U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB


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


                For the quarterly period ended September 30, 2006


[ ]  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 333-127185


                            MORGAN CREEK ENERGY CORP.
        _________________________________________________________________
        (Exact name of small business issuer as specified in its charter)


            NEVADA                                                201777817
_______________________________                              ___________________
(State or other jurisdiction of                               (I.R.S. Employer
incorporation of organization)                               Identification No.)


                             10120 S. Eastern Avenue
                                    Suite 200
                            Henderson, Nevada 89052
                    ________________________________________
                    (Address of Principal Executive Offices)


                   (702) 566-1307 (Issuer's telephone number)


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


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

                                    Yes  X       No
                                       _______      ______

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

                                    Yes          No   X
                                       _______      ______

                    Applicable   only  to   issuers   involved   in   bankruptcy
proceedings during the preceding five years.

                                       N/A

<PAGE>


         Check whether the Registrant  filed all documents  required to be filed
by  Section  12, 13 and 15(d) of the  Exchange  Act  after the  distribution  of
securities under a plan confirmed by a court.

                                    Yes          No
                                       _______      ______

                      Applicable only to corporate issuers

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

Class                                  Outstanding as of November 10, 2006

Common Stock, $.001 par value                  41,814,905

Transitional Small Business Disclosure Format (check one)

     Yes      No  X

<PAGE>


PART I.  FINANCIAL INFORMATION

ITEM 1.  INTERIM FINANCIAL STATEMENTS

         BALANCE SHEETS

         INTERIM STATEMENTS OF OPERATIONS


         INTERIM STATEMENTS OF CASH FLOWS

         NOTES TO INTERIM FINANCIAL STATEMENTS

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION OR PLAN OF OPERATION

ITEM 3.  CONTROLS AND PROCEDURES

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS                                                   16

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                           21

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                     22

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                 22

ITEM 5.  OTHER INFORMATION                                                   22

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                    22

SIGNATURES                                                                   23

<PAGE>


PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                          MORGAN CREEK ENERGY CORP.

                        INTERIM FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2006
                                (Unaudited)




                            MORGAN CREEK ENERGY CORP.

                         (An Exploration Stage Company)

                          INTERIM FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2006

                                   (UNAUDITED)























BALANCE SHEETS

INTERIM STATEMENTS OF OPERATIONS

INTERIM STATEMENTS OF CASH FLOWS

NOTES TO INTERIM FINANCIAL STATEMENTS


<PAGE>
<TABLE>
<CAPTION>

                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)

                                 BALANCE SHEETS

                                                                                              September 30,       December 31,
                                                                                                   2006               2005
------------------------------------------------------------------------------------------- ------------------- -----------------

                                                                                               (unaudited)
                                     ASSETS


<S>                                                                                              <C>                 <C>
CURRENT ASSETS
   Cash                                                                                          $      1,647        $    7,110
     Prepaid                                                                                            3,816                 -
     Due from related party (Note 5)                                                                       -            200,000
------------------------------------------------------------------------------------------- ------------------- -----------------
                                                                                                        5,463           207,110

OIL AND GAS PROPERTIES, unproved (Note  3)                                                          1,534,506           300,000
------------------------------------------------------------------------------------------- ------------------- -----------------

                                                                                                 $  1,539,969        $  507,110
=========================================================================================== =================== =================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable and accrued liabilities                                                    $    123,759        $   16,015
     Agreement payable (Note 3(c))                                                                    637,500                 -
     Due to related parties (Note 5)                                                                  972,256            10,000
------------------------------------------------------------------------------------------- ------------------- -----------------
                                                                                                    1,733,515            26,015
------------------------------------------------------------------------------------------- ------------------- -----------------

GOING CONCERN (Note 1)

STOCKHOLDERS' EQUITY (DEFICIT) (Note 4)
Common stock, 100,000,000 shares authorized with $0.001 par value
 Issued and outstanding
     40,670,800 common shares (December 31, 2005 - 40,670,800)                                         40,671            10,168
     Additional paid-in-capital                                                                       668,179           698,682
   Deficit accumulated during exploration stage                                                      (902,396)         (227,755)
------------------------------------------------------------------------------------------- ------------------- -----------------

                                                                                                    (193,546)           481,095
------------------------------------------------------------------------------------------- ------------------- -----------------

                                                                                                 $  1,539,969        $  507,110
=========================================================================================== =================== =================

</TABLE>



 The accompanying notes are an integral part of these interim financial
 statements.

<PAGE>
<TABLE>
<CAPTION>


                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)

                        INTERIM STATEMENTS OF OPERATIONS
                                   (unaudited)



                                                                    Three months                        Nine         October 19,
                                                       Three           ended            Nine        Months ended        2004
                                                    months ended   September 30,    months ended      September      (inception)
                                                   September 30,        2005        September 30,        30,        to Sept. 30,
                                                         2006                           2006            2005             2006
------------------------------------------------- ---------------- --------------- --------------- ---------------- --------------


<S>                                                   <C>              <C>             <C>              <C>            <C>
GENERAL AND ADMINISTRATIVE EXPENSES

    Advertising and investor relations                $    25,000      $        -      $  107,930       $  250,000     $  157,500
    Consulting expenses                                   119,000          30,000         226,500           50,000        316,500
    Management Fees                                       129,245               -         154,245                -        154,245
    Office and general                                     89,130           3,663          96,911            9,517        112,246
    Professional fees                                      45,085           2,997          89,055           28,272        161,905
------------------------------------------------- ---------------- --------------- --------------- ---------------- --------------


NET LOSS FOR THE PERIOD                               $  (407,460)     $ (36,660)      $ (674,641)      $ (337,789)    $ (902,396)


================================================= ================ =============== =============== ================ ==============

BASIC AND DILUTED LOSS PER COMMON SHARE               $   (0.01)       $   (0.00)      $   (0.02)       $   (0.01)
================================================= =============== ================ =============== ================

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                    40,670,800       40,670,800      40,670,800       40,602,960
================================================= =============== ================ =============== ================

</TABLE>

 The accompanying notes are an integral part of these interim financial
 statements.

<PAGE>
<TABLE>
<CAPTION>

                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)

                        INTERIM STATEMENTS OF CASH FLOWS
                                   (unaudited)


                                                                       Nine                 Nine         October 19, 2004
                                                                    months ended        months ended      (inception) to
                                                                   September 30,     September 30, 2005    September 30,
                                                                       2006                                     2006
--------------------------------------------------------------- -------------------- ------------------- -----------------


<S>                                                                     <C>              <C>                  <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
  Net loss for the period                                               $ (674,641)      $     (337,789)      $  (902,396)
   Changes in working capital assets and liabilities:
     - Return of prepaid expenses from related party                       200,000                    -                 -
     - Prepaid expenses                                                     (3,816)                   -            (3,816)
     - Accrued and unpaid management fees                                   87,256                    -            87,256
    - Accounts payable and accrued liabilities                              97,744             (19,330)           123,759
--------------------------------------------------------------- -------------------- ------------------- -----------------

NET CASH USED IN OPERATING ACTIVITIES                                     (293,457)           (357,119)          (695,197)
--------------------------------------------------------------- -------------------- ------------------- -----------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of oil and gas properties                                   (597,006)                   -          (897,006)
--------------------------------------------------------------- -------------------- ------------------- -----------------

NET CASH FLOWS USED IN INVESTING ACTIVITIES                               (597,006)                   -          (897,006)
--------------------------------------------------------------- -------------------- ------------------- -----------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Advance from related party                                              885,000                  -            885,000
    Proceeds on sale of common stock                                              -              35,000           708,850
--------------------------------------------------------------- -------------------- ------------------- -----------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                   885,000              35,000         1,593,850
--------------------------------------------------------------- -------------------- ------------------- -----------------

INCREASE (DECREASE)  IN CASH                                                (5,463)           (322,119)             1,647

CASH, BEGINNING OF PERIOD                                                     7,110             370,499
                                                                                                                 -
--------------------------------------------------------------- -------------------- ------------------- -----------------

CASH, END OF PERIOD                                                     $     1,647      $       48,380       $     1,647

=============================================================== ==================== =================== =================


SUPPLEMENTAL CASH FLOW INFORMATION:
     Cash paid for interest                                             $         -      $             -      $         -
     Cash paid for income taxes                                         $         -      $             -      $         -
     Common stock issued for oil and gas property (Note 3)              $         -      $             -      $   600,000

</TABLE>


 The accompanying notes are an integral part of these interim financial
 statements.

<PAGE>


                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
--------------------------------------------------------------------------------

Morgan Creek Energy Corp. (the  "Company") is an exploration  stage company that
was  organized to enter into the oil and gas  industry.  The Company  intends to
locate, explore, acquire and develop oil and gas properties in the United States
and within North America.

