UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



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



For the quarterly period endedMarch 31, 2007



Commission File No.001-32920







(Exact name of registrant as specified in its charter)





|Yukon Territory(State or other jurisdiction of incorporation
or organization) | N/A(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------- | ---------------------------------------



1625 Broadway, Suite 330

Denver, Colorado 80202

(Address of principal executive offices, including zip code)





303-592-8075

(Registrants telephone number, including area code)





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

|Yes | No | 
|--- | -- | 



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



|Large accelerated filer | Accelerated filer | Non-accelerated filer
|----------------------- | ----------------- | ---------------------



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

|Yes |  | No
|--- |  | --



87,573,426 shares of no par value of
the Registrants Common Stock were issued and outstanding as of April 30, 2007.

___________________________

---







KODIAK OIL & GAS CORP.

FORM 10-Q

TABLE OF CONTENTS



|                                                                                               | 
|---------------------------------------------------------------------------------------------- | 
|PART I - FINANCIAL INFORMATION                                                                 | 
|
|ITEM 1.  FINANCIAL STATEMENTS                                                                  | 
|
|ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 
|
|ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            | 
|
|ITEM 4.  CONTROLS AND PROCEDURES                                                               | 
|
|PART II - FINANCIAL INFORMATION                                                                | 
|
|ITEM 1.  LEGAL PROCEEDINGS                                                                     | 
|
|ITEM 1A. RISK FACTORS                                                                          | 
|
|ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           | 
|
|ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                                       | 
|
|ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   | 
|
|ITEM 5.  OTHER INFORMATION                                                                     | 
|
|ITEM 6.  EXHIBITS                                                                              | 
|
|
|SIGNATURES                                                                                     | 





i



---







PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



KODIAK OIL & GAS CORP.

CONSOLIDATED BALANCE SHEETS



|ASSETS                                                           | (UNAUDITED)
March 31,
2007 | (AUDITED)
December 31,
2006
|---------------------------------------------------------------- | -------------------------- | ---------------------------
|                                                                 |                            |                            
|Current assets:                                                  |                            |                            
|Cash and cash equivalents                                        |                            |                            
|Accounts receivable                                              |                            |                            
|Trade                                                            |                            |                            
|Accrued Sales                                                    |                            |                            
|Prepaid expenses and other                                       |                            |                            
|                                                                 |                            |                            
|Total Current Assets                                             |                            |                            
|                                                                 |                            |                            
|Property and equipment (full cost method), at cost:              |                            |                            
|Proved oil and gas properties                                    |                            |                            
|Unproved oil and gas properties                                  |                            |                            
|Wells in progress                                                |                            |                            
|Less-accumulated depletion, depreciation, amortization and       |                            |                            
|asset impairment                                                 |                            |                            
|                                                                 |                            |                            
|Net oil and gas properties                                       |                            |                            
|                                                                 |                            |                            
|Other property and equipment, net of accumulated depreciation    |                            |                            
|of $115,868 in 2007 and $102,231 in 2006                         |                            |                            
|Restricted Investments                                           |                            |                            
|                                                                 |                            |                            
|Total Assets                                                     |                            |                            
|                                                                 |                            |                            
|LIABILITIES AND STOCKHOLDERS EQUITY                             |                            |                            
|Current Liabilities:                                             |                            |                            
|Accounts payable and accrued liabilities                         |                            |                            
|Noncurrent liabilities:                                          |                            |                            
|Asset retirement obligation                                      |                            |                            
|                                                                 |                            |                            
|Total Liabilities                                                |                            |                            
|                                                                 |                            |                            
|Stockholders equity:                                            |                            |                            
|Common stock, $0.01 par value: authorized-100,000,000 shares     |                            |                            
|Issued:  87,573,426 shares in 2007 and 87,548,426 shares in 2006 |                            |                            
|Additional paid-in capital                                       |                            |                            
|Accumulated deficit                                              |                            |                            
|                                                                 |                            |                            
|Total Stockholders' Equity                                       |                            |                            
|                                                                 |                            |                            
|Total Liabilities and Stockholders Equity                       |                            |                            
|                                                                 |                            |                            

SEE ACCOMPANYING NOTES



1



---









KODIAK OIL & GAS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                             | Three months ended March 31,
|------------------------------------------------------------ | ----------------------------
|
|                                                             |                             
|Revenues:                                                    |                             
|Gas production                                               |                             
|Oil production                                               |                             
|Interest                                                     |                             
|                                                             |                             
|Total revenue                                                |                             
|                                                             |                             
|Costs and expenses:                                          |                             
|Oil and gas production                                       |                             
|Depletion, depreciation, amortization                        |                             
|and abandonment liability accretion                          |                             
|Asset impairment                                             |                             
|General and administrative                                   |                             
|(Gain) / loss on currency exchange                           |                             
|                                                             |                             
|Total costs and expenses                                     |                             
|                                                             |                             
|Net loss                                                     |                             
|                                                             |                             
|Basic and diluted weighted-average common shares outstanding |                             
|                                                             |                             
|Basic and diluted net loss per common share                  |                             
|                                                             |                             

SEE ACCOMPANYING NOTES



2



---







KODIAK OIL & GAS CORP.

