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, 1996
                               ----------------------------

[  ]     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 13,956,540
shares outstanding as of October 31,1996.

<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,
                                                                                    1996                   1995
                                                                        

                                Assets
<S>                                                                              <C>                 <C>

Current assets:
  Cash and cash equivalents                                                      $3,595,927          $  1,181,581
  U.S. Government securities                                                      5,419,365                     -
  Accounts and interest receivable                                                  804,229               350,598
  Prepaid insurance and other                                                       241,521               226,539
  Deferred costs                                                                          -               112,903
                                                                                 ----------             ---------
Total current assets                                                             10,061,042             1,871,621
                                                                                 ----------             ---------

Oil and gas properties and equipment
  (full cost method)                                                             10,583,621            10,508,619
                                                                                 -----------         ------------
                                                                                $20,644,663           $12,380,240
                                                                                ============          ===========

                 Liabilities and Shareholders' Equity

Current liabilities:
  Accounts payable                                                            $     321,245          $    125,509
  Accrued liabilities                                                               170,325               236,332
                                                                                -----------           -----------
Total current liabilities                                                           491,570               361,841
                                                                                -----------           -----------

Future site restoration costs                                                       302,672               306,728
                                                                                -----------           -----------

Shareholders' Equity
  Limited Voting Shares,  par value $1 per share 
  Authorized - 100,000,000 shares
  Outstanding -13,956,540 and 12,645,791
     shares, respectively                                                        13,956,540            12,645,791
  Contributed surplus                                                            24,930,964            16,989,397
                                                                                -----------          ------------
                                                                                 38,887,504            29,635,188
  Deficit                                                                       (19,037,083)          (17,923,517)
                                                                               -------------          ------------
Total shareholders' equity                                                       19,850,421            11,711,671
                                                                                -----------           -----------
                                                                                $20,644,663           $12,380,240
                                                                                ===========           ===========
</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,

                                                                1996                1995             1996                 1995
<S>                                                        <C>                <C>                <C>                 <C>

Revenues:
  Oil sales                                                $   168,983         $    115,013         497,897          $   414,111
  Gas sales                                                    101,858              106,081         283,790              299,867
  Proceeds under carried interest agreements                   121,452              341,460         607,436              444,062
  Interest and other income                                    161,562               31,725         235,369              107,976
                                                            ----------         ------------       ----------          -----------
                                                               553,855              594,279       1,624,492            1,266,016
                                                            ----------          -----------       ---------           ----------
Costs and expenses:
  General and administrative                                   177,820              159,016         721,774              799,540
  Legal                                                        426,357              185,297       1,229,088              602,281
  Lease operating costs                                         69,743              132,256         312,070              403,658
  Depletion, depreciation, and amortization                    127,182              134,300         402,982              375,130
  Foreign exchange loss                                         12,705                7,772          18,380               18,050
  Provision for future site restoration costs                    4,800                4,500          14,200               12,600
  Rent                                                          13,419               11,265          39,564               38,961
                                                            ----------          -----------      ------------         ------------
                                                               832,026              634,406       2,738,058            2,250,220
                                                             ---------           ----------      ----------           ----------
  Loss before income taxes                                    (278,171)             (40,127)     (1,113,566)            (984,204)
  Income taxes                                                       -                    -               -                    -
                                                        --------------      ---------------     ------------         ------------
Net loss                                                      (278,171)             (40,127)     (1,113,566)            (984,204)

  Deficit - beginning of period                            (18,758,912)         (17,705,831)    (17,923,517)         (16,761,754)
                                                           ------------         ------------    ------------        -------------
  Deficit - end of period                                 $(19,037,083)        $(17,745,958)   $(19,037,083)        $(17,745,958)
                                                          =============        =============    =============        ============

Average number of shares outstanding                        13,955,290           12,616,541      13,184,171           12,614,291
                                                            ==========         ============      ==========           ==========

Net loss per share                                           $(.02)                $(-)            $(.08)              $ (.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,

                                                                                   1996                   1995
                                                                                   ----                   ----
<S>                                                                          <C>                      <C>  
Cash flows from operating  activities:
    Net loss                                                                 $(1,113,566)             $(984,204)
    Adjustments to reconcile net loss
    to net cash used in operating activity:
      Depreciation, depletion and amortization                                   402,982                375,130
      Future site restoration costs                                               (4,060)                12,600
    Change in current assets and liabilities:
      Accounts and interest receivable                                          (453,631)               (79,469)
      Prepaid insurance and other                                                 97,921                 19,893
      Accounts payable                                                           195,735                (20,444)
      Accrued liabilities                                                        (66,008)                15,026
                                                                             ------------           -----------
  Net cash used in operations                                                   (940,627)              (661,468)
                                                                              -----------            -----------

Cash flows from investing activities:
  Additions to oil and gas properties (Net)                                     (477,978)              (302,927)
  Purchase of U.S. Government securities                                      (5,419,365)                     -
                                                                              -----------      ----------------
Net cash used in investing activities                                         (5,897,343)              (302,927)
                                                                              -----------            -----------