During fiscal 2004,  the Company  completed the  acquisition of prospects in the
Arkoma  Basin in the State of Oklahoma,  including a 75% working  interest and a
56.25% net revenue  interest in  approximately  560 gross acres of two petroleum
and natural gas leases (the "Hurley Lease" and the "Chapman Lease"). The Company
plans to enter certain well bores on the subject  leases to test certain  target
zones for coal bed methane gas. If testing provides  evidence of gas quality and
sufficient  production  quantities,  the  Company  plans  to  raise  capital  to
undertake  a drilling  program to  establish  up to six  wells,  and  production
infrastructure  and pipeline.  During the three months ended  September 30, 2006
the Company  reached an agreement to acquire an additional  oil and gas prospect
in Alabama ("Little Cedar Creek Prospect"),  Louisiana ("Bayou Choctaw Project")
and Texas ("Cooke County Lease" and "Quachita Prospect"). Effective May 10, 2006
the Company  completed a common stock share  forward  split by the issuance of 2
new shares for each 1 outstanding share of the Company's common stock. Effective
August 8, 2006, the Company completed a further common stock share forward split
by the issuance of 2 new shares for each 1  outstanding  share of the  Company's
common stock.  All references in these financial  statements to number of common
shares, price per share and weighted average number of common shares outstanding
have been adjusted to reflect these stock splits on a retroactive basis,  unless
otherwise noted.

GOING CONCERN
The Company  commenced  operations  on October 19, 2004 and has not realized any
revenues  since  inception.  As of  September  30,  2006 the Company has a total
deficit of $902,396 and a working capital deficit of $1,728,052.  The ability of
the Company to continue as a going  concern is dependent  on raising  capital to
fund ongoing  losses and carry out its business  plan and  ultimately  to attain
profitable operations.  Accordingly, these factors raise substantial doubt as to
the Company's  ability to continue as a going  concern.  To date the Company has
funded its initial  operations by way of private  placements of common stock and
advances from related parties.

UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying  unaudited interim consolidated  financial statements have been
prepared in accordance with generally accepted accounting principals for interim
financial  information  and with the  instructions  to Form 10-QSB of Regulation
S-B. They do not include all information and footnotes required by United States
generally  accepted  accounting  principles for complete  financial  statements.
However,  except as disclosed herein,  there has been no material changes in the
information  disclosed  in the notes to the  financial  statements  for the year
ended  December 31, 2005 included in the Company's  Annual Report on Form 10-KSB
filed  with the  Securities  and  Exchange  Commission.  The  interim  unaudited
financial  statements  should  be  read  in  conjunction  with  those  financial
statements  included  in the Form  10-KSB.  In the  opinion of  Management,  all
adjustments  considered necessary for a fair presentation,  consisting solely of
normal recurring  adjustments,  have been made.  Operating  results for the nine
months ended  September 30, 2006 are not  necessarily  indicative of the results
that may be expected for the year ending December 31, 2006.

COMPARATIVE FIGURES
Certain  comparative  figures have been  reclassified in order to conform to the
current period's financial statement presentation.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------

ORGANIZATION
The Company  was  incorporated  on October 19, 2004 in the State of Nevada.  The
Company's fiscal year end is December 31. The Company's financial statements are
presented in US dollars.

<PAGE>


                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------

BASIS OF PRESENTATION
These financial  statements are presented in United States dollars and have been
prepared  in  accordance  with  United  States  generally  accepted   accounting
principles.

OIL AND GAS PROPERTIES
The  Company  follows  the full cost  method of  accounting  for its oil and gas
operations  whereby all costs related to the acquisition of methane,  petroleum,
and natural gas interests are capitalized. Under this method, all productive and
non-productive  costs  incurred  in  connection  with  the  exploration  for and
development of oil and gas reserves are capitalized. Such costs include land and
lease acquisition  costs,  annual carrying charges of non-producing  properties,
geological and geophysical costs, costs of drilling and equipping productive and
non-productive  wells,  and direct  exploration  salaries and related  benefits.
Proceeds from the disposal of oil and gas properties are recorded as a reduction
of the related  capitalized  costs without  recognition of a gain or loss unless
the  disposal  would  result in a change of 20 percent or more in the  depletion
rate. The Company currently operates solely in the U.S.A.

Depreciation  and depletion of proved oil and gas  properties is computed on the
units-of-production   method  based  upon  estimates  of  proved  reserves,   as
determined by  independent  consultants,  with oil and gas being  converted to a
common unit of measure based on their relative energy content.

The costs of acquisition  and  exploration  of unproved oil and gas  properties,
including  any  related  capitalized   interest  expense,  are  not  subject  to
depletion,  but  are  assessed  for  impairment  either  individually  or  on an
aggregated basis. The costs of certain unevaluated leasehold acreage is also not
subject to depletion.  Costs not subject to depletion are periodically  assessed
for possible  impairment  or  reductions  in value.  If a reduction in value has
occurred,  costs  subject to depletion are increased or a charge is made against
earnings for those operations where a reserve base is not yet established.

Estimated future removal and site  restoration  costs are provided over the life
of  proven  reserves  on  a  units-of-production  basis.  Costs,  which  include
production equipment removal and environmental  remediation,  are estimated each
period by management based on current regulations, actual expenses incurred, and
technology and industry  standards.  The charge is included in the provision for
depletion and depreciation and the actual  restoration  expenditures are charged
to the accumulated provision amounts as incurred.

The Company applies a ceiling test to capitalized  costs which limits such costs
to the aggregate of the estimated  present value,  using a ten percent  discount
rate of the estimated  future net revenues from production of proven reserves at
year end at market  prices less future  production,  administrative,  financing,
site  restoration,  and  income  tax costs  plus the lower of cost or  estimated
market value of unproved  properties.  If  capitalized  costs are  determined to
exceed estimated future net revenues,  a write-down of carrying value is charged
to depletion in the period.

ASSET RETIREMENT OBLIGATIONS
The Company has adopted the  provisions of SFAS No. 143,  "Accounting  for Asset
Retirement Obligations." SFAS No. 143 requires the fair value of a liability for
an asset  retirement  obligation  to be  recognized in the period in which it is
incurred  if a  reasonable  estimate of fair value can be made.  The  associated
asset  retirement  costs are  capitalized as part of the carrying  amount of the
related  oil and  gas  properties.  As of  September  30,  2006  management  has
determined that there are no material asset retirement obligations.

USE OF ESTIMATES
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of 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 period.  Actual results
could differ from those estimates.

FINANCIAL INSTRUMENTS
The fair  value of the  Company's  financial  assets and  financial  liabilities
approximate their carrying values due to the immediate or short-term maturity of
these financial instruments.

<PAGE>

                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------

LOSS PER COMMON SHARE
Basic earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding  for the period.  Dilutive  earnings per share reflect the potential
dilution of securities that could share in the earnings of the Company.  Because
the Company does not have any  potentially  dilutive  securities,  fully diluted
loss per share is equal to basic loss per share.

INCOME TAXES
The Company follows the liability  method of accounting for income taxes.  Under
this method,  deferred tax assets and  liabilities are recognized for the future
tax  consequences  attributable to differences  between the financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
balances.  Deferred tax assets and  liabilities  are measured  using  enacted or
substantially  enacted tax rates  expected to apply to the taxable income in the
years in which those  differences  are expected to be recovered or settled.  The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized  in income in the  period  that  includes  the date of  enactment  or
substantive  enactment.  As at September  30, 2006 the Company had net operating
loss carryforwards,  however, due to the uncertainty of realization, the Company
has provided a full  valuation  allowance for the deferred tax assets  resulting
from these loss carryforwards.

STOCK-BASED COMPENSATION
On January 1, 2006,  the Company  adopted SFAS No. 123 (revised  2004) (SFAS No.
123R),  SHARE-BASED  PAYMENT,  which  addresses the accounting  for  stock-based
payment  transactions  in which an  enterprise  receives  employee  services  in
exchange for (a) equity  instruments of the enterprise or (b)  liabilities  that
are based on the fair value of the enterprise's  equity  instruments or that may
be settled by the  issuance of such equity  instruments.  In January  2005,  the
Securities and Exchange  Commission (SEC) issued Staff Accounting Bulletin (SAB)
No. 107, which provides supplemental  implementation guidance for SFAS No. 123R.
SFAS No. 123R  eliminates  the ability to account for  stock-based  compensation
transactions using the intrinsic value method under Accounting  Principles Board
(APB)  Opinion No. 25,  ACCOUNTING  FOR STOCK ISSUED TO  EMPLOYEES,  and instead
generally   requires   that  such   transactions   be  accounted   for  using  a
fair-value-based  method.  The  Company  uses the  Black-Scholes-Merton  ("BSM")
option-pricing  model to determine the  fair-value of  stock-based  awards under
SFAS No. 123R,  consistent with that used for pro forma  disclosures  under SFAS
No. 123,  ACCOUNTING FOR STOCK-BASED  COMPENSATION.  The Company has elected the
modified  prospective  transition  method  as  permitted  by SFAS  No.  123R and
accordingly  prior  periods have not been restated to reflect the impact of SFAS
No. 123R. The modified  prospective  transition method requires that stock-based
compensation  expense  be  recorded  for  all new and  unvested  stock  options,
restricted  stock,  restricted  stock units,  and employee  stock  purchase plan
shares that are ultimately expected to vest as the requisite service is rendered
beginning  on January 1, 2006 the first day of the  Company's  fiscal year 2006.
Stock-based  compensation expense for awards granted prior to January 1, 2006 is
based on the grant date fair-value as determined  under the pro forma provisions
of SFAS No. 123.

