other gas
producing  domains,  and to  implement  the  drilling  of new  wells to  develop
reserves and to provide  revenues.  We plan to build a strategic  base of proven
reserves and production.

     As of the date of this  Annual  Report,  our  operating  plans are to enter
certain well bores on our Leases to test certain target zones thought to contain
coal bed methane  ("CBM") gas, and conduct  further  geological and  engineering
studies of our properties to provide evidence of gas quality.

     Our  ability to continue to complete  planned  exploration  activities  and
expand land  acquisitions  and explore  drilling  opportunities  is dependent on
adequate  capital  resources  being  available  and further  sources of debt and
equity being  obtained.  The two  following  alternatives  provide the basis for
business development options:

     (i) Development of current Leases. The requirement to raise further funding
for oil and gas  exploration  beyond that obtained for the next six month period
depends on the outcome of geological and engineering testing occurring over this
interval.  Subsequent to the completion of current property evaluations,  and if
the  results  provide  the basis to  continue  to develop  the  properties,  and
geological  studies  indicate  high   probabilities  of  sufficient   production
quantities,  we will attempt to raise capital to undertake a drilling program to
establish up to six wells on leases in hand, and build production infrastructure
and pipeline, and to further raise additional capital to allow this drilling and
further land acquisitions.





                                       7
<PAGE>

(i) Development of current Leases - continued

--------------------------------------------------------------------------------
Activity

--------------------------------------------------------------------------------
Site preparation for entry into current  wellbores  including of roadway upgrade
and operations site, design, review, and finalize testing procedures,  book zone
fracture and testing consultants, arrange equipment required
--------------------------------------------------------------------------------
Pull old well tubing tubing, run test tools in wellbore,  cut well casing,  test
target gas zones with acid and water
--------------------------------------------------------------------------------
If gas content conducive to production, complete well by inserting downhole pump
and rods, set pumping unit, wellhead, and gas line
--------------------------------------------------------------------------------
Complete pipeline
--------------------------------------------------------------------------------
Create well  development  model and  investment  documents to develop 6 wells on
subject leases including funding plan
--------------------------------------------------------------------------------
Create investor communications materials, corporate identity
--------------------------------------------------------------------------------
Raise funding for well development,
--------------------------------------------------------------------------------
Drill, complete, and produce from 6 well drilling program (Company's 75% working
interest)
--------------------------------------------------------------------------------
Target further leases for  exploration  potential and obtain further  funding to
acquire new development targets
--------------------------------------------------------------------------------

     (ii) New lease  acquisition and development.  If gas quality and quantities
are not deemed sufficient from work to be conducted on our current leases during
the first six months of operation, additional land acquisitions will be assessed
and obtained subject to adequate  capital  resources being available and further
sources of debt and equity being obtained.  The following  outlines  anticipated
activities pursuant to this business option.

--------------------------------------------------------------------------------
Site preparation for entry into current  wellbores  including of roadway upgrade
and operations site, design, review, and finalize testing procedures,  book zone
fracture and testing consultants, arrange equipment required
--------------------------------------------------------------------------------
Pull old well tubing tubing, run test tools in wellbore,  cut well casing,  test
target gas zones with acid and water,
--------------------------------------------------------------------------------
If gas content not deemed  conducive to  production,  target  further leases for
exploration  potential  and obtain  further  funding to acquire new  development
targets
--------------------------------------------------------------------------------

     We will  require  additional  funding  to  implement  our  proposed  future
business  activities.  See "Item 6.  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operation - Plan of Operation."

     We do  not  expect  to  purchase  any  significant  equipment  or  increase
significantly  the number of our employees  during the next twelve  months.  Our
current  business  strategy is to obtain resources under contract where possible
because  management  believes  that  this  strategy,  at its  current  level  of


                                       8
<PAGE>

(ii) New lease  acquisition and development - continued

development, provides the best services available in the circumstances, leads to
lower  overall  costs,  and  provides  the  best  flexibility  for our  business
operations.

COAL BED METHANE GAS

     Natural gas consists  primarily of methane,  which is produced when organic
material is physically turned into coal under extreme geologic conditions.  When
the coal and methane  conversion  process occurs such that the resultant coal is
saturated with water and methane is trapped within the coal, the result is "coal
bed methane."  Water  permeates  coal beds and the water  pressure traps the gas
within the coal.  Because coal has a large and complex internal surface area, it
can store volumes of gas six or seven time as much as a conventional  nature gas
reservoir of equal rock volume. Coal bed methane is kept in place usually by the
presence  of  water.  Thus the  production  of coal bed  methane  in many  cases
requires the  dewatering of the coal gas to be extracted.  Therefore,  in a coal
bed gas well,  water can be produced in large  volumes  especially  in the early
stages  of  production.  As the  amount  of  water in the  coal  decreases,  gas
production increases.

COMPETITION

     We operate in a highly competitive  industry,  competing with major oil and
gas companies, independent producers and institutional and individual investors,
which are actively seeking oil and gas properties  throughout the world together
with the equipment, labor and materials required to operate properties.  Most of
our competitors have financial  resources,  staffs and facilities  substantially
greater than ours.  The principal  area of  competition  is  encountered  in the
financial  ability to acquire good acreage  positions and drill wells to explore
for oil and  gas,  then,  if  warranted,  drill  production  wells  and  install
production  equipment.  Competition  for the acquisition of oil and gas wells is
intense with many oil and gas properties and or leases or concessions  available
in a competitive bidding process in which we may lack technological  information
or expertise available to other bidders.  Therefore, we may not be successful in
acquiring and developing  profitable properties in the face of this competition.
No assurance can be given that a sufficient number of suitable oil and gas wells
will be available for acquisition and development.

GOVERNMENT REGULATION

     The  production  and sale of oil and gas are  subject to  various  federal,
state and local governmental regulations, which may be changed from time to time
in  response  to economic or  political  conditions  and can have a  significant
impact upon overall operations.  Matters subject to regulation include discharge
permits for drilling operations,  drilling bonds, reports concerning operations,
the  spacing  of  wells,  unitization  and  pooling  of  properties,   taxation,
abandonment  and  restoration  and  environmental  protection.  These  laws  and
regulations are under constant  review for amendment or expansion.  From time to
time,  regulatory  agencies  have  imposed  price  controls and  limitations  on
production  by  restricting  the rate of flow of oil and gas wells below  actual
production  capacity  in order to conserve  supplies of oil and gas.  Changes in
these  regulations  could require us to expend  significant  resources to comply
with new laws or regulations or changes to current requirements and could have a
material adverse effect our business operations.

                                       9
<PAGE>

GOVERNMENT REGULATION - continued

Regulation of Oil and Natural Gas Production

     Our oil and natural gas exploration,  production and related operations are
subject to extensive  rules and  regulations  promulgated by federal,  state and
local  authorities  and  agencies.   Failure  to  comply  with  such  rules  and
regulations can result in substantial  penalties.  The regulatory  burden on the
oil and natural gas industry  increases  our cost of doing  business and affects
our profitability. Although we believe we are in substantial compliance with all
applicable  laws  and  regulations,  because  such  rules  and  regulations  are
frequently amended or reinterpreted, we are unable to predict the future cost or
impact of complying with such laws.

     Many states  require  permits for drilling  operations,  drilling bonds and
reports  concerning  operations  and impose other  requirements  relating to the
exploration  and  production  of oil and  natural  gas.  Such  states  also have
statutes or regulations  addressing  conservation matters,  including provisions
for  the  unitization  or  pooling  of  oil  and  natural  gas  properties,  the
establishment  of maximum rates of production from wells,  and the regulation of
spacing, plugging and abandonment of such wells.

Federal Regulation of Natural Gas

     The Federal Energy  Regulatory  Commission  ("FERC")  regulates  interstate
natural  gas  transportation  rates and  service  conditions,  which  affect the
marketing of natural gas produced by us, as well as the revenues  received by us
for sales of such production.  Since the mid-1980's, FERC has issued a series of
orders that have  significantly  altered the  marketing  and  transportation  of
natural gas.  These orders  mandate a  fundamental  restructuring  of interstate
pipeline  sales  and  transportation   service,   including  the  unbundling  by
interstate pipelines of the sale,  transportation,  storage and other components
of the city-gate  sales services such  pipelines  previously  performed.  One of
FERC's  purposes in issuing the orders was to  increase  competition  within all
phases of the  natural  gas  industry.  Certain  aspects of these  orders may be
modified  as a result of  various  appeals  and  related  proceedings  and it is
difficult  to  predict  the  ultimate  impact of the  orders  on us and  others.
Generally,   the  orders  eliminate  or  substantially   reduce  the  interstate
pipelines'  traditional role as wholesalers of natural gas in favor of providing
only  storage  and  transportation  service,  and have  substantially  increased
competition and volatility in natural gas markets.

     The  price,  which  we may  receive  for the  sale of oil and  natural  gas
liquids, would be affected by the cost of transporting products to markets. FERC
has implemented  regulations  establishing an indexing system for transportation
rates for oil pipelines,  which, generally, would index such rates to inflation,
subject to certain  conditions and limitations.  We are not able to predict with
certainty the effect,  if any, of these  regulations  on any future  operations.
However,  the regulations may increase  transportation  costs or reduce wellhead
prices for oil and natural gas liquids.

Environmental Matters

     Our  operations  and  properties  will be subject to extensive and changing
federal,  state  and  local  laws  and  regulations  relating  to  environmental
protection,    including   the   generation,    storage,   handling,   emission,
transportation and discharge of materials into the environment,  and relating to
safety and health. The recent trend in environmental  legislation and regulation
generally is toward  stricter  standards,  and this trend will likely  continue.
These laws and  regulations may (i) require the acquisition of a permit or other


                                       10
<PAGE>

Environmental Matters - continued

authorization  before  construction or drilling  commences and for certain other
activities;  (ii) limit or prohibit construction,  drilling and other activities
on certain lands lying within  wilderness and other protected  areas;  and (iii)
impose substantial liabilities for pollution resulting from our operations.  The
permits  required  for  several of our  operations  are  subject to  revocation,
modification and renewal by issuing authorities.  Governmental  authorities have
the power to enforce their  regulations,  and violations are subject to fines or
injunctions,  or both.  In the  opinion  of  management,  we are in  substantial
compliance with current  applicable  environmental  law and regulations,  and we
have no material  commitments  for capital  expenditures to comply with existing
environmental requirements. Nevertheless, changes in existing environmental laws
and regulations or in interpretations thereof could have a significant impact on
our business operations, as well as the oil and natural gas industry in general.

     The Comprehensive Environmental,  Response, Compensation, and Liability Act
("CERCL ") and  comparable  state  statutes  impose  strict,  joint and  several
liability  on owners and  operators  of sites and on persons who  disposed of or
arranged for the disposal of "hazardous  substances"  found at such sites. It is
not  uncommon for the  neighboring  landowners  and other third  parties to file
claims for personal injury and property damage allegedly caused by the hazardous
substances released into the environment.  The Federal Resource Conservation and
Recovery Act  ("RCRA")  and  comparable  state  statutes  govern the disposal of
"solid waste" and "hazardous  waste" and authorize the imposition of substantial
fines and  penalties  for  noncompliance.  Although  CERCLA  currently  excludes
petroleum from its definition of "hazardous substance," state laws affecting our
operations impose clean-up liability relating to petroleum and petroleum related
products.  In addition,  although  RCRA  classifies  certain oil field wastes as
"non-hazardous," such exploration and production wastes could be reclassified as
A  hazardous  wastes,  thereby  making  such  wastes  subject to more  stringent
handling and disposal requirements.

     We intend to acquire leasehold  interests in properties that for many years
have  produced  oil and  natural  gas.  Although  the  previous  owners of these
interests may have used  operating and disposal  practices that were standard in
the industry at the time, hydrocarbons or other wastes may have been disposed of
or released on or under the properties.  In addition, some of our properties may
be  operated  in the  future by third  parties  over  which we have no  control.
Notwithstanding  our lack of control  over  properties  operated by others,  the
failure of the operator to comply with applicable environmental regulations may,
in certain circumstances, adversely impact our business operations.

     The National Environmental Policy Act ("NEPA") is applicable to many of our
planned  activities and operations.  NEPA is a broad procedural statute intended
to ensure that  federal  agencies  consider  the  environmental  impact of their
actions by requiring such agencies to prepare  environmental  impact  statements
("EIS") in connection with all federal activities that significantly  affect the
environment.  Although  NEPA is a  procedural  statute  only  applicable  to the
federal  government,  a portion  of our  properties  may be  acreage  located on
federal land. The Bureau of Land  Management's  issuance of drilling permits and
the  Secretary  of the  Interior's  approval  of plans of  operation  and  lease
agreements all constitute federal action within the scope of NEPA. Consequently,
unless the responsible  agency determines that our drilling  activities will not
materially  impact the environment,  the responsible  agency will be required to
prepare an EIS in conjunction with the issuance of any permit or approval.



                                       11
<PAGE>

Environmental Matters - continued

     The Endangered  Species Act ("ESA") seeks to ensure that  activities do not
jeopardize  endangered or threatened animal, fish and plant species, nor destroy
or modify the  critical  habitat of such  species.  Under ESA,  exploration  and
production  operation,   as  well  as  actions  by  federal  agencies,  may  not
significantly  impair or jeopardize the species or their  habitat.  ESA provides
for criminal  penalties for willful  violations of the Act.  Other statutes that
provide  protection  to  animal  and  plant  species  and that may  apply to our
operations  include,  but are not necessarily  limited to, the Fish and Wildlife
Coordination  Act, the Fishery  Conservation  and Management  Act, the Migratory
Bird Treaty Act and the National Historic  Preservation Act. Although we believe
teat our operations are in substantial compliance with such statutes, any change
in these  statutes  or any  reclassification  of a species as  endangered  could
subject us to  significant  expense to modify our  operations  or could force to
discontinue certain operations altogether.

     Management  believes  that we are in  substantial  compliance  with current
applicable environmental laws and regulations.

RESEARCH AND DEVELOPMENT ACTIVITIES

     No research and development expenditures have been incurred,  either on our
account or sponsored by customers, to the date of our inception.

EMPLOYEES

     We do not  employ any  persons  on a  full-time  or on a  part-time  basis.
Douglas Humphreys is our President and Chief Executive Officer, and Grant Atkins
is our Chief Financial Officer.  These individuals are primarily responsible for
all of our day-to-day operations. Other services are provided by outsourcing and
consultant and special purpose contracts.

RISK FACTORS

     An  investment  in our common stock  involves a number of very  significant
risks.  You should carefully  consider the following risks and  uncertainties in
addition to other  information in evaluating our company and its business before
purchasing  shares of our common  stock.  Our  business,  operating  results and
financial condition could be seriously harmed due to any of the following risks.
The risks  described  below are all of the material  risks that we are currently
aware of that are facing our company. Additional risks not presently known to us
may also  impair  our  business  operations.  You could lose all or part of your
investment due to any of these risks.

