UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

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

For the quarterly period ended                  June 30, 2001
                               ------------------------------------------------

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

For the transition period from ________________ to ____________________

Commission file number     1-3793
                       --------------

                         CANADA SOUTHERN PETROLEUM LTD.
 ................................................................................
             (Exact name of registrant as specified in its charter)

     NOVA SCOTIA, CANADA                                       98-0085412
 ................................................................................
   (State or other jurisdiction of                         (I.R.S. Employer
   incorporation or organization)                           Identification No.)

#505, 706 - 7th  Avenue, S.W., Calgary, Alberta, Canada           T2P 0Z1
 ................................................................................
(Address of principal executive offices)                         (Zip Code)

                                 (403) 269-7741
 ................................................................................
              (Registrant's telephone number, including area code)


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

     Indicate  by check mark  whether the  registrant  (l) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.                         |X| Yes |_| No

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

     Limited Voting  Shares,  par value $1.00  (Canadian)  per share  14,390,470
shares outstanding as of August 10, 2001.


<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.

                                   FORM 10-Q

                                 JUNE 30, 2001

                               Table of Contents


                         PART I - FINANCIAL INFORMATION


ITEM 1   Financial Statements                                             Page
                                                                          ----
         Consolidated balance sheets at June 30, 2001 and
         December 31, 2000                                                  3

         Consolidated  statements of income and deficit for the six
         months ended June 30, 2001 and 2000                                4

         Consolidated  statements of cash flows for the three and six
         months ended June 30, 2001 and 2000                                5

         Notes to consolidated financial statements                         6

ITEM 2   Management's  Discussion and Analysis of Financial
         Condition and Results of Operations                               10

ITEM 3   Quantitative and Qualitative Disclosure About Market Risk         17

                           PART II - OTHER INFORMATION

ITEM 4.  Submission of Matters to a Vote of Security Holders               18

ITEM 5   Other Information                                                 18

ITEM 6   Exhibits and Reports on Form 8-K                                  19

         Signatures                                                        20




<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.
                                   FORM 10-Q
                         PART I - FINANCIAL INFORMATION

Item 1.      Financial Statements
-------      --------------------

                          CONSOLIDATED BALANCE SHEETS
                         (Expressed in Canadian dollars)
<TABLE>
<CAPTION>

                                                                                June 30,             December 31,
                                                                                  2001                   2000
                                                                                  ----                   ----
                                Assets                                           (unaudited)                (Note)
                                ------

Current assets
<S>                                                                             <C>                   <C>
  Cash and cash equivalents                                                     $  8,359,818          $  1,160,031
  Accounts receivable                                                                975,217               244,745
  Other assets                                                                       300,167               300,871
                                                                                ------------          ------------
Total current assets                                                               9,635,202             1,705,647
                                                                                ------------          ------------

Oil and gas properties and equipment
  (full cost method)                                                               8,481,499             9,378,008
Future tax asset                                                                     761,000             1,665,700
                                                                                 -----------           -----------
Total assets                                                                     $18,877,701           $12,749,355
                                                                                 ===========           ===========

                 Liabilities and Shareholders' Equity
                 ------------------------------------

Current liabilities
  Accounts payable                                                             $     529,116         $     307,550
  Accrued liabilities                                                                223,825               137,527
                                                                                     -------               -------
Total current liabilities                                                            752,941               445,077
                                                                                     -------               -------

Future site restoration costs                                                        141,206               136,123

Shareholders' Equity
  Limited Voting Shares, par value $1 per share
  Authorized - 100,000,000 shares
  Outstanding - 14,378,470 and 14,285,970 shares                                  14,378,470            14,285,970
  Contributed surplus                                                             27,042,333            26,508,438
                                                                                 -----------           -----------
  Total capital                                                                   41,420,803            40,794,408
  Deficit                                                                        (23,437,249)          (28,626,253)
                                                                                 ------------          ------------
Total shareholders' equity                                                        17,983,554            12,168,155
                                                                                 -----------           -----------
Total liabilities and shareholders' equity                                       $18,877,701           $12,749,355
                                                                                 ===========           ===========

                                  Note: The balance sheet at December 31, 2000 has been derived from
                                      the audited consolidated financial statements at that date.