Prior to the  adoption  of SFAS No.  123R,  the  Company  measured  compensation
expense for its  employee  stock-based  compensation  plans using the  intrinsic
value  method  prescribed  by APB  Opinion  No.  25.  The  Company  applied  the
disclosure provisions of SFAS No. 123 as amended by SFAS No. 148, ACCOUNTING FOR
STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE, as if the fair-value-based
method had been applied in measuring compensation expense. Under APB Opinion No.
25, when the exercise price of the Company's employee stock options was equal to
the  market  price  of the  underlying  stock  on the  date  of  the  grant,  no
compensation expense was recognized.

To September  30, 2006 the Company has not granted any stock options and has not
recorded any stock-based compensation.

<PAGE>

                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------

RECENT ACCOUNTING PRONOUNCEMENTS
In February 2006, the FASB issued SFAS No. 155,  "ACCOUNTING  FOR CERTAIN HYBRID
FINANCIAL  INSTRUMENTS-AN  AMENDMENT  OF FASB  STATEMENTS  NO. 133 AND 140",  to
simplify  and  make  more  consistent  the  accounting  for  certain   financial
instruments.  SFAS No. 155  amends  SFAS No.  133,  "ACCOUNTING  FOR  DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES", to permit fair value re-measurement for any
hybrid  financial  instrument  with an embedded  derivative that otherwise would
require  bifurcation,  provided that the whole  instrument is accounted for on a
fair  value  basis.  SFAS No.  155  amends  SFAS No.  140,  "ACCOUNTING  FOR THE
IMPAIRMENT   OR  DISPOSAL  OF   LONG-LIVED   ASSETS",   to  allow  a  qualifying
special-purpose  entity to hold a derivative  financial instrument that pertains
to a beneficial  interest other than another  derivative  financial  instrument.
SFAS No. 155 applies to all financial  instruments  acquired or issued after the
beginning of an entity's first fiscal year that begins after September 15, 2006,
with earlier application allowed. The adoption of this statement is not expected
to have a material effect on the Company's future reported financial position or
results of operations.

In March  2006,  the FASB  issued SFAS No. 156,  "ACCOUNTING  FOR  SERVICING  OF
FINANCIAL  ASSETS,  AN  AMENDMENT  OF FASB  STATEMENT  NO. 140,  ACCOUNTING  FOR
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES".
This statement requires all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable, and permits for
subsequent  measurement using either fair value measurement with changes in fair
value reflected in earnings or the amortization  and impairment  requirements of
Statement No. 140. The subsequent measurement of separately recognized servicing
assets and  servicing  liabilities  at fair value  eliminates  the necessity for
entities  that  manage the risks  inherent  in  servicing  assets and  servicing
liabilities  with  derivatives  to qualify for hedge  accounting  treatment  and
eliminates  the  characterization  of declines in fair value as  impairments  or
direct write-downs.  SFAS No. 156 is effective for an entity's first fiscal year
beginning  after  September  15,  2006.  The  adoption of this  statement is not
expected to have a material effect on the Company's  future  reported  financial
position or results of operations.

In September 2006, the FASB issued SFAS No. 157, "FAIR VALUE MEASUREMENTS".  The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value  measurements.  SFAS 157
defines  fair  value,  establishes  a  framework  for  measuring  fair  value in
generally accepted  accounting  principles,  and expands  disclosures about fair
value measurements.  SFAS 157 applies under other accounting pronouncements that
require or permit  fair value  measurements  and does not  require  any new fair
value measurements.  The provisions of SFAS No. 157 are effective for fair value
measurements  made in fiscal  years  beginning  after  November  15,  2007.  The
adoption of this  statement  is not  expected  to have a material  effect on the
Company's future reported financial position or results of operations.

In September  2006,  the FASB issued SFAS No. 158,  "EMPLOYERS'  ACCOUNTING  FOR
DEFINED  BENEFIT PENSION AND OTHER  POSTRETIREMENT  PLANS - AN AMENDMENT OF FASB
STATEMENTS NO. 87, 88, 106, AND 132(R)".  This statement  requires  employers to
recognize  the   overfunded  or   underfunded   status  of  a  defined   benefit
postretirement  plan (other than a multiemployer  plan) as an asset or liability
in its statement of financial  position and to recognize  changes in that funded
status in the year in which the changes occur through  comprehensive income of a
business  entity or  changes  in  unrestricted  net  assets of a  not-for-profit
organization.  This  statement  also  requires an employer to measure the funded
status of a plan as of the date of its year-end statement of financial position,
with  limited  exceptions.  The  provisions  of SFAS No. 158 are  effective  for
employers  with publicly  traded  equity  securities as of the end of the fiscal
year ending  after  December 15,  2006.  The  adoption of this  statement is not
expected to have a material effect on the Company's  future  reported  financial
position or results of operations

In September  2006, the SEC issued Staff  Accounting  Bulletin  ("SAB") No. 108,
"CONSIDERING   THE  EFFECTS  OF  PRIOR  YEAR   MISSTATEMENTS   WHEN  QUANTIFYING
MISSTATEMENTS  IN CURRENT YEAR FINANCIAL  STATEMENTS." SAB No. 108 addresses how
the effects of prior year  uncorrected  misstatements  should be considered when
quantifying  misstatements  in current year  financial  statements.  SAB No. 108
requires  companies to quantify  misstatements  using a balance sheet and income
statement   approach  and  to  evaluate   whether  either  approach  results  in
quantifying  an error that is  material in light of  relevant  quantitative  and
qualitative  factors. SAB No. 108 is effective for periods ending after November
15, 2006. The Company is currently evaluating the impact of adopting SAB No. 108
but does  not  expect  that it will  have a  material  effect  on its  financial
position and results of operations.

<PAGE>

                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)
--------------------------------------------------------------------------------


NOTE 3 - OIL AND GAS PROPERTIES
--------------------------------------------------------------------------------

(A) HURLEY-CHAPMAN PROSPECT
By  agreement  dated  December  17,  2004,  the  Company  acquired a 75% working
interest,  56.25% net revenue  interest  from its founding  shareholder,  in two
sections (560 acres)  production held acreage in Okfuskee County,  Oklahoma (the
"Hurley-Chapman  Prospect")  with the  intention to develop coal bed methane gas
producing  wells.  The lease is unproved  and was acquired for a cash payment of
$300,000 and for the issuance of 6,000,000 common shares (pre May and August 200
stock splits) valued at $600,000.

For accounting  purposes the Company has recorded the acquisition of the oil and
gas interests at the related party vendor's cost of $300,000 and the issuance of
the 6,000,000  common  shares (pre May and August 2006 stock  splits)  valued at
$600,000 has been recorded as a capital distribution.

(B) VAMOOSA PROSPECT
By agreement  dated May 10,  2006,  the Company had the rights to acquire a 100%
working interest,  78% net revenue interest for a 520 acres oil and gas prospect
in Seminole  County,  Oklahoma.  After further  evaluation of the property,  the
Company has decided not to proceed with the purchase of the property.

(C) BAYOU CHOCTAW PROJECT - AGREEMENT PAYABLE
On July 10,  2006 the Company  entered  into a letter of intent to acquire a 25%
Working interest, 18.25% Net Revenue Interest, in two wells to be drilled in the
"Bayou  Choctaw"  oil and gas  project  in  Iberville  Parish,  in the  State of
Louisiana for:

    (i)  $250,000  ($125,000  paid on July 19, 2006 and  $125,000  accrued as at
    September  30,  2006 and paid on October 17,  2006) and  200,000  restricted
    common shares which will have piggy back registration  rights (accrued as at
    September  30, 2006 at $1.75 per share and  subsequently  issued) ; and (ii)
    reimbursement  of initial costs estimated at $162,500,  payable upon signing
    lease  participation  documents to be provided by the operator upon drilling
    (accrued as at September 30, 2006); and  (iii)participation  in a 3D-seismic
    survey which is estimated to cost approximately  $425,000. As of the date of
    these financial statements the 3D-seismic survey has not been initiated.

The lease is unproven.  As of the date of these financial statements drilling of
the first well has not commenced.

(D)COOKE COUNTY LEASE
On July 24, 2006 the Company acquired a 100% Working  Interest,  74% Net Revenue
Interest, in the "Browder" Barnett Shale oil and gas project in Cooke County, in
the State of Texas.  The lease is unproven  and was acquired  for  $146,820.  On
November  6, 2006 the  Company  reached an  agreement  to sell up to 50% working
interest in this lease for $73,410.

(E) LITTLE CEDAR CREEK PROSPECT

    (i) Conecuh County (Lease 1)

On August 11, 2006 the Company  entered into  agreements to acquire 103 acres in
Conecuh County,  Alabama for a five year term, in consideration  for $1,000,000.
On August 11, 2006 the Company paid a  non-refundable  deposit of $250,000.  The
balance of $750,000 is subject to due diligence by the Company however, pursuant
to the terms of the  agreement it is due no later than  October 15, 2006.  As of
the date of these financial statements the Company has not yet completed its due
diligence and has engaged the lessor in further  negotiation with respect to the
lease.