Risks Related to Our Business

     Our business is difficult to evaluate  because we have a limited  operating
history.  In  considering  whether  to invest in our  common  stock,  you should
consider  that  there  is  only  limited  historical   financial  and  operating
information  available on which to base your evaluation of our performance.  Our
inception  was October 19,  2004 and, as a result,  we have a limited  operating
history.

     We have a history of operating losses and there can be no assurance we will
be profitable in the future.

     We have a history of operating losses,  expect to continue to incur losses,
and may never be profitable,  and we must be considered to be in the exploration
stage.  Further,  we have been  dependent on sales of our equity  securities and


                                       12
<PAGE>

Risks Related to Our Business - continued

debt financing to meet our cash  requirements.  We have incurred losses totaling
approximately  $227,755 from October 19, 2004  (inception) to December 31, 2005.
As of December 31, 2005, we had an accumulated deficit of $227,755.  Further, we
do not expect positive cash flow from  operations in the near term.  There is no
assurance  that  actual  cash  requirements  will not exceed our  estimates.  In
particular,  additional capital may be required in the event that: (i) the costs
to  acquire  additional  leases  are more  than we  currently  anticipate;  (ii)
drilling  and  completion   costs  for  additional  wells  increase  beyond  our
expectations;  or (iii) we encounter  greater costs  associated with general and
administrative expenses or offering costs.

     Our  development  of  and  participation  in  what  could  evolve  into  an
increasing  number of oil and gas  prospects  may  require  substantial  capital
expenditures.  The uncertainty and factors described throughout this section may
impede our ability to economically find, develop,  produce,  and acquire natural
gas and oil  reserves.  As a result,  we may not be able to  achieve  or sustain
profitability or positive cash flows from operating activities in the future.

     We have  received a going  concern  opinion from our  independent  auditors
report  accompanying  our  December  31, 2005 and  December  31, 2004  financial
statements.  The independent auditor's report accompanying our December 31, 2005
and  2004  audited  financial  statements  contains  an  explanatory   paragraph
expressing  substantial  doubt about our ability to continue as a going concern.
The  consolidated  financial  statements  have been prepared  "assuming that the
Company will  continue as a going  concern."  Our ability to continue as a going
concern is dependent on raising  additional  capital to fund our  operations and
ultimately on generating future profitable operations. There can be no assurance
that we will be able to raise sufficient  additional  capital or eventually have
positive cash flow from  operations to address all of our cash flow needs. If we
are not able to find alternative  sources of cash or generate positive cash flow
from operations,  our business and shareholders will be materially and adversely
affected.

     We will require additional funding in the future. Based upon our historical
losses from operations,  we will require additional funding in the future. If we
cannot obtain capital  through  financings or otherwise,  our ability to execute
our development plans and achieve production levels will be greatly limited. Our
current  development  plans  require  us to make  capital  expenditures  for the
exploration and development of our oil and natural gas properties. Historically,
we have funded our operations through the issuance of equity. We may not be able
to obtain  additional  financing on favorable  terms, if at all. Our future cash
flows  and  the  availability  of  financing  will be  subject  to a  number  of
variables,  including  potential  production  and the  market  prices of oil and
natural gas. Further, debt financing, if utilized,  could lead to a diversion of
cash flow to  satisfy  debt-servicing  obligations  and create  restrictions  on
business operations. If we are unable to raise additional funds, it would have a
material adverse effect upon our operations.

     Our acquisitions may not be successful.  As part of our growth strategy, we
intend to acquire  additional  oil and gas  production  properties.  Current and
subsequent  acquisitions may pose substantial  risks to our business,  financial
condition, and results of operations. In pursuing acquisitions,  we will compete
with other companies,  many of which have greater  financial and other resources
to  acquire  attractive  properties.  Even  if we are  successful  in  acquiring
additional  properties,  some of the  properties  may not  produce  revenues  at
anticipated  levels or failure to conduct drilling on prospects within specified
time periods may cause the forfeiture of the lease in that  prospect.  There can
be no  assurance  that  we  will be  able  to  successfully  integrate  acquired


                                       13
<PAGE>

Risks Related to Our Business - continued

properties,  which  could  result  in  substantial  costs  and  delays  or other
operational,  technical,  or financial  problems.  Further,  acquisitions  could
disrupt ongoing business operations. If any of these events occur, it would have
a material adverse effect upon our operations and results from operations.

     Our drilling  operations may not be  successful.  We intend to test certain
zones in wellbores  already  drilled on certain of the properties and if results
are  positive  and  capital  is  available,  drill  additional  wells  and begin
production  operations  from  existing and new wells.  There can be no assurance
that our current well  re-completion  activities or future  drilling  activities
will be successful, and we cannot be sure that our overall drilling success rate
or our  production  operations  within  a  particular  area  will  ever  come to
fruition,  and if it does, will not decline over time. We may not recover all or
any portion of our capital investment in the wells or the underlying leaseholds.
Unsuccessful  drilling  activities would have a material adverse effect upon our
results of operations and financial condition. The cost of drilling, completing,
and  operating  wells is often  uncertain,  and a number of factors can delay or
prevent drilling operations including: (i) unexpected drilling conditions;  (ii)
pressure or irregularities in geological formations; (iii) equipment failures or
accidents;  (iv) adverse  weather  conditions;  and (iv)  shortages or delays in
availability of drilling rigs and delivery of equipment.

     Our production  initiatives may not prove successful.  The coal beds in the
Arkoma  Basin in the State of Oklahoma  from which we intend to produce  methane
gas  frequently  contain  water,  which may hamper our ability to produce gas in
commercial  quantities.  The amount of coal bed methane that can be commercially
produced  depends  upon the coal  quality,  the original gas content of the coal
seam, the thickness of the seam, the reservoir  pressure,  the rate at which gas
is released from the coal,  and the existence of any natural  fractures  through
which the gas can flow to the well bore.  However,  coal beds frequently contain
water that must be removed in order for the gas to detach from the coal and flow
to the well bore. The average life of a coal bed well is only five to six years.
Our ability to remove and  dispose of  sufficient  quantities  of water from the
coal seam will  determine  whether  or not we can  produce  coal bed  methane in
commercial quantities.

     There is no  guarantee  that the  potential  drilling  locations we have or
acquire in the future will ever produce  natural gas or oil,  which could have a
material adverse effect upon our results of operations.

     We are a new  entrant  into  the oil and gas  industry  without  profitable
operating history and no proved developed producing reserves.  Since October 19,
2004 (inception),  our activities have been limited to  organizational  efforts,
obtaining working capital and acquiring a very limited number of properties.  In
addition,  there is limited  information  regarding  property related production
potential or revenue generation potential. Further, our Leases have no probable,
proved or developed producing reserves.  As a result, our future revenues may be
limited or non-existent.

     Prospects  that we  decide to drill  may not  yield  natural  gas or oil in
commercially  viable  quantities.  We describe some of our current  prospects in
this  Annual  Report.  Our  prospects  are  in  various  stages  of  preliminary
evaluation and assessment and we have not reached the point where we will decide
to drill at all on the  subject  prospects.  However,  the use of seismic  data,
historical  drilling logs,  offsetting well information,  and other technologies
and the study of  producing  fields in the same area will not  enable us to know
conclusively  prior to drilling and testing  whether  natural gas or oil will be
present or, if present, whether natural gas or oil will be present in sufficient


                                       14
<PAGE>

Risks Related to Our Business - continued

quantities  or  quality  to  recover  drilling  or  completion  costs  or  to be
economically viable. In sum, the cost of drilling,  completing and operating any
wells is often uncertain and new wells may not be productive.

     We may be unable to identify liabilities  associated with the properties or
obtain  protection from sellers against them. One of our growth strategies is to
capitalize  on  opportunistic  acquisitions  of oil and  natural  gas  reserves.
However, our reviews of acquired properties are inherently incomplete because it
generally is not feasible to review in depth every individual  property involved
in each  acquisition.  A  detailed  review of  records  and  properties  may not
necessarily reveal existing or potential problems, nor will it permit a buyer to
become  sufficiently   familiar  with  the  properties  to  assess  fully  their
deficiencies  and potential.  Further,  environmental  problems,  such as ground
water contamination,  are not necessarily  observable even when an inspection is
undertaken.  We may not be able to obtain  indemnification  or other protections
from the sellers against such potential liabilities, which would have a material
adverse effect upon our results of operations.

     The  potential  profitability  of oil and gas ventures  depends upon global
political  and market  related  factors  beyond our  control.  World  prices and
markets for oil and gas are unpredictable,  highly volatile, potentially subject
to governmental fixing, pegging, controls, or any combination of these and other
factors, and respond to changes in domestic,  international,  political, social,
and economic environments.  Additionally, due to worldwide economic uncertainty,
the availability and cost of funds for production and other expenses have become
increasingly difficult,  if not impossible,  to project. These and other changes
and events  may  materially  affect our  financial  performance.  The  potential
profitability  of oil and gas properties is dependent on these and other factors
beyond our control.

     Production  or oil and gas  resources  if found are  dependent  on numerous
operational  uncertainties specific to the area of the resource that affects its
profitability.  Production area specifics affect profitability.  Adverse weather
conditions  can hinder  drilling  operations  and  ongoing  production  work.  A
productive  well may become  uneconomic in the event water or other  deleterious
substances are encountered  which impair or prevent the production of oil and/or
gas from the well. Production and treatments on other wells in the area can have
either  appositive or negative  effect on our production and wells. In addition,
production from any well may be unmarketable if it is impregnated  with water or
other deleterious  substances.  The content of hydrocarbons is subject to change
over the life of  producing  wells.  The  marketability  of oil and gas from any
specific  reserve  which may be  acquired  or  discovered  will be  affected  by
numerous factors beyond our control.  These factors include, but are not limited
to, the proximity and capacity of oil and gas pipelines, availability of room in
the pipelines to accommodate  additional  production,  processing and production
equipment  operating  costs and equipment  efficiency,  market  fluctuations  of
prices and oil and gas marketing  relationships,  local and state taxes, mineral
owner and other  royalties,  land  tenure,  lease bonus  costs and lease  damage
costs, allowable production, and environmental protection.  These factors cannot
be accurately  predicted and the  combination  of these factors may result in us
not receiving an adequate return on our invested capital.

     If production results from operations, we are dependent upon transportation
and storage  services  provided by third  parties.  We will be  dependent on the
transportation and storage services offered by various interstate and intrastate
pipeline  companies  for the  delivery  and sale of our gas  supplies.  Both the
performance of transportation  and storage services by interstate  pipelines and
the rates  charged  for such  services  are subject to the  jurisdiction  of the


                                       15
<PAGE>

Risks Related to Our Business - continued

Federal Energy Regulatory  Commission or state regulatory agencies. An inability
to obtain  transportation  and/or storage  services at  competitive  rates could
hinder our processing and marketing operations and/or affect our sales margins.

     Our results of operations are dependent upon market prices for oil and gas,
which fluctuate  widely and are beyond our control.  If and when production from
oil and gas  properties is reached,  our revenue,  profitability,  and cash flow
depend upon the prices and demand for oil and natural gas. The markets for these
commodities  are very  volatile and even  relatively  modest drops in prices can
significantly  affect  our  financial  results  and impede  our  growth.  Prices
received  also will affect the amount of future cash flow  available for capital
expenditures  and may affect  our  ability to raise  additional  capital.  Lower
prices  may  also  affect  the  amount  of  natural  gas  and  oil  that  can be
economically produced from reserves either discovered or acquired.  Factors that
can cause price fluctuations  include: (i) the level of consumer product demand;
(ii)  domestic  and  foreign  governmental  regulations;  (iii)  the  price  and
availability of alternative  fuels;  (iv) technical  advances  affecting  energy
consumption;  (v)  proximity  and  capacity of oil and gas  pipelines  and other
transportation  facilities;  (vi)  political  conditions  in natural gas and oil
producing regions; (vii) the domestic and foreign supply of natural gas and oil;
(viii) the ability of members of Organization of Petroleum  Exporting  Countries
to agree to and maintain oil price and  production  controls;  (ix) the price of
foreign imports; and (x) overall domestic and global economic conditions.

     The  availability  of a ready  market  for our  oil  and gas  depends  upon
numerous factors beyond our control, including the extent of domestic production
and  importation  of oil and  gas,  the  relative  status  of the  domestic  and
international  economies,  the  proximity  of our  properties  to gas  gathering
systems,  the capacity of those  systems,  the  marketing  of other  competitive
fuels,   fluctuations  in  seasonal  demand  and   governmental   regulation  of
production,  refining,  transportation and pricing of oil, natural gas and other
fuels.

     The oil and gas industry in which we operate involved many industry related
operating and implementation risks that can cause substantial losses, including,
but  not  limited  to,  unproductive  wells,  natural  disasters,  facility  and
equipment  problems  and  environmental  hazards.  Our drilling  activities  are
subject to many risks, including the risk that we will not discover commercially
productive reservoirs. Drilling for oil and natural gas can be unprofitable, not
only from dry holes,  but from productive  wells that do not produce  sufficient
revenues to return a profit. In addition,  our drilling and producing operations
may be  curtailed,  delayed  or  canceled  as a  result  of other  drilling  and
production,  weather  and  natural  disaster,  equipment  and  service  failure,
environmental and regulatory,  and site specific related factors,  including but
not  limited  to:  (i) fires;  (ii)  explosions;  (iii)  blow-outs  and  surface
cratering;  (iv)  uncontrollable  flows of  underground  natural  gas,  oil,  or
formation water; (v) natural  disasters;  (vi) facility and equipment  failures;
(vii) title  problems;  (viii)  shortages or delivery  delays of  equipment  and
services; (ix) abnormal pressure formations;  and (x) environmental hazards such
as natural gas leaks,  oil spills,  pipeline  ruptures and  discharges  of toxic
gases.

     If any of these events occur, we could incur substantial losses as a result
of:  (i)  injury  or loss of life;  (ii)  severe  damage to and  destruction  of
property,   natural   resources  or   equipment;   (iii)   pollution  and  other
environmental   damage;   (iv)   clean-up   responsibilities;   (v)   regulatory
investigation and penalties; (vi) suspension of our operations; or (vii) repairs
necessary to resume operations.

                                       16
<PAGE>

Risks Related to Our Business - continued

     If we were to experience any of these problems, it could affect well bores,
gathering  systems and processing  facilities,  any one of which could adversely
affect our  ability to conduct  operations.  We may be  affected by any of these
events more than larger companies, since we have limited working capital.

