**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





x
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934 For the quarterly period ended **March 31,
                  2006**o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934 For the transition period from ________________ to
                  _________________





Commission
      file number 1-4668




**COASTAL
                  CARIBBEAN OILS & MINERALS,
                  LTD.**(Exact
                  name of registrant as specified in its
                  charter)BERMUDA
              
              NONE(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer
                Identification
                  No.)Clarendon
                  House, Church Street, Hamilton,
                  Bermuda
              
              HM
                  11(Address
                  of principal executive
                  offices)
              
              (Zip
                  Code)(850)
                  653-2732(Registrant's
                  telephone number, including area code)(Former
                  name, former address and former
                  fiscal year, if changed since last report)





Indicate
      by check mark whether the registrant (l) has filed all reports required to
      be
      filed by Section 13 or 15 (d) of the Securities Exchange Act of l934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. T Yes  ̈ No





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act).  ̈ Yes T No





Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act). ).  ̈ Yes T No





The
      number of shares outstanding of the issuer's single class of common stock as
      of
      May 5, 2006 was 46,211,604.





**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 
 **FORM
        10-Q**
 
 **MARCH
        31, 2006**





**Table
      of Contents**








**PART
      I - FINANCIAL INFORMATION**





ITEM
                1
            
            Financial
                Statements
            
            PageConsolidated
                balance sheets at March 31, 2006 and December 31,
                2005
            
            3Consolidated
                statements of operations for the three month periods ended March
                31, 2006
                and 2005 and for the period from January 31, 1953 (inception) to
                March 31,
                2006
            
            4Consolidated
                statements of cash flows for the three month periods ended March
                31, 2006
                and 2005 and for the period from January 31, 1953 (inception) to
                March 31,
                2006
            
            5Notes
                to consolidated financial statements
            
            6ITEM
                2
            
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            10ITEM
                3
            
            Quantitative
                and Qualitative Disclosure About Market Risk
            
            13ITEM
                4
            
            Controls
                and Procedures
            
            13**PART
                II - OTHER INFORMATION**ITEM
                5
            
            Other
                Information
            
            14ITEM
                6
            
            Exhibits
            
            15Signatures
            
            16







2


**ITEM
      1** **-** **Financial
      Statements**





**CONSOLIDATED
      BALANCE SHEETS**


(Expressed
      in U.S. dollars)





(A
      Bermuda Corporation)


A
      Development Stage Company















March
                31,
            
            December
                31,2006
            
            2005**Assets**
            
            (Unaudited)
            
            (Note)Current
                assets:Cash
                and cash equivalents
            
            $
            1,676,615
            
            $
            2,250,236Prepaid
                expenses and other
            
            
            23,297
            
            
            199,754Total
                current assets
            
            
            1,699,912
            
            
            2,449,990Certificate
                of deposit
            
            
            75,000
            
            
            75,000Inventory
                - drilling
            
            
            21,968
            
            
            —Well
                drilling costs
            
            
            592,206
            
            
            —Petroleum
                leases
            
            
            1,875,429
            
            
            1,860,614Equipment,
                net
            
            
            1,771
            
            
            1,771________
            
            
            
            
            
            ________Total
                assets
            
            $
            4,266,286
            
            $
            4,387,375**Liabilities
                and Shareholders’ (Deficit) Equity**Current
                liabilities:Accounts
                payable and accrued liabilities
            
            $
            123,152
            
            $
            27,526Income
                taxes payable
            
            
            —
            
            
            35,000Total
                current liabilities
            
            
            123,152
            
            
            62,526Shareholders'
                equityCommon
                stock, par value $.12 per share:Authorized
                - 250,000,000 sharesOutstanding
                - 46,211,604, respectively
            
            
            5,545,392
            
            
            5,545,392Capital
                in excess of par value
            
            
            32,137,811
            
            
            32,137,81137,683,203
            
            
            37,683,203Deficit
                accumulated during the development stage
            
            
            (33,540,069
            )
            
            (33,358,354
            )Total
                shareholders’ equity
            
            
            4,143,134
            
            
            4,324,849Total
                liabilities and shareholders’ equity
            
            $
            4,266,286
            
            $
            4,387,375








Note:
      The
      balance sheet at December 31, 2005 has been derived from


the
      audited consolidated financial statements at that date.