    (ii) Conecuh County (Lease 2)

On August 28, 2006 the Company  entered into agreements to acquire an additional
385 acres in Conecuh County,  Alabama for a five year term, in consideration for
$1,000  per  acre  plus  $1,000  per acre at $2.25  per  share of the  Company's
restricted common stock. On September 28, 2006 the Company paid a non-refundable
deposit of $50,000.  The balance of the funds and shares  payable are subject to
due diligence which, as of the date of these financial  statements,  has not yet
been  completed.  As of the date of these  financial  statements the Company has
engaged the lessor in further  negotiations  with respect to these  leases.  The
leases are  subject to a royalty of 20% and an  additional  over-riding  royalty
interest of 2.50%.

<PAGE>

                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 3 - OIL AND GAS PROPERTIES (CONTINUED)
--------------------------------------------------------------------------------

(F ) QUACHITA PROSPECT
On  September  29, 2006 the Company  leased  approximately  126 acres within the
Quachita  Trend within the state of Texas for a five year term in  consideration
for $25,186 (paid in September, 2006).

NOTE 4 - STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

The Company's  capitalization  is 100,000,000  common shares with a par value of
$0.001 per share.

On May 10, 2006, the directors of the Company  approved a special  resolution to
undertake a forward  split of the common  stock of the Company on a 2 new shares
for 1 old share basis whereby  10,167,700  common shares were issued pro-rata to
shareholders of the Company as of the record date on May 10, 2006.

On July 26, 2006, the directors of the Company approved a special  resolution to
undertake a further  forward split of the common stock of the Company on a 2 new
shares for 1 old share  basis  whereby  20,335,400  common  shares  were  issued
pro-rata to shareholders of the Company as of the record date on August 8, 2006.

All references in these financial  statements to number of common shares,  price
per share and weighted average number of common shares  outstanding prior to the
2:1 forward  stock split on May 10, 2006 and the 2:1 forward  split on August 8,
2006 have been adjusted to reflect  these stock splits on a  retroactive  basis,
unless otherwise noted.

On April 3, 2006 the Board of  Directors of the Company  ratified,  approved and
adopted a 2006 Stock  Option  Plan for the  Company  in the amount of  5,000,000
shares.

On April 3, 2006 the  Company  indicated  that it  intended  to issue  2,000,000
options to officers and directors of the Company. Upon further review, the Board
of Directors of the Company determined to not proceed with the issuance of these
grants.

To September  30, 2006 the Company has not granted any stock options and has not
recorded any stock-based compensation.

(Refer to Note 6.)

NOTE 5 - RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

INTERNATIONAL MARKET TREND, INC. ("IMT")
An officer and director of IMT, a private company,  is also a shareholder of the
Company.  During the nine months ended  September  30, 2006 the Company paid IMT
consulting  expenses of $137,500  (2005 - $20,000),  including  $42,500  (2005 -
$nil) for assisting  the Company to obtain a listing on the  Frankfurt  Exchange
and $95,000 for administration fees as per contract. During the same period, the
Company  paid IMT another  $75,000  (2005 - $nil) for  implementing  an investor
awareness  mailing  program in Germany,  $7,500  (2005 - $nil) for  updating the
Company's web site and other  identity  related  items as well as  approximately
$2,300 for telephone and office  expenses.  As of September 30, 2006 the Company
owed IMT  $41,065,  which is  unsecured  and  non-interest  bearing,  and has no
definite  repayment  terms.  Subsequent to the period,  on October 18, 2005, all
outstanding debts to IMT were paid.

During the nine month period ended  September 30, 2006 a certain  shareholder of
the Company who is also an officer and director of IMT  advanced  $40,000 to the
Company. These advances are non-interest bearing, unsecured and have no definite
repayment  terms.  Subsequent to the period,  on October 18, 2006,  the advances
were repaid.

During July,  August and September of 2006 a certain  shareholder of the Company
advanced  $845,000 to the Company.  These advances are non-interest  bearing and
have no definite repayment terms. Subsequent to the period, on October 16, 2006,
the funds were converted to 563,333  restricted  common shares of the Company at
$1.50 per share plus a two year warrant entitling the warrant holder to purchase
563,333 additional common shares at $3.00 per share. (refer to Note 6)

<PAGE>

                            MORGAN CREEK ENERGY CORP.
                         (An Exploration Stage Company)
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED)
--------------------------------------------------------------------------------

MANAGEMENT FEES
During the nine months ended September 30, 2006, the Company paid officer(s) and
director(s) $154,245 for management fees (2005-$nil).

On October 16, 2006,  pursuant to management  agreements,  we committed to pay a
total of $20,000 per month to two of our executives.  These  agreements are on a
month-to-month basis.


AMERICAN NEWS PUBLISHING INC. ("ANP")
During the year ended  December  31, 2005 the Company  paid  $200,000 to ANP for
Investor  relations  services.  The services  were  cancelled  and ANP agreed to
return the $200,000 to the Company. On January 20, 2006 the funds were repaid to
the Company in full. An officer and director of ANP, a private company,  is also
an officer and director of a corporate shareholder of the Company.

NOTE 6 - SUBSEQUENT EVENTS
--------------------------------------------------------------------------------

On October 4, 2006 the Company  entered into  agreements  to lease an additional
approximate  1,946 acres for $394,358 in the Company's  Quachita Prospect in the
state of Texas.

On October 16, 2006 the Company  completed  a private  placement  consisting  of
944,105  Units with each Unit  comprised  of one common share at $1.50 per share
and one  non-transferable  share  purchase  warrant  at $3.00  per  share in the
capital  of the  Company  and each such  warrant  entitling  the  subscriber  to
purchase an additional  common share of the Company for the period commencing on
October  16,  2006 and ending on the day which is earlier of 24 months  from the
date of issuance of the Units or 18 months from the effective  date of a planned
registration statement.  Of this private placement,  563,333 of the units issued
were in exchange for $845,000 previously advanced to the Company. (See Note 5)

On  November  6, 2006 the  Company  agreed to pay  Stonegate  Securities,  Inc.,
$25,000  to settle  all  outstanding  obligations  and  terminate  the terms and
conditions of the September 22, 2006 Placement  Agency  Agreement with them. The
$25,000  liability  has been  accrued at  September  30, 2006 and is included in
accounts payable and accrued liabilities.


<PAGE>


         Statements  made in this Form 10-QSB that are not historical or current
facts  are  "forward-looking  statements"  made  pursuant  to  the  safe  harbor
provisions of Section 27A of the  Securities Act of 1933 (the "Act") and Section
21E of the  Securities  Exchange  Act of 1934.  These  statements  often  can be
identified  by the use of terms  such as  "may,"  "will,"  "expect,"  "believe,"
"anticipate,"  "estimate," "approximate" or "continue," or the negative thereof.
We intend that such  forward-looking  statements  be subject to the safe harbors
for such  statements.  We wish to caution readers not to place undue reliance on
any such forward-looking  statements,  which speak only as of the date made. Any
forward-looking  statements represent  management's best judgment as to what may
occur in the future. However,  forward-looking  statements are subject to risks,
uncertainties  and important  factors beyond our control that could cause actual
results and events to differ  materially from  historical  results of operations
and events  and those  presently  anticipated  or  projected.  We  disclaim  any
obligation  subsequently  to revise any  forward-looking  statements  to reflect
events or  circumstances  after the date of such  statement  or to  reflect  the
occurrence of anticipated or unanticipated  events.  Please note that throughout
this Quarterly Report,  and unless otherwise noted, the words "we", "our" or the
"Company" refer to Lexington Resources, Inc.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
         OPERATION

GENERAL

         Morgan Creek Energy Corp. is a corporation  organized under the laws of
the State of Nevada.  After the  effective  date of our  registration  statement
filed with the  Securities  and Exchange  Commission  (February  14,  2006),  we
commenced  trading  on the  Over-the-Counter  Bulletin  Board  under the  symbol
"MCRE:OB".  We are engaged in the business of exploration of oil and gas bearing
properties  in the United  States.  Our shares are also traded on the  Frankfurt
Stock Exchange in Germany under the symbol "M6C".

         Please note that throughout this Quarterly Report, and unless otherwise
noted,  the words "we," "our," "us," the "Company," or "Morgan Creek," refers to
Morgan Creek Energy Corp.

RECENT DEVELOPMENTS

         AUGUST 8, 2006 FORWARD STOCK SPLIT

         On July 26, 2006, our Board of Directors pursuant to minutes of written
consent in lieu of a special  meeting  authorized  and approved a forward  stock
split of two for one of our total issued and outstanding  shares of common stock
(the "August 2006 Forward Stock Split").

         The August 2006  Forward  Stock Split was  effectuated  based on market
conditions  and upon a  determination  by our Board of Directors that the August
2006 Forward Stock Split was in our best interests and of the  shareholders.  In
our judgment  the August 2006 Forward  Stock Split will result in an increase in
our trading  float of shares of common  stock  available  for sale  resulting in
facilitation of investor  liquidity and trading volume potential.  The intent of
the August 2006  Forward  Stock Split is to increase  the  marketability  of our
common stock.

<PAGE>

         The August 2006 Forward Stock Split was effectuated  with a record date
of August 8, 2006 upon filing the  appropriate  documentation  with NASDAQ.  The
August 2006 Forward Stock Split increased our issued and  outstanding  shares of
common stock from 20,335,400 to approximately 40,670,800 shares of common stock.
The common stock will continue to be $0.001 par value.

