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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended February 29,
2008

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT

For the transition period from _________ to __________

Commission file number 000-50375

California Oil & Gas
Corporation(Exact name of small business issuer as specified
in its charter)

|Nevada                                                               | 98-0389524                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)

#260, 600  6th Avenue SW, Calgary, Alberta, T2P
0S5(Address of principal executive offices)

(403) 261-1965(Issuers telephone number)

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

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[X] No [ ]

State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date:

41,588,471 common shares issued and outstanding as of April
17, 2008.

Transitional Small Business Disclosure Format (Check one): Yes [
] No [X]

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

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-2 -

PART I

Item 1. Financial Statements

Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.

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- 3 -

California Oil & Gas Corporation

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|BALANCE SHEET                                                 |   |                   |   |   |                   |  
|------------------------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|                                                              |   |                   |   |   |                   |  
|                                                              |   |                   |   |   |                   |  
|                                                              |   | February 29, 2008 |   |   | November 30, 2007 |  
|                                                              |   | (unaudited)       |   |   |                   |  
|ASSETS                                                        |   |                   |   |   |                   |  
|Current assets                                                |   |                   |   |   |                   |  
|Cash                                                          | $ | 93,163            |   |   | 238,140           |  
|Trade receivable, net                                         |   | 21,125            |   |   | 83,367            |  
|Joint interest
      billings receivables                     |   | 6,857             |   |   | 1,134,581         |  
|Restricted cash - certificates
      of deposit               |   | 30,000            |   |   | 30,000            |  
|Deposits                                                      |   | 16,250            |   |   | 16,250            |  
|Total current assets                                          |   | 167,395           |   |   | 1,502,338         |  
|                                                              |   |                   |   |   |                   |  
|Long term assets                                              |   |                   |   |   |                   |  
|Oil and gas
      properties, net (successful efforts method) |   | 907,643           |   |   | 924,778           |  
|Property and equipment, net                                   |   | 2,013             |   |   | 2,119             |  
|                                                              |   | 909,656           |   |   | 926,897           |  
|                                                              |   |                   |   |   |                   |  
|                                                              |   |                   |   |   |                   |  
|Total Assets                                                  | $ | 1,077,051         |   | $ | 2,429,235         |  
|                                                              |   |                   |   |   |                   |  
|LIABILITIES AND SHAREHOLDERS' EQUITY                          |   |                   |   |   |                   |  
|Current liabilities                                           |   |                   |   |   |                   |  
|Accounts payable and accrued
      liabilities                | $ | 711,340           |   | $ | 1,964,200         |  
|Debentures,
      related parties                             |   | 175,000           |   |   | 175,000           |  
|Total current
      liabilities                               |   | 886,340           |   |   | 2,139,200         |  
|                                                              |   |                   |   |   |                   |  
|Total liabilities                                             |   | 886,340           |   |   | 2,139,200         |  
|                                                              |   |                   |   |   |                   |  
|Shareholders' equity                                          |   |                   |   |   |                   |  
|                                                              |   |                   |   |   |                   |  
|Common Stock
      - $.001 par value, 600,000,000 shares      |   |                   |   |   |                   |  
|authorized,
      40,888,471 issued and outstanding           |   | 40,889            |   |   | 40,889            |  
|Additional
      paid in capital                              |   | 3,950,380         |   |   | 3,741,018         |  
|Accumulated
      deficit                                     |   | (3,800,558        | ) |   | (3,491,872        | )
|Total shareholders' equity                                    |   | 190,711           |   |   | 290,035           |  
|                                                              |   |                   |   |   |                   |  
|Total Liabilities & Shareholders' Equity                      | $ | 1,077,051         |   | $ | 2,429,235         |  

The accompanying notes are an integral part of these
financial statements

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- 4 -

California Oil & Gas Corporation

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|STATEMENTS OF OPERATIONS            |   |                                               |   |   |            |  
|----------------------------------- | - | --------------------------------------------- | - | - | ---------- | -
|(unaudited)                         |   |                                               |   |   |            |  
|                                    |   |                                               |   |   |            |  
|                                    |   | For the three months ended
      February 29, |  
|                                    |   | 2008 and February 28, 2007                    |  
|                                    |   | 2008                                          |   |   | 2007       |  
|                                    |   |                                               |   |   |            |  
|REVENUES                            |   |                                               |   |   |            |  
|Gas sales, net of royalty           | $ | 41,043                                        |   | $ | -          |  
|                                    |   |                                               |   |   |            |  
|                                    |   |                                               |   |   |            |  
|EXPENSES                            |   |                                               |   |   |            |  
|Production costs                    |   | 13,500                                        |   |   | -          |  
|General & administrative            |   | 74,360                                        |   |   | 86,829     |  
|Depletion and depreciation          |   | 52,507                                        |   |   | 87         |  
|Stock based compensation            |   | 209,362                                       |   |   | 40,938     |  
|Total expenses                      |   | 349,729                                       |   |   | 127,854    |  
|Ope rating loss                     |   | (308,686                                      | ) |   | (127,854   | )
|Net loss                            | $ | (308,686                                      | ) | $ | (127,854   | )
|                                    |   |                                               |   |   |            |  
|Net loss per share                  |   |                                               |   |   |            |  
|Basic and diluted                   | $ | (0.01                                         | ) | $ | (0.00      | )
|                                    |   |                                               |   |   |            |  
|Weighted average shares outstanding |   |                                               |   |   |            |  
|Basic and diluted                   |   | 40,888,471                                    |   |   | 38,614,768 |  

The accompanying notes are an integral part of these
financial statements

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California Oil & Gas Corporation