See
      accompanying notes .


3


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**





**FORM
      10-Q**





**PART
      I - FINANCIAL INFORMATION**


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**





**ITEM
      1** **-** **Financial
      Statements**





**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


(Expressed
      in U.S. dollars)





(A
      Bermuda Corporation)


A
      Development Stage Company





(Unaudited)




For
                theperiod
                fromJan.
                31, 1953(inception)Three
                months ended
            
            to
                March 31,March
                31,
            
            20062006
            
            2005**Interest
                and other income**
            
            $
            15,243
            
            $
            —
            
            $
            3,943,537**Gain
                on settlement**
            
            
            —
            
            
            —
            
            
            8,124,01615,243
            
            
            —
            
            
            12,067,553**Expenses:**Legal
                fees and costs
            
            
            46,083
            
            
            9,033
            
            
            17,101,150Administrative
                expenses
            
            
            116,374
            
            
            48,133
            
            
            10,053,914Salaries
            
            
            31,250
            
            
            24,760
            
            
            3,899,081Shareholder
                communications
            
            
            3,251
            
            
            6,060
            
            
            4,079,160Goodwill
                impairment
            
            
            —
            
            
            —
            
            
            801,823Write
                off of unproved properties
            
            
            —
            
            
            —
            
            
            5,560,494Exploration
                costs
            
            
            —
            
            
            —
            
            
            247,465Lawsuit
                judgments
            
            
            —
            
            
            —
            
            
            1,941,916Minority
                interests
            
            
            —
            
            
            —
            
            
            (632,974
            )Other
            
            
            —
            
            
            —
            
            
            364,865Contractual
                services
            
            
            —
            
            
            —
            
            
            2,155,728196,958
            
            
            87,986
            
            
            45,572,622**Income
                taxes**
            
            
            —
            
            
            —
            
            
            35,000**Net
                loss**
            
            $
            (181,715
            )
            $
            (87,986
            )Deficit
                accumulated duringthe
                development stage
            
            
            
            
            
            
            
            $
            (33,540,069
            )Average
                number of sharesoutstanding
                (basic & diluted)
            
            
            46,211,604
            
            
            46,211,604Net
                loss per share (basic & diluted)
            
            $
            (.004
            )
            $
            (.002
            )











See
      accompanying notes.





4


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**





**FORM
      10-Q**





**PART
      I - FINANCIAL INFORMATION**


**ITEM
      1** **-** **Financial
      Statements**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(Expressed
      in U.S. Dollars)





(A
      Bermuda Corporation)


A
      Development Stage Company


(Unaudited)




For
                the periodfrom
                Jan. 31, 1953Three
                months ended
            
            (inception)March
                31,
            
            To2006
            
            2005
            
            March
                31, 2006**Operating
                activities:**Net
                loss
            
            $
            (181,715
            )
            $
            (87,986
            )
            $
            (33,540,069
            )Adjustments
                to reconcile net loss to net cashused
                in operating activities:Gain
                on settlement
            
            
            —
            
            
            —
            
            
            (8,124,016
            )Goodwill
                impairment
            
            
            —
            
            
            —
            
            
            801,823Minority
                interest
            
            
            —
            
            
            —
            
            
            (632,974
            )Depreciation
            
            
            —
            
            
            —
            
            
            120Write
                off of unproved properties
            
            
            —
            
            
            —
            
            
            5,619,741Common
                stock issued for services
            
            
            —
            
            
            —
            
            
            119,500Compensation
                recognized for stock option grant
            
            
            —
            
            
            —
            
            
            75,000Recoveries
                from previously written off properties
            
            
            —
            
            
            —
            
            
            252,173Net
                change in:Prepaid
                expenses and other
            
            
            176,457
            
            
            9,033
            
            
            (23,297
            )Inventory
                - drilling
            
            
            (21,968
            )
            