                                                        See accompanying notes.
</TABLE>

<PAGE>



                         CANADA SOUTHERN PETROLEUM LTD.
                                   FORM 10-Q
                         PART I - FINANCIAL INFORMATION

Item 1.          Financial Statements
-------          --------------------

                 CONSOLIDATED STATEMENTS OF INCOME AND DEFICIT
                         (Expressed in Canadian dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                     Three months ended                         Six months ended
                                                          June 30,                                  June 30,
                                                          --------                                  --------
                                                 2001                  2000                 2001                 2000
                                                 ----                  ----                 ----                 ----
Revenues:
<S>                                         <C>                   <C>                  <C>                  <C>
  Oil sales                                 $     10,506          $      2,042         $     13,699         $      8,154
  Gas sales                                      650,496                23,665            1,734,407               44,215
  Proceeds from carried interests              5,761,057               249,555            6,105,613              549,554
  Interest and other income                       58,474                36,976               79,892               81,539
                                               ---------               -------          -----------           ----------
  Total revenues                               6,480,533               312,238            7,933,611              683,462
                                               ---------               -------          -----------           ----------

Costs and expenses:
  General and administrative                     414,517               466,913              779,573              871,702
  Legal                                          166,712               620,766              474,759            1,109,488
  Lease operating costs                           60,872                10,383              152,942               21,331
  Depletion, depreciation
   and amortization                              382,100                51,500              452,202              119,000
  Foreign exchange loss (gain)                     6,367               (31,843)             (19,569)             (39,973)
  Abandonments and write downs                         -               634,582                    -              634,582
                                               ---------             ---------          -----------          -----------
  Total costs and expenses                     1,030,568             1,752,301            1,839,907            2,716,130
                                               ---------             ---------          -----------          -----------
  Income (loss) before income taxes            5,449,965            (1,440,063)           6,093,704           (2,032,668)
  Income tax (provision) recovery               (847,000)               53,028             (904,700)             242,525
                                            -------------         ------------         -------------        ------------
Net Income (loss)                              4,602,965            (1,387,035)           5,189,004           (1,790,143)
  Deficit - beginning of period              (28,040,214)          (25,945,028)         (28,626,253)         (25,541,920)
                                            -------------         -------------        -------------        -------------
  Deficit - end of period                   $(23,437,249)         $(27,332,063)        $(23,437,249)        $(27,332,063)
                                            =============         =============        =============        =============

Average number of shares outstanding          14,337,345            14,284,970           14,324,184           14,284,970
                                              ==========            ==========           ==========           ==========

Net income (loss) per share
  (basic & diluted)                             $.32                 $(.10)                $.36                $(.13)
                                                ====                 ======                ====                ======


                                                        See accompanying notes.
</TABLE>


<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.
                                   FORM 10-Q
                         PART I - FINANCIAL INFORMATION

Item 1.         Financial Statements
-------         --------------------

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (Expressed in Canadian dollars)
                                   (unaudited)
<TABLE>
<CAPTION>

                                                        Three months ended                    Six months ended
                                                            June 30,                              June 30,
                                                      --------------------------------------------------------------
                                                        2001               2000              2001              2000
                                                        ----               ----              ----              ----
Cash flows from operating activities:

<S>                                                  <C>               <C>                <C>              <C>
    Net income (loss)                                $  4,602,965      $  (1,387,035)     $  5,189,004     $  (1,790,143)
    Adjustments to reconcile net income
    (loss) to net cash provided from (used in)
    operating  activities
    Depletion depreciation, and amortization              382,100             51,500           452,202           119,000
    Future tax provision (recovery)                       847,000           (216,338)          904,700          (242,525)
    Abandonments and write downs                                -            634,582                 -           634,582
    Future site restoration costs                          (1,000)           160,735            (8,917)          (28,762)
                                                       -----------        -----------       -----------      ------------
    Funds provided from (used in) operations            5,831,065           (756,556)        6,536,989        (1,307,848)
    Change in current assets and liabilities:
      Accounts and interest receivable                   (252,061)            68,129          (730,472)           14,354
      Other assets                                        (13,257)            16,305               704            18,364
      Accounts payable                                    (31,147)             2,812           221,566          (114,136)
      Accrued liabilities                                 (27,112)            95,278            86,298           162,344
                                                       -----------        -----------       -----------      ------------
  Net cash provided from (used in) operations           5,507,488          ( 574,032)        6,115,085       ( 1,226,922)
                                                       -----------        -----------       -----------      ------------

