FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

For the quarterly period ended               September 30, 1997
                               ------------------------------------------------

[   ]    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.)

Suite 1410, One Palliser Square,
125 Ninth Avenue, S.E., Calgary, Alberta, Canada                   T2G OP6
 ................................................................................
(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
l934  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. Yes X 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 14,234,740
shares outstanding as of November 1, 1997.



<PAGE>


                                                    
                         PART I - FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                         CANADA SOUTHERN PETROLEUM LTD.

                           CONSOLIDATED BALANCE SHEETS
                         (Expressed in Canadian dollars)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                               September 30,          December 31,
                                                                                   1997                   1996
                                                                               -------------          ------------
                                Assets

 Current assets:
<S>                                                                             <C>                   <C>        
   Cash and cash equivalents                                                    $ 2,993,562           $ 2,709,597
   Marketable securities                                                          3,933,528             3,404,213
   Accounts and interest receivable                                                 593,909               635,223
   Prepaid insurance and other                                                      252,588               227,368
                                                                                -----------           -----------
 Total current assets                                                             7,773,587             6,976,401
                                                                                -----------           -----------

 Marketable securities                                                                    -             2,048,573
                                                                                -----------           -----------

 Oil and gas properties and equipment
   (full cost method)                                                            13,217,481            11,349,945
                                                                                -----------           -----------
                                                                                $20,991,068           $20,374,919
                                                                                ===========           ===========

                 Liabilities and Shareholders' Equity

 Current liabilities:
   Accounts payable                                                             $   777,731           $   439,837
   Accrued liabilities                                                              221,688               182,104
                                                                                -----------           -----------
 Total current liabilities                                                          999,419               621,941
                                                                                -----------           -----------

 Future site restoration costs                                                      205,546               250,274
                                                                                -----------           -----------

 Shareholders' Equity
   Limited Voting Shares, par value $1 per share
   Authorized - 100,000,000 shares
   Outstanding -14,229,740 and 13,956,540 shares                                 14,229,740            13,956,540
   Contributed surplus                                                           26,238,839            24,930,964
                                                                                -----------           -----------
                                                                                 40,468,579            38,887,504
   Deficit                                                                      (20,682,476)          (19,384,800)
                                                                                -----------           -----------
 Total shareholders' equity                                                      19,786,103            19,502,704
                                                                                -----------           -----------
                                                                                $20,991,068           $20,374,919
                                                                                ===========           ===========
</TABLE>


<PAGE>


                                                        
                         PART I - FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                         CANADA SOUTHERN PETROLEUM LTD.

                Consolidated Statements of Operations and Deficit
                         (Expressed in Canadian dollars)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                Three months ended                        Nine months ended
                                                                  September 30,                             September 30,
                                                        ----------------------------------        ----------------------------------
                                                             1997                 1996                 1997                 1996
                                                        -------------        -------------        -------------        -------------

Revenues:
<S>                                                    <C>                  <C>                  <C>                  <C>          
  Oil sales                                            $     250,214        $     168,983        $     782,826        $     497,897
  Gas sales                                                   89,801              101,858              372,025              283,790
  Proceeds under carried interest agreements                  74,627              121,452              222,111              607,436
  Interest and other income                                   88,274              161,562              278,633              235,369
                                                        -------------        -------------        -------------        -------------
                                                             502,916              553,855            1,655,595            1,624,492
                                                        -------------        -------------        -------------        -------------
Costs and expenses:
  General and administrative                                 241,316              177,820              854,799              721,774
  Legal                                                      327,127              426,357            1,113,936            1,229,088
  Lease operating costs                                      186,195               69,743              618,244              312,070
  Depletion, depreciation, and amortization                  110,100              127,182              360,200              402,982
  Foreign exchange loss (gain)                                 5,001               12,705              (46,422)              18,380
  Provision for future site restoration costs                  4,000                4,800               13,500               14,200
  Rent                                                        11,921               13,419               39,014               39,564
                                                        -------------        -------------        -------------        -------------
                                                             885,660              832,026            2,953,271            2,738,058
                                                        -------------        -------------        -------------        -------------
  Loss before income taxes                                  (382,744)            (278,171)          (1,297,676)          (1,113,566)
  Income taxes
                                                                   -                    -                    -                    -
Net loss                                                    (382,744)            (278,171)          (1,297,676)          (1,113,566)