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|STATEMENTS OF CASH FLOWS                              |   |                                               |   |   |            |  
|----------------------------------------------------- | - | --------------------------------------------- | - | - | ---------- | -
|(unaudited)                                           |   |                                               |   |   |            |  
|                                                      |   |                                               |   |   |            |  
|                                                      |   | For the three months ended
      February 29, |  
|                                                      |   | 2008 and February 28, 2007                    |  
|                                                      |   | 2008                                          |   |   | 2007       |  
|Cash flows from operating activities                  |   |                                               |   |   |            |  
|Net loss                                              | $ | (308,686                                      | ) | $ | (127,854   | )
|Adjustments to reconcile
      net loss to cash       |   |                                               |   |   |            |  
|used by
      operating activities                    |   |                                               |   |   |            |  
|Depreciation and depletion                            |   | 52,507                                        |   |   | 87         |  
|Stock based compensation                              |   | 209,362                                       |   |   | 40,938     |  
|Net changes in:                                       |   |                                               |   |   |            |  
|Joint interest billing receivables                    |   | 1,127,724                                     |   |   | (10,056    | )
|Trade
      receivables                               |   | 62,242                                        |   |   | -          |  
|Accounts payable and accrued liability                |   | (1,252,860                                    | ) |   | 29,446     |  
|Net cash flows used in operating activities           |   | (109,711                                      | ) |   | (67,439    | )
|Cash flows from investing activities                  |   |                                               |   |   |            |  
|Acquisition of oil and
      gas properties           |   | (35,266                                       | ) |   | (1,105,008 | )
|Net cash flows used in investing
      activities     |   | (35,266                                       | ) |   | (1,105,008 | )
|                                                      |   |                                               |   |   |            |  
|Cash flows from financing activities                  |   |                                               |   |   |            |  
|Proceeds from sale of
      common shares, net        |   | -                                             |   |   | 574,911    |  
|Net cash flows provided by financing
      activities |   | -                                             |   |   | 574,911    |  
|                                                      |   |                                               |   |   |            |  
|Decrease in cash                                      |   | (144,977                                      | ) |   | (597,536   | )
|                                                      |   |                                               |   |   |            |  
|Cash, beginning of period                             |   | 238,140                                       |   |   | 709,502    |  
|                                                      |   |                                               |   |   |            |  
|Cash, end of period                                   | $ | 93,163                                        |   | $ | 111,966    |  
|Net cash paid during the period for:                  |   |                                               |   |   |            |  
|Interest                                              | $ | -                                             |   | $ | -          |  
|Income taxes                                          | $ | -                                             |   | $ | -          |  
|Non cash transactions:                                |   |                                               |   |   |            |  
|Deposits reclassified to
      oil & gas properties   | $ | -                                             |   | $ | 250,000    |  

The accompanying notes are an integral part of these
financial statements

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California Oil & Gas Corporation

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Notes to the Financial Statements February 29, 2008
(unaudited)

|1. | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The accompanying unaudited interim financial statements
      of California Oil & Gas Corporation (formerly Ucluelet Exploration
      Corp.) (the Company) have been prepared in accordance with accounting
      principles generally accepted in the United States of America and the
      rules of the Securities and Exchange Commission (SEC), and should be
      read in conjunction with the audited financial statements and notes
      thereto contained in the Companys annual report filed with the SEC on
      Form 10-KSB. In the opinion of management, all adjustments, consisting of
      normal adjustments, necessary for a fair presentation of financial
      position and the results of operations for the interim periods presented
      have been reflected herein. The results of operations for interim periods
      are not necessarily indicative of the results to be expected for the full
      year. Notes to the financial statements which would substantially
      duplicate the disclosure contained in the audited financial statements for
      the most recent fiscal year end November 30, 2007 as reported in Form
      10-KSB, have been omitted.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2. | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | As of February 29, 2008, there were 40,888,471 common
      shares issued and 47,355,609 common shares, on a diluted basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The fair market value of the 2,500,000 options issued in
      November 2007 was valued at $838,212 and is being expensed ratably over
      the three year vesting period. Stock based compensation of $209,362 and
      $40,938 was expensed during the three months ended February 29, 2008 and
      February 28, 2007, respectively. The fair market value of the options was
      calculated using the Black-Scholes option pricing as
  follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

2007Risk free interest rate (%)
    3.36Volatility (%)
    137Expected life (years)
    3


|3. | Oil and Gas Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | During the three month period ended February 29, 2008,
      the Company acquired certain non-producing oil and gas leases in
      California for $35,266. The Krotz Springs property, which is the Companys
      only proved property, generated $41,043 in net revenues, after deducting
      royalties of $1,870 for the three months ended February 29, 2008. As of
      February 29, 2008 the net book value of the oil and gas properties was
      $907,643 which is made up of $40,138 from producing properties and
      $867,505 from unproven properties.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4. | Subsequent events                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On April 9 2008, the Company issued 700,000 units of our
      company to one investor, who is the wife of the president of the Company,
      in a private placement at a price of $0.15 per unit for aggregate proceeds
      of US$105,000. Each unit consists of one common share and one common share
      purchase warrant. Each common share purchase warrant entitles the holder
      to purchase one additional common share of our company at a price of $0.20
      per warrant share until the warrants expire on April 8,
  2009.                          

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- 7 -

California Oil & Gas Corporation

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On or about April 1 2008, the Company
  received a petition filed by Daybreak Oil & Gas, Inc. in the Nineteenth
  Judicial District Court of the State of Louisiana, Parish of East Baton Rouge,
  Suit Number 562933, Division SEC.24. In that petition, Daybreak Oil & Gas
  alleges that the Company owes Daybreak Oil & Gas the amount of $587,464.55,
  being 25% of the cost of the #60 Haas-Hirsch well in the Krotz Springs Prospect,
  as the result of our breach of a Joint Operating Agreement in which we agreed
  to pay 25% of the costs associated with the well. Daybreak Oil & Gas is
  also seeking interest on the amounts alleged owing plus a reasonable attorneys
  fee and the costs of the action. Although the Company believes that California
  Oil & Gas Corporation does have defences to this action, The Company is
  currently seeking the advice of an attorney licensed to practice law in the
  State of Louisiana. As of February 29, 2008 the amount of the asserted damages
  (less interest and attorney fees) has been accrued by the Company. Ultimately,
  if litigation ensues and judgement requiring immediate payment results, there
  could be a significant adverse impact on the Companys operations.

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Item 2. Managements Discussion and Analysis and Plan of
Operation.

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements.
Forward-looking statements are statements that relate to future events, future
financial performance or are otherwise projections of future results. In some
cases, you can identify forward-looking statements by terminology such as may,
should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section of this quarterly report on Form 10-QSB entitled Risk Factors, that
may cause our companys or our industrys actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these
forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.

Unless otherwise specified in this quarterly report, all dollar
amounts are expressed in United States dollars and all references to common
shares refer to shares of our common stock.

As used in this quarterly report, the terms we, us, our,
our Company and California Oil & Gas mean our company, California Oil
& Gas Corporation, unless otherwise indicated.