Cash flows from investing activities:
  Additions to oil and gas properties                    (307,671)          (109,160)         (342,920)         (245,722)
  Proceeds from sale of properties                              -                  -           801,227           336,000
  Sale of marketable securities                                 -           (291,342)                -           277,032
                                                       -----------        -----------       -----------       -----------
Net cash provided from investing activities              (307,671)          (400,502)          458,307           367,310
                                                       -----------        -----------       -----------       -----------

Cash flows from financing activities:
  Exercise of stock options                               409,395                   -          626,395                 -
                                                       -----------        -----------       -----------       -----------
Net cash from financing activities                        409,395                   -          626,395                 -
                                                       -----------        -----------       -----------       -----------

Increase in cash and cash equivalents                   5,609,212           (974,534)        7,199,787          (859,612)
Cash and cash equivalents at the
  beginning of period                                   2,750,606          3,160,452         1,160,031         3,045,530
                                                       -----------        -----------       -----------       -----------
Cash and cash equivalents at the
  end of period                                        $8,359,818         $2,185,918        $8,359,818        $2,185,918
                                                       ===========        ===========       ===========       ===========

                                                        See accompanying notes.
</TABLE>


<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.
                                   FORM 10-Q
                          PART 1 FINANCIAL INFORMATION

                                  June 30, 2001
                         (Expressed in Canadian Dollars)



Item 1.     Financial Statements - Notes

Note 1.  Basis of Presentation
         ---------------------

     The accompanying  unaudited  condensed  consolidated  financial  statements
include the accounts of Canada  Southern  Petroleum  Ltd.  and its  wholly-owned
subsidiaries,  Canpet Inc. and C.S.  Petroleum Limited and have been prepared in
accordance  with  accounting   principles  generally  accepted  in  Canada.  The
financial statements conform in all material respects with accounting principles
generally  accepted in the United States (U.S.  GAAP) except for the  difference
described in Note 7 for interim financial  information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly,they  do not include
all of the information and footnotes required by generally  accepted  accounting
principles for complete financial statements. In the opinion of management,  all
adjustments considered necessary for a fair presentation have been included. All
such adjustments are of a normal  recurring  nature.  Operating  results for the
three and six month periods ended June 30, 2001 are not  necessarily  indicative
of the results that may be expected for the year ending  December 31, 2001.  For
further  information,   refer  to  the  consolidated  financial  statements  and
footnotes  thereto  included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2000.

Note 2.  Revenue Recognition
         -------------------

     Canada Southern  recognizes  revenue from carried interest  properties when
the proceeds  become  receivable  and collection is reasonably  assured.  Canada
Southern has a 30% carried  interest in the Kotaneelee  natural gas field in the
Yukon, Canada.  During May 2001, the Company received its first payment from the
Kotaneelee field because the carried interest account reached  undisputed payout
status on January 19, 2001.

     Prior to the  Kotaneelee  field  reaching  undisputed  payout  status,  the
operator of the Kotaneelee field had been reporting and depositing in escrow its
share of the disputed  amount of the Company's  share of net revenues.  Based on
the reported data, the Company believes the total amount due the Company through
March 31, 2001 production  (including interest) was approximately $21.7 million.
The  disputed  amounts  represent  gas  processing  fees  claimed by the working
interest partners.


<PAGE>


Item 1.     Financial Statements - Notes (Cont'd)

     Proceeds  from  carried  interests  include  $340,000  of carried  interest
revenue  relating to production  periods prior to January 1, 2001 from the Buick
Creek,  Wargen and  Clarke  Lake  properties  which  were  converted  to working
interests effective January 1, 2001.

Note 3.  Oil and Gas Properties
         ----------------------

     On January 15,  2001,  Canada  Southern  sold its  interest in Doe Creek in
British Columbia for  approximately  $800,000,  effective as of January 1, 2001.
The proceeds of sale were credited to oil and gas properties.

Note 4.  Income Taxes
         ------------

     At June 30,  2001,  the Company had a total of $15.6  million of unused tax
benefits,  consisting of various Canadian tax pools ($10.4 million) and tax loss
carry forwards and earned  depletion ($5.2 million),  available to offset future
taxable income.