STATEMENT OF STOCKHOLDERS EQUITY

(UNAUDITED)



|                                 | Common Stock | Paid-in | Accumulated | Total
Stockholders
|-------------------------------- | ------------ | ------- | ----------- | -------------------
|
|                                 |             
|Balance December 31, 2005:       |              |         |             | 54,547,158         
|Issuance of stock for cash:      |              |        
|-pursuant to private placement   |              |         |             | 31,589,268         
|-pursant to exercise of options  |              |         |             | 1,412,000          
|Stock issuance costs             |              |         |             |                    
|Stock based compensation         |              |         |             |                    
|Net loss                         |              |         |             |                    
|                                 |             
|Balance December 31, 2006:       |              |         |             | 87,548,426         
|                                 |             
|Issuance of stock for cash:      |              |        
|-pursuant to exercise of options |              |         |             | 25,000             
|Stock based compensation         |              |         |             |                    
|Net loss                         |              |         |             |                    
|                                 |             
|Balance March 31, 2007:          |              |         |             | 87,573,426         
|                                 |             

SEE ACCOMPANYING NOTES



3



---







KODIAK OIL & GAS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                             | Three months ended March 31,
|------------------------------------------------------------ | ----------------------------
|
|                                                             |                             
|Cash flows from operating activities:                        |                             
|Net loss                                                     |                             
|Reconciliation of net loss to net cash (used in)/provided by |                             
|operating activities:                                        |                             
|Depletion, depreciation, amortization and                    |                             
|abandonment liability accretion                              |                             
|Asset impairment                                             |                             
|Stock based compensation                                     |                             
|                                                             |                             
|Changes in current assets and liabilities:                   |                             
|Accounts receivable-trade                                    |                             
|Accounts receivable-accrued sales                            |                             
|Prepaid expenses and other                                   |                             
|Accounts payable                                             |                             
|Accrued expenses                                             |                             
|                                                             |                             
|Net cash (used in)/provided by operating activities          |                             
|                                                             |                             
|Cash flows from investing activities:                        |                             
|Oil and gas properties                                       |                             
|Equipment                                                    |                             
|                                                             |                             
|Net cash (used in) investing activities                      |                             
|                                                             |                             
|Cash flows from financing activity:                          |                             
|Proceeds from the issuance of shares                         |                             
|Stock issuance costs                                         |                             
|                                                             |                             
|Net cash provided by financing activities                    |                             
|                                                             |                             
|Net change in cash and cash equivalents                      |                             
|                                                             |                             
|Cash and cash equivalents at beginning of the period         |                             
|                                                             |                             
|Cash and cash equivalents at end of the period               |                             
|                                                             |                             
|Non-cash Items                                               |                             
|Oil and gas property accrual included in:                    |                             
|Accounts payable                                             |                             
|Asset retirement obligation                                  |                             
|                                                             |                             





SEE ACCOMPANYING NOTES



4



---







KODIAK OIL & GAS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Organization



Description of Operations



Kodiak Oil & Gas Corp. and its subsidiary (Kodiak or the Company) is a public company
listed for trading on the American Stock Exchange (AMEX) whose corporate headquarters are located in Denver, Colorado, USA. The Company is an independent energy company engaged in the exploration, exploitation, development, acquisition and production of natural gas and crude oil entirely in the western United States.



The Company was incorporated (continued) in the Yukon Territory on September 28, 2001.



Note 2  Basis of Presentation and Significant Accounting Policies



Basis of Presentation



The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Kodiak Oil & Gas (USA) Inc. All significant inter-company balances and transactions have been eliminated. The majority of the Corporations business is transacted in US dollars and, accordingly, the financial statements are expressed in US dollars.The accompanying unaudited consolidated financial statements have been prepared in accordance with
U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U. S. generally accepted accounting principles for complete financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the Companys results for the periods presented. These consolidated financial statements should be read in conjunction with the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.



Certain amounts in the 2006 unaudited consolidated financial statements have been reclassified to conform to the 2007 unaudited consolidated financial statement presentation; such reclassifications had no effect on the 2006 net loss.



Use of Estimates in the Preparation of Financial Statements



The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of oil and gas reserves, assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances. Although actual results may differ from these estimates under different assumptions or conditions, the Company believes that its estimates are reasonable.





5



---







Cash and Cash Equivalents



Cash and cash  equivalents  consist of all highly  liquid  investments  that are
readily  convertible  to cash and have  maturities  of three months or less when
purchased.  The carrying value of cash and cash  equivalents  approximates  fair
value due to the short-term nature of these instruments.



Restricted Investment



The restricted investment balance as of March 31, 2007 and December 31, 2006 is comprised of: (a) $175,000 certificate of deposit to collateralize a surety bond to provide for state bonding requirements for plugging and abandonment liabilities; and (b) $42,400 certificate of deposit to collateralize the costs of office improvements that will be released over the four year remaining term of the lease at $10,600 per year. Subsequent to period end, the Company increased the certificate of deposit to collateralize the office improvements for the new leased space to $67,797.



Concentration of Credit Risk



The Companys cash equivalents and short-term investments are exposed to concentrations of credit risk. The Company manages and controls this risk by investing these funds with major financial institutions.



The Companys receivables are comprised of oil and gas revenue receivables and joint interest billings receivable. The amounts are due from a limited number of entities. Therefore, the collectability is dependent upon the general economic conditions of the few purchasers and joint interest owners. The receivables are not collateralized. However, to date the Company has had minimal bad debts.



Oil and Gas Producing Activities



The Company follows the full cost method of accounting for oil and gas operations whereby all costs related to the exploration and development of oil and gas properties are initially capitalized into a single cost center (full cost pool). Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling directly related to acquisition and exploration activities. Proceeds from property sales are generally credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves attributable to
these costs. A significant alteration would typically involve a sale of 25% or more of the proved reserves related to a single full costs pool.