  Deficit - beginning of period                          (20,299,732)         (18,758,912)         (19,384,800)         (17,923,517)
                                                        -------------        -------------        -------------        -------------
  Deficit - end of period                               $(20,682,476)        $(19,037,083)        $(20,682,476)        $(19,037,083)
                                                        =============        =============        =============        =============

Average number of shares outstanding                      14,154,340           13,955,290           14,039,160           13,184,171
                                                          ==========           ==========           ==========           ==========

Net loss per share                                          $(.03)               $(.02)               $(.09)               $(.08)
                                                            ======               ======               ======               ======
</TABLE>


<PAGE>


                                                         
                         PART I - FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                         CANADA SOUTHERN PETROLEUM LTD.

                      Consolidated Statements of Cash Flows
                         (Expressed in Canadian dollars)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                              Nine months ended
                                                                                                September 30,
                                                                                      ---------------------------------
                                                                                         1997                   1996
                                                                                      ----------             ----------
                                                                                  
Cash flows from operating activities:                                             
<S>                                                                                  <C>                    <C>         
    Net loss                                                                         $(1,297,676)           $(1,113,566)
    Adjustments to reconcile net loss to net cash used in operating activity:     
      Depreciation, depletion and amortization                                           360,200                402,982
      Future site restoration costs                                                      (44,728)                (4,060)
    Change in current assets and liabilities:                                     
      Accounts and interest receivable                                                    41,314               (453,631)
      Prepaid insurance and other                                                        (25,220)                97,921
      Accounts payable                                                                   337,891                195,735
      Accrued liabilities                                                                 39,584                (66,008)
                                                                                      -----------            -----------
  Net cash used in operations                                                           (588,635)              (940,627)
                                                                                      -----------            -----------
                                                                                  
Cash flows from investing activities:                                             
  Additions to oil and gas properties (net)                                           (2,227,733)              (477,978)
  Sale (purchase) of marketable securities                                             1,519,258             (5,419,365)
                                                                                      -----------            -----------
Net cash used in investing activities                                                   (708,475)            (5,897,343)
                                                                                      -----------            -----------
                                                                                  
Cash flows from financing activities:                                             
  Sale of Limited Voting Shares less expenses                                                  -              9,019,609
  Exercise of stock options                                                            1,581,075                232,707
                                                                                      -----------            -----------
  Net cash from financing activities                                                   1,581,075              9,252,316
                                                                                      -----------            -----------
                                                                                  
Increase (decrease) in cash and cash equivalents                                         283,965              2,414,346
Cash and cash equivalents at the                                                  
  beginning of period                                                                  2,709,597              1,181,581
                                                                                      -----------            -----------
Cash and cash equivalents at the                                                  
  end of period                                                                       $2,993,562             $3,595,927
                                                                                      ==========             ==========
</TABLE>                                                                       
                                                                          
                                                                      

<PAGE>



                                                       
                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1997
                         (Expressed in Canadian Dollars)

Item 1.  Financial Statements - Notes

         The  information  for the three and nine month periods ended  September
30, 1997 and 1996 is unaudited  but includes all  adjustments  which the Company
considers  necessary for a fair statement of the results for those periods.  All
adjustments are of a normal recurring nature.

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.

Liquidity and Capital Resources

         At September 30, 1997,  the Company had  approximately  $6.9 million of
cash and securities  available.  Of this amount,  approximately $4.6 million are
held in U.S. Government  securities which are subject to exchange  fluctuations.
These funds are expected to be used for general  corporate  purposes,  including
exploration and to continue the Kotaneelee field litigation.