     The future tax asset of  $761,000 at June 30, 2001 does not include the tax
benefit  of the $5.2  million of tax loss carry  forwards  and earned  depletion
because realization is not assured at this time.

Note 5.  Limited Voting Shares and Stock Options
         ---------------------------------------

     During  the six months  ended June 30,  2001,  options to  purchase  92,500
Limited Voting Shares per share were exercised.

Following is a summary of option transactions since December 31, 2000:

<TABLE>
<CAPTION>

Options Outstanding                  Expiration Dates             Number of Shares            Option Prices ($)
-------------------                  ----------------             ----------------            -----------------
 December 31, 2000               Jun. 30, 2001 - Jan. 2004              593,500         $7.11 weighted average
<S>                                      <C>                            <C>                         <C>
  Exercised                              Jan. 2001                      (31,000)                    7.00
  Expired                                Jan. 2001                      (10,000)                    7.00
  Exercised                              Sep. 2001                      (33,500)                    6.37
  Exercised                              Sep. 2001                       (8,000)                    7.00
  Exercised                              Jan. 2004                      (20,000)                    7.00
                                                                        --------
 June 30, 2001                   Sep. 30, 2001 - Jan. 2004              491,000         $7.17 weighted average
                                                                        =======
</TABLE>



Item 1.  Financial Statements - Notes (Cont'd)

Note 6.  Earnings per share
         ------------------

     Earnings per common share (EPS) is based upon the weighted  average  number
of common and common equivalent shares  outstanding  during the period. The only
reconciling  item in the  calculation  of diluted EPS is the dilutive  effect of
stock  options  which was  computed  using the  treasury  stock  method.  Canada
Southern's basic and diluted  calculations of EPS are the same prior to the year
2001 because the exercise of options was not assumed in calculating diluted EPS,
as the result would have been anti-dilutive (Canada Southern had losses in years
prior to 2001). In addition, Canada Southern's basic and diluted calculations of
EPS are the same for both U.S. and Canadian GAAP.

Note 7.  U. S. GAAP - Other Comprehensive Income
         ---------------------------------------

     During 1998,  the Company wrote down the value of its interest in the Tapia
Canyon, California heavy oil project to a nominal value. During August 1999, the
project was sold and the Company received shares of stock in the purchaser.  The
purchaser  has now  become a public  company  (Sefton  Resources,  Inc) which is
listed on the  London  Stock  Exchange.  At June 30,  2001,  the  Company  owned
approximately 5% of Sefton Resources,  Inc. with a fair market value of $739,000
and a cost of $1.00.  The shares of Sefton  Resources,  Inc. are  restricted and
cannot be sold before December 2001.

     Under U.S.  GAAP,  the  Sefton  Resources  shares  would be  classified  as
available for sale  securities and recorded at fair value at June 30, 2001. This
would  result in other  comprehensive  income for the three and six months ended
June  30,  2001.  In  addition,  the  balance  sheet  would  reflect  Marketable
securities   in  the  amount  of  $739,000  with  a   corresponding   credit  to
Shareholders'  Equity - Accumulated other comprehensive  income in the amount of
$739,000.


<PAGE>


Item 1.  Financial Statements - Notes (Cont'd)

Note 7.  U. S. GAAP - Other Comprehensive Income (Cont'd)
         ------------------------------------------------

     Total  comprehensive  income  (loss)  during the three and six months ended
June 30, 2001 and 2000 would be as follows:
<TABLE>
<CAPTION>

                                                       Three months ended                      Six months ended
                                                       ------------------                      ----------------
                                                            June 30,                               June 30,
                                                     2001              2000                2001                2000

<S>                                              <C>               <C>                  <C>               <C>
Net income (loss)                                $ 4,602,965       $(1,387,035)         $ 5,189,004       $(1,790,143)
Unrealized gain on available for sale
   securities                                        739,000                 -              739,000                 -
                                                 -----------       -----------          -----------       -----------
Total comprehensive income (loss)                 $5,341,965       $(1,387,035)         $ 5,928,004       $(1,790,143)
                                                 ===========       ============         ===========       ============
</TABLE>



<PAGE>



Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations

     Statements  included in  Management's  Discussion and Analysis of Financial
Condition  and  Results of  Operations  which are not  historical  in nature are
intended to be, and are hereby  identified as, "forward looking  statements" for
purposes of the "Safe Harbor" Statement under the Private Securities  Litigation
Reform Act of 1995. The Company cautions readers that forward looking statements
are subject to certain risks and  uncertainties  that could cause actual results
to differ  materially from those  indicated in the forward  looking  statements.
Among these  risks and  uncertainties  are the costs,  length and outcome of the
Kotaneelee litigation.