Costs capitalized, together with the costs of production equipment, are depleted and amortized on the unit-of-production method based on the estimated gross proved reserves as determined by independent petroleum engineers. The costs of unproved properties are withheld from the depletion base until such time as they are either developed or abandoned. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion calculations.



For depletion and depreciation purposes, relative volumes of oil and gas production and reserves are converted at the energy equivalent rate of six thousand cubic feet of natural gas to one barrel of crude oil.



Under the full cost method of  accounting,  capitalized  oil and gas  property
costs less accumulated depletion and net of deferred income taxes may not exceed
an amount equal to the present value,



6



---





discounted at 10%, of estimated future net
revenues from proved oil and gas reserves plus the cost, or
estimated fair value, if lower of unproved properties.  Should capitalized costs
exceed this ceiling, an impairment is recognized. The present value of estimated
future net  revenues is computed  by applying  current  prices of oil and gas to
estimated  future  production  of proved oil and gas reserves as of  period-end,
less estimated  future  expenditures  to be incurred in developing and producing
the  proved   reserves   assuming   the   continuation   of  existing   economic
conditions.



As of December  31,  2006,  based on oil and gas prices of $50.37 per barrel and $4.53 per Mcf,  the full cost  pool  would  have  exceeded  the above  described ceiling by  $5,219,276. However, subsequent to year end, oil and gas prices increased and the Company completed a well with additional reserves; using these prices, the Companys full cost pool would not have exceeded the ceiling limitation. As a result of the increase in the ceiling amount using subsequent prices and an estimate of the additional proved reserves, the Company did not record an impairment of its oil and gas prices at December 31, 2006. As of March 31, 2007, the Companys full cost pool exceeded the ceiling limitation based on oil and gas prices of $55.12 per barrel and $4.16 per Mcf. Subsequent commodity price increases were not sufficient to eliminate the need for the impairment and therefore, impairment
expense of $14,000,000 was recorded during the quarter ended March 31, 2007.



Estimated reserve quantities and future net cash flows have the most significant impact on the Company because these reserve estimates are used in providing a measure of the Companys overall value. These estimates are also used in the quarterly calculations of depletion, depreciation and impairment of the Companys proved properties.



Estimating accumulations of gas and oil is complex and is not exact because of the numerous uncertainties inherent in the process. The process relies on interpretations of available geological, geophysical, engineering and production data. The extent, quality and reliability of this technical data can vary. The process also requires certain economic assumptions, some of which are mandated by the Securities and Exchange Commission (SEC), such as gas and oil prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The accuracy of a reserve estimate is a function of the quality and quantity of available data; the interpretation of that data; the accuracy of various mandated economic assumptions; and the judgment of the persons preparing the estimate.



The most accurate method of determining proved reserve estimates is based upon a decline analysis method, which consists of extrapolating future reservoir pressure and production from historical pressure decline and production data. The accuracy of the decline analysis method generally increases with the length of the production history. Since most of the Companys wells have been producing less than six years,  their  production  history is relatively  short,  so other (generally less accurate) methods such as volumetric analysis and analogy to the production  history of wells of other  operators in the same reservoir were used in  conjunction  with the decline  analysis  method to determine  the  Companys estimates  of  proved  reserves   including   developed   producing,   developed non-producing and undeveloped. As the Companys wells are produced over time and more data
is available, the estimated proved reserves will be redetermined on an annual basis and may be adjusted based on that data.



Actual  future  production,  gas and oil prices,  revenues,  taxes,  development
expenditures,  operating  expenses and  quantities  of  recoverable  gas and oil
reserves  most  likely  will  vary  from  the  Companys   estimates.   Any
significant variance could materially affect the quantities and present value of
the  Companys  reserves.  For example, a decrease in price of $0.10 per Mcf
for  natural  gas and $1.00 per barrel of oil would  result in a decrease in the
Companys  December  31,  2006  present  value of future  net cash flows of
approximately  $763,000. In addition, the Company may adjust estimates of proved
reserves to reflect production history,  acquisitions,  divestitures,  ownership
interest  revisions,  results of



7



---







exploration  and development and prevailing gas
and oil prices. The Companys  reserves may also be susceptible to drainage
by operators on adjacent properties.



Other Property and Equipment



Other property and equipment such as office  furniture and equipment,  vehicles,
and computer  hardware and software are recorded at cost.  Costs of renewals and
improvements  that  substantially  extend  the  useful  lives of the  assets are
capitalized.   Maintenance   and  repair  costs  are  expensed  when   incurred.
Depreciation  is recorded  using the  straight-line  method  over the  estimated
useful  lives of three years for computer  equipment,  and five years for office
equipment  and vehicles.  When other  property and equipment is sold or retired,
the capitalized costs and related accumulated  depreciation are removed from the
accounts.



Fair Value of Financial Instruments



The Companys financial instruments including cash and cash equivalents, accounts receivable and accounts payable are carried at cost, which approximates fair value due to the short-term maturity of these instruments.



Stock-Based Compensation



The Company has historically accounted for stock-based compensation under the provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. This statement requires us to record an expense associated with the fair value of stock-based compensation. We currently use the Black-Scholes option valuation model to calculate stock based compensation at the date of grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate.