         Cash flow used in operations during the nine months ended September 30,
1997  decreased  to $589,000  compared to $941,000  during the  comparable  1996
period.  The  difference  between  the  periods  was  caused  primarily  by  the
following:

              Increase in loss from operations              $(268,000)
              Changes in accounts receivable and other        372,000
              Net change in current liabilities               248,000
                                                            ---------
              Difference in net cash used in operations     $ 352,000
                                                            =========
                                                        


<PAGE>


                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1997
                         (Expressed in Canadian Dollars)

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

         A  significant  proportion  of the  Company's  property  interests  are
covered by carried interest agreements,  which provide that expenditures made by
the operator are recouped solely out of revenues from production.  Major capital
expenditures  made by the operators  have an impact on the  Company's  cash flow
from  operations as no revenues are reported or received until the capital costs
have been  recovered by the  operator.  Properties  in the Fort Nelson,  British
Columbia  area in which the Company has carried  interests  have reached  payout
status.  Proceeds  from  these  carried  interests  plus oil and gas sales  from
working  interest properties are the Company's major sources of working capital.

         The  operator of the  Kotaneelee  gas field has reported to the Company
that  development  costs  totaling  approximately  $17,048,000,   of  which  the
Company's share is $5,114,000, remains to be recovered at July 31, 1997.

         The Company is currently evaluating and expects to continue to evaluate
oil and gas properties and may make  investments  in such  properties  utilizing
cash on hand. The Company  anticipates  that its capital  expenditures  for land
acquisitions and drilling for 1997 will be approximately $2.7 million,  of which
approximately  $2.2  million  has been spent  through  September  30,  1997.  In
addition,  substantial  continuing  expenses  are  expected  to be  incurred  in
connection  with  the  Kotaneelee  Litigation.  The  expense  of the  Kotaneelee
Litigation has been the principal  cause of the Company's losses since 1991. The
Company estimates that it will complete the  presentation of its case before the
Christmas recess in December 1997,  which may result in a decrease in litigation
related expenses in  subsequent periods.  The Company is unable  to estimate the
time required for the defendants to present their evidence.

         During  the  second  half  of  1996,  the  Company  participated  in  8
productive oil and gas wells.  In addition,  during the first nine months of the
current year, 18  additional  wells were drilled with 14 being  completed as oil
wells, 3 as gas wells and one as a water disposal well. This successful drilling
program is being  reflected  in the increase in the amount of oil and gas sales.
The Company's  share (12-15%) of revenues  should  continue to increase when the
installation of production facilities is completed.



<PAGE>


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

Results of Operations

         Three month period ended September 30, 1997 vs. September 30, 1996

         The net loss for the quarter  ended  September  30,  1997 was  $383,000
($(.03) per share)  compared to a net loss of $278,000  ($.02 per share) for the
1996 period. A summary of revenue and expenses during the periods is as follows:

                                1997                1996             Net Change
                                ----                ----             ----------
Revenues                     $ 502,916           $ 553,855           $ (50,939)
Costs and expenses            (885,660)           (832,026)            (53,634)
                             ----------          ----------          ----------
Net loss                     $(382,744)          $(278,171)          $(104,573)
                             ==========          ==========          ==========

         Oil sales  increased  48% due to a 125% increase in the number of units
sold which was partially  offset by a 20% decrease in the price of oil sold. Oil
unit sales in barrels  ("bbls")  (before  deducting  royalties)  and the average
price per barrel sold during the periods indicated were as follows:

<TABLE>
<CAPTION>
                                                  Three month period ended September 30,
                                          1997                                            1996
                        ------------------------------------------     ---------------------------------------------
                                   Average price                                   Average price
                         bbls         per bbl             Total         bbls          per bbl              Total
<S>                     <C>            <C>                <C>          <C>             <C>                 <C>     
Oil sales               17,039         $20.77             $354,000     7,569           $25.83              $196,000
Royalties paid                                            (104,000)                                         (27,000)
                                                          ---------                                        ---------
Total                                                     $250,000                                         $169,000
                                                          ========                                         ========
</TABLE>