Liquidity and Capital Resources
-------------------------------

     At June 30, 2001,  the Company had  approximately  $8.4 million of cash and
cash  equivalents.  These funds are  expected  to be used for general  corporate
purposes,  including  exploration and development and to continue the Kotaneelee
field  litigation.  The  Company's  capital  expenditures  are  expected  to  be
approximately  $800,000  during 2001, of which  $500,000 will be used to further
develop Buick Creek properties.

     Net cash flow provided from operations during the six months ended June 30,
2001  increased  to  $6,115,000  compared  to the funds  used in  operations  of
$1,227,000 during the comparable 2000 period. The difference between the periods
was caused primarily by the following:

     Increase in funds from operations                          $ 7,845,000
     Net changes in accounts receivable and other                  (763,000)
     Net change in current liabilities                              260,000
                                                                -----------
     Increase in net cash provided by operations                $ 7,342,000
                                                                ===========



<PAGE>


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Cont'd)

     The Company received its first payment of net production  proceeds from the
Kotaneelee  gas field during May 2001.  The Company's  carried-interest  account
reached  undisputed payout status in January 2001. During the three months ended
June 30,  2001,  the Company  recorded the net  proceeds of  approximately  $5.8
million  received by the Company,  after all disputed  "processing  fee" charges
were taken into  account,  for the  production  period  January 19, 2001 through
March 31, 2001.

     The Company's  Annual  Report on Form 10-K for the year ended  December 31,
2000 should be read for a detailed discussion of the Kotaneelee litigation.

     At  December  31,  2000,  most  of our  properties  were  carried  interest
properties  including the Kotaneelee  field.  Capital  expenditures  made by the
working  interest  owners  reduced cash flow from  operations as no revenues are
reported  until  all  capital  expenditures  have been  recovered.  In the past,
proceeds from the carried interest properties were the Company's major source of
cash  flow  and  working  capital.  However,  certain  of the  carried  interest
properties  in British  Columbia  were  converted to working  interests in early
2001.

     The Company has  established a provision for our potential  share of future
site  restoration  costs.  The  estimated  amount of these  costs,  which totals
$428,000,  is being  provided on a unit of production  basis in accordance  with
existing  legislation and industry  practice.  At June 30, 2001, The Company has
accrued  $141,000 of these costs with $287,000  remaining costs to be accrued in
the future.  During the six months  ended June 30,  2001,  the  Company  accrued
approximately $14,000 in site restoration costs.


<PAGE>


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Cont'd)


Results of Operations

         Three months ended June 30, 2001 vs. June 30, 2000
         --------------------------------------------------

     A comparison  of revenues,  costs and  expenses,  net loss and earnings per
share for 2001 and 2000 is as follows:
<TABLE>
<CAPTION>

                                                        2001                     2000                  Net Change
                                                    ---------------          ---------------           --------------
<S>                                                 <C>                      <C>                       <C>
Revenues                                            $    6,480,533           $      312,238            $   6,168,295
Costs and expenses                                      (1,030,568)              (1,752,301)                 721,733
Income tax (provision) recovery                           (847,000)                  53,028                ( 900,028)
                                                    ---------------          ---------------           --------------
Net income (loss)                                   $    4,602,965            $  (1,387,035)           $   5,990,000
                                                    ===============          ===============           ==============

Net  income   (loss)  per  share  basic  and
diluted                                                $.32                    $(.10)                    $.42
                                                       ====                    ======                    ====
</TABLE>

     Oil sales  increased  by 415% to $11,000 in 2001  compared to $2,000 in the
2000 period.  Since the Company disposed of most of its oil producing properties
in the year 2000,  future oil sales are expected to be minimal unless additional
producing properties are drilled or purchased.