On January 1, 2006, we adopted SFAS No. 123(R), Accounting for Stock-Based Compensation, using the modified prospective method. Under the modified prospective method, the adoption of SFAS No. 123(R) applies to new awards and to awards modified, repurchased, or cancelled after December 31, 2005, as well as to the unvested portion of awards outstanding as of January 1, 2006. In accordance with the modified prospective method, we have not adjusted the financial statements for periods ended prior to January 1, 2006. We did not recognize any one time effects of the adoption and continued to use similar option valuation models and assumptions as were used prior to January 1, 2006. There is no fair-value-based compensation expense associated with prior awards that were not vested on the date of the adoption of SFAS No. 123(R).



Asset Retirement Obligation



The  Company  follows  SFAS  No.  143,  Accounting  for  Asset  Retirement
Obligations,  which  requires  that the fair value of a  liability  for an
asset retirement obligation be recognized in the period in which it was incurred
if a  reasonable  estimate of fair value  could be made.  The  associated  asset
retirement  costs  are  capitalized  as  part  of  the  carrying  amount  of the
long-lived  asset. The increase in carrying value of a property  associated with
the capitalization of an asset retirement cost is included in proved oil and gas
properties in the consolidated  balance sheets.  The Company depletes the amount
added to proved oil and gas property costs. The future cash outflows  associated
with  settling the asset  retirement  obligations  that have been accrued in the
accompanying balance sheets are excluded from the ceiling test calculations. The
Company also depletes the estimated  dismantlement and abandonment costs, net of
salvage values,



8



---





associated with future development activities that have not yet
been capitalized as asset retirement obligations.  These costs are also included
in the  ceiling  test  calculation.  The  asset  retirement  liability  will  be
allocated to operating  expense by using a systematic and rational  method.  The
Company
has  recorded a net  liability  of  $289,631 as of March 31,  2007,  compared to
$129,205 as of March 31, 2006. The information below reconciles the value of the
asset retirement obligation for the periods presented.



|                                  | Three months ended March 31,
|--------------------------------- | ----------------------------
|
|                                  |                             
|Balance beginning of period       |                             
|Liabilities incurred              |                             
|Liabilities settled               |                             
|Revisions in estimated cash flows |                             
|Accretion expense                 |                             
|                                  |                             
|Balance end of period             |                             
|                                  |                             



Recently Issued Accounting Pronouncements:



In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The interpretation clarifies the accounting for uncertainty in income taxes recognized in a companys financial statements in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Specifically, the pronouncement prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on the related derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions. The interpretation is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have any impact on the Companys
consolidated financial position, results of operations or cash flows.



On February 15, 2007, the FASB issued SFAS No. 159 The Fair Value Option for Financial Assets and Financial Liabilities.  This Statement   establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for the Companys financial statements issued in 2008. The Company is currently evaluating the impact that the adoption of SFAS No. 159 might have on its financial position or results of operations.



Note 3  Compensation Plan



Stock-based Compensation Plan



The Company has a stock-based compensation plan whereby share purchase options may be granted with an exercise price equal to the trading value when granted. The total number of share purchase options outstanding cannot exceed 10% of the total number of shares issued.



For the three-month periods ended March 31, 2007 and 2006, the Company recorded stock-based compensation of $275,580 and $51,243 respectively. The Company did not grant any options during these same periods.



9



---







The following assumptions were used for the Black-Scholes model:



|                                                     | December 31, 2006
|---------------------------------------------------- | -----------------
|                                                     |                  
|Risk free rates                                      |                  
|Dividend yield                                       |                  
|Expected volatility                                  |                  
|Weighted average expected stock option life          |                  
|The weighted average fair value at the date of grant |                  
|for stock options granted is as follows:             |                  
|Weighted average fair value per share                |                  
|Total options granted                                |                  
|                                                    
|Total weighted average fair value of options granted |                  



Note 4  Stock Options



A summary of the stock options outstanding is as follows:



|                                         | Number
of Options | Weighted
Average
Exercise
Price
|---------------------------------------- | ----------------- | -------------------------------
|                                         |                   |                                
|Balance outstanding at December 31, 2006 |                   |                                
|Exercised                                |                   |                                
|                                         |                   |                                
|Balance outstanding at March 31, 2007    |                   |                                
|                                         |                   |                                
|Options exercisable at March 31, 2007    |                   |                                
|                                         |                   |                                



10



---





At March 31, 2007, stock options outstanding are as follows:



|Exercise Price | Number of
Shares | Expiry Date
|-------------- | ---------------- | -----------
|               |                  |            
|$        0.14  |                  | 125,000    
|$        0.45  |                  | 1,000,000  
|$        0.90  |                  | 501,500    
|$        1.08  |                  | 875,000    
|$        2.11  |                  | 50,000     
|$        3.17  |                  | 1,300,000  
|$        4.03  |                  | 285,000    
|$        3.81  |                  | 475,000    
|               |                  |            
|               |                  | 4,611,500  
|               |                  |            

Note 5 - Commitments and Contingencies



Rent expense was $21,555 and $16,324 for the periods
ended March 31, 2007 and 2006 respectively. In February 2007, the Company entered
into a lease  agreement  for office  facilities  that  expires  June  2012.  This lease
replaced the Companys previous lease that was scheduled to expire on June 30, 2010.



The following table shows the annual rentals per year for the life of the lease committed to in February 2007:



|      | 
|----- | 
|2007  | 
|2008  | 
|2009  | 
|2010  | 
|2011  | 
|2012  | 
|      | 
|Total | 
|      | 



The Company has no other capital leases and no other operating lease commitments.