Our Current Business

We are an early stage production company engaged in the
identification, acquisition and exploration of oil and natural gas properties.
Since transitioning our focus from mineral resource properties to oil and
natural gas properties in January of 2006, we have entered into letters of
intent and agreements, all of which are discussed below in greater detail,
whereby we have earned, or we hope in the future to earn, an interest in certain
oil and gas properties located in California and Louisiana.

Plan of Operation and Cash Requirements

Overview

You should read the following discussion of our financial
condition and results of operations together with our reviewed but unaudited
financial statements and the notes to those reviewed but unaudited financial
statements included elsewhere in this filing prepared in accordance with
accounting principles generally accepted in the United States. This discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those anticipated in
these forward-looking statements.

California

To date, our partners in the East Slopes project have leased
over 19,000 acres of mineral property in four prospect areas. During the next
six months, these partners intend to finalize interpretation of a 3-D seismic
program conducted over three of these four areas. Using this information and
acting in consultation with our partners and Chevron U.S.A. Inc., we plan to
select locations for four exploration wells.

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- 9 -

On July 9, 2007 we, together with the other participants in the
East Slopes project, entered into a seismic option farm-in agreement dated for
reference June 21, 2007 with Chevron U.S.A. Inc. granting to Chevron an option
to farm-in to a 50% interest in the East Slopes project if Chevron funded a High
Definition 3-D Exploration Seismic Survey over a project area in the San Joaquin
area of Southern California consisting of approximately 22,500 acres. The
project area is comprised of 19,000 gross acres of mineral leaseholds to be
contributed by our current partners and approximately 3,500 gross acres of
mineral leaseholds contributed by Chevron, all of which has been subdivided into
three prospect areas. Under the terms of the agreement, Chevron had the right,
but was not obligated, to fund the high definition 3-D exploration seismic
survey over the project area. The agreement provides that if Chevron chose to
fund the survey (which they did), our company would act as the operator. The
agreement also provides that if the survey was shot and the data are acquired,
processed and delivered to the other parties to the agreement, Chevron will have
earned 50% of the interest held by our partners in the 19,000 gross acres of
mineral leaseholds contributed by them and our current partners would have the
option to farm-in to a 50% interest in the 3,500 gross acres contributed to the
project by Chevron by drilling four initial test wells on what all of our
partners mutually agree to be the best exploration prospects within the seismic
acquisition area. If this occurs, then our current partners as a group and
Chevron will then each hold a 50% interest in the lands and wells. The agreement
provides that our company would also be the operator for the purposes of
drilling each of these four test wells. If after we have drilled these four test
wells the parties decide to continue exploration in any of the prospect areas,
Chevron will have the right, at its option, to become the operator in place of
our company for the production phase. Beginning in mid-September, 2007, we began
preliminary work on the 3-D seismic project and data acquisition began October
15, 2007. Field data acquisition for the 35.2 square mile seismic survey has
been completed, the data have been processed and interpretation of the data is
underway. With the exception of the 50% working interest recently acquired in
320 acres of leases in the Dyer Creek area, our company does not currently own
any interest in this Eastern Slopes project. We have previously entered into a
farm-in agreement with our current partners that gives us the ability to earn an
interest. Under this agreement, and following interpretation of the seismic data
derived from the High Definition 3-D Exploration Seismic Survey, we will have
the option to earn a 12.5% interest (including recovery of 200% of costs) in the
seismic area leases and wells by paying 25% of the cost of three wells in each
of the three prospect areas covered by the seismic survey.

Under the farm-in agreement with Chevron, Chevron has a call
right to purchase any oil, gas or other hydrocarbons produced under the terms of
the agreement at posted, competitive pricing.

We anticipate that we will spend approximately $1 million in an
effort to earn an interest in the East Slopes project over the next 12
months.

In the North project, basic exploration techniques have
identified an area that could be prospective for shallow oil production. Over
the next 12 months we plan to continue our geologic analysis of the area, the
acquisition of oil and gas leases in areas considered prospective, and
acquisition of 2-D and 3-D seismic data in anticipation of beginning exploratory
drilling. We anticipate that we will spend approximately $1,500,000 on this
project over the next 12 months.

Our company, in partnership with Consolidated Beacon Resources
Ltd. (TSX-V:KBC-V), a Canadian public company, acquired from third parties a 50%
interest in 320 acres of oil and gas leases in each of the Dyer Creek and
Southeast Edison fields in the San Joaquin Basin in California. The Dyer Creek
acreage (50% working interest) is within the area covered by the 3-D seismic
survey and is subject to the Chevron farm-in. The Southeast Edison leases (50%
working interest) are outside all areas of mutual interest. Both fields were
productive in the 1940s and were abandoned.

We have executed a Letter of Intent with Consolidated Beacon
Resources Ltd. to acquire its interests in the San Joaquin Basin, which include
an approximately 10% interest in both the southern and northern areas,
Consolidated Beacons 50% working interest in the 320 acre Dyer Creek parcel and
50% of their 50% interest in the 320 acre Southeast Edison parcel. Consideration
is to be $1,250,000 ($575,000 cash and the remainder in shares of our common
stock at a deemed price of $0.50 per share). This transaction is contingent on
approval by Consolidated Beacons shareholders, the TSX Venture stock exchange,
financing and other regulatory approval.

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- 10 -

Louisiana

At the South Krotz Springs project located in St. Landry
Parish, gas sales from the Haas-Hirsch No. 1 well (formerly the began May 16,
2007.

The cost of the Krotz Springs well in Louisiana was significantly
  over budget. As a result, our share of the well drilling and completion costs
  increased from the original estimate of $1,000,000 to $2,277,058. We have paid
  $1,791,462 of this amount to the operator and $485,596 remains outstanding as
  at February 29, 2008. The operator has demanded payment of the balance. We do
  not currently have the resources available to pay the operator the balance due
  and we assigned our share of revenue from the well to the operator to reduce
  the outstanding amount owing. The operator has recently filed a lawsuit in State
  Court in Louisiana to recover the balance due. This lawsuit is discussed in
  more detail in the section of this Quarterly Report on Form 10-QSB, titled Legal
  Proceedings, beginning at page 20, below.

The well is currently producing. For the period December 2007
through February 2008 the revenues from this well, net of royalty, were $41,043.
We believe that there will be no activity at Krotz Springs during the next 12
months. We have written down our investment in Krotz Springs by $2,037,000 as at
November 30, 2007.