            —
            
            
            (21,968
            )Accrued
                liabilities
            
            
            95,626
            
            
            65,359
            
            
            123,152Income
                taxes payable
            
            
            (35,000
            )
            
            —
            
            
            —Net
                cash provided by (used in) operating activities
            
            
            33,400
            
            
            (13,594
            )
            
            (35,350,815
            )**Investing
                activities:**Additions
                to oil, gas, and mineral propertiesnet
                of assets acquired for common stock and reimbursements
            
            
            (86,952
            )
            
            —
            
            
            (5,687,748
            )Well
                drilling costs
            
            
            (520,069
            )
            
            —
            
            
            (520,069
            )Net
                proceeds from settlement
            
            
            —
            
            
            —
            
            
            8,124,016Proceeds
                from relinquishment of surface rights
            
            
            —
            
            
            —
            
            
            246,733Purchase
                of certificate of deposit
            
            
            —
            
            
            —
            
            
            (75,000
            )Purchase
                of minority interest in CPC
            
            
            —
            
            
            —
            
            
            (801,823
            )Purchase
                of fixed assets
            
            
            —
            
            
            —
            
            
            (63,540
            )Net
                cash provided by (used in) investing activities
            
            
            (607,021
            )
            
            —
            
            
            1,222,569**Financing
                activities:**Loans
                from officers
            
            
            —
            
            
            13,500
            
            
            —Sale
                of common stock net of expenses
            
            
            —
            
            
            —
            
            
            30,380,612Shares
                issued upon exercise of options
            
            
            —
            
            
            —
            
            
            884,249Sale
                of shares by subsidiary
            
            
            —
            
            
            —
            
            
            820,000Sale
                of subsidiary shares
            
            
            —
            
            
            —
            
            
            3,720,000Net
                cash provided by financing activities
            
            
            —
            
            
            13,500
            
            
            35,804,861Net
                (decrease) increase in cash and cash equivalents
            
            
            (573,621
            )
            
            (94
            )
            
            1,676,615Cash
                and cash equivalents at beginning of period
            
            
            2,250,236
            
            
            179
            
            
            —Cash
                and cash equivalents at end of period
            
            $
            1,676,615
            
            $
            85
            
            $
            1,676,615


See
      accompanying notes.


5


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**





**FORM
      10-Q**





**PART
      I - FINANCIAL INFORMATION**


**ITEM
      1**   **Financial
      Statements**





Note
      1.  Basis
      of Presentation





The
      accompanying unaudited consolidated financial statements include Coastal
      Caribbean Oils & Minerals, Ltd. (the Company’s) and its wholly owned
      subsidiary, Coastal Petroleum Company (Coastal Petroleum) and have been prepared
      in accordance with generally accepted accounting principles for interim
      financial information and with the instructions to Form 10-Q and Rule 10-01
      of
      Regulation S-X. Accordingly, they do not include all of the information and
      footnotes required by generally accepted accounting principles for complete
      financial statements. In the opinion of management, all adjustments considered
      necessary for a fair presentation have been included. All such adjustments
      are
      of a normal recurring nature. Operating results for the three month period
      ended
      March 31, 2006 are not necessarily indicative of the results that may be
      expected for the year ending December 31, 2006. For further information, refer
      to the consolidated financial statements and footnotes thereto included in
      the
      Company’s Annual Report on Form 10-K for the year ended December 31,
      2005.