As is customary in the oil and gas industry, the Company may at times have commitments in place to reserve or earn certain acreage positions or wells. If the Company does not pay such commitments, the acreage positions or wells may be lost.



Note 6  Differences Between Canadian and United States Accounting Principles



These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America which differ in certain respects with those principles and practices that the Company would have followed had its financial statements been prepared in accordance with accounting principles and practices generally accepted in Canada.





11



---





The Companys accounting principles generally accepted in the United States of American differ from accounting principles generally accepted in Canada as follows:



| | a) |  | Comprehensive
Loss
| | -- |  | ------------------



US GAAP requires  disclosure of comprehensive loss which, for the Company, is net
loss under US GAAP plus the change in cumulative translation adjustment under US
GAAP.



Comprehensive loss came into effect with fiscal years beginning on or after October 1, 2006.



Management does not believe that any recently issued, not yet effective, Canadian accounting standards if currently adopted could have a material effect on the accompanying financial statements.





12



---







|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Forward-Looking Statements



This Quarterly Report includes certain statements that may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements included in this Quarterly Report, other than statements of historical facts, address matters that the Company reasonably expects, believes or anticipates will or may occur in the future. Forward-looking statements may relate to, among other things:



| |  | the Companys future financial position, including working capital and anticipated cash flow;
| | - | ---------------------------------------------------------------------------------------------

| |  | the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas;
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| |  | market demand;
| | - | --------------

| |  | risks and uncertainties involving geology of oil and gas deposits;
| | - | ------------------------------------------------------------------

| |  | the uncertainty of reserve estimates and reserves life;
| | - | -------------------------------------------------------

| |  | the uncertainty of estimates and projections relating to production, costs and expenses;
| | - | ----------------------------------------------------------------------------------------

| |  | potential delays or changes in plans with respect to exploration or development projects or capital expenditures;
| | - | -----------------------------------------------------------------------------------------------------------------

| |  | fluctuations in oil and gas prices, foreign currency exchange rates and interest rates;
| | - | ---------------------------------------------------------------------------------------

| |  | health, safety and environmental risks;
| | - | ---------------------------------------

| |  | uncertainties as to the availability and cost of financing; and
| | - | ---------------------------------------------------------------

| |  | the possibility that government policies or laws may change or governmental approvals may be delayed or withheld.
| | - | -----------------------------------------------------------------------------------------------------------------

Other sections of the Quarterly Report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Our forward-looking statements contained in this Quarterly Report are made as of the respective dates set forth in this Quarterly Report. Such forward-looking statements are based on the beliefs, expectations and opinions of management as of the date the statements are made. We do not intend to update these forward-looking statements, except as otherwise required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.



13



---







Overall Performance



The Company is a public company listed on the American Stock Exchange (AMEX), trading symbol KOG, and is engaged in the business of exploration and development of oil and gas properties. The Companys principal focus is on the exploration and development of oil and gas properties within two producing basins in the Rocky Mountain Region. The Company is exploring and developing natural gas in the Green River Basin in southwestern Wyoming and oil in the Williston Basin in Montana and North Dakota.



Our results of operations and financial condition are significantly affected by oil and natural gas commodity prices, which can fluctuate dramatically. The commodity prices are beyond the companys control and are difficult to predict. Spot market prices reflected worldwide concerns about producer ability to ensure sufficient supply to meet increasing demand amid a host of uncertainties caused by political instability, a weaker US dollar and crude oil refining constraint. We receive lower prices for our oil and gas than what is posted on the New York Mercantile Exchange (NYMEX). The price differentials received for our products vary from month to month.



Exploratory Activity



Williston Basin-Wrangler/Lowell Prospect



We own a 50% working interest (WI) and operate the Wrangler/Lowell Project located in Sheridan County, Montana encompassing approximately 22,194 gross acres. The primary producing objectives include the Mission Canyon and the Red River Formations at approximate depths of 8,000 feet and 11,000 feet, respectively. During the first quarter of 2007 we completed the Larsh #2-13 well in the Red River Formation. The well was placed on production with an initial flowing rate of 232 barrels of oil per day. The well is still flowing but will be placed on pump during the second quarter of 2007.



We have identified several geologic leads in this same prospect area based on a 3-D
seismic  program  completed in 2006. We are currently  drilling a stepout to the
Larsh #2-13 well,  which we expect to complete in May 2007.  The  Companys
share  of  the  development   well  is  expected  to  be  $1.4  million  through
completion.



Williston Basin-Great Bear Prospect



The Great Bear Prospect is located  along the  northwest  flank of the Williston
Basin in Divide County,  North Dakota.  The main  reservoir  objective is porous
dolomite in the Ordovician Red River Formation. The Red River Formation produces
oil and  natural  gas from  structural  and  stratigraphic  traps in the area of
interest. We have acquired an interest under approximately  14,500 gross acres on
the Great Bear Prospect.  Based upon a reinterpretation of seismic data, we have
identified  additional potential  locations.  We intend to drill one exploratory
well  on  the  prospect   lands  late  in  the  second   quarter  of  2007.  The
Companys  share of the drilling and completion  costs is estimated at $2.0
million.