         MAY 2006 FORWARD STOCK SPLIT

         On May 10, 2006, our Board of Directors  pursuant to minutes of written
consent in lieu of a special  meeting  authorized  and approved a forward  stock
split of two for one of our total issued and outstanding  shares of common stock
(the "May 2006 Forward Stock Split").

         The May 2006  Forward  Stock  Split  was  effectuated  based on  market
conditions and upon a determination  by our Board of Directors that the May 2006
Forward Stock Split was in our best  interests and of the  shareholders.  In our
judgment the May 2006 Forward Stock Split resulted in an increase in our trading
float of shares of common stock  available for sale resulting in facilitation of
investor  liquidity  and trading  volume  potential.  The intent of the May 2006
Forward Stock Split was to increase the marketability of our common stock.

         The May 2006 Forward Stock Split was effectuated  with a record date of
May 22, 2006 upon filing the appropriate documentation with NASDAQ. The May 2006
Forward Stock Split increased our issued and outstanding  shares of common stock
from 10,167,700 to  approximately  22,452,338  shares of common stock before the
August 2006 stock split, as described  above.  The common stock will continue to
be $0.001 par value.

CURRENT BUSINESS OPERATIONS

OIL AND GAS PROPERTIES

         We are a natural resource  exploration and production company currently
engaged  in  the  exploration,  acquisition  and  development  of  oil  and  gas
properties in the United States. We acquired a 75% working interest and a 56.25%
net revenue interest in two separate  petroleum and natural gas targeted leases,
known as the Hurley and Chapman leases, in approximately 560 gross acres located
in the Arkoma Basin in the State of Oklahoma for the  development and production
of coal bed methane gas  (collectively,  the  "Leases"  and,  individually,  the
Hurley Lease originally  dated December 16, 1983 (the "Hurley  Lease"),  and the
Chapman Lease  originally  dated  December 21, 1983 (the "Chapman  Lease").  The
Leases are unproved and were acquired for a cash payment of $300,000 and for the
issuance  to Geneva  Energy  Corp.,  our  founding  shareholder  ("Geneva"),  of
6,000,000 common shares (pre May and August 2006 stock splits) of our restricted
common  stock  valued at  $600,000.  The Leases are held by  production  and are
validly existing and in good standing.

         CHAPMAN LEASE

         The  Chapman  Lease  encompasses  approximately  240 acres in  Okfuskee
County, State of Oklahoma.  We have acquired a 75% working interest and a 56.25%
net revenue  interest.  The term of the Chapman Lease was  originally  for three
years,  and is currently held  indefinitely by production.  The Chapman lease is
currently  producing minor quantities of oil from existing wells. As long as the
lease produces any oil or gas as demonstrated by any marketed  quantities of oil
or gas, the lease will be deemed to be valid and thus,  "held by production" and
no further costs will be incurred by us as lessee.  The Chapman  Lease  includes
all  potential  oil or gas  producing  zones  extending  from the surface to and
including the Senora Sand zones.

<PAGE>


         HURLEY LEASE

                  The  Hurley  Lease  encompasses  approximately  320  acres  in
Okfuskee County, State of Oklahoma.  We have acquired a 75% working interest and
a 56.25% net revenue  interest.  The term of the Hurley Lease was originally for
one year, and is currently held indefinitely by production.  The Hurley Lease is
currently  producing minor quantities of oil from existing wells. As long as the
lease produces any oil or gas as demonstrated  by marketed  quantities of oil or
gas, the Hurley  Lease will be deemed to be valid and thus "held by  production"
and no further  costs will be  incurred  by us. The Hurley  Lease  includes  all
potential oil or gas producing zones extending from the surface to and including
the Senora Sand zones.

         VAMOOSA LEASE

         On approximately  May 10, 2006, we entered into an agreement to acquire
a 100% working  interest and a 78% net revenue  interest in an  approximate  520
acre oil and gas prospect  located in Seminole  County,  Oklahoma  (the "Vamoosa
Lease").  After  further  evaluation  of the  property,  we have  decided not to
proceed with the purchase of the property.

         BAYOU CHOCTAW LEASE

         On  approximately  July 10, 2006, we entered into a letter of intent to
acquire a 25% working  interest and an 18.25% net revenue  interest in the Bayou
Choctaw  oil and gas  project  located  in  Iberville  Parish  in the  State  of
Louisiana (the "Bayou Choctaw Lease").  According to the terms and provisions of
the letter of intent,  we are to: (i) pay an  aggregate  of  $250,000,  of which
$125,000 was paid on July 19, 2006 and $125,000 on October 17, 2006;  (ii) issue
an aggregate of 200,000 post August Forward Stock Split shares of our restricted
common stock with  piggyback  registration  rights,  which  200,000  shares were
issued on October 17, 2006  (accrued as at September 30, 2006 at $1.75 per share
and subsequently  issued);  (iii) reimburse  initial costs estimated at $162,500
for our prorata portion,  payable upon signing the lease participation documents
to be  provided  by the  operator  upon  drilling;  and  (iv)  participate  in a
3D-seismic survey during which is estimated to cost  approximately  $425,000 for
our prorata  portion.  We have the option to  participate in the first two wells
and carry the promoting  parties  through the drilling of those wells to `casing
point'  on the  basis of  paying  for 1/3 of the  cost to earn  our 25%  working
interest.  Subsequent  to the  drilling  of the first two  wells,  costs will be
shares in direct  proportion  to  working  interest  participation  without  any
further carried working interest.

         As of the  date  of  this  Quarterly  Report,  we  have  completed  due
diligence and completion of the acquisition.

         BROWDER BARNETT SHALE LEASE

         On approximately July 24, 2006, we acquired a 100% working interest and
74% net revenue  interest in the Browder  Barnett  shale oil and gas prospect in
Cooke County in the State of Texas (the "Browder  Lease").  The Browder Lease is
unproven and was acquired for $146,820.

<PAGE>

         As of the date of this Quarterly  Report,  we have reached an agreement
with  Pierco  Petroleum  Inc.  ("Pierco"),  to drill on our  Browder  Lease (the
"Pierco  Agreement").  In accordance with the terms and provisions of the Pierco
Agreement: (i) Pierco will participate in the Browder Lease and drilling with up
to a 50%  working  interest  and a 37% net  revenue  interest;  and (ii) we will
retain a minimum 50% working interest and a 37% net revenue interest.  We expect
to spud the well  within  the next  month  based on  operational  readiness  and
drilling availability.

         LITTLE CEDAR CREEK LEASES

         On  approximately  August 11, 2006,  we entered into an agreement  with
U.S. Gas Systems Inc. ("US Gas Systems") to acquire an aggregate of 103 acres of
oil and gas  targeted  development  leases in the Cedar Creek  field  located in
Conecuh  County,  Alabama (the "Cedar  Creek Lease  Agreement").  The  five-year
leases are located  primarily in two 160-acre  sections.  In accordance with the
terms and provisions of the Cedar Creek Lease  Agreement,  we agreed  originally
to: (i) pay an aggregate  consideration  of  $1,000,000,  of which $250,000 as a
non-refundable  deposit  was paid on August  11,  2006;  (ii) pay the  remaining
$750,000 due and owing by October 15, 2006;  (iii) own a 36.25% working interest
and a 27.18% net revenue  interest  before well capital cost payout in the first
well, and a 20.39% net revenue interest after well capital cost payout; and (iv)
a 25.0% working  interest and an 18.75% net revenue interest before well capital
cost payout in the second well to be drilled,  and a 14.06% net revenue interest
after well capital cost payout.

         The Company has not  completed  this  transaction  and has entered into
further  discussions  regarding final terms,  and continues its due diligence on
the subject leases.

         On  approximately  August 28,  2006,  we entered  into an  agreement to
acquire an  additional  385 acres under the Cedar Creek Leases in  consideration
for $385,000 and $385,000 in restricted  stock priced at $2.25 per share.  As of
the  date of this  Quarterly  Report,  the  balance  of the  funds  were  due on
September 30, 2006.  The additional 385 acres of leases are subject to a royalty
of 20% and an additional over-riding royalty interest of 2.5%.

         The Company has not  completed  this  transaction  and has entered into
further  discussions  regarding final terms,  and continues its due diligence on
the subject leases.

         Quachita Prospect

         On approximately  September 29, 2006, we leased approximately 126 acres
within the  Ouachita  Trend  within the State of Texas for a  five-year  term in
consideration  of  $25,186,  which was paid in  September  2006  (the  "Ouachita
Lease").  On October 4, 2006, we entered into  agreements to lease an additional
1,946 acres for payment of $394,358. We had previously identified seven separate
potential areas of exploration  interest and are carrying out wide scale leasing
on the  first of these  targets.  As of the date of this  Quarterly  Report,  we
intend to  secure  all  immediate  rights  relating  to oil and gas in the areas
providing  control over any potential  major  structural play that develops as a
result of this in-depth exploration.

         As of the date of this Quarterly  Report, we have initiated the process
of permitting a twin well for drilling on a key lease in the Quachita Prospect.