Note
      2.  Going
      Concern





As
      of
      March 31, 2006, the Company had no revenues, had recurring losses from
      operations and has had an accumulated deficit during the development
      stage.   We, along with various other parties, settled several
      lawsuits in 2005, which were filed by the Company, our subsidiary Coastal
      Petroleum Company and others against the State of Florida (See Notes 3 and
      5).
 All of these lawsuits were related to the State’s actions limiting oil and
      gas exploration and development activities on land covered by
      our subsidiary's leases and by royalties held by the Company and
      others.  The cost of that litigation was substantial.  Management
      believes its current cash position will allow the Company to move forward to
      explore and develop profitable oil and gas operations, although there is no
      assurance these efforts will be successful.





Note
      3.  Litigation





Florida
      Case





In
      June
      2005, the Company and others agreed to a final settlement of all claims and
      rights with the State of Florida (the State) for $12.5 million (the Agreement).





The
      State
      paid out the settlement through an intermediary in July 2005. The total
      settlement and the amount received by the Company was as follows:





Gross
                  settlement proceeds
              
              $
              12,500,000Distribution
                  to other parties:Lykes
                  Mineral Corporation
              
              
              1,390,000Outside
                  Royalty Holders
              
              
              2,540,000Settlement
                  Consultant
              
              
              465,000Gross
                  proceeds to Coastal
              
              
              8,105,000Purchase
                  of other CPC shares
              
              
              802,200Paid
                  to Coastal Creditors
              
              
              2,431,000Net
                  proceeds to Company
              
              $
              4,872,000




6


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**





**FORM
      10-Q**





**PART
      I - FINANCIAL INFORMATION**


**ITEM
      1**   **Financial
      Statements** **** (Continued)





Note
      3.  Litigation (Continued)





As
      part
      of the settlement, the Company acquired the remaining minority interests in
      its
      subsidiary, Coastal Petroleum for $802,000. As Coastal Petroleum had no tangible
      or intangible assets at the time the shares were acquired, the full purchase
      price was assigned to goodwill. The Company reviewed its goodwill related to
      Coastal Petroleum for impairment and determined the goodwill was fully impaired.
      Therefore, an impairment charge of $802,000 was made during the quarter ending
      September 30, 2005. The Company now owns 100% of Coastal Petroleum Company.





For
      the
      quarter ending September 30, 2005, the Company recorded a gain on its share
      of
      the settlement of $8,124,000 after deducting all direct settlement costs and
      costs to cancel various royalty rights related to the Florida
      leases.





Lease
      Taking Case (Lease 224-A)





This
      proceeding has been dismissed as part of the Agreement with the
      State.








Royalty
      Taking Case





This
      proceeding has been dismissed as part of the Agreement with the
      State.





Lease
      Taking Case (Lease 224-B)





This
      proceeding has been dismissed as part of the Agreement with the
      State.








Note
      4.  Loss
      per share





Loss
      per
      share is based upon the weighted average number of common and common equivalent
      shares outstanding during the period. The Company’s basic and diluted
      calculations of EPS are the same because the exercise of options is not assumed
      in calculating diluted EPS, as the result would be anti-dilutive (the Company
      has continuing losses).








Note
      5.  Oil
      & Gas Development Activity





Drilling
      Activity





The
      Company began drilling its initial well in north central Montana in January
      2006
      under a farm-in agreement with the mineral owner on acreage in Blaine County.
      The Company has capitalized $592,000 in drilling costs through March 31, 2006
      and is currently in the process of completing and testing the well. The drilling
      results will remain confidential until that process is complete.




7


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 
 **FORM
        10-Q**
 
 **PART
        I - FINANCIAL INFORMATION**


**ITEM
      1**  **Financial
      Statements** **** (Continued)





Note
      5. Oil
      & Gas Development Activity (Continued)





Montana
      Leases





The
      Company’s primary presence in Montana is in Valley County, where it holds leases
      covering 131,297 net acres which the Company acquired in three separate
      acquisitions between July 2005 and February 2006. The leases acquired in those
      acquisitions are contiguous to each other and are referred to collectively
      as
“the Valley County Leases.” The leases are subject to various landowner and
      overriding royalty interests ranging up to 19.5%.