Green River Basin--Vermillion Basin, Sweetwater County, Wyoming



Vermillion Basin Shallow - Almond Sandstone, Almond Coals and Ericson Sandstone



During the fourth  quarter of 2006,  the Company  participated  in a development
program of three vertical wells (approximate depth of 6,000 feet) on its Chicken
Springs Unit (50% WI 42% net revenue interest (NRI); non-operator) in Sweetwater
County,  Wyoming to develop  natural gas from the Almond



14



---





sands.  The wells were
completed  during the first quarter of 2007 and placed in production at rates of
300-600 Mcfpd. We are currently enlarging our compression facilities in the area. We
are not  planning  any  additional  development  drilling  in this area as these
formations  will be  evaluated  in the  drilling  of the  deeper  formations  as
discussed below.



Vermillion Basin Deep-Gas Project  Baxter Shale and Frontier and Dakota Sandstone

Chicken Springs, Chicken Ranch, Whiskey Canyon, Horseshoe Basin Units



The primary over-pressured deeper natural gas targets of the Vermillion Basin area are the Baxter Shale and Frontier sands at depths of up to approximately 15,000 feet. The prospective zones are present over a very large geologic area and have undergone the proper burial and subsequent uplift to generate hydrocarbons in the dry gas phase and maintain the over-pressuring created during hydrocarbon generation. Based upon early exploration work, the current production drainage projections would require well spacing of a maximum of 40 acres. While the total prospective productive area is unknown at this time, we currently control 49,427 gross acres (30,892 net), giving us the potential for over 750 locations based upon a 40-acre spacing pattern. Currently these wells cost $5.0-$6 million per well for drilling and completion.



During the first quarter of 2007, the Company completed the NT Federal #1-33 well (100% WI, 84.5% NRI  Kodiak operated) to a depth of 14,331 feet. The well was placed on production in late February 2007. The North Trail-State #4-36 (100% WI  Kodiak operated), was drilled to a total depth of 14,625 feet in late 2006 and was put on production in May 2007. We experienced some mechanical issues during completion which delayed getting the well onto sales. We are currently drilling the NT Federal #4-35 well located between the two aforementioned wells. The well is drilling below 9,000 feet and drilling operations should be completed in late May 2007 followed by completion work. We intend to drill up to six additional wells through the balance of the year and into 2008 and have allocated approximately $35 million of our budget to this project area.



We are in the process of permitting  and shooting an  approximate 43 square mile
3-D seismic  program over the northern block of our acreage.  We anticipate that
the permitting process will be completed in the second quarter of 2007, with the
data acquisition and  interpretation to be completed during the third quarter of
2007.  Total costs of the seismic  program will be  approximately  $1.5 million,
which might be shared by other working interest owners in the area.



Product Prices and Production



Our results of operations and financial condition are significantly affected by oil and natural gas commodity prices, which can fluctuate dramatically. The commodity prices are beyond the companys control and are difficult to predict. Oil and gas volume and price realization comparisons for the indicated periods are set forth below. The Company does not hedge any of its production.





15



---





|           | Three months ended March 31,
|---------- | ----------------------------
|
|           |                             
|Volume:    |                             
|Gas (Mcf)  |                             
|Oil (Bbls) |                             
|Price:     |                             
|Gas (Mcf)  |                             
|Oil (Bbls) |                             



Exploration and Development Costs



The prices  received for domestic  production of oil and gas have risen over the
past several years.  While such prices are subject to  significant  fluctuation,
the upward  trend in  commodity  prices has  increased  the demand for oil field
services and equipment.  As a result,  over the past several years,  the Company
has experienced  increases in development costs, such as those pertaining to rig
rates,  field service costs and  material prices,  as well as costs associated with
drilling, completing and operating wells.



Asset Impairment



As of March 31, 2007, the Companys full cost pool exceeded the ceiling limitation based on oil and gas prices of $55.12 per barrel and $4.16 per Mcf (including British Thermal Unit BTU adjustments of $0.38 per Mcf). In contrast, our oil and gas prices as of December 31, 2006 were $50.37 per barrel and $4.53 per Mcf (including BTU adjustments of $0.45). Consequently, the Company recorded an impairment expense of $14,000,000 during the period ended March 31, 2007.



The impairment was caused primarily by lower prices for natural gas production in the Rocky Mountain region, which the Company believes resulted from pipeline capacity constraints. As of March 31, 2007, the Henry Hub pricing for natural gas was $7.34 per Mcf, resulting in a differential of $3.56 per Mcf. Until additional pipelines are completed (the Rockies Express Pipeline is scheduled for extension in 2008, with anticipated completion in 2009), we expect differentials in the Rocky Mountains to remain higher than in other areas of the United States. The lower prices were not offset by increases in our reported reserves. In the first quarter, the Company was unable to complete the North Trail State #4-36 and the NT Federal #1-33 in the Vermillion Basin, as originally planned.