     The oil and gas  industry is highly  competitive  and there is no assurance
that we will be successful in acquiring leases. The oil and natural gas industry
is intensely competitive,  and we compete with other companies that have greater
resources.  Many of these  companies  not only  explore  for and produce oil and
natural  gas, but also carry on refining  operations  and market  petroleum  and
other products on a regional,  national or worldwide basis.  These companies may
be  able  to pay  more  for  productive  oil  and  natural  gas  properties  and
exploratory prospects or define, evaluate, bid for and purchase a greater number
of properties and prospects  than our financial or human  resources  permit.  In
addition,  these  companies may have a greater  ability to continue  exploration
activities  during periods of low oil and natural gas market prices.  Our larger
competitors  may be able to absorb  the burden of  present  and future  federal,
state, local and other laws and regulations more easily than we can, which would
adversely  affect our competitive  position.  Our ability to acquire  additional
properties  and to discover  reserves in the future will be  dependent  upon our
ability  to  evaluate  and  select   suitable   properties   and  to  consummate
transactions in a highly competitive environment.  In addition,  because we have
fewer financial and human resources than many companies in our industry,  we may
be at a disadvantage in bidding for exploratory  prospects and producing oil and
natural gas properties.

     The marketability of natural resources will be affected by numerous factors
beyond our control,  which may result in us not receiving an adequate  return on
invested  capital to be  profitable  or  viable.  The  marketability  of natural
resources which may be acquired or discovered by us will be affected by numerous
factors beyond our control. These factors include market fluctuations in oil and
gas pricing and demand,  the proximity and capacity of natural  resource markets
and  processing  equipment,  governmental  regulations,  land tenure,  land use,
regulation   concerning   the  importing  and  exporting  of  oil  and  gas  and
environmental  protection regulations.  The exact effect of these factors cannot
be accurately  predicted,  but the combination of these factors may result in us
not receiving an adequate return on invested capital to be profitable or viable.

     Oil and gas operations are subject to  comprehensive  regulation  which may
cause  substantial  delays  or  require  capital  outlays  in  excess  of  those
anticipated  causing an adverse effect on our business  operations.  Oil and gas
operations  are  subject  to  federal,  state,  and local laws  relating  to the
protection of the  environment,  including  laws  regulating  removal of natural
resources from the ground and the discharge of materials  into the  environment.
Oil and gas  operations are also subject to federal,  state,  and local laws and
regulations which seek to maintain health and safety standards by regulating the
design  and  use  of  drilling  methods  and  equipment.  Various  permits  from
government  bodies are required  for drilling  operations  to be  conducted;  no
assurance  can be  given  that  such  permits  will be  received.  Environmental
standards  imposed by federal,  provincial,  or local authorities may be changed
and any such  changes  may have  material  adverse  effects  on our  activities.
Moreover,  compliance  with such laws may cause  substantial  delays or  require
capital outlays in excess of those  anticipated,  thus causing an adverse effect
on us.  Additionally,  we may be subject to  liability  for  pollution  or other
environmental  damages  which  we  may  elect  not  to  insure  against  due  to
prohibitive  premium costs and other reasons.  To date we have not been required
to spend material amounts on compliance with environmental regulations. However,
we may be  required to do so in future and this may affect our ability to expand
or maintain our operations.

                                       17
<PAGE>

Risks Related to Our Business - continued

     In  general,  our  exploration  and  production  activities  are subject to
certain federal,  state and local laws and regulations relating to environmental
quality and pollution control.  Such laws and regulations  increase the costs of
these  activities and may prevent or delay the  commencement or continuance of a
given  operation.  Compliance  with  these  laws and  regulations  has not had a
material effect on our operations or financial condition to date.  Specifically,
we are subject to legislation  regarding  emissions into the environment,  water
discharges  and  storage and  disposition  of  hazardous  wastes.  In  addition,
legislation  has been  enacted  which  requires  well and  facility  sites to be
abandoned and reclaimed to the satisfaction of state authorities.  However, such
laws and  regulations  are  frequently  changed and we are unable to predict the
ultimate cost of compliance. Generally, environmental requirements do not appear
to affect us any  differently  or to any  greater  or lesser  extent  than other
companies in the industry.

     We believe that our operations comply, in all material  respects,  with all
applicable  environmental  regulations.  We need  insurance  to protect our self
against risks  associated with the leases  obtained.  The leases allow for entry
onto the properties for the purposes of oil and gas  exploration.  The insurance
we require  relates solely to developments on the properties for the purposes of
oil and gas  exploration.  We will contract with Oakhills  Drilling & Operating,
LLC.  to  complete  developments  on the  properties  that relate to oil and gas
exploration.  Oakhills Drilling & Operating, LLC's insurance policies will cover
any and all risks including  liability  pertaining to oil and gas exploration as
they will be executing  operational  oil and gas aspects for us. Our oil and gas
operator, Oakhills Drilling & Operating, LLC, an Oklahoma corporation, maintains
in full force and effect  insurance  coverage that is customary  for  comparably
situated  companies  for the  business  being  conducted  as it  relates  to the
development of properties owned or leased by us. Our management does not believe
that  we  require  our own  insurance  in the  current  circumstances  when  our
operations in the oil and gas exploration  domain are not substantive to warrant
in house,  non-contract labor. Our contractor's  insurance is more than adequate
in the circumstances.  We reasonably believe that the insurance coverage carried
by our intended contact operator,  Oakhills Drilling & Operating,  LLC, provides
reasonable,  prudent and customary coverage against all liabilities,  claims and
risks against which it is customary for comparably situated companies to insure.

     Oakhills Drilling & Operating, LLC carries the following insurance policies
and coverage:  (i) business automotive policies:  $1,000,000  liability,  $1,000
medical  payment per  occurrence and covers all  automobiles  and pulling units;
(ii)  workers  compensation  policy:  $1,000,000  per  accident per employee and
$1,000,000 per disease per employee; (iii) general liability policy:  $2,000,000
aggregate  coverage,  $1,000,000 per occurrence,  $100,000 per fire  occurrence,
$5,000 medical per person;  (iv) drilling rig insurance:  $1,000,000 on drilling
rig and  equipment,  $540,000 on triplex  mud pump,  rig  terrorism  coverage of
$25,000; and (v) umbrella insurance policy: liability coverage of $3,000,000.

     When and if we are convinced that our current leases or those  subsequently
acquired are capable of hydrocarbon  production and sales,  and we plan to drill
more than one well,  we plan to maintain a  $2,000,000  per year limit policy on
bodily  injury and  general  liability  with  regard to risks  incurred  for the
drilling  of up to 25 wells.  This  will  allow for our  growth to  contain  non
contract  labor that would  require us to carry such  additional  insurance  for
risks  pertaining to oil and gas  exploration  conducted  directly by us. Such a
policy  would   include   coverage  for  numerous   locations   for   pollution,
environmental  damage,  chemical spills and commercial general liability,  fire,
and personal injury. Such a policy will not be required until such time and date
as we believe that we will begin a sustained drilling and operating program, and
that at least one well has been  drilled and is producing to justify and warrant
further drilling and a sustained drilling and operating program.

                                       18
<PAGE>

Risks Related to Our Business - continued

     Any change to  government  regulation/administrative  practices  may have a
negative  impact on our  ability to  operate  and our  profitability.  The laws,
regulations,  policies or current  administrative  practices  of any  government
body,  organization  or  regulatory  agency  in the  United  States or any other
jurisdiction,  may be changed,  applied or  interpreted  in a manner  which will
fundamentally alter our ability to carry on business.  The actions,  policies or
regulations, or changes thereto, of any government body or regulatory agency, or
other special interest groups,  may have a detrimental  effect on us. Any or all
of these  situations may have a negative impact on our ability to operate and/or
our profitably.

     We may be  unable  to  retain  key  employees  or  consultants  or  recruit
additional  qualified  personnel.  Our extremely limited personnel means that we
would be  required  to spend  significant  sums of money to locate and train new
employees in the event any of our employees resign or terminate their employment
with us for any reason.  Due to our  limited  operating  history  and  financial
resources,  we are  entirely  dependent  on the  continued  service  of  Douglas
Humphreys,  our Chief Executive  Officer,  and Grant Atkins, our Chief Financial
Officer.  Further,  we do not have key man life  insurance  on  either  of these
individuals.  We may not have the financial  resources to hire a replacement  if
one or both of our officers  were to die. The loss of service of either of these
employees could therefore significantly and adversely affect our operations.

     Our officers  and  directors  may be subject to conflicts of interest.  Our
officers  and  directors  serve only part time and are subject to  conflicts  of
interest.  Each devotes part of his working  time to other  business  endeavors,
including  consulting  relationships  with other oil and gas  entities,  and has
responsibilities  to these other entities.  Specifically,  Douglas  Humphreys is
currently a director and drilling operations manager of Lexington Oil & Gas Ltd.
Co.,  the wholly  owned  subsidiary  of  Lexington  Resources,  Inc.,  a natural
resource  exploration  company engaged in the acquisition and development of oil
and natural gas properties in the United States with an operational focus on gas
development  initiatives  in the Arkoma Basin of Oklahoma and in the Dallas Fort
Worth Basin of Texas. Mr.  Humphreys is also a director of Lexington  Resources,
Inc.  Mr.  Humphreys  is a director  and  president  of  Oakhills  Drilling  and
Operating, LLC, a full service drilling,  operating and well completion company.
Mr.  Humphreys is also a director and  president  of Paluca  Petroleum,  Inc., a
private  Oklahoma based oil and gas services  company owned by Mr. Humphreys and
his immediate family. Some of the services to be provided by Mr. Humphreys to us
in the future may be provided  through this business  entity.  Mr.  Humphreys is
also a director of GBH Farms, Inc. a private livestock company.  Grant Atkins is
also  currently a director  and  president of  Lexington  Resources,  Inc. and a
director of  Lexington  Oil & Gas Ltd.  Co. Steve Jewett is a director and audit
committee member to both Lexington  Resources,  Inc. and Uranium Energy Corp. He
also has a private  accounting and tax practice.  Bruce Horton is a director and
audit  committee  member to Uranium  Energy Corp. He is also an  accountant  and
financial management consultant.

     Such conflicts include deciding how much time to devote to our affairs,  as
well as what business  opportunities should be presented to us. Because of these
relationships,  our  officers  and  directors  will be subject to  conflicts  of
interest.  Currently,  we have no policy in place to address  such  conflicts of
interest.

     One of our  shareholders  may exercise voting power of more than 50% of our
common  stock.  Geneva  Energy Corp.  ("Geneva")  owns  6,000,000  shares of our
restricted common stock, or 59.0% of our outstanding common stock as of the date
of this Annual Report.  Due to its stock ownership,  Geneva may be in a position


                                       19
<PAGE>

Risks Related to Our Business - continued

to elect the board of  directors  and,  therefore,  to control our  business and
affairs  including certain  significant  corporate actions such as acquisitions,
the sale or purchase of assets,  and the  issuance  and sale of our  securities.
Further, Geneva may be able to prevent or cause a change in control. We also may
be prevented  from  entering  into  transactions  that could be beneficial to us
without  Geneva's  consent.  The interest of our largest  shareholder may differ
from the interests of other shareholders.

Risks Related to Our Common Stock

     Sales of a substantial number of shares of our common stock into the public
market by certain  stockholders may result in significant  downward  pressure on
the price of our common  stock and could  affect  your  ability  to realize  the
current  trading  price of our common stock.  Sales of a  substantial  number of
shares of our common stock in the public  market by certain  stockholders  could
cause a reduction  in the market  price of our common  stock.  As of the date of
this  Annual  Report,  we have  10,167,700  shares of common  stock  issued  and
outstanding.  Of the total  number of issued  and  outstanding  shares of common
stock,  certain  stockholders  are able to resell up to 4,167,700  shares of our
common  stock  pursuant to the  Registration  Statement  declared  effective  on
February 14, 2006. As a result of the Registration  Statement,  4,167,700 shares
of our common stock were issued and are  available  for  immediate  resale which
could have an adverse effect on the price of our common stock.

     As of the date of this  Annual  Report,  there  are  6,000,000  outstanding
shares  of our  common  stock  that are  restricted  securities  as that term is
defined  in  Rule  144  under  the  Securities  Act of  1933,  as  amended  (the
"Securities  Act").  Although  the  Securities  Act and Rule 144  place  certain
prohibitions on the sale of restricted securities,  restricted securities may be
sold into the public market under certain conditions.

     Any significant  downward  pressure on the price of our common stock as the
selling stockholders sell their shares of our common stock could encourage short
sales by the selling  stockholders  or others.  Any such short sales could place
further downward pressure on the price of our common stock.

     The  trading  price of our  common  stock on the OTC  Bulletin  Board  will
fluctuate  significantly  and stockholders  may have difficulty  reselling their
shares. As of the date of this Annual Report, our common stock has not commenced
trading on the  Over-the-Counter  Bulletin Board.  Upon commencement of trading,
there is a volatility  associated with Bulletin Board securities in general, and
the  value of your  investment  could  decline  due to the  impact of any of the
following  factors upon the market price of our common stock: (i)  disappointing
results from our  discovery  or  development  efforts;  (ii) failure to meet our
revenue or profit goals or  operating  budget;  (iii)  decline in demand for our
common stock;  (iv)  downward  revisions in  securities  analysts'  estimates or
changes  in  general  market  conditions;   (v)  technological   innovations  by
competitors  or in competing  technologies;  (vi) lack of funding  generated for
operations;  (vii)  investor  perception of our industry or our  prospects;  and
(viii) general economic trends.

     In addition,  stock markets have experienced price and volume  fluctuations
and  the  market  prices  of  securities  have  been  highly   volatile.   These
fluctuations  are often  unrelated to operating  performance  and may  adversely
affect  the market  price of our common  stock.  As a result,  investors  may be
unable to sell their shares at a fair price and you may lose all or part of your
investment.

                                       20
<PAGE>

Risks Related to Our Common Stock - continued

     Additional  issuance  of equity  securities  may result in  dilution to our
existing stockholders.  Our Articles of Incorporation  authorize the issuance of
100,000,000 shares of common stock. Common stock is our only authorized class of
stock.  The board of directors has the authority to issue  additional  shares of
our capital stock to provide additional financing in the future and the issuance
of any such shares may result in a reduction  of the book value or market  price
of  the  outstanding  shares  of our  common  stock.  If we do  issue  any  such
additional   shares,   such   issuance  also  will  cause  a  reduction  in  the
proportionate ownership and voting power of all other stockholders.  As a result
of such dilution, your proportionate ownership interest and voting power will be
decreased  accordingly.  Further,  any such issuance could result in a change of
control.

     Our common  stock is  classified  as a "penny  stock" under SEC rules which
limits the market for our common stock.  The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks." Penny
stocks  generally are equity  securities  with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the NASDAQ  system,  provided  that current  price and volume  information  with
respect to  transactions  in such  securities  is  provided  by the  exchange or
system). Penny stock rules require a broker-dealer,  prior to a transaction in a
penny stock not  otherwise  exempt from those rules,  to deliver a  standardized
risk disclosure document prepared by the SEC, which specifies  information about
penny stocks and the nature and significance of risks of the penny stock market.
A broker-dealer must also provide the customer with bid and offer quotations for
the penny stock, the compensation of the broker-dealer,  and sales person in the
transaction,  and monthly account statements indicating the market value of each
penny stock held in the customer's account.  In addition,  the penny stock rules
require that,  prior to a transaction in a penny stock not otherwise exempt from
those rules, the broker-dealer  must make a special written  determination  that
the penny  stock is a suitable  investment  for the  purchaser  and  receive the
purchaser's written agreement to the transaction.  These disclosure requirements
may have the effect of reducing the trading activity in the secondary market for
stock that becomes  subject to those penny stock rules.  If a trading market for
our common stock develops,  our common stock will probably become subject to the
penny stock rules, and shareholders may have difficulty in selling their shares.