Our E project in Louisiana involves the potential exploration
of a subterranean structure. Current operations involve leasing of acreage over
the structure that our partners believe may be prospective for oil, gas and/or
condensate. After leasing is completed, we expect that our partners will
consider acquisition of 3-D seismic data. If interpretation of the seismic data
identifies prospective locations, exploration wells might be planned and
drilled. We believe that it is unlikely that a well will be drilled during the
12 month period ending April 30, 2009. The project is currently on hold and we
anticipate only minimal expenditures over the next 12 months.

Other Activity

We expect to continue to investigate other opportunities within
the oil and gas sector, both domestic and international, over the next 12
months. We anticipate that our costs for the investigation and analysis of
opportunities over the next 12 months should be approximately $200,000. Unless
we are successful in identifying a project or projects that are, in our opinion,
worth pursuing, it is unlikely that we will incur significant project costs in
the coming 12 month period.

Financial Condition, Liquidity and Capital Resources

From inception on June 21, 2002 to November 30, 2006 (the date
that we abandoned our mineral exploration business), we were engaged in the
acquisition and exploration of mineral properties. Our principal capital
resources have been acquired through the issuance of common stock.

At February 29, 2008, we had a working capital deficiency of
$718,945.

At February 29, 2008, our total assets of $1,077,051 consisted
of current assets of $167,395 and oil and gas properties and other long term
assets of $909,656. This compares with our assets at November 30, 2007 of
$1,502,338 which consisted of cash and a deposit.

At February 29, 2008, our total liabilities were $886,340
compared to our liabilities of $2,139,200 as at November 30, 2007. The 59%
decrease in these liabilities consisted primarily of a decrease in trade
payables of $1,252,860.

On August 7, 2007, we closed a private placement of 363,636
units for gross proceeds of $200,000. Each unit consisted of one common share
and one common share purchase warrant. Each common share purchase warrant
entitles the holder to purchase one additional common share of our company at a
price of $0.55 per warrant share until the warrants expire on August 7,
2008.

On November 1, 2007, we closed a private placement of 315,791
  units for gross proceeds of $180,001. Each unit consists of one common share
  and one common share purchase warrant. Each common share purchase warrant entitles
  the holder to purchase one additional common share of our company at a price
  of $0.67 per warrant share until the warrants expire on October 31, 2009.

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- 11 -

On April 8, 2008, we closed a private placement of 700,000
units for gross proceeds of $105,000. Each unit consists of one common share and
one common share purchase warrant. Each common share purchase warrant entitles
the holder to purchase one additional common share of our company at a price of
$0.20 per warrant share until the warrants expire on April 8, 2009.

The continuation of our business is dependent upon obtaining
financing, a successful program of acquisition and exploration, and, finally,
achieving a profitable level of operations. The issuance of additional equity
securities by us could result in a significant dilution in the equity interests
of our current stockholders. Obtaining commercial loans, assuming those loans
would be available, will increase our liabilities and future cash
commitments.

There are no assurances that we will be able to obtain funds
required for our continued operations. As noted herein, we are pursuing various
financing alternatives to meet our immediate and long-term financial
requirements. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, we will be unable to conduct our operations as
planned, and we will not be able to meet our other obligations as they become
due. In such event, we will be forced to scale down or perhaps even cease our
operations.

We have no long-term debt and do not regard long-term borrowing
as a good, prospective source of financing at this stage in the development of
our company and its business.

Cash Requirements

We estimate that we will spend approximately $600,000 on
general and administrative expenses over the next 12 months and approximately
$4,400,000 on our oil and gas activities. Working capital requirements may
increase if we identify, assess and acquire one or more new oil and gas
exploration or development properties during the year. The amount of the
increase will depend, to a large extent, on the nature of the properties
identified, if any.

Based on our current plan of operations, we do not have
sufficient funds for the next 12 months. We believe that we will require
additional funds to continue our operations. If we are unable to raise
additional financing in the next 12 months, and we fail to otherwise generate
any cash flow through operations, we will be required to modify our operations
plan accordingly or even to cease operations altogether. These funds may be
raised through equity financing, debt financing or other sources, and may result
in substantial dilution of the equity ownership of our shares.

Specifically, we estimate our operating expenses for the next
12 months to be as follows:

Estimated Funding Required During the Twelve Month
      Period Ending April 30, 2009California Projects
    $
    3,800,000Acquisitions
    $
    600,000General and
      Administrative
    $
    600,000Total
    $
    5,000,000


There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to
scale down or perhaps even cease the operation of our business.

Exploration and Development

Our business plan is focused on a strategy of acquiring and
maximizing the long-term exploration and development of oil and gas
opportunities. To date, execution of our business plan has largely focused on
assessing prospective oil and gas interests and acquiring the interests that we
have acquired in California and Louisiana, as well as those that

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we recently failed to farm-in on in Chile. As our plans for
these properties continue to develop based on leasing progress, results of
initial wells and other exploration and related events that will evolve over
time, we hope to structure and implement an exploration and development plan. In
addition, we continue to look for additional properties of interest.

Employees

We do not currently have any employees (other than our
directors and officers who, at present, have not signed an employment or
consulting agreement with us). We do not expect any material changes in the
number of employees over the next 12 month period (although we may enter into
employment or consulting agreements with our officers or directors). We do and
will continue to outsource contract employment as needed. We have an agreement
with one consultant who performs general administrative and clerical functions
for our company on an as-needed basis.

Going Concern

Due to the uncertainty of our ability to meet our current
operating expenses and the capital expenses noted above, in their report on the
annual financial statements for the year ended November 30, 2007, our
independent auditors included an explanatory paragraph expressing substantial
doubt about our ability to continue as a going concern. Our financial statements
contain additional note disclosures describing the circumstances that lead to
this disclosure by our independent auditors.

There are no assurances that we will be able to obtain further
funds required for our continued operations. As noted herein, we are pursuing
various financing alternatives to meet our immediate and long-term financial
requirements. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, we will be unable to conduct our operations as
planned, and we will not be able to meet our other obligations as they become
due. In such event, we will be forced to scale down or perhaps even cease our
operations.

Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board
(FASB) issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in GAAP, and expands
disclosures about fair value measurements. This statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007.
Management is currently evaluating the impact SFAS No. 157 will have on our
financial position, results of operations, and cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities  including an amendment
of FASB statement No. 115. This Statement permits all entities to choose, at
specified election dates, to measure eligible items at fair value (the fair
value option). A business entity shall report unrealized gains and losses on
items for which the fair value option has been elected in earnings (or another
performance indicator if the business entity does not report earnings) at each
subsequent reporting date. This statement is effective as of the first fiscal
year that begins after November 15, 2007. We are currently analyzing the effects
of SFAS 159 but does not expect its implementation will have a significant
impact on our financial condition or results of operations.