         Gas sales decreased 12%. There was a 2% increase in the number of units
sold but a 10%  decrease  in gas  prices.  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>
                                                   Three month period ended September 30,
                                            1997                                              1996
                         --------------------------------------------     --------------------------------------------
                                     Average price                                    Average price
                         mmcf           per mcf             Total         mmcf           per mcf             Total
<S>                       <C>            <C>                 <C>           <C>            <C>                <C>     
Gas sales                 52             $1.44               $75,000       51             $1.60              $ 82,000
Royalty income                                                25,000                                           24,000
Royalties paid                                               (10,000)                                          (4,000)
                                                             --------                                        ---------
Total                                                        $90,000                                         $102,000
                                                             =======                                         ========
</TABLE>



<PAGE>


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

         Proceeds  under carried  interest  agreements  decreased 39% to $75,000
during 1997  compared to $121,000 in 1996.  Proceeds  should  increase  when the
balance of capital costs to be recovered on one of the  properties is completed.
In addition,  the operator of one of the  properties  changed during the current
quarter and there has been a delay in reporting information.

         Interest  and  other  income  was 45%  lower in 1997.  Interest  income
decreased 19% from $121,000 in 1996 to $98,000 in the current  period due to the
decrease in funds  available  for  investment  during 1997 compared to the prior
period. In addition,  the 1997 period includes proceeds from the sale of seismic
data in the amount of $8,000 compared to $41,000 in 1996.

         General and administrative expenses increased  36% in 1997 to  $241,000
from $178,000  in 1996.  Business  taxes, which are  based on the  Company's net
worth, increased  in  1997.  Directors' fees  also  increased  in  1997  because
four nonemployee directors  are being paid  fees in 1997  compared to 1996  when
only two directors were paid fees.

         Legal  expenses  decreased  23% during  1997 to  $327,000  compared  to
$426,000  during  1996.  The court in Calgary was closed  during July and August
1997, whereas, in 1996, the Company was preparing  for the commencement of trial
in September 1996 during the comparable period.

         Lease  operating  costs increased 167% from $70,000 in 1996 to $186,000
in the 1997  period.  The  increase  represents  the  increased  charges  by the
operators of the Company's  properties  during the current period.  Although the
revenue on these properties also increased during the period,  the costs are not
yet  proportional  to  revenue  because  some  of the  new  wells  are  awaiting
installation of production facilities.

         Depletion,  depreciation and amortization expense decreased 13% in 1997
to $110,000  from  $127,000 in 1996.  The decrease in depletion is the result of
the 1997  reduction  in the  carried  interest  production  compared to the 1996
period.

         A foreign exchange loss of $5,000 was recorded in 1997, compared with a
loss of $13,000 in 1996 on the Company's U.S. investments.

         Income taxes. No provision for income taxes is required for the current
period.


<PAGE>


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

         Nine month period ended September 30, 1997 vs. September 30, 1996

         The net loss for the quarter ended  September  30, 1997 was  $1,298,000
($(.09) per share) compared to a net loss of $1,114,000 ($.08 per share) for the
1996 period. A summary of revenue and expenses during the periods is as follows:

                                1997                1996              Net Change
                                ----                ----              ----------
Revenues                     $ 1,655,595          $ 1,624,492         $  31,103
Costs and expenses            (2,953,271)          (2,738,060)         (215,211)
                             ------------         ------------        ----------
Net loss                     $(1,297,676)         $(1,113,568)        $(184,108)
                             ============         ============        ==========

         Oil sales  increased  57% due to a 92%  increase in the number of units
sold which was partially  offset by a 7% decrease in oil prices.  Oil unit sales
in barrels  ("bbls")  (before  deducting  royalties)  and the average  price per
barrel sold during the periods indicated were as follows:

<TABLE>
<CAPTION>
                                                       Nine month period ended September 30,
                                            1997                                              1996
                        ---------------------------------------------     --------------------------------------------
                                     Average price                                    Average price
                         bbls           per bbl             Total          bbls          per bbl             Total
<S>                     <C>             <C>               <C>             <C>            <C>                 <C>     
Oil sales               45,001          $22.66            $1,020,000      23,467         $24.37              $575,000
Royalties paid                                              (237,000)                                         (77,000)
                                                          -----------                                        ---------
Total                                                     $  783,000                                         $498,000
                                                          ==========                                         ========
</TABLE>