     A majority of our  directors  and officers  are outside the United  States,
with the result that it may be difficult  for  investors  to enforce  within the
United  States any  judgments  obtained  against us or any of our  directors  or
officers.  A  majority  of our  directors  and  officers  are  nationals  and/or
residents of countries  other than the United  States,  and all or a substantial
portion of such  persons'  assets are located  outside the United  States.  As a
result,  it may be difficult for  investors to effect  service of process on our
directors  or  officers,  or  enforce  within  the  United  States or Canada any
judgments obtained against us or our officers or directors,  including judgments
predicated  upon the civil  liability  provisions of the securities  laws of the
United  States  or any  state  thereof.  Consequently,  you  may be  effectively
prevented from pursuing  remedies  under U.S.  federal  securities  laws against
them. In addition, investors may not be able to commence an action in a Canadian
court  predicated upon the civil liability  provisions of the securities laws of
the United States.

     Nevada law and our Articles of Incorporation may protect our directors from
certain  types of lawsuits.  Nevada law provides that our officers and directors
will not be liable to us or our  stockholders  for monetary  damages for all but
certain types of conduct as officers and  directors.  Our Bylaws permit us broad
indemnification powers to all persons against all damages incurred in connection


                                       21
<PAGE>

Risks Related to Our Common Stock - continued

with our  business  to the  fullest  extent  provided  or  allowed  by law.  The
exculpation  provisions  may have the  effect of  preventing  stockholders  from
recovering   damages  against  our  officers  and  directors   caused  by  their
negligence, poor judgment or other circumstances. The indemnification provisions
may require us to use our limited  assets to defend our officers  and  directors
against claims, including claims arising out of their negligence, poor judgment,
or other circumstance

ITEM 2. DESCRIPTION OF PROPERTIES

     We lease our  principal  office space  located at 10120 S. Eastern  Avenue,
Suite  200,  Henderson,   Nevada  89052.  The  office  space  is  for  corporate
identification,  mailing,  and courier  purposes only and costs us approximately
$225 monthly.  The office and services  related  thereto may be cancelled at any
time with a thirty day notice.

ITEM 3. LEGAL PROCEEDINGS

     Management  is not  aware  of any  legal  proceedings  contemplated  by any
governmental authority or any other party involving us or our properties.  As of
the date of this Annual Report, no director, officer or affiliate is (i) a party
adverse to us in any legal proceeding,  or (ii) has an adverse interest to us in
any legal  proceedings.  Management is not aware of any other legal  proceedings
pending or that have been threatened against us or our properties.

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

     During fiscal year ended  December 31, 2005,  no matters were  submitted to
our stockholders for approval.

ITEM 5. MARKET FOR REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR COMMON EQUITY

     As of the date of this  Annual  Report,  shares of our  common  stock  been
authorized  for  trading on the OTC  Bulletin  Board,  but  trading  has not yet
commenced.  We anticipate that our shares of common stock will commence  trading
approximately  April 15,  2006.  The market for our common stock will be limited
and can be volatile.

     As of the date of this Annual  Report,  we have 49  shareholders  of record
which does not include  shareholders  whose shares are held in street or nominee
names. We have no outstanding warrants or options to purchase our securities.

DIVIDEND POLICY

     No  dividends  have ever been  declared  by the Board of  Directors  on our
common stock.  Our losses do not currently  indicate the ability to pay any cash
dividends,  and we do not indicate the intention of paying cash dividends either
on our common stock in the foreseeable future.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS

     As of the date of this Annual Report, we have no equity compensation plan.

                                       22
<PAGE>

RECENT SALES OF UNREGISTERED SECURITIES

     As of the date of this Annual Report, and during fiscal year ended December
31, 2005, we engaged in a private placement offering.

Private Placement

     On  March 9,  2005,  we  engaged  in a  private  placement  offering  under
Regulation  S of the  Securities  Act of 1933  Securities  Act, as amended  (the
"Securities  Act").  Pursuant  to the terms of the  private  placement,  we sold
70,000 shares of our restricted  common stock at a  subscription  price of $0.50
per share for aggregate proceeds of $35,000.  Therefore, we issued 70,000 shares
of our  restricted  common  stock to two  accredited  investors  in  reliance on
Regulation S under  Securities  Act.  The shares sold in the offering  have been
registered  on Form  SB-2  under  the  Securities  Act with the  Securities  and
Exchange Commission (see section immediately below).

Shares Eligible for Future Sale

     During  fiscal  year  ended  December  31,  2005,  we filed a  registration
statement on Form SB-2 under the  Securities  Act of 1933, as amended,  with the
Securities  and  Exchange   Commission  (the  "Registration   Statement").   The
Securities and Exchange Commission declared the Registration Statement effective
on February 14, 2006, pursuant to which certain purchasers of shares, other than
affiliates, may resell their shares of common stock aggregating 4,167,700 shares
immediately.  Upon completion of the Registration  Statement,  we had 10,167,700
shares of common stock issued and outstanding.  A current  shareholder who is an
"affiliate" of us,  defined in Rule 144 as a person who directly,  or indirectly
through one or more intermediaries,  controls,  or is controlled by, or is under
common control with, us, will be required to comply with the resale  limitations
of Rule  144.  Sales by  affiliates  will be  subject  to the  volume  and other
limitations of Rule 144, including certain restrictions  regarding the manner of
sale, notice  requirements,  and the availability of current public  information
about us. The volume  limitations  generally permit an affiliate to sell, within
any three month  period,  a number of shares that does not exceed the greater of
one percent of the  outstanding  shares of common  stock or the  average  weekly
trading volume during the four calendar  weeks  preceding his sale. A person who
ceases to be an affiliate at least three  months  before the sale of  restricted
securities  beneficially  owned for at least  two years may sell the  restricted
securities under Rule 144 without regard to any of the Rule 144 limitations.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The summarized  financial data set forth in the table below is derived from
and should be read in conjunction with our audited financial  statements for the
period from  inception  (October  19,  2004) to year ended  December  31,  2005,
including  the notes to those  financial  statements  which are included in this
Annual Report.  The following  discussion should be read in conjunction with our
audited financial statements and the related notes that appear elsewhere in this
Annual Report. The following discussion contains forward-looking statements that
reflect our plans,  estimates  and  beliefs.  Our actual  results  could  differ
materially from those discussed in the forward looking statements.  Factors that
could cause or contribute to such  differences  include,  but are not limited to
those discussed  below and elsewhere in this Annual Report,  particularly in the
section entitled "Risk Factors".  Our audited financial statements are stated in
United  States  Dollars  and are  prepared  in  accordance  with  United  States
Generally Accepted Accounting Principles.


                                       23
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued

                                                          For the Period from
                                                          Inception (October 19,
                                                          2004) to December 31,
                                                          2005
-------------------------------------------------------   ---------------------
Revenues                                                  $                   0
-------------------------------------------------------   ---------------------
Net Loss                                                  $            (227,755)
-------------------------------------------------------   ---------------------
                                                           For the Year Ended
                                                           December 31, 2005
                                                               (audited)
-------------------------------------------------------   ---------------------
Oil and Gas Revenue                                       $                   0
-------------------------------------------------------   ---------------------
Office and general                                                      152,954
-------------------------------------------------------   ---------------------
Professional fees                                                        51,072
-------------------------------------------------------   ---------------------
Net Loss for the Year                                     $            (204,026)
-------------------------------------------------------   ---------------------

-------------------------------------------------------   ---------------------
Total Number of Shares of Common Stock Outstanding                   10,167,700
-------------------------------------------------------   ---------------------

-------------------------------------------------------   ---------------------
Deficit                                                   $            (227,755)
-------------------------------------------------------   ---------------------
Total Stockholders' Equity                                              481,095
-------------------------------------------------------   ---------------------

MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATION

For Fiscal Year Ended December 31, 2005

     Our net loss for fiscal year ended December 31, 2005 was ($204,026). During
fiscal year ended  December 31, 2005, we recorded no income.  During fiscal year
ended December 31, 2005, we recorded operating expenses of $204,026,  consisting
primarily of: (i) $152,954 in office and general  expenses;  and (ii) $51,072 in
professional  fees.  General  and  administrative   expenses  generally  include
corporate  overhead,   financial  and  administrative  contracted  services  and
consulting costs.

     General  and  administrative  expenses  incurred  during  fiscal year ended
December 31, 2005  increased  primarily  due to the increase in operating  costs
associated  with the  acquisition  and development of oil and gas properties and
overall corporate activity associated with the legal and administrative costs of
the Registration Statement.

     Of the  $204,026  incurred as general and  administrative  expenses  during
fiscal year ended  December 31, 2005,  an aggregate of $80,000 and an additional
$50,000 was incurred by us payable to International  Market Trend, Inc. ("IMT"),
to develop a corporate identity package including logo, trade name, website, and
other  administrative  identity  related items as well as  management,  business
planning,  project evaluation, and other consulting services. As of December 31,


                                       24
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued

2005, we owed IMT $5,000 in consulting expenses.  An officer and director of one
of our  shareholders who holds of record 500,000 shares of common stock, is also
an officer and director of IMT.

     A further $74,026 was paid for  administrative  expenses  including  legal,
engineering, audit, office, and bank charges.

     An aggregate of $200,000 was  incurred to American  News  Publishing,  Inc.
("ANP"),  for the  development  of an investor  communications  package and as a
deposit on  shareholder  communications  materials and direct mail  distribution
costs. Such image  advertising  services were to include the creation of 16 page
newsletter with color photo content about us, printing,  posting, and mailing of
such newsletter to approximately  150,000  intended readers  interested in a new
company  in the oil and gas  industry.  A  formal  written  contract  was  never
executed for these  services,  and such  services were to be performed at a date
after we were public based upon a verbal agreement.  We abandoned our initiative
regarding  the  development  of the  above  referenced  investor  communications
package and  shareholder  communications  materials  and  implementation  of the
direct  mail  communication  program  with  ANP and  have  rescinded  previously
contracted  services with ANP. As of December 31, 2005, the $200,000 paid to ANP
was to be refunded  and was booked as a  receivable  to us. On January 20, 2006,
ANP repaid the entire  $200,000 fee in  connection  with the  rescission  of the
verbal agreement.

     Our net loss during fiscal year ended  December 31, 2005 was  ($204,026) or
($0.02)  per  share.  The  weighted  average  number of shares  outstanding  was
10,155,015 at December 31, 2005.

For the Period October 19, 2004 (Inception) to December 31, 2004

     Our net loss during the period October 19, 2004 (inception) to December 31,
2004 was ($23,729).  During the period October 19, 2004  (inception) to December
31, 2004, we recorded no income.  During the period October 19, 2004 (inception)
to December  31, 2004,  we recorded  operating  expenses of $23,729,  consisting
primarily  of: (i) $1,951 in office and general  expenses;  and (ii)  $21,778 in
professional  fees  primarily  composed  of legal  and  audit/accounting  review
expenses.

     Our net loss during the period October 19, 2004 (inception) to December 31,
2004 was ($23,729) or ($0.00) per share.  The weighted  average number of shares
outstanding was 4,913,163.

LIQUIDITY AND CAPITAL RESOURCES

     As at fiscal year ended December 31, 2005, our current assets were $207,110
and our  current  liabilities  were  $26,015,  resulting  in working  capital of
$181,095.  As at fiscal  year ended  December  31,  2005,  current  assets  were
comprised of: (i) $7,110 in cash; and (ii) $200,000 due from a related party. As
at fiscal year ended December 31, 2005,  current  liabilities were comprised of:
(i) $16,015 in accounts payable and accrued liabilities; and (ii) $10,000 due to
related parties.

     As at fiscal year ended  December 31, 2005,  our total assets were $507,110
comprised  of: (i)  $207,110 in current  assets;  and (ii)  $300,000 in carrying
value of unproved oil and gas  properties.  The decrease in total assets  during
fiscal year ended December 31, 2005 from fiscal year ended December 31, 2004 was
primarily due to the decrease in cash.

                                       25
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued

     As at fiscal year ended  December  31,  2005,  our total  liabilities  were
$26,015  comprised of current  liabilities.  The  increase in total  liabilities
during fiscal year ended  December 31, 2005 from fiscal year ended  December 31,
2004 was primarily due to the increase in amounts due to related parties.

     Stockholders'  equity  decreased  from  $650,121  for  December 31, 2004 to
$481,095 for December 31, 2005.

     We have not generated  positive cash flows from operating  activities.  For
fiscal year ended December 31, 2005, net cash flows used in operating activities
was $(398,389),  consisting primarily of a net loss of ($204,026) and the amount
of  $200,000  due  from a  related  party.  For  the  period  October  19,  2004
(inception) to December 31, 2004, net cash flow used in operating activities was
$(3,351),  consisting primarily of a net loss of $(23,729),  which was offset by
an increase in accounts payable and accrued liabilities of $20,378.

     For fiscal year ended  December 31, 2005,  net cash flows used in investing
activities  was $0  compared  to the period  October  19,  2004  (inception)  to
December  31,  2004,  whereby net cash flows used in  investing  activities  was
$(300,000),  which  was  the  result  of the  acquisition  of our  oil  and  gas
properties.

     For fiscal  year ended  December  31,  2005,  net cash flow from  financing
activities was $35,000  compared to the period  October 19, 2004  (inception) to
December 31, 2004, whereby net cash flow from financing  activities was $673,850
pertaining to $673,850 received from proceeds on the sale of our common stock.

     We expect that  working  capital  requirements  will  continue to be funded
through a combination of our existing funds, debt instruments and advances,  and
further issuances of securities.  Our working capital  requirements are expected
to increase in line with the growth of our business.

PLAN OF OPERATION AND FUNDING

     Existing  working  capital,  further  advances  and debt  instruments,  and
anticipated  cash flow are expected to be adequate to fund our  operations  over
the  next  six  months.  We have no lines of  credit  or  other  bank  financing
arrangements.  Generally,  we  have  financed  operations  to date  through  the
proceeds of the private placement of equity and debt instruments.  In connection
with our business plan, management anticipates additional increases in operating
expenses  and  capital  expenditures  relating  to:  (i) oil  and gas  operating
properties;  (ii) possible drilling initiatives on current properties and future
properties;  and (iii) future property acquisitions.  We intend to finance these
expenses with further issuances of securities,  and debt issuances.  Thereafter,
we expect we will need to raise additional capital and generate revenues to meet
long-term operating requirements.  Additional issuances of equity or convertible
debt  securities will result in dilution to our current  shareholders.  Further,
such  securities  might have rights,  preferences  or  privileges  senior to our
common stock.  Additional  financing may not be available upon acceptable terms,
or at  all.  If  adequate  funds  are not  available  or are  not  available  on
acceptable  terms,  we may  not be able to take  advantage  of  prospective  new
business  endeavors or opportunities,  which could  significantly and materially
restrict our business operations.