In July 2006, the FASB issued FASB Interpretation (FIN)
  No. 48 Accounting for Uncertainty in Income Taxes An Interpretation of
  FASB Statement No. 109. FIN 48 prescribes detailed guidance for the financial
  statement recognition, measurement, and disclosure of uncertain tax positions
  recognized in an enterprises financial statements in accordance with SFAS
  No. 109, Accounting for Income Taxes. Tax positions must meet a more-likely-than-not
  recognition threshold at the effective date to be recognized upon the adoption
  of FIN 48 and in subsequent periods. FIN 48 will be effective for fiscal years
  beginning after December 15, 2006, and the provisions of FIN 48 will be applied
  to all positions upon the adoption of the Interpretation. The cumulative effect
  of this applying the provisions of this Interpretation will be reported as an
  adjustment to the opening balance of retained earnings for that fiscal year.
  Management is currently analyzing the impact of FIN 48 on the financial statements
  but does not believe that its adoption will have a material effect on our financial
  position, results of operations, or cash flows.

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- 13 -

In December 2007, the FASB issued SFAS No. 141(R), "Business
Combinations" ("SFAS 141"). SFAS 141(R) replaces SFAS 141 and provides greater
consistency in the accounting and financial reporting of business combinations.
SFAS 141(R) requires the acquiring entity in a business combination to recognize
all assets acquired and liabilities assumed in the transaction and any
noncontrolling interest in the acquiree at the acquisition date, measured at the
fair value as of that date. This includes the measurement of the acquirer shares
issued in consideration for a business combination, the recognition of
contingent consideration, the accounting for pre-acquisition gain and loss
contingencies, the recognition of capitalized in-process research and
development, the accounting for acquisition-related restructuring cost accruals,
the treatment of acquisition related transaction costs and the recognition of
changes in the acquirer's income tax valuation allowance and deferred taxes.
SFAS 141(R) is effective for fiscal years and interim periods within those
fiscal years, beginning on or after December 15, 2008, and is to be applied
prospectively as of the beginning of the fiscal year in which the statement is
applied. The implementation of SFAS 141(R) is not expected to have a material
effect on the our financial condition or results of operation.

In December 2007, the FASB issued SFAS No. 160 "Noncontrolling
Interest in Consolidated Financial Statements, an amendment of ARB Statement No.
51" ("SFAS 160"). SFAS 160 amends Accounting Research Bulletin ("ARB") No. 51,
"Consolidated Financial Statements," to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 clarifies that a noncontrolling
interest in a subsidiary, which is sometimes referred to as minority interest,
is an ownership interest in the consolidated entity that should be reported as a
component of equity in the consolidated financial statements. Among other
requirements, SFAS 160 requires consolidated net income to be reported at
amounts that include the amounts attributable to both the parent and the
noncontrolling interest. It also requires disclosure, on the face of the
consolidated income statement, of the amounts of consolidated net income
attributable to the parent and to the non-controlling interest. SFAS 160 is
effective for our company on January 1, 2009 and is not expected to have a
significant impact on our financial statements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by managements
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our consolidated financial statements is critical to an understanding of our
financials.

We have historically incurred losses and through February 29,
2008 have incurred losses of $3,800,558 since inception. Because of these
historical losses, we will require additional working capital to develop our
business operations. We do not anticipate that we will derive any revenues from
operations unless and until we establish the existence of a reserve on any of
our properties and put a well into production. There can be no assurance that we
can do so or that, even if we are successful in doing so that we will be able to
operate profitably.

We intend to raise additional working capital as and when we
need it through private placements, public offerings and/or bank financing. We
have historically raised working capital through the sale of equity securities
but there can be no assurance that we will be able to continue to do so. As of
the date of this annual report on Form 10-KSB, we are not engaged in any
discussions with prospective investors and we have no definitive agreements for
the investments of any funds in our company.

There are no assurances that we will be able to either (1) achieve
  a level of revenues adequate to generate sufficient cash flow from operations;
  or (2) obtain additional financing through either private placements, public
  offerings and/or bank financing necessary to support our working capital requirements.
  To the extent that funds generated from operations and any private placements,
  public offerings and/or bank financing are insufficient, we will have to raise
  additional working capital. No assurance can be given that additional financing
  will be available, or if available, will be on terms acceptable to us. If adequate
  working capital is not available we may not increase our operations.

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- 14 -

These conditions raise substantial doubt about our ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should we be unable to continue as a going concern.

RISK FACTORS

GENERAL STATEMENT ABOUT RISKS

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 this prospectus in evaluating
our company and our business before purchasing shares of our company's common
stock. Our business, operating results and financial condition could be
seriously harmed due to any of the following risks. You could lose all or part
of your investment due to any of these risks.

This quarterly report on Form 10-QSB contains forward-looking
statements. Forward-looking statements are statements that relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by the use of terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. Examples of forward-looking statements made in this quarterly
report include statements about:

- Our future operating results,
- Our future capital expenditures,
- Our expansion and growth of operations, and
- Our future investments in and acquisitions of oil and natural gas
  properties.

These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including:

- General economic and business conditions,
- Exposure to market risks in our financial instruments,
- Fluctuations in worldwide prices and demand for oil and natural gas,
- Fluctuations in the levels of our oil and natural gas exploration and
  development activities,
- Risks associated with oil and natural gas exploration and development
  activities,
- Competition for raw materials and customers in the oil and natural gas
  industry,
- Technological changes and developments in the oil and natural gas
  industry,
- Regulatory uncertainties and potential environmental liabilities, and
- the risks in the section of this quarterly report entitled "Risk Factors",

any of which may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

While these forward-looking statements and any assumptions upon
which they are based are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein. Except as required by applicable
law, including the securities laws of the United States, we do not intend to
update any of the forward-looking statements to conform these statements to
actual results.

Our common shares are considered speculative during the
development of our new business operations. Prospective investors should
consider carefully the risk factors set out below.

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- 15 -

Risks Relating to Our Business:

Our independent auditors have expressed substantial doubt
about our ability to continue as a going concern.