The
      first
      acquisition of the Valley County Leases was in July 2005, when the Company
      acquired the rights to drill two 6,500 foot wells to test Mississippian
      Lodgepole Reefs in Valley County, in northeast Montana for a one time fee of
      $50,000 from an entity controlled by one of the Company’s Directors. The
      acquisition included a small amount of acreage and the option to drill fifty
      additional prospects in the Valley County area.





The
      second acquisition of the Valley County Leases was in November 2005, when the
      Company acquired a group of oil and gas lease rights to approximately 103,557
      net acres in eastern Montana for $1,568,000. These leases expire in years from
      2007 to 2014.





The
      final
      acquisition of acreage within the Valley County Leases was in February 2006,
      when the Company acquired additional oil and gas leases in eastern Montana
      covering 27,740 net acres contiguous to its existing Montana leases. These
      leases were acquired from the Bureau of Land Management and United States
      Department of the Interior.





The
      Company has an agreement with a consultant entity, controlled by one of the
      Company’s Directors, to identify Mississipian Lodgepole Reef prospects to be
      drilled on and near its Valley County Leases. The agreement provides for up
      to a
      25% working interest, 20% net revenue interest in each well after payout, on
      a
      well by well basis, to the consulting entity. Under the prior agreement, the
      Company was required to drill a test well on an identified Lodgepole Reef
      prospect by March 31, 2006, in order to maintain the contract and have the
      option to have fifty additional Lodgepole Reef prospects identified. Under
      the
      current amended agreement, the Company must drill a test well on an identified
      Lodgepole Reef prospect by September 30, 2006, in order to maintain the contract
      and have the option under that contract to have all of the Lodgepole Reef
      prospects identified over the extent of the Valley County Leases and in
      surrounding areas.





The
      Company has recently received two permits, and a third is pending, to drill
      on
      its Valley County Leases. The Company estimates the cost to drill a test well
      on
      the Valley County Leases to be approximately $500,000 and the Company is
      actively seeking partners to participate for the bulk of
      expenditures.


8


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**





**FORM
      10-Q**





**PART
      I - FINANCIAL INFORMATION**




**ITEM
      1**  **Financial
      Statements** **** (Continued)





Note
      5. Oil
      & Gas Development Activity (Continued)





North
      Dakota Leases





In
      July
      2005, the Company acquired leases to the deeper rights in approximately 21,688
      net acres in and near Slope County, North Dakota for a one time fee of $50,000
      from a consultant entity controlled by one of the Company’s Directors. The
      Company’s agreement with the consultant entity to identify Mississipian
      Lodgepole Reef prospects to be drilled on and near its Slope County Leases,
      provides for up to a 25% working interest, 20% net revenue interest in each
      well
      after payout, on a well by well basis, to the consulting entity. The leases
      are
      also subject to various landowner and overriding royalty interests ranging
      up to
      19.5%.





The
      Company is obligated to drill a test well before July 31, 2006, and has the
      option to drill the remaining Lodgepole Reef prospects on these leases. The
      Company intends to partner with other entities to share the cost of the initial
      9,700 foot test well the total estimated drilling cost of which is estimated
      to
      be $1,200,000.





Florida
      Leases





The
      Florida Leases were surrendered to Florida as a part of the 2005 Agreement
      with
      Florida and are no longer held by the Company.





Prior
      to
      2005, Coastal Petroleum held three unproved and nonproducing oil, gas and
      mineral leases granted by the Trustees of the Internal Improvement Fund of
      the
      State of Florida (Trustees). These leases covered submerged and unsubmerged
      lands, principally along the Florida Gulf Coast, and certain inland lakes and
      rivers throughout the State. The two leases bordering the Gulf Coast were
      divided into three areas, each running the entire length of the coastline from
      Apalachicola Bay to the Naples area. Coastal Petroleum held certain royalty
      interests in the inner area, no interest in the middle area and a 100% working
      interest in the outside area. Coastal Petroleum also held a 100% working
      interest in Lake Okeechobee, and a royalty interest in other areas. Coastal
      Petroleum had agreed not to conduct exploration, drilling, or mining operations
      on said lake, except with prior approval of the Trustees.