     Gas sales  increased  2,649% to $650,000 in 2001 compared to $24,000 in the
2000 period.  There was a 1,495% increase in the number of units sold and a 375%
increase in the  average  price for gas.  Gas sales  include  royalty  income of
$81,000 for the 2001 period  compared to $20,000 in the prior period.  Effective
January  1,  2001,  Canada  Southern  converted  certain  carried  interests  in
Northeast  British  Columbia,  including Buick Creek,  Wargen and Clark Lake, to
working  interests.  The volumes in million  cubic feet ("mmcf") and the average
price of gas per thousand  cubic feet ("mcf") sold during the periods  indicated
were as follows:


<PAGE>


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Cont'd))
<TABLE>
<CAPTION>

                                                Three months ended June 30,
                                                ---------------------------
                                           2001                                         2000
                             -------------------------------------------------------------------------------------
                                       Average price                                Average price
                             mmcf         per mcf            Total         mmcf        per mcf           Total
                             ----         -------            -----         ----        -------           -----
<S>                          <C>           <C>              <C>            <C>          <C>                <C>
Gas sales                    63.8          $9.31            $ 594,000      4.0          $1.96              $ 5,000
Liquids sold                                                   68,000                                            -
Royalty income                                                 81,000                                       20,000
Royalties deducted                                            (93,000)                                      (1,000)
                                                            ----------                                     --------
Total                                                       $ 650,000                                      $24,000
                                                            ==========                                     ========
</TABLE>

     Proceeds from carried interests  increased 2,209% to $5,761,000 during 2001
compared to $250,000 in 2000.  The  Company  received  its first  payment of net
production proceeds from the Kotaneelee gas field during May 2001. The Company's
carried  interest  account  reached  undisputed  payout  status in January 2001.
During the current  quarter,  the Company recorded net proceeds of approximately
$5.8  million  received by the  Company,  after all  disputed  "processing  fee"
charges were taken into  account,  for the  production  period  January 19, 2001
through March 31, 2001.

 Production from the Kotaneelee field during the year 2001 has been as follows:
                               Month                          Mmcf/d
                               -----                          ------
                               January                         52.9
                               February                        54.6
                               March                           50.5
                               April                           47.7
                               May                             46.8
                               June                            41.8

     Sales gas from the field is approximately 80% of total monthly  production.
Because of the  uncertainties  as to  production  rates,  natural gas prices and
future  capital  expenditures,  the Company is unable to accurately  predict the
amount of future net production proceeds that it may receive from the field.

     Interest and other income increased 58% in 2001.  Interest income increased
58% from  $37,000 in 2000 to $58,000 in the 2001 period  because more funds were
available for investment.

     General and  administrative  costs  decreased  11% in 2001 to $415,000 from
$467,000  in 2000  primarily  due to a decrease  in salaries  and  benefits  and
shareholder  related  costs.

Item 2.  Management's  Discussion  and Analysis of
         Financial Condition and Results of Operations (Cont'd))

     Legal expenses  decreased 73% during 2001 to $167,000 from $621,000  during
2000.  These  expenses  are  related  primarily  to the  cost of the  Kotaneelee
litigation. On February 6, 2001, presentation of evidence to the trial court was
concluded.  The Company  expects  that there will be a  substantial  decrease in
legal costs pending the court's decision.

     Lease operating costs increased 486% from $11,000 in 2000 to $61,000 in the
2001  period.  Effective  January 1, 2001,  Canada  Southern  converted  certain
carried interests in Northeast British Columbia,  including Buick Creek,  Wargen
and Clark Lake, to working interests.

     Depletion,  depreciation and amortization expense increased 642% in 2001 to
$382,000  from  $51,000  in 2000 as a  result  of  Kotaneelee  gas  sales  being
recognized during the period.

     A foreign exchange loss of $6,000 was recorded in 2001,  compared to a gain
of $32,000 in 2000 on the Company's U.S.  dollar  investments.  The value of the
Canadian  dollar was U.S.  $.63 at March 31, 2001  compared to U.S. $.66 at June
30, 2001.

     An income tax  provision of $847,000  was  recorded in 2001  compared to an
income tax  recovery  of $53,000 in 2000.  During the 2001  period,  $847,000 of
income taxes were provided which resulted in a 16% effective tax rate instead of
an expected rate of 45% because of the  utilization  of tax loss carry  forwards
and earned depletion not previously recorded as a future tax asset.