         Gas sales  increased  31%.  There was a 7% decrease in units sold which
was offset by a 55%  increase in gas prices.  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>
                                                       Nine month period ended September 30,
                                            1997                                              1996
                         --------------------------------------------      -------------------------------------------
                                     Average price                                    Average price
                         mmcf           per mcf             Total          mmcf          per mcf             Total
<S>                       <C>            <C>                <C>            <C>            <C>                <C>     
Gas sales                 141            $2.38              $336,000       152            $1.54              $237,000
Royalty income                                               104,000                                           73,000
Royalties paid                                               (68,000)                                         (26,000)
                                                          -----------                                      -----------
Total                                                       $372,000                                         $284,000
                                                            ========                                         ========
</TABLE>

         Proceeds under carried  interest  agreements  decreased 63% to $222,000
during 1997 compared to  $607,000 in 1996.  The Company  had been  involved in a
dispute with an operator of one of the Company's properties.  During the quarter
ended September 30, 1997,  the dispute was resolved in  substantial part against
the Company which resulted  in a decrease of approximately  $276,000 in proceeds
under carried interest agreements during the current nine month period.


<PAGE>


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

         Interest  and other  income  was 18%  higher in 1997.  Interest  income
increased  from  $142,000 in 1996 to $261,000 in the current year because  funds
were not available for investment until after the June 1996 rights offering.  In
addition, the 1997 period includes proceeds from the sale of seismic data in the
amount of  $18,000  compared  to  $94,000 in 1996.  It is not  possible  for the
Company to estimate the amount of future  seismic data sales which are dependent
on a  purchaser's  evaluation  of a  prospective  oil and gas  prospect  for the
related seismic data.

         General and  administrative  expenses increased 18% to $855,000 in 1997
from  $722,000  in 1996.  In 1996,  the Company  saved the cost of printing  and
mailing a separate  annual  report by  utilizing  the June 1996 rights  offering
prospectus in lieu of an annual  report.  In addition,  business taxes which are
based on the  Company's  net  worth  increased  in 1997.  Directors'  fees  also
increased in 1997 because four nonemployee directors are being paid fees in 1997
compared to 1996 when only two directors were paid fees.

         Legal  expenses  decreased  9% during  1997 to  $1,114,000  compared to
$1,229,000  during 1996.  The court in Calgary was closed during July and August
1997, whereas, in 1996, the Company was preparing  for the commencement of trial
in September 1996 during the comparable period.

         Lease  operating  costs increased 98% from $312,000 in 1996 to $618,000
in the 1997  period.  The  increase  represents  the  increased  charges  by the
operators of the Company's  properties  during the current period.  Although the
revenue on these properties also increased during the period,  the costs are not
yet  proportional  to  revenue  because  some  of the  new  wells  are  awaiting
installation of production facilities.

         Depletion,  depreciation and amortization expense decreased 11% in 1997
to $360,000  from  $403,000 in 1996.  The decrease in depletion is the result of
the 1997  reduction  in the  carried  interest  production  compared to the 1996
period.

         A foreign exchange gain of $46,000 was recorded in 1997,  compared with
a loss of $18,000 on the Company's  U.S.  investments in 1996. In 1997, the gain
was  attributable  to a  strengthening  of the U.S.  dollar as  compared  to the
Canadian dollar on the Company's U.S. investments.

         Income taxes. No provision for income taxes is required for the current
period.


<PAGE>



                           PART II - OTHER INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1997

Item 6.  Exhibits and Reports on Form 8-K

         On October  1, 1997,  the  Company  filed a Current  Report on Form 8-K
reporting that effective  September 30, 1997, Mr. Charles J. Horne resigned as a
director of the Company  primarily  for health  related  reasons.  On October 1,
1997,  Mr.  Timothy L.  Largay was  elected to fill the  vacancy  created by Mr.
Horne's resignation.



<PAGE>


                                   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:  November 11, 1997                   By  /s/ Beverley A. Scobie
                                               Treasurer and Chief Financial and
                                               Accounting Officer