Note
      6.  Income
      Taxes





For
      the
      three months ended March 31, 2006 and 2005, the Company reported a loss for
      both
      financial statement reporting and income tax purposes. The Company has provided
      a 100% valuation allowance on its additional deferred tax asset as a result
      of
      its net operating loss carryforward. The Company has approximately $8,800,000
      in
      net operating loss carryforwards at December 31, 2005.





9


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 
 **FORM
        10-Q**
 
 **PART
        I - FINANCIAL INFORMATION**





**ITEM
      2**  **Management's
      Discussion and Analysis of Financial Condition and**


**Results
      of Operations**





**Forward
      Looking Statements**





Statements
      included in Management’s Discussion and Analysis of Financial Condition and
      Results of Operations, which are not historical in nature are intended to be
      forward looking statements. The Company cautions readers that forward looking
      statements are subject to certain risks and uncertainties that could cause
      actual results to differ materially from those indicated in the forward looking
      statements. Among the risks and uncertainties are: the uncertainty of securing
      additional financing through the sale of shares of Coastal Petroleum and/or
      Coastal Caribbean; changes in the income tax laws relating to tax loss carry
      forwards; the failure of the Company’s test wells to locate oil or gas reserves
      or the failure to locate oil or gas reserves which are economically feasible
      to
      recover; reductions in world wide oil or gas prices; adverse weather conditions;
      or mechanical failures of equipment used to explore the Company’s
      leases.





**Critical
      Accounting Policies**





The
      Company follows the full cost method of accounting for its oil and gas
      properties. All costs associated with property acquisition, exploration and
      development activities whether successful or unsuccessful are
      capitalized.





The
      capitalized costs are subject to a ceiling test which basically limits such
      costs to the aggregate of the estimated present value discounted at a 10% rate
      of future net revenues from proved reserves, based on current economic and
      operating conditions, plus the lower of cost or fair market value of unproved
      properties.




The Company assesses whether its unproved properties are impaired on a periodic
      basis. This assessment is based upon work completed on the properties to date,
      the expiration date of its leases and technical data from the properties and
      adjacent areas.





**Oil
      & Gas Development Activity**





Drilling
      Activity





The
      Company began drilling its initial well in north central Montana in January
      2006
      under a farm-in agreement with the mineral owner on acreage in Blaine County.
      The Company has capitalized $592,000 in drilling costs through March 31, 2006
      and is currently in the process of completing and testing the well. The drilling
      results will remain confidential until that process is complete.





10





**ITEM
      2**  **Management's
      Discussion and Analysis of Financial Condition and**


**** **Results
      of Operations** (Continued)





**Oil
      & Gas Development Activity** (Continued)





Montana
      Leases





The
      Company’s primary presence in Montana is in Valley County, where it holds leases
      covering 131,297 net acres which the Company acquired in three separate
      acquisitions between July 2005 and February 2006. The leases acquired in those
      acquisitions are contiguous to each other and are referred to collectively
      as
“the Valley County Leases.” The leases are subject to various landowner and
      overriding royalty interests ranging up to 19.5%.




The
      first
      acquisition of the Valley County Leases was in July 2005, when the Company
      acquired the rights to drill two 6,500 foot wells to test Mississippian
      Lodgepole Reefs in Valley County, in northeast Montana for a one time fee of
      $50,000 from an entity controlled by one of the Company’s Directors. The
      acquisition included a small amount of acreage and the option to drill fifty
      additional prospects in the Valley County area.





The
      second acquisition of the Valley County Leases was in November 2005, when the
      Company acquired a group of oil and gas lease rights to approximately 103,557
      net acres in eastern Montana for $1,568,000. These leases expire in years from
      2007 to 2014.