<PAGE>


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Cont'd))


         Six months ended June, 2001 vs. June 30, 2000
         ---------------------------------------------

         A comparison of revenues, costs and expenses, net loss and earnings per
share for 2001 and 2000 is as follows:

<TABLE>
<CAPTION>
                                                         2001                    2000                  Net Change
                                                    ---------------         ----------------           --------------
<S>                                                  <C>                       <C>                      <C>
Revenues                                             $   7,933,611             $    683,462             $  7,250,149
Costs and expenses                                      (1,839,907)              (2,716,130)                 876,223
Income tax (provision) recovery                           (904,700)                 242,525               (1,147,225)
                                                    ---------------         ----------------           --------------
Net income (loss)                                   $    5,189,004            $  (1,790,143)           $   6,979,147
                                                    ===============         ================           ==============

Net  income   (loss)  per  share  basic  and
diluted                                                    $.36                    $(.13)                    $.49
                                                           ====                    ======                    ====
</TABLE>

     Oil sales  increased  by 68% to $14,000 in 2001  compared  to $8,000 in the
2000 period.  Since the Company disposed of most of its oil producing properties
in the year 2000,  future oil sales are expected to be minimal unless additional
producing properties are drilled or purchased.

     Gas sales increased 3,823% to $1,734,000 in 2001 compared to $44,000 in the
2000 period.  There was a 3,540% increase in the number of units sold and a 387%
increase in the  average  price for gas.  Gas sales  include  royalty  income of
$181,000 for the 2001 period  compared to $35,000 in the 2000 period.  Effective
January  1,  2001,  Canada  Southern  converted  certain  carried  interests  in
Northeast  British  Columbia,  including Buick Creek,  Wargen and Clark Lake, to
working  interests.  The volumes in million  cubic feet ("mmcf") and the average
price of gas per thousand  cubic feet ("mcf") sold during the periods  indicated
were as follows:
<TABLE>
<CAPTION>

                                                           Six months ended June 30,
                                               2001                                          2000
                                       Average price                                  Average price
                             mmcf         per mcf            Total         mmcf          per mcf            Total
                             ----         -------            -----         ----          -------            -----
<S>                          <C>          <C>             <C>              <C>            <C>               <C>
Gas sales                    182          $11.29          $ 2,053,000      5.0            $2.32             $  11,000
Liquids sold                                                   80,000
Royalty income                                                181,000                                          35,000
Royalties deducted                                           (580,000)                                         (2,000)
                                                          ------------                                       ---------
Total                                                     $ 1,734,000                                        $ 44,000
                                                          ============                                       =========
</TABLE>


<PAGE>


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Cont'd)

     Proceeds from carried interests  increased 1,011% to $6,106,000 during 2001
compared to $550,000 in 2000.  During the first  quarter  proceeds  from carried
interests  included $340,000 of carried interest revenues relating to production
periods  prior to January 1, 2001 from the Buick  Creek,  Wargen and Clarke Lake
properties which were converted to working interests  effective January 1, 2001.
The second  quarter  proceeds are  primarily  net  production  proceeds from the
Kotaneelee gas field.

     The Company received its first payment of net production  proceeds from the
Kotaneelee gas field during May 2001.  The Company's  carried  interest  account
reached  undisputed payout status in January 2001. During the second quarter the
Company  recorded net  proceeds of  approximately  $5.8 million  received by the
Company,  after all disputed  "processing  fee" charges were taken into account,
for the production period January 19, 2001 through March 31, 2001.

  Production from the Kotaneelee field during the year 2001 has been as follows:
                               Month                          Mmcf/d
                               -----                          ------
                               January                         52.9
                               February                        54.6
                               March                           50.5
                               April                           47.7
                               May                             46.8
                               June                            41.8

     Sales gas from the field is approximately 80% of total monthly  production.
Because of the  uncertainties  as to  production  rates,  natural gas prices and
future  capital  expenditures,  the Company is unable to accurately  predict the
amount of future net production proceeds that it may receive from the field.

     Interest and other income  decreased 2% in 2001.  Interest income decreased
14% from  $76,000 in 2000 to $65,000 in the 2001 period  because less funds were
available for investment.  The 2001 period includes $15,000 in proceeds from the
sale of seismic data as compared to $6,000 in 2000.