Cash flows from financing activities:
  Sale of Limited Voting shares less expenses                                  9,019,609                (61,693)
  Exercise of stock options                                                      232,707                 51,750
                                                                             -----------             ----------
  Net cash from financing activities                                           9,252,316                 (9,943)
                                                                              ----------            ------------

Increase (decrease) in cash and cash equivalents                               2,414,346               (974,338)
Cash and cash equivalents at the
  beginning of period                                                          1,181,581              2,225,882
                                                                              ----------              ---------
Cash and cash equivalents at the
  end of period                                                               $3,595,927             $1,251,544
                                                                              ==========             ==========
</TABLE>

<PAGE>




                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1996
                         (Expressed in Canadian Dollars)

Item 1.  Financial Statements - Notes

         The  information  for the three and nine month periods ended  September
30, 1996 and 1995 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

Liquidity and Capital Resources

         The  Company's  working  capital of $9.6 million at September 30, 1996,
and operating revenues are the Company's  principal sources of liquidity.  These
sources are expected to provide adequate liquidity for the foreseeable future.

         On June 24, 1996, the Company  concluded its offering of  approximately
1.3 million  shares to its  shareholders  at $7.50 per share.  The  offering was
oversubscribed  and the  proceeds to the Company were  approximately  $9 million
after the expenses of the offering.

         Cash flow used in operations during the nine months ended September 30,
1996  increased  to $941,000  compared to $661,000  during the  comparable  1995
period. The $280,000  difference between the periods was caused primarily by the
following:

Increase in loss from operations                   $118,000
Increase in accounts receivable                     297,000
Net change in current liabilities                  (135,000)
                                                  ---------
Difference in net cash used in operations          $280,000

         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 normal working
capital.


<PAGE>


                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1996
                         (Expressed in Canadian Dollars)

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

         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 fiscal year 1996 will be at least  $800,000  with
$478,000 spent through September 30, 1966. 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 has established a reserve for its potential share of future
site restoration costs. The estimated amount of these costs,  $690,000, is being
provided  for  on a  unit  of  production  basis  in  accordance  with  existing
legislation and industry practice.

Results of Operations

         Three month period ended September 30, 1996 vs. September 30, 1995

         The net loss for the quarter  ended  September  30,  1996 was  $278,121
$(.02) per  share)  compared  to a net loss of $40,127  ($.00 per share) for the
1995 period. A summary of revenue and expenses during the periods is as follows:


                           1996             1995            Net Change
                           ----             ----            ----------
Revenues                $ 553,855       $  594,279         $  (40,424)
Costs and expenses       (832,026)        (634,406)          (197,620)
                        ---------        ---------         ----------
Net loss                $(278,171)      $  (40,127)         $(238,044)
                       ==========       ===========        ==========
<PAGE>


                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1996
                         (Expressed in Canadian Dollars)

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

         Oil sales  increased  47% due to a 1% increase in the price of oil sold
and a 40%  increase  in the  number of units  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,
                                           1996                                            1995
                        -----------------------------------------      ---------------------------------------------
                                   Average price                                   Average price
                         bbls         per bbl             Total         bbls          per bbl                Total
<S>                     <C>            <C>                <C>          <C>             <C>                 <C>

Oil sales               7,569          $25.83             $196,000     5,402           $25.46              $138,000
Royalties paid                                             (27,000)                                         (23,000)
                                                          ---------                                        ---------
Total                                                     $169,000                                         $115,000
                                                          ========                                         ========
</TABLE>

         Gas sales  decreased  4%.  There was a 22% decrease in units sold which
was  partially  offset by a 13%  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>

                                        Three month period ended September 30,
                                             1996                                            1995
                        -----------------------------------------      ---------------------------------------------
                                     Average price                                   Average price
                         mmcf           per mcf             Total         mmcf          per mcf             Total
<S>                       <C>            <C>                <C>            <C>          <C>               <C>

Gas sales                 51             $1.60               $82,000       65            $1.41             $  92,000
Royalty income                                                24,000                                          24,000
Royalties paid                                                (4,000)                                        (10,000)
                                                            ---------                                       ---------
Total                                                       $102,000                                        $106,000
                                                            ========                                        ========
</TABLE>

         Proceeds under carried interest agreements decreased to $121,000 during
1996  compared to  $341,000  in 1995.  The  operator  of the  Company's  carried
interest properties  significantly  increased its development  activities during
1995,  thereby incurring  additional  expenses.  Proceeds under carried interest
agreements  are derived  from gross  production  revenues  after payout of these
expenses.  The 1995 quarter  benefited from increased  production as a result of
these development activities and included a nonrecurring  production payment. In
addition,  there  were  increased  development  activities  during  the  current
quarter.


<PAGE>


                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1996
                         (Expressed in Canadian Dollars)

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

         Interest  and other  income was 409%  higher in 1996.  Interest  income
increased  from $16,000 to $121,000 in the current period due to the increase in
funds  available for  investment  during 1996  compared to the prior period.  In
addition, the 1996 period includes proceeds from the sale of seismic data in the
amount of $41,000 compared to $16,000 in 1995.