The
      final
      acquisition of acreage within the Valley County Leases was in February 2006,
      when the Company acquired additional oil and gas leases in eastern Montana
      covering 27,740 net acres contiguous to its existing Montana leases. These
      leases were acquired from the Bureau of Land Management and United States
      Department of the Interior.





The
      Company has an agreement with a consultant entity, controlled by one of the
      Company’s Directors, to identify Mississipian Lodgepole Reef prospects to be
      drilled on and near its Valley County Leases. The agreement provides for up
      to a
      25% working interest, 20% net revenue interest in each well after payout, on
      a
      well by well basis, to the consulting entity. Under the prior agreement, the
      Company was required to drill a test well on an identified Lodgepole Reef
      prospect by March 31, 2006, in order to maintain the contract and have the
      option to have fifty additional Lodgepole Reef prospects identified. Under
      the
      current amended agreement, the Company must drill a test well on an identified
      Lodgepole Reef prospect by September 30, 2006, in order to maintain the contract
      and have the option under that contract to have all of the Lodgepole Reef
      prospects identified over the extent of the Valley County Leases and in
      surrounding areas.





The
      Company has recently received two permits, and a third is pending, to drill
      on
      its Valley County Leases. The Company estimates the cost to drill a test well
      on
      the Valley County Leases to be approximately $500,000 and the Company is
      actively seeking partners to participate for the bulk of
      expenditures.





11


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**





**FORM
      10-Q**





**PART
      I - FINANCIAL INFORMATION**





**ITEM
      2**  **Management's
      Discussion and Analysis of Financial Condition and**


**** **Results
      of Operations** (Continued)





**Oil
      & Gas Development Activity** (Continued)





North
      Dakota Leases





In
      July
      2005, the Company acquired leases to the deeper rights in approximately 21,688
      net acres in and near Slope County, North Dakota for a one time fee of $50,000
      from a consultant entity controlled by one of the Company’s Directors. The
      Company’s agreement with the consultant entity to identify Mississipian
      Lodgepole Reef prospects to be drilled on and near its Slope County Leases,
      provides for up to a 25% working interest, 20% net revenue interest in each
      well
      after payout, on a well by well basis, to the consulting entity. The leases
      are
      also subject to various landowner and overriding royalty interests ranging
      up to
      19.5%.





The
      Company is obligated to drill a test well before July 31, 2006, and has the
      option to drill the remaining Lodgepole Reef prospects on these leases. The
      Company intends to partner with other entities to share the cost of the initial
      9,700 foot test well the total estimated drilling cost of which is estimated
      to
      be $1,200,000.





**Liquidity and Capital Resources**





The
      Company has significantly improved its cash and working capital positions as
      the
      result of its settlement with the State of Florida. The Company has $1.677M
      in
      cash at March 31, 2006 compared to $179 at March 31, 2005. The Company has
      paid
      all its past due accounts and is current with all its vendors and has no loans
      outstanding.





As
      of March
      31,
      2006 ,
      the
      Company had no revenues, had recurring losses prior to 2005 and has an
      accumulated deficit during the development stage.   We, along with
      others, settled several lawsuits in June 2005, which were filed by the Company,
      our subsidiary Coastal Petroleum Company and others against the State of Florida
      (See Notes 3 and 5).  All of these lawsuits were related to the State’s
      actions limiting our ability to commence development activities through our
      subsidiary.  The cost of that litigation was substantial.  Management
      believes its current cash position will allow the Company to move forward to
      explore and develop profitable oil and gas operations, although there is no
      assurance these efforts will be successful.





**Results of Operations**





**Three
      months ended March 31, 2006 vs. March 31, 2005**




In June 2005, we settled all our legal actions with the State of Florida and
      realized a gain of $8,124,000. Prior to June 2005, we expensed all our oil
      and
      gas property lease costs as impaired as well as substantial legal costs.