RESULTS OF OPERATION

NINE-MONTH  PERIOD ENDED SEPTEMBER 30, 2006 COMPARED TO NINE-MONTH  PERIOD ENDED
SEPTEMBER 30, 2005

<PAGE>


         Our net loss for the  nine-month  period ended  September  30, 2006 was
approximately  ($674,641)  compared  to a net  loss  of  ($337,789)  during  the
nine-month period ended September 30, 2005 (an increase of $336,852). During the
nine-month periods ended September 30, 2006 and 2005,  respectively,  we did not
record any income.  During the  nine-month  period ended  September 30, 2006, we
recorded  operating  expenses of  $674,641  compared  to  operating  expenses of
$337,789  incurred in the same  period,  consisting  primarily  of: (i) $226,500
(2005:  $50,000) in  consulting  expenses;  (ii)  $107,930  (2005:  $250,000) in
advertising and investor  relations;  (iii) $154,245 (2005:  $-0-) in management
fees;  (iv)  $96,911  (2005:  $9,517) in office and  general  expenses;  and (v)
$89,055  (2005:  $28,272)  in  professional  fees.  General  and  administrative
expenses  generally include  corporate  overhead,  financial and  administrative
contracted services and consulting costs.

         Consulting expenses,  management fees, professional fees and office and
general expense  incurred during the nine-month  period ended September 30, 2006
increased from the nine-month  period ended  September 30, 2005 primarily due to
the increase in operating costs  associated with the acquisition and development
of oil and gas properties and overall  corporate  activity  associated  with the
legal and administrative  costs of the Registration  Statement.  Advertising and
investor  relations fees incurred  during the nine-month  period ended September
30, 2006 decreased from the nine-month period ended September 30, 2005 primarily
from  the  decrease  in fees  associated  with an  existing  investor  awareness
program.

         Of the $674,641 incurred as general and administrative  expenses during
the  nine-month  period ended  September  30, 2006, an aggregate of $222,300 was
paid by us to  International  Market Trend,  Inc.  ("IMT"),  which is one of our
shareholders,  for:  (i)  $137,500 for  consulting  fees,  which is inclusive of
$42,500 for  assistance  in  obtaining a listing on the  Frankfurt  Exchange and
$95,000 for administration fees pursuant to the contractual  relationship;  (ii)
$75,000 for creation of an investor awareness mailing program in Germany;  (iii)
$7,500 for updating and changing our web site and other identity  related items;
and (iv)  $2,300 for  reimbursement  of  telephone  and office  expenses.  As of
September  30, 2006, we owed IMT $41,065,  which is unsecured  and  non-interest
bearing and has no specific repayment terms. Subsequent to the nine-month period
ended  September 30, 2006, we paid all  outstanding  debts to IMT on October 18,
2006.  An officer  and  director of IMT, a private  company,  is also one of our
shareholders.

         During the  nine-month  period ended  September  30,  2006,  we paid an
aggregate of $154,245 in management fees, which included certain payments to our
officers/directors  for  services  rendered as  follows:  (i) $30,000 to William
Bolles,  which at  September  30, 2006 an  aggregate  of $7,500  remains due and
owing; (ii) $35,000 to Grant Atkins;  (iii) $20,000 to Thomas Markham,  which at
September  30,  2006 an  aggregate  of $5,000  remains  due and owing;  and (iv)
$19,245 to Erik  Essiger,  which at  September  30, 2006 an aggregate of $19,245
plus $1,945 in reimbursement of expenses remains due and owing.

         Our net loss during the nine-month  period ended September 30, 2006 was
approximately  ($674,641)  or  ($0.00)  per  share  compared  to a net  loss  of
($337,789) or ($0.00) during the nine-month period ended September 30, 2005. The
weighted average number of shares  outstanding was 40,670,800 for the nine-month
period ended September 30, 2006 compared to 40,602,960 for the nine-month period
ended September 30, 2005.


<PAGE>

THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2006 COMPARED TO THREE-MONTH PERIOD ENDED
SEPTEMBER 30, 2005

         Our net loss for the  three-month  period ended  September 30, 2006 was
approximately  ($407,460  )  compared  to a net  loss of  ($36,660)  during  the
three-month  period ended  September 30, 2005 (an increase of $370,800 ). During
the three-month periods ended September 30, 2006 and 2005, respectively,  we did
not record any income.  During the three-month  period ended September 30, 2006,
we recorded  operating  expenses of $407,460  compared to operating  expenses of
$36,660  incurred in the same  period,  consisting  primarily  of: (i)  $119,000
(2005: $30,000) in consulting expenses; (ii) $25,000 (2005: $-0-) in advertising
and investor  relations;  (iii) $129,245 (2005:  $-0-) in management  fees; (iv)
$89,130 (2005:  $3,663) in office and general expenses;  and (ii) $45,085 (2005:
$2,997) in professional fees.

         Consulting expenses,  management fees, professional fees and office and
general expenses incurred during the three-month period ended September 30, 2006
increased from the three-month  period ended September 30, 2005 primarily due to
the increase in operating costs  associated with the acquisition and development
of oil and gas properties and overall  corporate  activity  associated  with the
legal and administrative costs of the Registration Statement.

         Our net loss during the three-month period ended September 30, 2006 was
approximately  ($407,460)  or  ($0.00)  per  share  compared  to a net  loss  of
($36,660) or ($0.00) during the three-month period ended September 30, 2005. The
weighted   average  number  of  shares   outstanding  was  40,670,800  for  both
three-month periods ended September 30, 2006 and 2005, respectively.

LIQUIDITY AND CAPITAL RESOURCES

         Our  financial  statements  have been  prepared  assuming  that we will
continue  as a  going  concern  and,  accordingly,  do not  include  adjustments
relating to the  recoverability  and realization of assets and classification of
liabilities  that  might  be  necessary  should  we be  unable  to  continue  in
operation.

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006

         As of the  nine-month  period ended  September  30,  2006,  our current
assets were $5,463 and our current  liabilities were $1,733,515 , resulting in a
working  capital  deficit of  $1,728,052  . As at the  nine-month  period  ended
September 30, 2006,  current assets were comprised of: (i) cash in the amount of
$1,647;  and (ii) prepaid expenses in the amount of $3,816. As at the nine-month
period ended  September 30, 2006,  current  liabilities  were  comprised of: (i)
$972,256  due to related  parties;  and (ii)  $123,759 in  accounts  payable and
accrued liabilities;and (iii) $637,500 in agreement payable.

         As at the nine-month  period ended September 30, 2006, our total assets
of  $1,539,969  were  comprised  of:  (i)  $5,463 in  current  assets;  and (ii)
$1,534,506 in carrying value of unproved oil and gas properties. The increase in
total  assets  during  the  nine-month  period  ended  September  30,  2006 from
$$507,110  as at fiscal year ended  December 31, 2005 was  primarily  due to the
increase in the  carrying  value of unproved oil and gas  properties  during the
nine-month period ended September 30, 2006.

         As at the  nine-month  period  ended  September  30,  2006,  our  total
liabilities were $1,733,515  comprised of current  liabilities.  The increase in

<PAGE>

total  liabilities  during the nine-month  period ended  September 30, 2006 from
$26,015 as at fiscal  year ended  December  31,  2005 was  primarily  due to the
increase in amounts due to related  parties and in accounts  payable and accrued
liabilities and agreement payable on the Bayou Choctaw lease.

         Stockholders'  equity  decreased  from  $481,095  for fiscal year ended
December 31, 2005 to ($193,546)  for the nine-month  period ended  September 30,
2006.

         We have not generated  positive cash flows from  operating  activities.
For the  nine-month  period ended  September  30,  2006,  net cash flows used in
operating activities was ($293,457) compared to net cash flows used in operating
activities  for the  nine-month  period ended  September 30, 2005 of ($357,119),
consisting primarily of a net loss of ($674,641) adjusted by $200,000 due from a
related  party and $87,256 and $123,759 for accrued and unpaid  management  fees
and accounts payable and accrued liabilities, respectively.

         Net cash flow  used in  investing  activities  was  ($597,006)  for the
nine-month  period ended  September  30, 2006  compared to net cash flow used in
investing activities for the nine-month period ended September 30, 2005 of $-0-.
Net cash flow used in investing  activities  during the nine-month  period ended
September  30,  2006  was  primarily  related  to  acquisition  of oil  and  gas
properties.

         Net cash flows  provided by financing  activities  was $885,000 for the
nine-month  period ended  September 30, 2006 compared to net cash flows provided
by financing  activities for the nine-month  period ended  September 30, 2005 of
$35,000, received from advances by a related party to us.

         We expect that working capital  requirements will continue to be funded
through a combination of our existing funds, debt instruments and advances,  and
further issuances of securities.  Our working capital  requirements are expected
to increase in line with the growth of our business.

PLAN OF OPERATION AND FUNDING

         On October 16, 2006, we completed a private placement pursuant to which
we  issued an  aggregate  of  944,105  units  ("Unit")  of our  securities  at a
subscription  price  of  U.S.  $1.50  per  Unit  for  total  gross  proceeds  of
$1,416,157.50;  with each  Unit  being  comprised  of one  common  share and one
non-transferable  common stock  purchase  warrant  ("Warrant").  Each  resulting
Warrant  entitles the  subscriber to purchase an additional  share of our common
stock ("Warrant  Share") at a price of $3.00 per share for the period commencing
on October  16, 2006 and ending on the day which is the earlier of (i) 24 months
from the date of issuance of the Units or (ii) 18 months from the effective date
of our proposed registration statement of this private placement, 563,333 of the
units issued were in exchange for $845,000  previously  advanced to the Company.
Both the Warrant  Shares and the common  shares  issued  pursuant to the private
placement  offering are to be proposed for registration  under the United States
Securities Act of 1933, as amended.