     The independent  auditors'  report  accompanying  our December 31, 2005 and
December  31,  2004  financial  statements  contains  an  explanatory  paragraph
expressing  substantial  doubt about our ability to continue as a going concern.
The financial statements have been prepared "assuming that we will continue as a


                                       26
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued

going concern," which  contemplates  that we will realize our assets and satisfy
our liabilities and commitments in the ordinary course of business.

MATERIAL COMMITMENTS

     We do not have any material  commitments for fiscal year ended December 31,
2005.

PURCHASE OF SIGNIFICANT EQUIPMENT

     We do not intend to  purchase  any  significant  equipment  during the next
twelve months.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the FASB issued SFAS No. 153,  "Exchanges of Non-monetary
Assets - An  Amendment  of APB Opinion No. 29".  The guidance in APB Opinion No.
29, "Accounting for Non-monetary  Transactions",  is based on the principle that
exchanges of  non-monetary  assets should be measured based on the fair value of
the assets exchanged.  The guidance in that Opinion,  however,  included certain
exceptions to that  principle.  SFAS No. 153 amends  Opinion No. 29 to eliminate
the  exception  for  non-monetary  exchanges  of similar  productive  assets and
replaces it with a general  exception for exchanges of non-monetary  assets that
do not  have  commercial  substance.  A  non-monetary  exchange  has  commercial
substance  if the  future  cash  flows of the  entity  are  expected  to  change
significantly  as a result of the exchange.  The  provisions of SFAS No. 153 are
effective for non-monetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. Early application is permitted and companies must apply the
standard prospectively.  The adoption of this standard is not expected to have a
material effect on our results of operations or financial position.

     In December  2004,  the FASB issued SFAS No. 123R,  "Share Based  Payment".
SFAS  123R  is  a  revision  of  SFAS  No.  123   "Accounting   for  Stock-Based
Compensation",  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to Employees" and its related  implementation  guidance.  SFAS 123R  establishes
standards for the accounting for  transactions in which an entity  exchanges its
equity  instruments  for goods or services.  It also addresses  transactions  in
which an entity  incurs  liabilities  in exchange for goods or services that are
based  on the fair  value  of the  entity's  equity  instruments  or that may be
settled by the issuance of those equity instruments. SFAS 123R focuses primarily
on accounting for transactions in which an entity obtains  employee  services in
share-based  payment  transactions.  SFAS 123R does not  change  the  accounting
guidance for share-based payment  transactions with parties other than employees
provided in SFAS 123 as originally issued and EITF Issue No. 96-18,  "Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services".  SFAS 123R does not address the
accounting  for  employee  share  ownership  plans,  which are  subject to AICPA
Statement of Position 93-6,  "Employers' Accounting for Employee Stock Ownership
Plans".  SFAS 123R  requires  a public  entity to measure  the cost of  employee
services  received in exchange for an award of equity  instruments  based on the
grant-date fair value of the award (with limited exceptions).  That cost will be
recognized  over the period  during  which an  employee  is  required to provide
service in exchange for the award - the requisite  service  period  (usually the
vesting  period).  SFAS 123R  requires  that the  compensation  cost relating to
share-based  payment  transactions be recognized in financial  statements.  That
cost  will be  measured  based on the  fair  value of the  equity  or  liability
instruments  issued. The scope of SFAS 123R includes a wide range of share-based
compensation  arrangements  including  share  options,  restricted  share plans,


                                       27
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued

performance-based awards, share appreciation rights, and employee share purchase
plans.

     Public entities (other than those filing as small business issuers) will be
required to apply SFAS 123R as of the first interim or annual  reporting  period
that begins after June 15, 2005.  Public  entities  that file as small  business
issuers  will be  required  to apply  SFAS 123R in the first  interim  or annual
reporting  period that begins after  December 15, 2005.  Management is currently
evaluating  the impact,  which the  adoption of this  standard  will have on our
results of operations and financial position.

     The  interpretations  in staff accounting  bulletin ("SAB") No. 107 express
views of the staff  regarding  the  interaction  between  Statement of Financial
Accounting  Standards  Statement  No. 123 (revised  2004),  Share-Based  Payment
("Statement  123R" or the  "Statement")  and  certain  Securities  and  Exchange
Commission ("SEC") rules and regulations and provide the staff's views regarding
the valuation of  share-based  payment  arrangements  for public  companies.  In
particular,   this  SAB  provides   guidance  related  to  share-based   payment
transactions with non-employees,  the transition from nonpublic to public entity
status, valuation methods (including assumptions such as expected volatility and
expected  term),  the accounting for certain  redeemable  financial  instruments
issued  under   share-based   payment   arrangements,   the   classification  of
compensation  expense,  non-GAAP  financial  measures,  first-time  adoption  of
Statement 123R in an interim period, capitalization of compensation cost related
to share-based  payment  arrangements,  the accounting for income tax effects of
share-based   payment   arrangements   upon  adoption  of  Statement  123R,  the
modification  of employee  share options prior to adoption of Statement 123R and
disclosures  in  Management's  Discussion  and Analysis  ("MD&A")  subsequent to
adoption of Statement 123R.  Management is currently  evaluating the impact that
the  adoption  of this  standard  will  have on our  results  of  operations  or
financial position.

     In May  2005,  the FASB  issued  SFAS  154,  Accounting  Changes  and Error
Corrections. This Statement replaces APB Opinion No. 20, Accounting Changes, and
SFAS No. 3, Reporting  Accounting Changes in Interim Financial  Statements,  and
changes the  requirements  for the  accounting  for and reporting of a change in
accounting  principle.  This  Statement  applies  to all  voluntary  changes  in
accounting  principle.  We  believe  this  Statement  will have no impact on our
financial statements.

     In March 2005, the FASB issued FASB  Interpretation No. 47, "Accounting for
Conditional  Asset Retirement  Obligations,  an interpretation of FASB Statement
No. 143" (FIN 47). Asset  retirement  obligations  (AROs) are legal  obligations
associated  with the  retirement  of  long-lived  assets  that  result  from the
acquisition,  construction,  development and/or normal operation of a long-lived
asset,  except  for  certain  obligations  of  lessees.  FIN 47  clarifies  that
liabilities  associated  with  asset  retirement  obligations  whose  timing  or
settlement  method are  conditional  on future events should be recorded at fair
value  as soon as fair  value  is  reasonably  estimable.  FIN 47 also  provides
guidance on the  information  required to reasonably  estimate the fair value of
the liability.  FIN 47 is intended to result in more  consistent  recognition of
liabilities  relating to AROs among companies,  more information  about expected
future  cash  outflows  associated  with  those  obligations  stemming  from the
retirement of the asset(s) and more information  about investments in long-lived
assets  because   additional  asset  retirement  costs  will  be  recognized  by
increasing the carrying amounts of the assets  identified to be retired.  FIN 47
is effective  for fiscal years ending  after  December 15, 2005.  Management  is


                                       28
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued

currently  evaluating the impact,  which the adoption of this standard will have
on our financial statements.

     In November  2005,  FASB issued  Staff  Position  ("FSP") FAS 115-1 and FAS
124-1,  "The Meaning of  Other-Than-Temporary  Impairment and Its Application to
Certain  Investments" ("FSP FAS 115-1"),  which provides guidance on determining
when investments in certain debt and equity securities are considered  impaired,
whether  that  impairment  is   other-than-temporary,   and  on  measuring  such
impairment  loss.  FSP  FAS  115-1  also  includes   accounting   considerations
subsequent to the recognition of an other-than temporary impairment and requires
certain  disclosures  about  unrealized  losses that have not been recognized as
other-than-temporary  impairments.  FSP FAS 115-1 is  required  to be applied to
reporting  periods  beginning  after December 15, 2005. We are required to adopt
FSP FAS 115-1 in the second quarter of fiscal 2006.  Management  does not expect
the  adoption of this  statement  will have a material  impact on our results of
operations  or  financial  condition.  Management  is currently  evaluating  the
impact,  which  the  adoption  of  this  standard  will  have  on our  financial
statements.

     We believe  the  following  critical  accounting  policies  affect our more
significant  judgments and estimates  used in the  preparation  of our financial
statements.

ACCOUNTING FOR NATURAL GAS AND OIL PRODUCING ACTIVITIES

     We use  the  full  cost  method  to  account  for our  natural  gas and oil
producing activities.  Under this accounting method, we capitalize substantially
all of the costs incurred in connection with the acquisition,  development,  and
exploration  of natural gas and oil  reserves in full cost pools  maintained  by
geographic  areas,  regardless of whether  reserves are actually  discovered and
apply a  quarterly  full  cost  ceiling  test.  Adverse  changes  in  conditions
(primarily  gas price  declines)  could result in permanent  write-downs  in the
carrying  value  of oil  and gas  properties  as well  as  non-cash  charges  to
operations, but would not affect cash flows.

     We have  adopted  the  provisions  of SFAS No. 143,  "Accounting  for Asset
Retirement Obligations." SFAS No. 143 requires the fair value of a liability for
an asset  retirement  obligation  to be  recognized in the period in which it is
incurred  if a  reasonable  estimate of fair value can be made.  The  associated
asset  retirement  costs are  capitalized as part of the carrying  amount of the
related  oil  and  gas  properties.  As of  December  31,  2004  management  has
determined that there are no material asset retirement obligations.

PROPERTY, EQUIPMENT AND DEPRECIATION

     We follow the full cost method of accounting for our oil and gas operations
whereby all costs related to the acquisition of methane,  petroleum, and natural
gas  interests  are   capitalized.   Under  this  method,   all  productive  and
nonproductive  costs  incurred  in  connection  with  the  exploration  for  and
development of oil and gas reserves are capitalized. Such costs include land and
lease acquisition  costs,  annual carrying charges of non-producing  properties,
geological and geophysical costs, costs of drilling and equipping productive and
non-productive  wells,  and direct  exploration  salaries and related  benefits.
Proceeds from the disposal of oil and gas properties are recorded as a reduction
of the related  capitalized  costs without  recognition of a gain or loss unless
the  disposal  would  result in a change of 20 percent or more in the  depletion
rate. We currently operate solely in the U.S.A.

                                       29
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued

     Depreciation  and depletion of proved oil and gas properties is computed on
the  units-of-production  method  based upon  estimates of proved  reserves,  as
determined by  independent  consultants,  with oil and gas being  converted to a
common unit of measure based on their relative energy content.

     The  costs  of  acquisition   and  exploration  of  unproved  oil  and  gas
properties,  including any related capitalized interest expense, are not subject
to  depletion,  but are assessed for  impairment  either  individually  or on an
aggregated  basis. The costs of certain  unevaluated  leasehold acreage are also
not  subject to  depletion.  Costs not  subject to  depletion  are  periodically
assessed for possible impairment or reductions in value. If a reduction in value
has  occurred,  costs  subject to  depletion  are  increased or a charge is made
against  earnings  for  those  operations  where  a  reserve  base  is  not  yet
established.

     Estimated future removal and site  restoration  costs are provided over the
life of proven reserves on a  units-of-production  basis.  Costs,  which include
production equipment removal and environmental  remediation,  are estimated each
period by management based on current regulations, actual expenses incurred, and
technology and industry  standards.  The charge is included in the provision for
depletion and depreciation and the actual  restoration  expenditures are charged
to the accumulated provision amounts as incurred.

     We apply a ceiling test to capitalized costs which limits such costs to the
aggregate of the estimated  present value,  using a ten percent discount rate of
the estimated future net revenues from production of proven reserves at year end
at  market  prices  less  future  production,  administrative,  financing,  site
restoration,  and income tax costs  plus the lower of cost or  estimated  market
value of unproved  properties.  If  capitalized  costs are  determined to exceed
estimated  future net  revenues,  a write-down  of carrying  value is charged to
depletion in the period.








                                       30
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)
                              FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


Report of Independent  Registered  Public  Accounting  Firm Dated
February 16, 2006.......................................................... 32

Balance Sheets as at December 31, 2005 and December 31, 2004 .............. 33

Statements of Operations  For Fiscal Year Ended December 31, 2005
and for the Period From October 19, 2004  (Inception) to December
31, 2005 .................................................................. 34

Statement of Stockholders' Equity for the Period From October 19,
2004 (Inception) to December 31, 2005 ..................................... 35

Statements of Cash Flows for the Year Ended December 31, 2005 and
for the Period From October 19, 2004  (Inception) to December 31,
2005 ...................................................................... 36

Notes to Financial Statements ............................................. 37


                                       31
<PAGE>


[LETTERHEAD GRAPHIC OMITTED]



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
________________________________________________________________________________


To the Stockholders and Board of Directors of Morgan Creek Energy Corp.:

We have audited the balance sheets of Morgan Creek Energy Corp. (an  exploration
stage  company)  as at  December  31,  2005  and  2004  and  the  statements  of
operations,  stockholders' equity and cash flows for the year ended December 31,
2005, the period from inception on October 19, 2004 to December 31, 2004 and the
period from inception on October 19, 2004 to December 31, 2005.  These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  an audit to obtain  reasonable  assurance  whether  the  financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  these  financial  statements  present  fairly,  in all material
respects, the financial position of the Company as at December 31, 2005 and 2004
and the  statements of operations,  stockholders'  equity and cash flows for the
year ended  December 31, 2005,  the period from inception on October 19, 2004 to
December 31, 2004 and the period from  inception on October 19, 2004 to December
31, 2005 in conformity  with  accounting  principles  generally  accepted in the
United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  to date the Company  has not  generated  revenues  since
inception,  has incurred  losses in developing its business,  and further losses
are anticipated.  The Company requires  additional funds to meet its obligations
and finance its  operations.  These  factors raise  substantial  doubt about the
Company's  ability to continue as a going  concern.  Management's  plans in this
regard are  described  in Note 1. The  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.