During the three month period ended February 29, 2008, we
generated revenues from operations due to natural gas production from our well
in Krotz Springs, Louisiana. This well commenced production in May 2007 and has
generated oil and gas revenues, net of royalties, of $41,043 for the three month
period ended February 29, 2008. We incurred a net loss of $308,686 for the three
month period ended February 29, 2008 and $127,854 for the three month period
ended February 28, 2007. We anticipate that we will continue to incur operating
expenses in excess of revenues from operations unless and until we find oil or
natural gas in sufficient quantities as will enable us to realize a profit or
until we sell a property for a profit. On February 29, 2008, we had cash of
$93,163. At February 29, 2008, we had a working capital deficiency of $718,945.
We estimate our average monthly operating expenses to be approximately $50,000
each month, excluding exploration but including general and administrative
expense and investor relations expenses. We estimate that we will need
approximately $4,400,000 for drilling, exploration, leasing and other
exploration and development costs arising from our exploration activities during
the next 12 months. Therefore, we believe that we will require approximately
$5,719,000 to fund our continued operations and our working capital deficiency
for the 12 month period ending April 30, 2009. As a result, we believe that we
will have to raise additional funds to meet our currently budgeted operating
requirements for the next 12 months. As we cannot assure a lender that we will
be able to successfully acquire, explore and develop oil and gas properties, we
will probably find it difficult to raise debt financing from traditional lending
sources. We have traditionally raised our operating capital from sales of equity
securities, but there can be no assurance that we will continue to be able to do
so. If we cannot raise the money that we need to continue to acquire, explore
and develop oil and gas properties, we may be forced to delay, scale back, or
eliminate our activities. If any of these were to occur, there is a substantial
risk that our business would fail.

These circumstances raise substantial doubt about our ability
to continue as a going concern, as described in the explanatory paragraph to our
independent auditors' report on our consolidated financial statements for the
year ended November 30, 2007, which are included in our annual report on Form
10-KSB. Although our consolidated financial statements raise substantial doubt
about our ability to continue as a going concern, they do not reflect any
adjustments that might result if we are unable to continue our business.

If we are able to obtain additional funding by selling
our equity securities, our existing shareholders may suffer substantial
dilution.

We believe that we will require approximately $5,719,000 in
additional funds to maintain or expand our operations over the next 12 months.
We have historically raised funds required for this purpose from the sale of
equity securities. While there can be no assurance that we will be able to raise
any additional funds through the sale of our equity securities, any success may
result in substantial dilution to our existing shareholders.

We are an early stage production company with a limited
operating history implementing a new business plan

We are an early stage production company with only a limited
operating history upon which to base an evaluation of our current business and
future prospects, and we have just begun to implement our business plan, having
started in the oil and gas exploration and development industry in February of
2006. Our operations will be subject to all the risks inherent in the
establishment of a developing enterprise and the uncertainties arising from the
absence of a significant operating history. If we cannot successfully implement
our business plan and we are not able to operate profitably, you could lose some
or all of your investment in our company.

Our directors and executive officers are employed
elsewhere and their time and efforts will not be devoted to our company
full-time.

With the exception of John McLeod, who works for our company on
a full-time basis, and Mel Trethart, who works for our company on a part-time
basis, our directors and executive officers are employed in other positions with
other companies. As a result, they manage our company on a part-time basis.
Because of this, the management of our company may suffer and our company could
under-perform or fail.

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- 16 -

The oil and natural 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.
Although we do not compete with other oil and gas companies for the sale of any
oil and gas that we may produce, as there is sufficient demand in the world
market for these products, we compete with numerous individuals and companies,
including many major oil and natural gas companies which have substantially
greater technical, financial and operational resources and staff. Accordingly,
there is a high degree of competition for desirable oil and natural gas leases,
suitable properties for drilling operations and necessary drilling equipment, as
well as for access to funds. We cannot predict if the necessary funds can be
raised or that any projected work will be completed.

There can be no assurance that we will identify and
acquire an oil and natural gas exploration property. Even if we do acquire such
a property, there can be no assurance that we will discover oil or natural gas
in any commercial quantity thereon.

Exploration for economic reserves of oil and natural gas is
subject to a number of risks. There is competition for the acquisition of
available oil and natural gas properties. Even if we are able to acquire an oil
and natural gas exploration property, few properties that are explored are
ultimately developed into producing oil and/or natural gas wells. If we cannot
acquire one or more oil and natural gas exploration properties and discover oil
or natural gas in any commercial quantity thereon, our business will fail.

Even if we acquire an oil and natural gas exploration
property and establish that it contains oil or natural gas in commercially
exploitable quantities, the potential profitability of oil and natural gas
ventures depends upon factors beyond the control of our company.

The potential profitability of oil and natural gas properties
is dependent upon many factors beyond our control. For instance, world prices
and markets for oil and natural 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. In addition, adverse weather conditions can hinder drilling operations.
These changes and events may materially affect our future financial performance.
These factors cannot be accurately predicted and the combination of these
factors may result in our company not receiving an adequate return on invested
capital.

In addition, 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 natural gas from the well. Production from
any well may be unmarketable if it is impregnated with water or other
deleterious substances. Also, the marketability of oil and natural gas which may
be acquired or discovered will be affected by numerous related factors,
including the proximity and capacity of oil and natural gas pipelines and
processing equipment, market fluctuations of prices, taxes, royalties, land
tenure, allowable production and environmental protection, all of which could
result in greater expenses than revenue generated by the well.

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 natural 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 natural 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.

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- 17 -

Oil and natural 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 company.

Oil and natural 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 natural 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 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. To date, we
have not been required to spend any material amount on compliance with
environmental regulations. However, we may be required to do so in the future
and this may affect our ability to expand or maintain our operations.

Exploration and production activities are subject to
certain environmental regulations which may prevent or delay the commencement or
continuation of our operations.

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
continuation of a given operation. Specifically, we may be 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.

Exploratory drilling involves many risks and we may
become liable for pollution or other liabilities which may have an adverse
effect on our financial position.

Drilling operations generally involve a high degree of risk.
Hazards such as unusual or unexpected geological formations, power outages,
labor disruptions, blow-outs, sour natural gas leakage, fire, inability to
obtain suitable or adequate machinery, equipment or labor, and other risks are
involved. We may become subject to liability for pollution or hazards against
which it cannot adequately insure or which it may elect not to insure. Incurring
any such liability may have a material adverse effect on our financial position
and operations.

There are significant title risks associated with the
properties subject to our farm-out agreements.