         On November 6, 2006, we came to an agreement with Stonegate  Securities
Inc.  ("Stonegate")  to pay an  aggregate  of $25,000 to settle all  outstanding
obligations and terminate the Placement Agency Agreement between the Company and
Stonegate  dated  September 22, 2006. See "Part II. Other  Information.  Item 2.
Changes in Securities and Use of Proceeds."

         Existing working capital,  further advances and debt  instruments,  and
anticipated  cash flow are expected to be adequate to fund our  operations  over
the  next  six  months.  We have no lines of  credit  or  other  bank  financing

<PAGE>

arrangements.  Generally,  we  have  financed  operations  to date  through  the
proceeds of the private placement of equity and debt instruments.  In connection
with our business plan, management anticipates additional increases in operating
expenses  and  capital  expenditures  relating  to:  (i) oil  and gas  operating
properties;  (ii) possible drilling initiatives on current properties and future
properties;  and (iii) future property acquisitions.  We intend to finance these
expenses with further issuances of securities,  and debt issuances.  Thereafter,
we expect we will need to raise additional capital and generate revenues to meet
long-term operating requirements.  Additional issuances of equity or convertible
debt  securities will result in dilution to our current  shareholders.  Further,
such  securities  might have rights,  preferences  or  privileges  senior to our
common stock.  Additional  financing may not be available upon acceptable terms,
or at  all.  If  adequate  funds  are not  available  or are  not  available  on
acceptable  terms,  we may  not be able to take  advantage  of  prospective  new
business  endeavors or opportunities,  which could  significantly and materially
restrict our business operations.

         The independent auditors' report accompanying our December 31, 2005 and
December  31,  2004  financial  statements  contains  an  explanatory  paragraph
expressing  substantial  doubt about our ability to continue as a going concern.
The financial statements have been prepared "assuming that we will continue as a
going concern," which  contemplates  that we will realize our assets and satisfy
our liabilities and commitments in the ordinary course of business.

MATERIAL COMMITMENTS

         As of the  period  ended  September  30,  2006,  we have the  following
material  commitment for the current  fiscal year.  During July and August 2006,
one of our  shareholders  advanced an  aggregate of $845,000 to us. The advances
are  non-interest  bearing and have no specific  or  definite  repayment  terms.
Subsequent to the  nine-month  period ended  September  30, 2006,  the aggregate
amount of $845,000 was converted  into 563,333  restricted  shares of our common
stock at $1.50 per share plus a two-year  warrant the right to purchase  563,333
additional  shares of restricted  common stock at $3.00 per share. See "Part II.
Other Information. Item 2. Changes in Securities and Use of Proceeds."

We are  also  committed  to pay in the  future,  certain  oil and  gas  property
acquisition and exploration expenditures, as follows:

BAYOU CHOCTAW PROJECT
     The Company has committed to participation in a 3D-seismic  survey which is
     estimated to cost approximately $425,000. As of the date of these financial
     statements the 3D-seismic survey has not been initiated.

LITTLE CEDAR CREEK PROSPECT
     (a) Conecuh County (Lease 1)
     The balance of the acquisition cost of this property is $750,000.
     (b) Conecuh County (Lease 2)
     The balance of the  acquisition  cost of this  property is $335,000 in cash
     and $385,000 worth of the Company's common stock.

As of the date of these financial  statements the Company has not completed this
transaction  and its  due  diligence  on the two  Little  Cedar  Creek  Prospect
properties and has engaged the lessor in further negotiation.

MANAGEMENT AGREEMENTS

On October 16th, 2006, pursuant to management agreements,  we committed to pay a
total of $20,000 per month to two of our executives.  These  agreements are on a
month-to-month basis.

If we are unable to raise sufficient  funding to meet our  commitments,  then we
may not be able to meet our  commitments  and some or all of our  deposits,  may
become forfeit.


OFF-BALANCE SHEET ARRANGEMENTS

         As of the date of this Quarterly Report, we do not have any off-balance
sheet  arrangements  that have or are  reasonably  likely  to have a current  or
future  effect on our  financial  condition,  changes  in  financial  condition,
revenues or expenses, results of operations,  liquidity, capital expenditures or
capital resources that are material to investors.  The term  "off-balance  sheet
arrangement"  generally means any  transaction,  agreement or other  contractual
arrangement to which an entity unconsolidated with us is a party, under which we
have:  (i) any  obligation  arising  under  a  guaranteed  contract,  derivative
instrument or variable  interest;  or (ii) a retained or contingent  interest in
assets transferred to such entity or similar  arrangement that serves as credit,
liquidity or market risk support for such assets.

ITEM III. CONTROLS AND PROCEDURES

         Our management is responsible for establishing and maintaining a system
of  disclosure  controls  and  procedures  (as  defined  in Rule  13a-15(e)  and
15d-15(e)  under the Exchange  Act) that is designed to ensure that  information

<PAGE>

required to be  disclosed  by us in the reports that we file or submit under the
Exchange Act is recorded,  processed,  summarized and reported,  within the time
periods specified in the Commission's rules and forms.  Disclosure  controls and
procedures  include,  without  limitation,  controls and procedures  designed to
ensure that  information  required to be  disclosed  by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and  communicated
to the  issuer's  management,  including  its  principal  executive  officer  or
officers and  principal  financial  officer or officers,  or persons  performing
similar functions,  as appropriate to allow timely decisions  regarding required
disclosure.

         In accordance with Exchange Act Rules 13a-15 and 15d-15,  an evaluation
was  completed  under  the  supervision  and  with  the   participation  of  our
management,  including Mr. Marcus Johnson,  our Chief Executive Officer, and Mr.
D. Bruce Horton, our Chief Financial Officer, of the effectiveness of the design
and  operation of our  disclosure  controls and  procedures as of the end of the
period  covered  by  this  Quarterly  Report.  Based  on  that  evaluation,  our
management  including  the  Chief  Executive  Officer  and  Principal  Financial
Officer, concluded that our disclosure controls and procedures are effective, to
provide  reasonable  assurance that information  required to be disclosed in our
reports  filed or  submitted  under the  Exchange  Act is  recorded,  processed,
summarized,  and reported within the time periods  specified in the Commission's
rules and  forms.  There  have been no changes  to our  internal  controls  over
financial  reporting  (as  defined in Rule  13a-15(f)  and  15d-15(f)  under the
Securities  Exchange Act of 1934) that occurred during our nine-month  quarterly
period ended September 30, 2006, that  materially  affected,  or were reasonably
likely to materially affect, our internal controls over financial reporting.

AUDIT COMMITTEE REPORT

         The Board of Directors has established an audit committee.  The members
of the audit  committee  are Mr.  Marcus  Johnson,  Mr. Steven Jewett and Mr. D.
Bruce  Horton  and.  Two  of  the  three  members  of the  audit  committee  are
"independent" within the meaning of Rule 10A-3 under the Exchange Act. The audit
committee  was  organized  in  November  20, 2004 and  operates  under a written
charter adopted by our Board of Directors.

         The audit  committee has reviewed and  discussed  with  management  our
unaudited  financial  statements  as of and  for  the  nine-month  period  ended
September 30, 2006.  The audit  committee has also  discussed with Dale Matheson
Carr-Hilton  LaBonte  the matters  required  to be  discussed  by  Statement  on
Auditing Standards No. 61,  Communication with Audit Committees,  as amended, by
the  Auditing  Standards  Board of the American  Institute  of Certified  Public
Accountants.   The  audit  committee  has  received  and  reviewed  the  written
disclosures and the letter from Dale Matheson  Carr-Hilton  LaBonte  required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as amended, and has discussed with Dale Matheson Carr-Hilton LaBonte
their independence.

         Based on the  reviews  and  discussions  referred  to above,  the audit
committee has recommended to the Board of Directors that the unaudited financial
statements  referred to above be included in our Quarterly Report on Form 10-QSB
for the nine-month period ended September 30, 2006 filed with the Securities and
Exchange Commission.


<PAGE>

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Management is not aware of any legal  proceedings  contemplated  by any
governmental authority or any other party involving us or our properties.  As of
the date of this Quarterly  Report,  no director,  officer or affiliate is (i) a
party adverse to us in any legal proceeding,  or (ii) has an adverse interest to
us in any  legal  proceedings.  Management  is not  aware  of  any  other  legal
proceedings pending or that have been threatened against us or our properties.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

BAYOU CHOCTAW LEASE

         On October 17, 2006,  we issued an  aggregate of 200,000  shares of our
restricted  common stock in accordance  with the provisions of the Bayou Choctaw
Lease at an accrued  price at  September  30,  2006 of $1.75 per share.  The per
share  consideration  was  calculated  by  management  in  consideration  of net
tangible  value  inclusive  of all other  balance  sheet  assets,  current,  and
long-term  liabilities.  The shares were issued  pursuant to an  exemption  from
registration under Section 4(2) of the 1933 Securities Act.