                                             "Dale Matheson Carr-Hilton LaBonte"

                                                           CHARTERED ACCOUNTANTS

Vancouver, B.C.
February 16, 2006


                       [GRAPHIC OMITTED][GRAPHIC OMITTED]


                                       32
<PAGE>



                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                          December 31,       December 31,
                                                                             2005               2004
--------------------------------------------------------------------- ------------------- -----------------
<S>                                                                           <C>                <C>    <C>
                                     ASSETS


CURRENT ASSETS
   Cash                                                                      $     7,110        $  370,499
     Due from related party (Note 5)                                             200,000                 -
--------------------------------------------------------------------- ------------------- -----------------
                                                                                 207,110           370,499

OIL AND GAS PROPERTIES, unproved (Note  3)                                       300,000           300,000
--------------------------------------------------------------------- ------------------- -----------------

                                                                             $   507,110        $  670,499
===================================================================== =================== =================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable and accrued liabilities                                $    16,015        $   20,378
     Due to related parties (Note 5)                                              10,000                 -
--------------------------------------------------------------------- ------------------- -----------------
                                                                                  26,015            20,378

GOING CONCERN (Note 1)

STOCKHOLDERS' EQUITY (Note 4)
Common stock, 100,000,000 shares authorized with $0.001 par value
 Issued and outstanding
     10,167,700 common shares (December 31, 2004 - 10,097,700)                    10,168            10,098
     Additional paid-in-capital                                                  698,682           663,752
   Deficit accumulated during exploration stage                                (227,755)          (23,729)
--------------------------------------------------------------------- ------------------- -----------------

                                                                                 481,095           650,121
--------------------------------------------------------------------- ------------------- -----------------

                                                                             $   507,110        $  670,499
===================================================================== =================== =================
</TABLE>

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


                                       33
<PAGE>


                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)

                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                             October 19, 2004
                                              Year ended      (inception) to     October 19, 2004
                                             December 31,      December 31,       (inception) to
                                                 2005             2004           December 31, 2005
------------------------------------------ ----------------- ------------------ -------------------
<S>                                                 <C>             <C>                  <C>

GENERAL AND ADMINISTRATIVE EXPENSES

   Office and general                          $   152,954          $   1,951         $   154,905
   Professional fees                                51,072             21,778              72,850
------------------------------------------ ----------------- ------------------ -------------------


NET LOSS FOR THE PERIOD                        $  (204,026)        $  (23,729)        $  (227,755)
========================================== ================= ================== ===================




BASIC AND DILUTED LOSS PER COMMON SHARE         $    (0.02)         $   (0.00)
========================================== ================= ==================

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                               10,155,015          4,913,163
========================================== ================= ==================
</TABLE>

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


                                       34
<PAGE>



                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)

                        STATEMENT OF STOCKHOLDERS' EQUITY

      FOR THE PERIOD FROM OCTOBER 19, 2004 (INCEPTION) TO DECEMBER 31, 2005
<TABLE>
<CAPTION>
                                                                                                        Deficit
                                                                                                      Accumulated
                                                                     Common Stock         Additional     During
                                                                 Number of                  Paid in    Exploration    Stockholders'
                                                                  Shares       Amount       Capital        Stage        Equity
-------------------------------------------------------------   ----------   ----------   ----------    ----------    ----------
<S>                                                                 <C>          <C>         <C>           <C>           <C>
Balance, October 19, 2004                                             --     $     --     $     --      $     --      $     --

Common stock issued for oil and gas property at $0.10 per
share - November 19, 2004                                        6,000,000        6,000      594,000          --         600,000

Capital distribution to founding share holder on
acquisition of oil and gas property (Note 3)                          --           --       (600,000)         --        (600,000)

Common stock issued for cash at $0.10 per share -November
26, 2004 and December 15, 2004                                   3,437,500        3,438      340,312          --         343,750

Common stock issued for cash at $0.50 per share -December
15, 2004                                                           660,200          660      329,440          --         330,100

Net loss for the period
-------------------------------------------------------------   ----------   ----------   ----------    ----------    ----------


Balance, December 31, 2004                                      10,097,700       10,098      663,752       (23,729)      650,121

Common stock issued for cash at $0.50 per share -
March 9, 2005                                                       70,000           70       34,930          --          35,000

Net loss for the year                                                 --           --           --        (204,026)     (204,026)
-------------------------------------------------------------   ----------   ----------   ----------    ----------    ----------

Balance, December 31, 2005                                      10,167,700   $   10,168   $  698,682    $ (227,755)   $  481,095
=============================================================   ==========   ==========   ==========    ==========    ==========
</TABLE>

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

                                       35
<PAGE>



                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                October 19,     October 19,
                                                                                                   2004            2004
                                                                               Year ended     (inception) to  (inception) to
                                                                              December 31,      December 31,    December 31,
                                                                                  2005             2004            2005
-------------------------------------------------------------------------- ------------------- ------------- ---------------
<S>                                                                                <C>              <C>             <C>

CASH FLOWS USED IN OPERATING ACTIVITIES
  Net loss for the period                                                        $   (204,026)   $  (23,729)   $    (227,755)
  Adjustment to reconcile net loss
   to net cash from operating activities:
     - Due from related party                                                         (200,000)            -        (200,000)
     - Due to related parties
                                                                                        10,000             -          10,000
    - accounts payable and accrued liabilities                                          (4,363)       20,378          16,015
------------------------------------------------------------------------- -------------------- ------------- ---------------

NET CASH USED IN OPERATING ACTIVITIES                                                (398,389)        (3,351)       (401,740)
------------------------------------------------------------------------- -------------------- ------------- ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of oil and gas properties                                                      -     (300,000)        (300,000)
------------------------------------------------------------------------- -------------------- ------------ -----------------

NET CASH FLOWS USED IN INVESTING ACTIVITIES                                                  -      (300,000)       (300,000)
------------------------------------------------------------------------- -------------------- ------------- ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds on sale of common stock                                                    35,000       673,850         708,850
------------------------------------------------------------------------- -------------------- ------------- ---------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                               35,000       673,850         708,850
------------------------------------------------------------------------- -------------------- ------------- ---------------

INCREASE (DECREASE)  IN CASH                                                         (363,389)       370,499           7,110

CASH, BEGINNING OF PERIOD                                                              370,499             -               -
------------------------------------------------------------------------- -------------------- ------------- ---------------

CASH, END OF PERIOD                                                                 $    7,110    $  370,499     $     7,110
========================================================================= ==================== ============= ===============


SUPPLEMENTAL CASH FLOW INFORMATION:
     Cash paid for interest                                                         $        -     $       -    $          -
     Cash paid for income taxes                                                     $        -     $       -    $          -
     Common stock issued for acquisition of oil and gas (Note 3)                    $        -     $ 600,000    $    600,000

   The accompanying notes are an integral part of these financial statements.
</TABLE>


                                       36
<PAGE>


NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
________________________________________________________________________________

Morgan Creek Energy Corp. (the  "Company") is an exploration  stage company that
was  organized to enter into the oil and gas  industry.  The Company  intends to
locate, explore, acquire and develop oil and gas properties in the United States
and within North America.

During fiscal 2004,  the Company  completed the  acquisition of prospects in the
Arkoma  Basin in the State of Oklahoma,  including a 75% working  interest and a
56.25% net revenue  interest in  approximately  560 gross acres of two petroleum
and natural gas leases (the "Hurley Lease" and the "Chapman Lease"). The Company
plans to enter certain well bores on the subject  leases to test certain  target
zones for contain  coal bed methane  gas.  If testing  provides  evidence of gas
quality and sufficient production quantities, the Company plans to raise capital
to undertake a drilling  program to establish  up to six wells,  and  production
infrastructure and pipeline. If drilling results are not according to geological
analysis,  the  Company  will  seek  to  acquire  other  prospective  lands  for
exploration.

Going concern
The Company  commenced  operations  on October 19, 2004 and has not realized any
revenues since inception.  The Company has a deficit accumulated to December 31,
2005 in the amount of  $227,755.  The  ability of the  Company to  continue as a
going  concern is  dependent on raising  capital to fund its  business  plan and
ultimately to attain  profitable  operations.  Accordingly,  these factors raise
substantial  doubt as to the Company's  ability to continue as a going  concern.
The Company is funding its initial  operations  by way of private  placements of
common stock and advances from related parties.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________

Organization
The Company  was  incorporated  on October 19, 2004 in the State of Nevada.  The
Company's fiscal year end is December 31. The Company's financial statements are
presented in US dollars.

Basis of presentation
These financial  statements are presented in United States dollars and have been
prepared  in  accordance  with  United  States  generally  accepted   accounting
principles.

Oil and gas properties
The  Company  follows  the full cost  method of  accounting  for its oil and gas
operations  whereby all costs related to the acquisition of methane,  petroleum,
and natural gas interests are capitalized. Under this method, all productive and
non-productive  costs  incurred  in  connection  with  the  exploration  for and
development of oil and gas reserves are capitalized. Such costs include land and
lease acquisition  costs,  annual carrying charges of non-producing  properties,
geological and geophysical costs, costs of drilling and equipping productive and
non-productive  wells,  and direct  exploration  salaries and related  benefits.
Proceeds from the disposal of oil and gas properties are recorded as a reduction
of the related  capitalized  costs without  recognition of a gain or loss unless
the  disposal  would  result in a change of 20 percent or more in the  depletion
rate. The Company currently operates solely in the U.S.A.

Depreciation  and depletion of proved oil and gas  properties is computed on the
units-of-production   method  based  upon  estimates  of  proved  reserves,   as
determined by  independent  consultants,  with oil and gas being  converted to a
common unit of measure based on their relative energy content.

                                       37
<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
________________________________________________________________________________

Oil and Gas Properties (continued)
The costs of acquisition  and  exploration  of unproved oil and gas  properties,
including  any  related  capitalized   interest  expense,  are  not  subject  to
depletion,  but  are  assessed  for  impairment  either  individually  or  on an
aggregated  basis. The costs of certain  unevaluated  leasehold acreage are also
not  subject to  depletion.  Costs not  subject to  depletion  are  periodically
assessed for possible impairment or reductions in value. If a reduction in value
has  occurred,  costs  subject to  depletion  are  increased or a charge is made
against  earnings  for  those  operations  where  a  reserve  base  is  not  yet
established.

Estimated future removal and site  restoration  costs are provided over the life
of  proven  reserves  on  a  units-of-production  basis.  Costs,  which  include
production equipment removal and environmental  remediation,  are estimated each
period by management based on current regulations, actual expenses incurred, and
technology and industry  standards.  The charge is included in the provision for
depletion and depreciation and the actual  restoration  expenditures are charged
to the accumulated provision amounts as incurred.

The Company applies a ceiling test to capitalized  costs which limits such costs
to the aggregate of the estimated  present value,  using a ten percent  discount
rate of the estimated  future net revenues from production of proven reserves at
year end at market  prices less future  production,  administrative,  financing,
site  restoration,  and  income  tax costs  plus the lower of cost or  estimated
market value of unproved  properties.  If  capitalized  costs are  determined to
exceed estimated future net revenues,  a write-down of carrying value is charged
to depletion in the period.

Asset retirement obligations

The Company has adopted the  provisions of SFAS No. 143,  "Accounting  for Asset
Retirement Obligations." SFAS No. 143 requires the fair value of a liability for
an asset  retirement  obligation  to be  recognized in the period in which it is
incurred  if a  reasonable  estimate of fair value can be made.  The  associated
asset  retirement  costs are  capitalized as part of the carrying  amount of the
related  oil  and  gas  properties.  As of  December  31,  2005  management  has
determined that there are no material asset retirement obligations.

Use of estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the period.  Actual results
could differ from those estimates.

Financial instruments
The fair  value of the  Company's  financial  assets and  financial  liabilities
approximate their carrying values due to the immediate or short-term maturity of
these financial instruments.

Loss per common share
Basic earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period.  Dilutive  earnings per share reflects the potential
dilution of securities that could share in the earnings of the Company.  Because
the Company does not have any  potentially  dilutive  securities,  fully diluted
loss per share is equal to basic loss per share.

                                       38
<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
________________________________________________________________________________

Income taxes
The Company follows the liability  method of accounting for income taxes.  Under
this method,  deferred tax assets and  liabilities are recognized for the future
tax  consequences  attributable to differences  between the financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
balances.  Deferred tax assets and  liabilities  are measured  using  enacted or
substantially  enacted tax rates  expected to apply to the taxable income in the
years in which those  differences  are expected to be recovered or settled.  The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized  in income in the  period  that  includes  the date of  enactment  or
substantive  enactment.  As at December  31, 2005 the Company had net  operating
loss carryforwards,  however, due to the uncertainty of realization, the Company
has provided a full  valuation  allowance for the deferred tax assets  resulting
from these loss carryforwards.

Stock-based compensation

SFAS No.  123,  "Accounting  for  Stock-Based  Compensation",  as  issued by the
Financial  Accounting  Standards  Board  ("FASB"),  as amended by SFAS No.  148,
"Accounting   for  Stock-Based   Compensation  -  transition  and   disclosure",
encourages the use of the fair value based method of accounting for  stock-based
employee  compensation.  SFAS No. 123 allows  entities  to continue to apply the
intrinsic  value method  prescribed by Accounting  Principles  Board Opinion 25,
"Accounting   for  Stock   Issued  to   Employees"   ("APB   25")  and   related
interpretations  and  provide  pro forma  disclosures  of net income  (loss) and
earnings (loss) per share. Under APB 25,  compensation cost is measured based on
the  excess,  if any,  of the quoted  market  price or fair value of a company's
stock at the grant date (or a later date  where the  option has  variable  terms
that depend on events after the date of grant) over the amount an employee  must
pay to acquire the stock.  Compensation  expense is recognized  immediately  for
past services and pro-rata for future services over the  option-vesting  period.
SFAS 123 allows but does not require that  compensation  cost resulting from the
granting  of stock  options be measured  and  reported  currently  in the income
statement and allocated over the remaining life of the option.

The Company  has elected to follow APB 25 and provide the pro forma  disclosures
required under SFAS 123 with respect to stock options granted to employees.  The
Company   will   provide   pro-forma   information   and  expense   information,
respectively,  as required  by SFAS No. 123 showing the results of applying  the
fair value method using the Black-Scholes option pricing model.

The Company accounts for equity  instruments  issued in exchange for the receipt
of goods or services from other than  employees in accordance  with SFAS No. 123
and the  conclusions  reached  by the  Emerging  Issues  Task Force in Issue No.
96-18.   Costs  are  measured  at  the  estimated   fair  market  value  of  the
consideration  received or the  estimated  fair value of the equity  instruments
issued,  whichever is more reliably measurable.  The value of equity instruments
issued for  consideration  other than  employee  services is  determined  on the
earliest  of a  performance  commitment  or  completion  of  performance  by the
provider of goods or services as defined by EITF 96-18.

The Company has also adopted the  provisions of the FASB  Interpretation  No.44,
Accounting  for  Certain   Transactions   Involving  Stock   Compensation  -  An
Interpretation  of APB Opinion No. 25 ("FIN 44"), which provides  guidance as to
certain  applications of APB 25. FIN 44 is generally effective July 1, 2000 with
the exception of certain events occurring after December 15, 1998.

                                       39
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
________________________________________________________________________________

Stock-based compensation (continued)

To December  31, 2005 the Company has not granted any stock  options and has not
recorded any stock-based compensation.