In the event that we or our operating partners do not meet
regulated expenditure requirements or development conditions to convert permits
to leases or obtain an extension of such development requirements, the right to
explore for bitumen or oil shale, as applicable, may be lost. We believe that we
or our operating partners have good and proper right, title and interest in and
to the permits and leases that we intend to exploit. However, we have not
obtained title opinions on all of our interests. Even with respect to interests
where we have obtained title opinions, the opinions may be subject to
unregistered claims. Accordingly, ownership of our oil and natural gas
exploration rights could be subject to prior unregistered agreements or
interests or undetected claims or interests.

We have not yet established any reserves and resources
and we cannot assure you that we will ever establish any reserve or resource on
the properties subject to our farm-out agreements.

There are numerous uncertainties inherent in estimating
quantities of oil and natural gas resources, including many factors beyond our
control, and no assurance can be given that the recovery of oil and natural gas
resources will be realized. In general, estimates of recoverable oil and natural
gas resources are based upon a number of factors and assumptions made as of the
date on which the resource estimates were determined, such as geological and
engineering estimates which have inherent uncertainties and the assumed effects
of regulation by governmental agencies and estimates of future commodity prices
and operating costs, all of which may vary considerably from

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actual results. All such estimates are, to some degree,
uncertain and classifications of oil and natural gas resources are only attempts
to define the degree of uncertainty involved. For these reasons, estimates of
the recoverable oil and natural gas resources, the classification of oil and
natural gas resources based on risk of recovery, prepared by different engineers
or by the same engineers at different times, may vary substantially. No
estimates of commerciality or recoverable oil and natural gas resources can be
made at this time, if ever.

Any change to government regulation/administrative
practices may have a negative impact on our ability to operate and our
profitability.

The business of oil and natural gas exploration and development
is subject to substantial regulation under various countries laws relating to
the exploration for, and the development, upgrading, marketing, pricing,
taxation, and transportation of oil and natural gas and related products and
other matters. Amendments to current laws and regulations governing operations
and activities of oil and natural gas exploration and development operations
could have a material adverse impact on our business. In addition, there can be
no assurance that income tax laws, royalty regulations and government incentive
programs related to the properties subject to our farm-out agreements and the
oil and natural gas industry generally will not be changed in a manner which may
adversely affect our progress and cause delays, inability to explore and develop
or abandonment of these interests.

Permits, leases, licenses, and approvals are required from a
variety of regulatory authorities at various stages of exploration and
development. There can be no assurance that the various government permits,
leases, licenses and approvals sought will be granted in respect of our
activities or, if granted, will not be cancelled or will be renewed upon expiry.
There is no assurance that such permits, leases, licenses, and approvals will
not contain terms and provisions which may adversely affect our exploration and
development activities.

Risks Relating to Our Shares of Common Stock

Our stock is a penny stock. Trading of our stock may be
restricted by the SEC's penny stock regulations which may limit a stockholder's
ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these 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 level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.

Financial Industry Regulatory Authority sales practice
requirements may also limit a stockholders ability to buy and sell our shares
of common stock.

In addition to the penny stock rules described above, the
Financial Industry Regulatory Authority (known as FINRA) has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must

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have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customers financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the Financial Industry Regulatory Authority believes that there
is a high probability that speculative low priced securities will not be
suitable for at least some customers. Financial Industry Regulatory Authority
requirements make it more difficult for broker-dealers to recommend that their
customers buy our shares of common stock, which may limit your ability to buy
and sell our shares of common stock and have an adverse effect on the market for
its shares.

We do not currently have a shareholder rights plan or any
anti-takeover provisions in our by-laws.

We do not currently have a shareholder rights plan or any
anti-takeover provisions in our by-laws. Without any anti-takeover provisions,
there is no deterrent for a take-over of our company, which may result in a
change in our directors or executive officers.

Our by-laws contain provisions indemnifying our directors
and executive officers against all costs, charges and expenses incurred by them.

Our by-laws contain provisions with respect to the
indemnification of our directors and executive officers against all costs,
charges and expenses, including an amount paid to settle an action or satisfy a
judgment, actually and reasonably incurred by him, including an amount paid to
settle an action or satisfy a judgment in a civil, criminal or administrative
action or proceeding to which he/she is made a party by reason of his/her being
or having been one of our directors or executive officers.

In the future, the trading price of our common shares may
be subject to wide fluctuations.

In the future, the trading price of our common shares may be
subject to wide fluctuations. Trading prices of the common shares may fluctuate
in response to a number of factors, many of which will be beyond our control. In
addition, the stock market in general, and the market for oil and natural gas
exploration and development companies in particular, has experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of such companies. Market and industry factors may
adversely affect the market price of the common shares, regardless of our
operating performance.

In the past, following periods of volatility in the market
price of a companys securities, securities class-action litigation has often
been instituted. Such litigation, if instituted, could result in substantial
costs and a diversion of managements attention and resources.

Item 3. Controls and Procedures

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to our management, including our principal
executive officer (our president and chief executive officer) and our principal
accounting and financial officer (our chief financial officer) to allow for
timely decisions regarding required disclosure. In designing and evaluating our
disclosure controls and procedures, our management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and our
management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

As of February 29, 2008, the end of the three month period year
  covered by this report, we carried out an evaluation, under the supervision
  and with the participation of our management, including our president and chief
  executive officer and our chief financial officer, of the effectiveness of the
  design and operation of our disclosure controls and procedures. Based on the
  foregoing, our president and chief executive officer and our chief financial
  officer concluded that our disclosure controls and procedures were effective
  as of the end of the period covered by this quarterly report.

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There have been no significant changes in our internal controls
over financial reporting that occurred during the quarter ended February 29,
2008 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Except for the lawsuit described below, we know of no material,
active or pending legal proceedings against our company, nor are we involved as
a plaintiff in any material proceeding or pending litigation. There are no
proceedings in which any of our directors, officers or affiliates, or any
registered or beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.

On or about April 1, 2008, we received a petition filed by
Daybreak Oil & Gas, Inc. in the Nineteenth Judicial District Court of the
State of Louisiana, Parish of East Baton Rouge, Suit Number 562933, Division
SEC.24. In that petition, Daybreak Oil & Gas alleges that our company owes
Daybreak Oil & Gas the amount of $587,464.55, being 25% of the cost of the
#60 Haas-Hirsch well in the Krotz Springs Prospect, as the result of our breach
of a Joint Operating Agreement in which we agreed to pay 25% of the costs to
associated with the well. Daybreak Oil & Gas is also seeking interest on the
amounts alleged owing plus a reasonable attorneys fee and the costs of the
action. Although we believe that we do have defences to this action, we are
currently seeking the advice of an attorney licensed to practice law in the
State of Louisiana.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.