Results of Operations



Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006



The  Company  reported a net loss for the three  months  ended March 31, 2007 of
$14,454,833  compared  with a net loss of  $5,515  for the same  period in 2006.
$14,000,000 of the 2007 loss is  attributable  to our full cost pool  write-down
during  this  period,  which  derives  from lower gas  prices at  quarter  end as
described  above.   The   Companys   earnings  before   interest,   taxes,
depreciation,  depletion, amortization, gain on foreign currency and stock based
compensation  (Adjusted EBITDA) increased to $762,372 for the three
months ended March 31, 2007 compared to $485,777 for the same period ended March
31, 2006. Adjusted EBITDA is not a GAAP measure of performance. The company uses
this non-GAAP  performance  measure  primarily to compare its  performance  with
other  companies in the  industry  that make a similar  disclosure.  The Company
believes that this  performance  measure may also be





16



---





useful to investors for the
same  purpose.  Investors  should not consider this measure in isolation or as a
substitute  for  operating  income,  or any other  measure for  determining  the
Companys operating performance that is calculated in accordance with GAAP.
In  addition,  because  Adjusted  EBITDA  is not a  GAAP  measure,  it  may  not
necessarily  be  comparable  to  similarly  titled  measures  employed  by other
companies.  Reconciliation between Adjusted EBITDA and net income is provided in
the table below:

|                                                 | Three Months ending March 31,
|------------------------------------------------ | -----------------------------
|
|                                                 |                              
|Net Loss                                         |                              
|Add back:                                        |                              
|Depreciation, depletion and amortization expense |                              
|Asset impairment                                 |                              
|(Gain)/Loss on currency exchange                 |                              
|Stock based compensation expense                 |                              
|                                                 |                              
|Adjusted EBITDA                                  |                              
|                                                 |                              



Gas  production  volumes were 45,915 and 32,047 Mcf for the three-month  periods
ended March 31, 2007 and 2006, respectively.  Oil production volumes were 25,266
and 12,998 barrels for the three-month periods ended March 31, 2007 and 2006. As
the oil and gas price and volume table above shows, total gas price realizations
decreased  10.56% to $6.52 per Mcf for the three-month  period  ended March 31,
2007 compared to the same period ending March 31, 2006.  Oil price  realizations
were $50.55 per barrel for the three-month period ended March 31, 2007  compared
to $51.92  for the same  period  ending  March 31,  2006.  The net effect of the
pricing and volume  changes  resulted in oil and gas revenues of $1,576,817  for
the three-month  period  ended March 31, 2007 compared to $908,578 for the same
period ending March 31, 2006. On a natural gas equivalent basis, the Company produced 197.5 MMcfe for the first quarter, using a conversion rate of 6 Mcf gas to
each barrel of oil.  This compares to 109.7 MMcfe for the same period in 2006.



The Company  recorded  lease  operating and  production  tax expense of $390,775
during the three-month  period  ended March 31,  2007,  as compared to $112,914
during  the same  period  in 2006.  Depreciation,  depletion,  amortization  and
abandonment liability accretion was $1,039,246 for the three-month  period  ended March 31, 2007  compared to $387,516 for the same period in
2006.  The  changes  in  these  expenses  reflect  the  Companys   growing
production base, number of producing wells and revenues.



The  Companys  general and  administrative  costs of $1,262,960 during the
three  months  ended March 31, 2007  compares to $464,803 for the same period in
2006.  Included  in the  general  and  administrative  expense is a stock  based
compensation  charge of $275,580  and $51,243 for the periods  ending  March 31,
2007 and 2006, respectively,  for  options  issued  to  officers,  directors  and
employees  in  compliance  with  Statement  of  Financial  Accounting  Standards
(SFAS)  No.  123,  Accounting  for  Stock-Based  Compensation.   The
increase   in  general   and   administrative   expenses  is  a  result  of  the
Companys  increased  staffing  requirements  and  level of  activity.  The
Company currently has twelve full-time employees and one part-time employee,  an
increase of six from the same period in 2006.



As of March 31, 2007, based on current oil and gas prices of $55.12 per barrel and $4.16 per Mcf for our gas in the Rocky Mountain Region, the present value of the Companys future net revenue discounted at 10% exceeded the Companys full cost pool. Therefore, impairment expense of $14,000,000 was recorded during the quarter ended March 31, 2007.







17



---





Liquidity and Capital Resources



As of March 31, 2007, the Company had working capital of $42,000,204 and no long
term debt. The Company  believes that its current  working capital and cash flow
from  operations  will  fund  the  Companys  anticipated  exploration  and
development  drilling  program through year end and into the first part of 2008.
During the three-month periods ended March 31, 2007 and 2006, the Companys
share of exploration  and  development  costs was  $13,341,387  and  $14,420,938,
respectively.



The Company is currently  operating two rigs in the Rocky Mountain  Region.  The
Company has secured a drilling rig for its deep Vermillion  Basin prospect area.
This  drilling  program has  commenced  and drilling  activity  should  continue
throughout  2007. The Company is operating a second rig in the Williston  Basin.
We anticipate  utilizing this same rig throughout 2007. Future expenditures will
be subject to the  results of  continued  production.  The  Company  anticipates
capital expenditures  of  approximately  $45 million over the remaining nine
months of 2007.   The capital expenditures budget includes the proposed drilling and completion of
approximately 20 gross wells (13.38 net wells) for the total 2007 program. In the
Greater Green River Basin,  the budget  allocates  $31.5  million  to
seven gross and net (100% WI) wells  targeting  the Baxter  Shale and Dakota and
Frontier sands. Existing working capital,  anticipated cash flow from operations
and  access  to a  reserve-based  revolving  line of  credit,  which we intend to
establish  during  the  year,  are  expected  to be  sufficient  to fund  the
remaining 2007 operations and capital commitments.



As of March 31, 2007, the Company had no lines of credit or other bank financing arrangements. The Company is currently working towards developing a credit facility.  The Company has no defined benefit plan and no obligation for post retirement employee benefits.