PRIVATE PLACEMENT OFFERING

         On October 16, 2006, we completed a private placement pursuant to which
we issued an aggregate of 944,105 Units at a  subscription  price of U.S.  $1.50
per Unit for total gross  proceeds of  $1,416,157.50.  Each Unit is comprised of
one  common  share  and  one  non-transferable  common  stock  purchase  warrant
("Warrant").  Each  resulting  Warrant  entitles the  subscriber  to purchase an
additional  share of our common stock ("Warrant  Share") at a price of $3.00 per
share for the period  commencing on October 16, 2006 and ending on the day which
is the  earlier of (i) 24 months  from the date of issuance of the Units or (ii)
18 months from the effective date of our proposed registration  statement.  Both
the  Warrant  Shares  and the  common  shares  issued  pursuant  to the  private
placement  offering are to be proposed for registration  under the United States
Securities Act of 1933, as amended.

         The per share price of the offering was  arbitrarily  determined by our
Board of Directors  based upon analysis of certain  factors  including,  but not
limited to, stage of development, industry status, investment climate, perceived
investment  risks,  our assets,  and net  estimated  worth.  We issued  Units to
investors who were either a U.S. resident- or a non-U.S. resident. The investors
executed  subscription  agreements  and  acknowledged  that the securities to be
issued have not been  registered  under the Securities Act, that they understood
the economic  risk of an  investment  in the  securities,  and that they had the
opportunity  to ask  questions  of  and  receive  answers  from  our  management
concerning any and all matters related to acquisition of the securities.

SETTLEMENT OF DEBT

         During the  nine-month  period ended  September  30,  2006,  one of our
shareholders  advanced an aggregate  of $845,000 to us. On October 16, 2006,  we
entered into a settlement  agreement  pursuant to which the aggregate amount due
and owing was converted into 563,333  shares of our  restricted  common stock at
$1.50 per share plus a two-year warrant with the right to purchase an additional
563,333  shares  of our  common  stock  at  $3.00  per  share.  The  shareholder
acknowledged that the securities to be issued have not been registered under the

<PAGE>

Securities  Act,  that he  understood  the economic risk of an investment in the
securities,  and that he had the  opportunity  to ask  questions  of and receive
answers  from  our  management   concerning  any  and  all  matters  related  to
acquisition of the securities.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         No report required.

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

         No report required.

ITEM 5.  OTHER INFORMATION

RESIGNATION OF OFFICERS/DIRECTORS AND APPOINTMENT OF OFFICERS/DIRECTORS

         Effective  August  21,  2006,  our  Board  of  Directors  accepted  the
resignations of each of Grant Atkins and Douglas  Humphreys as directors and our
executive officers and in conjunction  accepted the consents to act as directors
and/or  executive  officers  from each of Thomas  Alden  Markham II,  Blake Box,
Marcus M. Johnson, William W. Bolles, and Erik Essiger.

         Effective  September  26,  2006,  our Board of  Directors  accepted the
consent from Mr. Bolles to act as one of our  directors.  Effective  October 25,
2006,  our  Board of  Directors  accepted  the  resignation  of Mr.  Bolles as a
director and as our  President/Chief  Executive Officer and director.  Effective
November 2, 2006, Mr. Blake Box resigned as director of the Company.

         Therefore,  as of the  date of this  Quarterly  Report,  the  following
represents the individuals and their respective capacity.

         INDIVIDUAL                                    POSITION

Marcus M. Johnson                    Director and Chairman, President/Chief
                                     Executive Officer/Principal Executive
                                     Officer

D. Bruce Horton                      Director and Secretary/Treasurer, Chief
                                     Financial Officer, Principal Accounting
                                     Officer and Stock Option Plan Administrator

Thomas A. Markham II                 Director and Chief Geologist

Stephen Jewett                       Director

Erik Essiger                         Director


2006 STOCK OPTION PLAN

            On April 3, 2006,  our Board of Directors  authorized  an approved a
2006 stock option plan (the "Stock Option Plan").

<PAGE>

         The  purpose  of the Stock  Option  Plan is to  enhance  our  long-term
stockholder  value  by  offering  opportunities  to  our  directors,   officers,
employees and eligible  consultants to acquire and maintain  stock  ownership in
order to give these persons the  opportunity  to  participate  in our growth and
success, and to encourage them to remain in our service.

         The Stock Option Plan is to be  administered  by our Board of Directors
or a committee  appointed by and  consisting of one or more members of the Board
of Directors,  which shall determine (i) the persons to be granted Stock Options
under the Stock Option Plan;  (ii) the number of shares  subject to each option,
the  exercise  price of each Stock  Option;  and (iii)  whether the Stock Option
shall be  exercisable  at any time during the option period of ten (10) years or
whether the Stock  Option shall be  exercisable  in  installments  or by vesting
only. The Stock Option Plan, as amended,  provides authorization to the Board of
Directors to grant Stock  Options to purchase a total number of shares of Common
Stock of the Company,  not to exceed 5,000,000 shares as at the date of adoption
by the Board of Directors  of the Stock Option Plan.  At the time a Stock Option
is granted  under the Stock  Option Plan,  the Board of Directors  shall fix and
determine  the  exercise  price at  which  shares  of our  Common  Stock  may be
acquired.

         In the  event  an  optionee  ceases  to be  employed  by or to  provide
services to us for reasons  other than cause,  retirement,  disability or death,
any Stock  Option  that is vested  and held by such  optionee  generally  may be
exercisable within up to ninety (90) calendar days after the effective date that
his position ceases,  and after such 90-day period any unexercised  Stock Option
shall  expire.  In the event an optionee  ceases to be employed by or to provide
services to us for reasons of retirement,  disability or death, any Stock Option
that is vested and held by such optionee  generally may be exercisable within up
to one-year  after the effective date that his position  ceases,  and after such
one-year period any unexercised Stock Option shall expire.

         No  Stock  Options   granted  under  the  Stock  Option  Plan  will  be
transferable by the optionee,  and each Stock Option will be exercisable  during
the lifetime of the optionee  subject to the option  period of ten (10) years or
limitations described above. Any Stock Option held by an optionee at the time of
his death may be  exercised  by his  estate  within one (1) year of his death or
such longer period as the Board of Directors may determine.

         The  exercise  price of a Stock  Option  granted  pursuant to the Stock
Option Plan shall be paid in full to us by delivery  of  consideration  equal to
the  product of the Stock  Option in  accordance  with the  requirements  of the
Nevada  Revised  Statutes.  Any  Stock  Option  settlement,   including  payment
deferrals  or  payments  deemed  made  by  way  of  settlement  of  pre-existing
indebtedness  from the Company may be subject to such  conditions,  restrictions
and contingencies as may be determined.

         INCENTIVE STOCK OPTIONS

         The Stock Option Plan further provides that,  subject to the provisions
of the Stock Option Plan and prior shareholder approval,  the Board of Directors
may grant to any key  individuals  who are our  employees  eligible  to  receive
options one or more incentive  stock options to purchase the number of shares of
common stock allotted by the Board of Directors (the "Incentive Stock Options").
The option price per share of common stock  deliverable  upon the exercise of an

<PAGE>

Incentive  Stock  Option  shall be at least 100% of the fair market value of the
common  shares of the  Company,  and in the case of an  Incentive  Stock  Option
granted to an optionee who owns more than 10% of the total combined voting power
of all  classes  of our  stock,  shall not be less than 100% of the fair  market
value of our common shares. The option term of each Incentive Stock Option shall
be determined by the Board of  Directors,  which shall not commence  sooner than
from the date of grant and shall terminate no later than ten (10) years from the
date  of  grant  of the  Incentive  Stock  Option,  subject  to  possible  early
termination as described above.

         During the six-month  period ended June 30, 2006, we indicated  that we
intended to issue  2,000,000  options to certain of our officers and  directors.
Upon further review,  our Board of Directors  determined to not proceed with the
grants of these options.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         Reports on Form 8-K:

         (i)  Report  on Form 8-K  Item  5.02  filed  with  the  Securities  and
              Exchange Commission on November 2, 2006.

         (ii) Report  on Form 8-K  Item  5.02  filed  with  the  Securities  and
              Exchange Commission on September 28, 2006.

         (iii)Report  on Form 8-K  Item  5.02  filed  with  the  Securities  and
              Exchange Commission on August 25, 2006.

         Exhibits:

         31.1 Certification  of Chief Executive  Officer  pursuant to Securities
              Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

         31.2 Certification  of Chief Financial  Officer  pursuant to Securities
              Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

         32.1 Certifications  pursuant to  Securities  Exchange Act of 1934 Rule
              13a- 14(b) or 15d-14(b)  and 18 U.S.C.  Section  1350,  as adopted
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                             MORGAN CREEK ENERGY CORP.

Dated: November 10, 2006                     By: /s/ MARCUS M. JOHNSON
                                             _______________________________
                                             Marcus M Johnson, President and
                                             Chief Executive Officer


Dated: November 10, 2006                  By: /s/ D. BRUCE HORTON
                                             ________________________________
                                             D. Bruce Horton, Chief Financial
                                             Officer