     General and  administrative  costs  decreased  11% in 2001 to $780,000 from
$872,000  in 2000  primarily  due to a decrease  in salaries  and  benefits  and
shareholder related costs.
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Cont'd))

     Legal expenses decreased 57% during 2001 to $475,000 from $1,109,000 during
2000.  These  expenses  are  related  primarily  to the  cost of the  Kotaneelee
litigation. On February 6, 2001, presentation of evidence to the trial court was
concluded.  The Company  expects  that there will be a  substantial  decrease in
legal costs pending the court's decision.

     Lease  operating  costs  increased 617% from $21,000 in 2000 to $153,000 in
the 2001 period.  Effective January 1, 2001,  Canada Southern  converted certain
carried interests in Northeast British Columbia,  including Buick Creek,  Wargen
and Clark Lake, to working interests. >

     Depletion,  depreciation and amortization expense increased 280% in 2001 to
$452,000  from  $119,000  in 2000 as a result  of  Kotaneelee  gas  sales  being
recognized during the period.

     A foreign exchange gain of $20,000 was recorded in 2001, compared to a gain
of $40,000 in 2000 on the Company's U.S.  dollar  investments.  The value of the
Canadian dollar was U.S. $.67 at December 31, 2000 compared to U.S. $.66 at June
30, 2001.

     An income tax  provision of $905,000  was  recorded in 2001  compared to an
income tax recovery of $243,000 in 2000. During the 2001 period, the $905,000 of
income taxes were provided which resulted in a 15% effective tax rate instead of
the expected rate of 45% because of the  utilization  of tax loss carry forwards
and earned depletion not previously recorded as a future tax asset.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

     The Company  does not have any  significant  exposure to market risk as the
only  market  risk  sensitive  instruments  are its  investments  in  marketable
securities which are classified as cash and cash  equivalent.  At June 30, 2001,
the carrying value of such investments was approximately  $4.1 million which was
approximately  equal to fair value and face value of the investments.  Since the
Company expects to hold the  investments to maturity,  the maturity value should
be realized.


<PAGE>



                         CANADA SOUTHERN PETROLEUM LTD.

                                   FORM 10-Q

                          PART II - OTHER INFORMATION

                                  June 30, 2001

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

         (a)      On June 20, 2001, the Company held its Annual General Meeting
                  of Shareholders.

         (b)      Arthur B. O'Donnell was reelected a director of the Company.
                  The vote was as follows:

                  For                         354,091
                  Withheld 19,839

         (c)      The firm of Ernst & Young LLP was  appointed  as the Company's
                  independent  auditors  for the year  ending December 31, 2001.
                  The vote was as follows:

                  For                         361,242
                  Against  5,394
                  Abstain   7,294


Item 5.  Other Information

                  On May 3, 2001, the Company announced that it was withdrawing
its registration statement for a common stock rights offering.




<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.

                                   FORM 10-Q

                          PART II - OTHER INFORMATION

                                  June 30, 2001

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits
                  --------

                  None

         (b)      Reports on Form 8-K
                  -------------------

                       On May 23, 2001,  the Company filed a Current  Report on
                  Form 8-K to report the that the Kotaneelee gas field generated
                  total revenues of approximately $5.7 million in January after
                  the field reach undisputed payout status on January 19, 2001,
                  that Canada Southern's share was  approximately  $1.7 million
                  and that the Company received $866,0000 from one of the
                  working interest partners.

                       On June 4, 2001, the Company filed a Current Report on
                  Form 8-K to report that M. Anthony Ashton resigned as a
                  director on May 29, 2001.

                       On July 11, 2001, the Company filed a Current Report on
                  Form 8-K to report that Mr. David Blain resigned as the
                  Secretary, Treasurer and Chief Financial Officer of the
                  Company, that Mr. Ben Anderson, President of the Company, was
                  elected Treasurer and Chief Financial Officer and that
                  Mr. Timothy L. Largay, a director of the Company was elected
                  Secretary.

<PAGE>



                         CANADA SOUTHERN PETROLEUM LTD.

                                   FORM 10-Q

                                 JUNE 30, 2001



                                   SIGNATURES


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

                                                  CANADA SOUTHERN PETROLEUM LTD.
                                                  ------------------------------
                                                           Registrant




Date:  August 10, 2001                        By  /s/ Ben Anderson
                                              ---------------------------------
                                              Ben Anderson
                                              President, Treasurer and Chief
                                              Financial and Accounting Officer