         Legal expenses  increased 130% to $426,000 in 1996 from $185,000 in the
1995 period.  These expenses are related primarily to the Kotaneelee  litigation
which  increased  as a  result  of  preparation  for the  trial  which  began on
September 3, 1996 and the actual costs of the trial.

         Lease  operating  costs  decreased  47% from $134,000 to $70,000 in the
current period.  The decrease  represents  lower charges by the operators of the
Company's properties during the current period.

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



<PAGE>


                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1996
                         (Expressed in Canadian Dollars)

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

Results of Operations

Nine month period ended September 30, 1996 vs. September 30, 1995

         The net loss for the nine months  ended June 30,  1996 was  $1,113,568,
($.08 per share)  compared to a loss of  $984,204  ($.08 per share) for the 1995
period. A summary of revenue and expenses during the periods is as follows:

                        1996               1995          Net Change
                        ----               ----          ----------
Revenues             $1,624,492        $1,266,016        $358,476
Costs and expenses   (2,738,060)       (2,250,220)       (487,840)
                    -----------       -----------       ----------
Net loss            $(1,113,568)       $ (984,204)      $(129,364)
                    ============      ============      ==========

                                  Oil Revenues

         Oil  sales  increased  by 20% due  primarily  to a 6%  increase  in the
average  price of oil sold and a 10% increase in  production.  Oil unit sales in
barrels  ("bbls"),  the  average  price per barrel  sold and the  average  daily
production during the periods indicated were as follows:
<TABLE>
<CAPTION>

                                       Nine month period ended September 30,
                                         1996 Sales                                     1995 Sales      
                              ---------------------------------------     ----------------------------------------
                                           Average                                       Average
                                            price                                         price
                               bbls        per bbl           Total          bbls         per bbl          Total
<S>                           <C>           <C>             <C>            <C>          <C>              <C>

Oil sales                     23,467        $24.37          $575,000       21,274        $23.10          $491,000
Royalties paid                                               (77,000)                                     (77,000)
                                                            ---------                                   ----------
     Total                                                  $498,000                                     $414,000
                                                            ========                                     ========
</TABLE>

                                  Gas Revenues

         Gas sales  decreased  5% due to a 24%  decrease in units sold which was
partially  offset by a 14% increase in the average price for gas. 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>


                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1996
                         (Expressed in Canadian Dollars)

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

<TABLE>
<CAPTION>
                                        Nine month period ended September 30,
                                           1996 Sales                                    1995 Sales
                        ---------------------------------------------     -----------------------------------------  
                                     Average price                                   Average price
                         mmcf           per mcf                Total      mmcf          per mcf               Total
<S>                       <C>            <C>                 <C>          <C>            <C>               <C>

Gas sales                 152            $1.54               $237,000     200            $1.35             $270,000
Royalty income                                                 73,000                                        68,000
Royalties paid                                                (26,000)                                      (29,000)
                                                            ----------                                      --------
                                                             $284,000                                      $300,000
                                                             ========                                      ========
</TABLE>

         Proceeds under carried  interest  agreements  were $607,000  during the
current  period  compared to $444,000 for 1995.  The  operator of the  Company's
carried interest properties  significantly  increased its development activities
in 1995, thereby incurring additional expenses.  Proceeds under carried interest
agreements  are derived  from gross  production  revenues  after payout of these
expenses.  The current period benefited from increased production as a result of
these development activities.

     General and  administrative  costs  decreased  10% from $800,000 in 1995 to
$722,000 in 1996. Salaries, accounting and auditing expenses were reduced during
the period.

         Legal  expenses  increased  104%  to  $1,229,000  in 1996  compared  to
$602,000  in 1995.  These  expenses  are  related  primarily  to the  Kotaneelee
litigation  which increased as a result of preparation for the trial which began
on September 3, 1996 and the actual costs of the trial.

         Lease  operating costs were 23% lower from $404,000 in 1995 to $312,000
in 1996 due to reduced charges by the operators of the Company's properties.

         Depletion,  depreciation  and  amortization  expense was 7% higher from
$375,000  in 1995 to  $403,000  in 1996 due to a  reduction  in  reserves  which
increased in the cost per unit sold.

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


<PAGE>


                           PART II - OTHER INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                               September 30, 1996


Item 5.  Other Information

     On October 17, 1996,  the Company  announced  that the trial of its lawsuit
against  Amoco  Canada  and  other  Kotaneelee  working  interest  partners  was
adjourned  pending  resolution of a conflict of interest dispute involving Amoco
Canada's law firm. A hearing has been  scheduled on November 20, 1966 to resolve
the dispute.

Item 6.  Exhibits and Reports on Form 8-K

                  None.



<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 8, 1996            By  /s/ Beverley A. Scobie
                                   Treasurer and Chief Financial and
                                   Accounting Officer


<PAGE>