On April 8, 2008, we issued 700,000 units of our company to one
investor, who is the wife of our president, in a private placement at a price of
US$0.15 per unit for aggregate proceeds of US$105,000. Each unit consists of one
common share and one common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase one additional common share of our
company at a price of US$0.20 per warrant share until the warrants expire on
April 8, 2009. We issued these securities to one investor relying on the
exemption from the registration requirements of the Securities Act of 1933
provided by Regulation S promulgated thereunder.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security
Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits Required by Item 601 of Regulation S-B.

|Exhibit | Description                                                                                                                           
|------- | --------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                       
|        |                                                                                                                                       
|(3)     | Articles of Incorporation
      and Bylaws                                                                                            
|        |                                                                                                                                       
|3.1     | Articles of Incorporation
      (incorporated by reference to the Companys SB-2 Registration Statement
      filed January 23, 2003).

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|Exhibit | Description                                                                                                                                                                                                                                                                                                 
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                             
|3.2     | Bylaws (incorporated
        by reference to the Companys SB-2 Registration Statement filed January
        23, 2003).                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                             
|3.3     | Certificate of
        Change filed with the Nevada Secretary of State on December 21, 2004 (incorporated
        by reference to our Current Report on Form 8-K filed on December 22, 2004).                                                                                                               
|        |                                                                                                                                                                                                                                                                                                             
|3.4     | Certificate of
        Change filed with the Nevada Secretary of State on January 18, 2006 (incorporated
        by reference to our Current Report on Form 8-K filed on January 26, 2006).                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                             
|3.5     | Articles of Merger
        filed with the Nevada Secretary of State on January 31, 2006 (incorporated
        by reference to our Current Report on Form 8-K filed on February 6, 2006).                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                             
|(4)     | Instruments
        Defining the Rights of Security Holders                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                             
|4.1     | 2006 Stock Option
        Plan (incorporated by reference from our Current Report on Form 8-K filed
        on April 26, 2006).                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                             
|4.2     | 2007 Nonqualified
        Stock Option Plan (incorporated by reference from our Current Report on
        Form 8-K filed on November 28, 2007).                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                             
|(10)    | Material Contracts                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                             
|10.1    | Form of Subscription
        Agreement (incorporated by reference from our Current Report on Form 8-K
        filed on March 21, 2006).                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                             
|10.2    | Letter of Intent
        with Nomad Hydrocarbons LLC (incorporated by reference from our Annual
        Report on Form 10-KSB filed on March 15, 2007).                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                             
|10.3    | Letter of Intent
        with Nomad Hydrocarbons LLC (incorporated by reference from our Quarterly
        Report on Form 10-QSB filed on April 13, 2006).                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                             
|10.4    | Investor Relations
        Consulting Agreement dated April 10, 2006 with Cypress Point Capital Inc.  (incorporated
        by reference from our Current Report on Form 8-K filed on April 26, 2006).                                                                                                      
|       
|10.5    | Letter of Understanding
        with March Resources Corp. dated September 11, 2006 (incorporated by reference
        from our Current Report on Form 8-K filed on September 12, 2006).                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                             
|10.6    | Purchase and
        Sale Agreement with Aspire Capital, Inc. dated November 14, 2006 (incorporated
        by reference from our Annual Report on Form 10-KSB filed on March 15,
        2007).                                                                                                            
|        |                                                                                                                                                                                                                                                                                                             
|10.7    | Seismic Option
        Farmin Agreement with Calstar Oil & Gas Ltd., Nomad Hydrocarbons Ltd.,
        Nomad Hydrocarbons LLC, Daybreak Oil and Gas, Inc. and Consolidated Beacon
        Resources Ltd. (incorporated by reference from our Quarterly Report on
        Form 10-QSB filed on July 13, 2007).
|        |                                                                                                                                                                                                                                                                                                             
|10.8    | Form of Subscription
        Agreement (incorporated by reference from our Current Report on Form 8-K
        filed on August 8, 2007).                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                             
|10.9    | Form of Subscription
        Agreement (US Subscriber) (incorporated by reference from our Current
        Report on Form 8-K filed on November 11, 2008).                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                             
|10.10   | Form of Subscription
        Agreement (Non-US Subscriber) (incorporated by reference from our Current
        Report on Form 8-K filed on November 11, 2008).                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                             
|10.11   | Form of Warrant
        Certificate (US Subscriber) (incorporated by reference from our Current
        Report on Form 8-K filed on November 11, 2008).                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                             
|10.12   | Form of Warrant
        Certificate (Non-US Subscriber) (incorporated by reference from our Current
        Report on Form 8-K filed on November 11, 2008).                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                             
|10.13*  | Subscription
        Agreement dated April 2, 2008 with Carol McLeod                                                                                                                                                                                                                                        

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- 22 -

|Exhibit | Description                                                                                                                                       
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                   
|        |                                                                                                                                                   
|(14)    | Code of Ethics                                                                                                                                    
|        |                                                                                                                                                   
|14.1    | Code of Business
        Conduct and Ethics (incorporated by reference from our Annual Report on
        Form 10- KSB filed on February 27, 2004).
|        |                                                                                                                                                   
|(31)    | Section 302 Certifications                                                                                                                        
|        |                                                                                                                                                   
|31.1*   | Section
      302 Certification of John G.F. McLeod.                                                                                              
|        |                                                                                                                                                   
|31.2*   | Section
      302 Certification of Norman S. Johnson.                                                                                             
|        |                                                                                                                                                   
|(32)    | Section 906 Certification                                                                                                                         
|        |                                                                                                                                                   
|32.1*   | Section
      906 Certification of John G.F. McLeod.                                                                                              
|        |                                                                                                                                                   
|32.2*   | Section
      906 Certification of Norman S. Johnson.                                                                                             

*Filed herewith.

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- 23 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

CALIFORNIA OIL & GAS CORPORATION

/s/ John McLeodJohn McLeod, President, Treasurer, Secretary
and Director (Principal Executive Officer)

Date: April 21, 2008

/s/ Norman S. JohnsonNorman S. Johnson, Chief Financial
Officer(Principal Financial Officer and Principal Accounting Officer)

Date: April 21, 2008

---