RECENT ACCOUNTING PRONOUNCEMENTS

In December  2004,  the FASB issued SFAS No.  153,  "Exchanges  of  Non-monetary
Assets - An  Amendment  of APB Opinion No. 29".  The guidance in APB Opinion No.
29, "Accounting for Non-monetary  Transactions",  is based on the principle that
exchanges of  non-monetary  assets should be measured based on the fair value of
the assets exchanged.  The guidance in that Opinion,  however,  included certain
exceptions to that  principle.  SFAS No. 153 amends  Opinion No. 29 to eliminate
the  exception  for  non-monetary  exchanges  of similar  productive  assets and
replaces it with a general  exception for exchanges of non-monetary  assets that
do not  have  commercial  substance.  A  non-monetary  exchange  has  commercial
substance  if the  future  cash  flows of the  entity  are  expected  to  change
significantly  as a result of the exchange.  The  provisions of SFAS No. 153 are
effective for non-monetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. Early application is permitted and companies must apply the
standard prospectively.  The adoption of this standard is not expected to have a
material effect on the Company's results of operations or financial position.

In December 2004,  the FASB issued SFAS No. 123R,  "Share Based  Payment".  SFAS
123R is a revision of SFAS No. 123 "Accounting  for  Stock-Based  Compensation",
and  supersedes APB Opinion No. 25,  "Accounting  for Stock Issued to Employees"
and its related implementation guidance. SFAS 123R establishes standards for the
accounting for transactions in which an entity exchanges its equity  instruments
for goods or services. It also addresses  transactions in which an entity incurs
liabilities  in exchange for goods or services  that are based on the fair value
of the  entity's  equity  instruments  or that may be settled by the issuance of
those  equity  instruments.  SFAS  123R  focuses  primarily  on  accounting  for
transactions in which an entity obtains employee services in share-based payment
transactions.  SFAS 123R does not change the accounting guidance for share-based
payment  transactions with parties other than employees  provided in SFAS 123 as
originally issued and EITF Issue No. 96-18,  "Accounting for Equity  Instruments
That Are Issued to Other Than  Employees for Acquiring,  or in Conjunction  with
Selling,  Goods or  Services".  SFAS 123R does not  address the  accounting  for
employee share ownership plans, which are subject to AICPA Statement of Position
93-6,  "Employers'  Accounting for Employee Stock  Ownership  Plans".  SFAS 123R
requires a public  entity to measure the cost of employee  services  received in
exchange for an award of equity  instruments  based on the grant-date fair value
of the award (with limited  exceptions).  That cost will be recognized  over the
period  during which an employee is required to provide  service in exchange for
the award - the requisite service period (usually the vesting period). SFAS 123R
requires that the compensation cost relating to share-based payment transactions
be recognized in financial  statements.  That cost will be measured based on the
fair value of the equity or liability instruments issued. The scope of SFAS 123R
includes a wide range of share-based  compensation  arrangements including share
options,  restricted share plans,  performance-based  awards, share appreciation
rights, and employee share purchase plans.

Public  entities  (other than those filing as small  business  issuers)  will be
required to apply SFAS 123R as of the first interim or annual  reporting  period
that begins after June 15, 2005.  Public  entities  that file as small  business
issuers  will be  required  to apply  SFAS 123R in the first  interim  or annual
reporting  period that begins after  December 15, 2005.  Management is currently


                                       40
<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
________________________________________________________________________________

RECENT ACCOUNTING PRONOUNCEMENTS (continued)

evaluating  the impact,  which the  adoption of this  standard  will have on the
Company's results of operations and financial position.

The  interpretations in staff accounting  bulletin ("SAB") No. 107 express views
of the staff regarding the interaction between Statement of Financial Accounting
Standards  Statement No. 123 (revised  2004),  Share-Based  Payment  ("Statement
123R" or the "Statement") and certain Securities and Exchange Commission ("SEC")
rules and  regulations  and provide the staff's views regarding the valuation of
share-based payment arrangements for public companies.  In particular,  this SAB
provides   guidance   related   to   share-based   payment   transactions   with
non-employees,  the transition from nonpublic to public entity status, valuation
methods (including  assumptions such as expected  volatility and expected term),
the  accounting  for  certain  redeemable  financial  instruments  issued  under
share-based payment  arrangements,  the classification of compensation  expense,
non-GAAP financial measures, first-time adoption of Statement 123R in an interim
period,  capitalization  of  compensation  cost related to  share-based  payment
arrangements,  the  accounting  for income tax  effects of  share-based  payment
arrangements upon adoption of Statement 123R, the modification of employee share
options  prior to adoption of Statement  123R and  disclosures  in  Management's
Discussion  and Analysis  ("MD&A")  subsequent  to adoption of  Statement  123R.
Management is currently evaluating the impact that the adoption of this standard
will have on the Company's results of operations or financial position.

In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections.
This Statement replaces APB Opinion No. 20, Accounting Changes,  and SFAS No. 3,
Reporting  Accounting Changes in Interim Financial  Statements,  and changes the
requirements  for the  accounting  for and  reporting of a change in  accounting
principle.  This  Statement  applies  to all  voluntary  changes  in  accounting
principle.  The  Company  believes  this  Statement  will  have no impact on the
financial statements of the Company.

In March 2005,  the FASB  issued FASB  Interpretation  No. 47,  "Accounting  for
Conditional  Asset Retirement  Obligations,  an interpretation of FASB Statement
No. 143" (FIN 47). Asset  retirement  obligations  (AROs) are legal  obligations
associated  with the  retirement  of  long-lived  assets  that  result  from the
acquisition,  construction,  development and/or normal operation of a long-lived
asset,  except  for  certain  obligations  of  lessees.  FIN 47  clarifies  that
liabilities  associated  with  asset  retirement  obligations  whose  timing  or
settlement  method are  conditional  on future events should be recorded at fair
value  as soon as fair  value  is  reasonably  estimable.  FIN 47 also  provides
guidance on the  information  required to reasonably  estimate the fair value of
the liability.  FIN 47 is intended to result in more  consistent  recognition of
liabilities  relating to AROs among companies,  more information  about expected
future  cash  outflows  associated  with  those  obligations  stemming  from the
retirement of the asset(s) and more information  about investments in long-lived
assets  because   additional  asset  retirement  costs  will  be  recognized  by
increasing the carrying amounts of the assets  identified to be retired.  FIN 47
is effective  for fiscal years ending  after  December 15, 2005.  Management  is
currently  evaluating the impact,  which the adoption of this standard will have
on the Company's financial statements.

In November 2005,  FASB issued Staff  Position  ("FSP") FAS 115-1 and FAS 124-1,
"The Meaning of  Other-Than-Temporary  Impairment and Its Application to Certain
Investments"  ("FSP FAS 115-1"),  which provides  guidance on  determining  when
investments  in certain  debt and equity  securities  are  considered  impaired,


                                       41
<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
________________________________________________________________________________

RECENT ACCOUNTING PRONOUNCEMENTS (continued)

whether  that  impairment  is   other-than-temporary,   and  on  measuring  such
impairment  loss.  FSP  FAS  115-1  also  includes   accounting   considerations
subsequent to the recognition of an other-than temporary impairment and requires
certain  disclosures  about  unrealized  losses that have not been recognized as
other-than-temporary  impairments.  FSP FAS 115-1 is  required  to be applied to
reporting  periods beginning after December 15, 2005. The Company is required to
adopt FSP FAS 115-1 in the second  quarter of fiscal 2006.  Management  does not
expect  the  adoption  of this  statement  will  have a  material  impact on the
Company's results of operations or financial condition.  Management is currently
evaluating  the impact,  which the  adoption of this  standard  will have on the
Company's financial statements.

NOTE 3 - OIL AND GAS PROPERTIES
________________________________________________________________________________

Hurley-Chapman Prospect
By  agreement  dated  December  17,  2004,  the  Company  acquired a 75% working
interest,  56.25% net revenue  interest  from its founding  shareholder,  in two
sections (560 acres)  production held acreage in Okfuskee County,  Oklahoma (the
"Hurley-Chapman  Prospect")  with the  intention to develop coal bed methane gas
producing  wells.  The lease is unproved  and was acquired for a cash payment of
$300,000 and for the issuance of 6,000,000 shares at valued at $600,000.  (Refer
to Note 5).

For accounting  purposes the Company has recorded the acquisition of the oil and
gas interests at the related party vendor's cost of $300,000 and the issuance of
the  6,000,000  shares  valued  at  $600,000  has  been  recorded  as a  capital
distribution .


NOTE 4 - STOCKHOLDERS' EQUITY
________________________________________________________________________________

The Company's  capitalization  is 100,000,000  common shares with a par value of
$0.001 per share.

To December  31, 2005 the Company has not granted any stock  options and has not
recorded any stock-based compensation.

Private Placements
On November  26, 2004 the Company  issued  1,550,000  shares of common  stock at
$0.10 per share for proceeds of $155,000.

On December  15, 2004 the Company  issued  1,887,500  shares of common  stock at
$0.10 per share for proceeds of $188,750  and 660,200  shares of common stock at
$0.50 per share for proceeds of $330,100.

On March 9, 2005 the Company  issued 70,000 shares of common stock at a price of
$0.50 per share for proceeds of $35,000.

                                       42
<PAGE>

NOTE 5 - RELATED PARTY TRANSACTIONS
________________________________________________________________________________

During the year ended December 31, 2005 the Company incurred consulting expenses
of $80,000  (2004-$nil) and a further $50,000 (2004-$nil) to develop a corporate
identity,  including logo, trade name, web site and other identity related items
with  International  Market  Trend,  Inc.  ("IMT").  As of December 31, 2005 the
Company  owed IMT $5,000  (2004-$nil)  in  consulting  expenses.  An officer and
director  of IMT,  a private  company,  is also an  officer  and  director  of a
corporate  shareholder  of  the  Company  and  has a  family  member  that  is a
shareholder  of the Company.  An additional  $5,000 is payable to an officer and
director for outstanding management fees (2004-$nil).

During the year ended December 31, 2005 the Company paid $200,000 (2004-$nil) to
American News Publishing Inc.("ANP") for Investor relations services. An officer
and  director of ANP, a private  company,  is also an officer and  director of a
corporate shareholder of the Company. The services were cancelled and ANP agreed
to return the $200,000 to the Company. At December 31, 2005 the $200,000 had not
been repaid and was recorded as a receivable. On January 20, 2006 the funds were
repaid to the Company in full.

During the period ending December 31, 2004 the Company  purchased an oil and gas
property interest from the founding shareholder. (Refer to Note 3).

NOTE 6 - INCOME TAXES
________________________________________________________________________________

The Company has adopted the FASB No. 109 for reporting purposes.  As of December
31, 2005,  the Company had net operating  loss carry  forwards of  approximately
$228,000 that may be available to reduce future years'  taxable  income  through
2025.  Future tax benefits  which may arise as a result of these losses have not
been  recognized  in  these  financial  statements,   as  their  realization  is
determined  not likely to occur and  accordingly,  the  Company  has  recorded a
valuation  allowance  for the  deferred  tax  asset  relating  to these tax loss
carryforwards.











                                       43
<PAGE>
________________________________________________________________________________

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     Our principal independent accountant from inception to current date is Dale
Matheson  Carr-Hilton  Labonte,  Chartered  Accountants,  1500-1140  West Pender
Street, Vancouver, British Columbia V6E 4G1.

ITEM 8A. CONTROLS AND PROCEDURES

FINANCIAL DISCLOSURE CONTROLS AND PROCEDURES

     An  evaluation   was  conducted   under  the   supervision   and  with  the
participation  of  our  management,   including  Douglas  Humphreys,  our  Chief
Executive Officer ("CEO") and Grant Atkins, our Chief Financial Officer ("CFO"),
of the effectiveness of the design and operation of our disclosure  controls and
procedures as of December 31, 2005. Based on that evaluation,  Messrs. Humphreys
and Atkins concluded that our disclosure  controls and procedures were effective
as of such date to ensure  that  information  required  to be  disclosed  in the
reports that we file or submit under the Exchange  Act, is recorded,  processed,
summarized  and  reported  within the time  periods  specified  in SEC rules and
forms.  Such  officers  also  confirm  that there was no change in our  internal
control over  financial  reporting  during the year ended December 31, 2005 that
has  materially  affected,  or is reasonably  likely to materially  affect,  our
internal control over financial reporting.

Audit Committee Report

     Our Board of Directors has established an audit  committee.  The members of
the audit  committee  are Mr.  Steven  Jewett,  Mr.  Bruce  Horton and Mr. Grant
Atkins. Two of the three members of the audit committee are "independent" within
the meaning of Rule 10A-3 under the Exchange Act and are financial experts.  The
audit  committee was organized on November 20, 2004 and operates under a written
charter adopted by the Board of Directors.

     The audit  committee has reviewed and discussed with management our audited
financial  statements  as of and for fiscal year ended  December 31,  2005.  The
audit  committee has also discussed with Dale Matheson  Carr-Hilton  LaBonte the
matters  required to be discussed by  Statement  on Auditing  Standards  No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public  Accountants.  The audit committee
has  received  and  reviewed  the written  disclosures  and the letter from Dale
Matheson  Carr-Hilton LaBonte required by Independence  Standards Board Standard
No. 1,  Independence  Discussions  with Audit  Committees,  as amended,  and has
discussed with Dale Matheson Carr-Hilton LaBonte their independence.

     Based on the reviews and discussions referred to above, the audit committee
has recommended to the Board of Directors that the audited financial  statements
referred  to above be  included  in our Annual  Report on Form 10-KSB for fiscal
year ended December 31, 2005 filed with the Securities and Exchange Commission.

ITEM 8B. OTHER INFORMATION

     Not applicable.


                                       44
<PAGE>

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

     All of our directors hold office until the next annual  general  meeting of
the  shareholders  or until their  successors  are elected  and  qualified.  Our
officers are  appointed  by our board of  directors  and hold office until their
earlier death, retirement, resignation or removal.

     Our directors and executive  officers,  their ages,  positions  held are as
follows:



      NAME               AGE  POSITION WITH THE COMPANY
      ------------------ ---  ------------------------
      Douglas Humphreys   53  President/Chief Executive Officer and Director

      Grant Atkins        45  Treasurer/Chief Financial Officer/Secretary and
                              Director


      Steve Jewett        67  Director

      D. Bruce Horton     61  Director


Business Experience

     The following is a brief  account of the education and business  experience
of each director,  executive  officer and key employee  during at least the past
five years, indicating each person's principal occupation during the period, and
the name  and  principal  business  of the  organization  by which he or she was
employed.