Financial Instruments and Other Instruments



As of March  31,  2007 the  Company  had  cash,  accounts  payable  and  accrued
liabilities, which are each carried at  approximate  fair value  due to the short
maturity   date  of  those   instruments.   Unless   otherwise   noted,   it  is
managements  opinion  that  the  Company  is not  exposed  to  significant
interest,    currency   or   credit   risks   arising   from   these   financial
instruments.



Critical Accounting Policies and Estimates



We refer you to the corresponding section in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2006.



Recently Issued Accounting Pronouncements:



In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The interpretation clarifies the accounting for uncertainty in income taxes recognized in a companys financial statements in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Specifically, the pronouncement prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on the related derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions. The interpretation is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a material impact on the
Companys consolidated financial position, results of operations or cash flows.



On February 15, 2007,  the FASB issued SFAS No. 159 The  Fair Value Option
for Financial Assets and Financial Liabilities. This Statement establishes
presentation  and  disclosure  requirements  designed to facilitate  comparisons
between companies that choose different measurement attributes for







18



---





similar types
of assets and  liabilities.  SFAS No. 159 is  effective  for the  Companys
financial  statements  issued in 2008.  The Company is currently  evaluating the
impact that the adoption of SFAS No. 159 might have on its financial position or
results of operations.



Off-Balance Sheet Arrangements



We do not have any off-balance sheet financing arrangements at March 31, 2007.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------



Oil and Gas Price Fluctuations



Our primary market risk is market changes in oil and natural gas prices. Prospective revenues from the sale of products or properties will be impacted by oil and natural gas prices. A $1.00 per Mcf change in the market price of natural gas will result in approximately a $45,000 change in our gross gas production revenue. A $1.00 per barrel change in the market price of oil will result in approximately a $25,000 change in our gross oil production revenue. The impact on any potential sale of property cannot be readily determined.



Interest Rate Fluctuations



We currently maintain some of our available cash in redeemable short term investments, classified as cash equivalents, and our reported interest income from these short term investments could be adversely affected by any material changes in US dollar interest rates. A 1% change in the interest rate would have approximately a $420,300 annual impact if all of our cash was invested in interest bearing notes.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



Under the supervision and with the participation of our management, we evaluated
the design and operation of our  disclosure  controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the

Securities  Exchange  Act  of  1934,  or  the  Exchange  Act)  as of
March 31,  2007. On the basis of this review, our management concluded that
our  disclosure  controls  and  procedures  are  effectively  designed  to  give
reasonable assurance that the information we are required to disclose in reports
that we file under the  Exchange  Act is  recorded,  processed,  summarized  and
reported within the time periods specified in the rules and forms of the SEC and
to ensure that  information  required to be  disclosed  in the reports  filed or
submitted  under  the  Exchange  Act  is  accumulated  and  communicated  to our
management,  including  our Chief  Executive  Officer,  in a manner  that allows
timely decisions regarding required disclosure.



There were no changes in the Companys internal controls over financial reporting that occurred in the first fiscal quarter of 2007 that materially affected, or were reasonably likely to materially affect, its internal control over financial reporting.



19



---





PART II  OTHER INFORMATION

|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

| | None.
| | -----

|ITEM 1A. | RISK FACTORS
|-------- | ------------



Information about material risks related to the Companys business, financial condition and
results  of  operations  for the three  months  ended  March  31,  2007 does not
materially  differ from the information  set forth under the heading  Risk
Factors  in Part I, Item 1A in the  Companys  Annual  Report on Form
10-K for the year ended December 31, 2006. The risk factors disclosed in Part I,
Item 1A to our Annual Report on Form 10-K for the fiscal year ended December 31,
2006, in addition to the other  information set forth in this quarterly  report,
could  materially  affect  our  business,  financial  condition  or  results  of
operations. Additional risks and uncertainties not currently known to us or that
we deem to be immaterial  could also materially  adversely  affect our business,
financial condition or results of operations.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------



In December 2006, we raised net proceeds of $46,672,213 in a public offering of 12,075,000 shares of common stock, all of which shares were sold. The registration statements to register the shares became effective on December 15, 2006 (commission file number 333-138932) and December 18, 2006 (commission file number 333-139441). During the quarter ended March 31, 2007, we used approximately $13 million of net proceeds from the offering for exploration and drilling activities. We expect to use the remainder of our net proceeds to fund a portion of our 2007 exploration and drilling programs and for working capital and general corporate purposes.

|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------



None.

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

None



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



20



---



ITEM 6. EXHIBITS



|Exhibit Number | Description                                                                                                                 
|-------------- | ----------------------------------------------------------------------------------------------------------------------------
|10.14(1)       | Fourth Amendment to Lease, dated February 14, 2007, between Transwestern Broadreach WTC, LLC and Kodiak Oil & Gas (USA) Inc.
|31.1           | Certification of the Chief Executive Officer and Chief Accounting Officer required by Rule 13a-14(a) or Rule 15d-14(a)      
|32.1           | Certification of the Chief Executive Officer and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350                
|               |                                                                                                                             
|               |                                                                                                                             

| | (1) | Incorporated by reference to the Registrants Annual Report on Form 10-K (SEC File No. 001-32920), filed on March 27, 2007.
| | --- | ---------------------------------------------------------------------------------------------------------------------------





21



---









SIGNATURES



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



KODIAK OIL & GAS CORP.





|May 10, 2007 | /s/ Lynn A. Peterson                  | 
|------------ | ------------------------------------- | 
|             | Lynn A. Peterson                      | 
|             | President and Chief Executive Officer
|             |                                       | 







22



---