     Douglas  Humphreys has been our Chief  Executive  Officer,  President and a
Director  since October 2004.  Mr.  Humphreys is also a manager and president of
Oak Hills Drilling and Operating,  LLC,  (since  February  2005), an oil and gas
drilling and operating  company based in Holdenville,  Oklahoma that acts as our
"operator".   Most  oil  and  gas  related  development   initiatives  including
geological, engineering, drilling, well completion, well service, and production
related  activities  will be  contracted  to our operator who has the  necessary
operating experience, personnel, equipment,  infrastructure,  and administration
required to develop oil and gas exploration and production initiatives on a cost
effective  basis without us having to develop  these  resources in house for our
current scale of enterprise.  Mr.  Humphreys was one of four founding  owners of
the parent company,  Oakhills Drilling and Operating  International,  Inc., that
owns 100% of Oak  Hills  Drilling  and  Operating,  LLC.  Mr.  Humphreys  is the
drilling and operations  manager of Lexington Oil & Gas Ltd. Co., and a director
and audit committee  member of its parent  company,  Lexington  Resources,  Inc.
since November 2003. Lexington  Resources,  Inc., and its subsidiary are engaged
in the  acquisition  and  development  of oil and natural gas  properties in the
United States with an operational  focus on gas  development  initiatives in the
Arkoma  Basin of  Oklahoma  and in the  Dallas  Fort Worth  Basin of Texas.  Mr.
Humphreys is currently also an oil and gas consultant to his private oil and gas
services firm,  Paluca  Petroleum,  Inc. since 1995.  Some of the services to be
provided by Mr.  Humphreys  to us in the future may be provided  through  Paluca
Petroleum,  Inc. Mr.  Humphreys is an officer,  director and sole shareholder of
Paluca Petroleum, Inc. He is also currently a director of a private company, GHB


                                       45
<PAGE>

Business Experience - Douglas  Humphreys - comtinued

Farms,  Inc., a private livestock  company (since 1994). Mr. Humphreys  received
his Bachelor of Science degree in Business and Geology from  Southwest  Oklahoma
State University.  Mr. Humphreys has been active in the oil and gas industry for
over 30 years,  mostly in his home state of Oklahoma and in the  surrounding oil
and  gas  rich  regions  of the  mid  continent.  In  addition  to oil  and  gas
development  related private entities  previously  mentioned,  Mr. Humphreys was
previously mid continent  operations officer with the public company,  Tide West
Oil Company (February, 1986 to 1996) that was sold to HS Resources in 1996.

     Grant  Atkins has been our Chief  Financial  Officer  and a Director  since
October 2004. He also acts as a  non-independent  member of our Audit  Committee
and acts as  Secretary/Treasurer.  Mr. Atkins is also currently president (since
Dec/2001) and a director (since 1998) of Lexington  Resources,  Inc., an oil and
gas exploration and development company.  Lexington Resources,  Inc. changed its
business  direction in December 2003 to oil and gas  exploration and production;
the same company was formerly named  "Intergold  Corporation" and was engaged in
precious metals  exploration in the domestic United States. For the past fifteen
years,  Mr.  Atkins  has been  self-employed  and has acted as a  financial  and
project  coordination  consultant to clients in government,  public, and private
industry. He has extensive  multi-industry  experience in the fields of finance,
administration  and  business  development.  His  previous  industry  experience
includes gold, silver,  and zinc mining and exploration in China  (Vega-Atlantic
Corporation), US domestic gold and silver exploration,  (Intergold Corporation),
biotech  cancer  immunotherapy  (GeneMax  Corp.),  oil and gas  exploration  and
development  (Lexington  Resources,  Inc.,  and Petrogen  Corp.,  formerly Hadro
Resource,  Inc., and a $200 million (CDN funds) radio and  tri-service  dispatch
initiative  and  deployment  of  Canadian  federal,   provincial  and  municipal
shareholders as interim chief financial officer of Emergency  Communications for
Southwest  British Columbia  ("E-Comm") (June 1997 to March 1998).

     Steve  Jewett  has been one of our  directors  and a  member  of our  Audit
Committee  since  October,  2004.  From 1978 to the current date, Mr. Jewett has
been  the  owner  and  independent   operator  of  Stephen  Jewett  -  Chartered
Accountant.  During  his  career,  Mr.  Jewett was  auditor  of  several  public
companies, and currently focuses on tax related engagements. Mr. Jewett received
his degree as a Chartered Accountant from the Institute of Chartered Accountants
of British Columbia and is our Audit Committee's financial expert. Mr. Jewett is
also  currently a director and audit  committee  member of Lexington  Resources,
Inc.  since April 30, 2004.  Mr.  Jewett is also a director and audit  committee
member to Uranium Energy Corp. since January 2005.

                                       46
<PAGE>

Business Experience - continued

     D.  Bruce  Horton has been one of our  directors  and a member of our Audit
Committee since October,  2004.  During the past five years, Mr. Horton has been
active in the  financial  arena in both the  private  and  public  sectors as an
accountant  and financial  management  consultant  with an emphasis on corporate
financial reporting,  financing and tax planning.  Mr. Horton has specialized in
corporate management, re-organization, merger and acquisition, international tax
structuring,  and public and private  financing for over thirty years. From 1972
through 1986, Mr. Horton was a partner in a public accounting firm. In 1986, Mr.
Horton co-founded the Clearly Canadian Beverage  Corporation,  of which he was a
director  and chief  financial  officer  from  June  1986 to May  1997.  He is a
principal consultant in Calneva Financial Services Ltd. that provides accounting
and  financial  management  consulting  services as well as  investment  banking
services  focusing on venture  capital  opportunities  in Asia.  Mr. Horton is a
director and audit committee member to Uranium Energy Corp. (since March 2005).

     Grant Atkins, Douglas Humphreys,  and the Geneva Energy Group may be deemed
to be our organizers  based upon their activities in founding and organizing our
business.

FAMILY RELATIONSHIPS

     There are no family relationships among our directors or officers.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

     During the past five years,  none of our directors,  executive  officers or
persons  that may be  deemed  promoters  is or have been  involved  in any legal
proceeding  concerning:  (i) any  bankruptcy  petition  filed by or against  any
business of which such person was a general partner or executive  officer either
at the time of the  bankruptcy or within two years prior to that time;  (ii) any
conviction  in a criminal  proceeding  or being  subject  to a pending  criminal
proceeding (excluding traffic violations and other minor offenses);  (iii) being
subject to any order, judgment or decree, not subsequently  reversed,  suspended
or vacated,  of any court of competent  jurisdiction  permanently or temporarily
enjoining,  barring, suspending or otherwise limiting involvement in any type of
business,  securities or banking  activity;  or (iv) being found by a court, the
Securities and Exchange  Commission or the Commodity Futures Trading  Commission
to have  violated  a federal or state  securities  or  commodities  law (and the
judgment has not been reversed, suspended or vacated).

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee

     As of the date of this Annual  Report,  Messrs.  Jewett,  Horton and Atkins
have been appointed as members to our audit committee.  Two of the three members
are  "independent"  within the meaning of Rule 10A-3 under the  Exchange Act and
are in addition financial experts.  The audit committee operates under a written
charter adopted by the Board of Directors on November 20, 2004.

     The audit committee's primary function is to provide advice with respect to
our  financial  matters and to assist the Board of Directors in  fulfilling  its
oversight responsibilities regarding finance,  accounting, and legal compliance.
The audit committee's primary duties and responsibilities  will be to: (i) serve
as an independent and objective party to monitor our financial reporting process
and internal  control system;  (ii) review and appraise the audit efforts of our
independent  accountants;  (iii) evaluate our quarterly financial performance as
well as our  compliance  with laws and  regulations;  (iv) oversee  management's


                                       47
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS - continued

establishment and enforcement of financial policies and business practices;  and
(v) provide an open avenue of communication  among the independent  accountants,
management and the Board of Directors.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Section 16(a) of the Exchange Act requires our directors and officers,  and
the persons who  beneficially  own more than ten percent of our common stock, to
file  reports of  ownership  and changes in ownership  with the  Securities  and
Exchange Commission. Copies of all filed reports are required to be furnished to
us pursuant to Rule 16a-3  promulgated  under the Exchange Act.  Based solely on
the reports received by us and on the  representations of the reporting persons,
we  believe  that  these  persons  have  complied  with  all  applicable  filing
requirements during the fiscal year ended December 31, 2005.

ITEM 10. EXECUTIVE COMPENSATION

     During the last fiscal year ended December 31, 2005,  none of our directors
were compensated for their roles as directors. Our officers and directors may be
reimbursed for any out-of-pocket  expenses incurred by them on our behalf. Grant
Atkins  received an aggregate of $15,000 for work conducted as an officer of the
Company  during 2005. As of the date of this Annual  Report,  we do not have any
pension,  health, annuity,  insurance,  profit sharing or similar benefit plans.
Executive compensation is subject to change concurrent with our requirements.

SUMMARY COMPENSATION TABLE

     None of our  executive  officers  received an annual  salary and bonus that
exceeded  $100,000  during  fiscal years ended  December 31, 2005 and 2004.  The
following  table  sets  forth the  compensation  received  by our  officers  and
directors  fiscal  years  ended  December  31,  2005 and  2004.  Generally,  our
Directors do not receive salaries or fees for serving as directors,  nor do they
receive any  compensation  for  attending  meetings  of the Board of  Directors.
Directors  are  entitled  to  reimbursement  of expenses  incurred in  attending
meetings.



                                       ANNUAL COMPENSATION      LONG TERM
                                                               COMPENSATION

NAME AND                  FISCAL        SALARY        OTHER     SECURITIES
PRINCIPAL POSITION          YEAR                                UNDERLYING
                                                                 OPTIONS

Douglas Humphreys           2005        $               -0-         -0-
President and  Chief        2004        $  -0-          -0-         -0-
Executive Officer

Grant Atkins                2005        $  -0-     -15,000-         -0-
Chief Financial             2004        $  -0-          -0-         -0-
Officer




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<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of the date of this  Annual  Report,  the  following  table  sets  forth
certain information with respect to the beneficial ownership of our common stock
by each  stockholder  known by us to be the beneficial  owner of more than 5% of
our common stock and by each of our current  directors and  executive  officers.
Each person has sole voting and  investment  power with respect to the shares of
common stock, except as otherwise indicated.  Beneficial ownership consists of a
direct interest in the shares of common stock, except as otherwise indicated. As
of the date of this Annual Report,  there are 10,167,700  shares of common stock
issued and outstanding.

------------------------------- ---------------------- -----------------------
Name and Address of              Amount and Nature of   Percent of Beneficial
Beneficial Owner                 Beneficial Ownership          Ownership
------------------------------- ---------------------- -----------------------
Douglas Humphreys                         -0-                   0%
7545 Highway 270
Holdenville, Oklahoma 74848
------------------------------- ---------------------- -----------------------
Grant Atkins                              -0-                   0%
10120 S. Eastern Avenue
Henderson, Nevada 89052
------------------------------- ---------------------- -----------------------
D. Bruce Horton                        100,000                1.0%
2443 Alder Street
Vancouver, British Columbia
Canada V6H 4A4
------------------------------- ---------------------- -----------------------
Steve Jewett                             -0-                    0%
1201 - 1633 W. 8th Avenue
Vancouver, British Columbia
Canada V6J 5H7
------------------------------- ---------------------- -----------------------
Newport Capital Corp.                  625,000 (2)            6.14%
Rennweg 28, CH - 8001
Zurich, Switzerland
------------------------------- ---------------------- -----------------------
Geneva Energy Corp.                  6,000,000 (1)(3)        59.01%
2020 Prospect Way
Bellingham, Washington 98229

------------------------------- ---------------------- -----------------------
All Officers and Directors             100,000                 1.0%
(4 total)
------------------------------- ---------------------- -----------------------
     (1) These shares are restricted stock.

     (2) This figure  consists  of: (i) 500,000  shares of common stock of which
Newport  Capital Corp. is the record  owner;  and (ii) 125,000  shares of common
stock of which the wife of Brent  Pierce is the record  owner.  Newport  Capital
Corp. is a  corporation  organized  under the laws of Belize.  Brent Pierce is a
director and officer of Newport  Capital  Corp.  and has voting and  dispositive
power over the 500,000 shares of common stock held of record by Newport  Capital
Corp.

     (3)  Geneva  Energy  Corp.  is a  corporation  organized  under the laws of
Nevada.  The sole director and officer of Geneva Energy Corp. is Marcus Johnson,
who has sole voting and  dispositive  power over the 6,000,000  shares of common
stock held of record by Geneva Energy Corp.

                                       49
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         - continued

CHANGES IN CONTROL

     We are unaware of any contract or other  arrangement the operation of which
may at a subsequent date result in a change in our control.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On November 19, 2004, we issued 6,000,000  shares of our restricted  common
stock to Geneva in consideration  for the Leases based upon a per share price of
$0.10 per share.

ITEM 13. EXHIBITS

The following exhibits are filed as part of this Annual Report.

          3.1  Articles of Incorporation (1)

          3.2  Bylaws of Morgan Creek Energy Corp. (1)

          10.1 Asset Purchase Agreement (1)

          10.2 Chapman Leases (2)

          10.3 Hurley Leases (2)

          10.4 Lease Assignment (2)

          10.5 Charter of Audit Committee (1)

          10.6 Ethics Charter (1)

          10.7 American News Publishing Rescission Letter (3)

          5.1  Fletcher Lewis Consent (3)

          31.1 Certification  of  Chief  Executive   Officer  Pursuant  to  Rule
               13a-14(a) or 15d-14(a) of the Securities Exchange Act.

          31.2 Certification  of  Chief  Financial   Officer  Pursuant  to  Rule
               13a-14(a) or 15d-14(a) of the Securities Exchange Act.

          32.1 Certification  of Chief  Executive  Officer  and Chief  Financial
               Officer Under Section 1350 as Adopted  Pursuant to Section 906 of
               the Sarbanes-Oxley Act.

(1)  Incorporated by reference from Form SB-2 filed with the Commission on April
     11, 2005.

(2)  Incorporated  by reference  from Form SB-2/A filed with the  Commission  on
     June 14, 2005.

(3)  Incorporated  by referenced  from Form SB-2/A filed with the  Commission on
     January 13, 2006.

                                       50
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

     During  fiscal year ended  December  31,  2005,  we incurred  approximately
$15,100  in  fees  to our  principal  independent  accountant  for  professional
services  rendered in connection with the audit of our financial  statements for
fiscal  year  ended  December  31,  2005  and for the  review  of our  financial
statements  for the quarters  ended March 31, 2005,  June 30, 2005 and September
30, 2005.

     During  fiscal year ended  December  31,  2004,  we incurred  approximately
$6,700 in fees to our principal independent accountant for professional services
rendered in  connection  with the audit of our financial  statements  for fiscal
year ended December 31, 2004 and for the review of our financial  statements for
the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004.

     During fiscal year ended December 31, 2005, we did not incur any other fees
for professional services rendered by our principal  independent  accountant for
all  other  non-audit  services  which  may  include,  but  is not  limited  to,
tax-related services, actuarial services or valuation services.

SIGNATURES

     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                              MORGAN CREEK ENERGY CORP.


Dated: March 29, 2006                     By: /s/DOUGLAS HUMPHREYS
                                              ----------------------------------
                                              Douglas Humphreys, President/Chief
                                              Executive Officer



Dated: March 29, 2006                         By: /s/ GRANT ATKINS
                                              ----------------------------------
                                              Grant Atkins, Treasurer/Chief
                                              Financial Officer/Secretary

                                       51
<PAGE>