Prior to June 2005, we have been working toward resolution of our legal actions
      against the State of Florida, and we continued to suffer declining financial
      condition and a lack of resources to continue pursuing expensive and lengthy
      litigation. We minimized




12


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 
 **FORM
        10-Q**
 
 **PART
        I - FINANCIAL INFORMATION**




**ITEM
      2**  **Management's
      Discussion and Analysis of Financial Condition and**


**Results
      of Operations** **** (Continued)





**Results of Operations** (Continued)





expenses,
      deferred payments and borrowed funds from our officers to maintain our legal
      efforts against the State of Florida.




Since
      June
      2005, we have actively acquired oil and gas leases in North Dakota and Montana
      and we began drilling our first well in January 2006.




Our
      interest
      income increased in 2006 due to the short-term investment of cash received
      from
      the settlement. We had no such investments in 2005.




For
      2006 and
      2005, we had one employee, and maintained legal counsel on a monthly retainer
      and maintained our periodic reporting obligations. During 2005, we also
      attempted to minimize all other operating expenses. During 2006, almost all
      our
      operating costs increased due to our lease acquisitions and well drilling
      activity in North Dakota and Montana resulting in significant increases in
      travel and lodging costs. In 2006, we also added Company directors, increased
      director compensation and added director liability insurance.





**ITEM
      3**  **Quantitative
      and Qualitative Disclosure About Market Risk**





The
      Company
      does not have any significant exposure to market risk as there were no
      investments in marketable securities at March 31, 2006.





**ITEM
      4**  **Controls
      and Procedures**




I,
      Phillip W.
      Ware, the principal executive officer and the principal financial officer,
      have
      evaluated the Company’s
      disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
      adopted under the Securities Act of 1934) as of the end of the period covered
      by
      this report and have concluded:




1.  That
      the
      Company’s disclosure controls and procedures are effective and adequately
      designed to ensure that material information relating to the Company, including
      its consolidated subsidiary, is timely made known to such officers by others
      within the Company and its subsidiary, particularly during the period in which
      this quarterly report is being prepared; and





2.  That
      there were no significant changes in the Company’s internal controls or in other
      factors that could materially affect or are reasonably likely to materially
      affect these controls subsequent to the date of their evaluation, including
      any
      corrective actions with regard to significant deficiencies and material
      weaknesses.





13


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**





**FORM
      10-Q**





**PART
      II - FINANCIAL INFORMATION**






**ITEM
      5**  **Other
      Information**




Coastal
      Caribbean is currently a passive foreign investment company, or PFIC, for United
      States federal income tax purposes, which could result in negative tax
      consequences to a shareholder. If, for any taxable year, the Company’s passive
      income or assets that produce passive income exceed levels provided by U.S.
      law,
      the Company would be a "passive foreign investment company," or PFIC, for U.S.
      federal income tax purposes. For the years 1987 through 2001, Coastal
      Caribbean's passive income and assets that produce passive income exceeded
      those
      levels and for those years Coastal Caribbean constituted a PFIC. If Coastal
      Caribbean is a PFIC for any taxable year, then the Company’s U.S. shareholders
      potentially would be subject to adverse U.S. tax consequences of holding and
      disposing of shares of our common stock for that year and for future tax years.
      Any gain from the sale of, and certain distributions with respect to, shares
      of
      the Company’s common stock, would cause a U.S. holder to become liable for U.S.
      federal income tax under section 1291 of the Internal Revenue Code (the interest
      charge regime). The tax is computed by allocating the amount of the gain on
      the
      sale or the amount of the distribution, as the case may be, to each day in
      the
      U.S. shareholder’s holding period. To the extent that the amount is allocated to
      a year, other than the year of the disposition or distribution, in which the
      corporation was treated as a PFIC with respect to the U.S. holder, the income
      will be taxed as ordinary income at the highest rate in effect for that year,
      plus an interest charge.





For
      further information, refer to the consolidated financial statements and
      footnotes thereto included in the Company’s Annual Report on Form 10-K for the
      year ended December 31, 2005.





14


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 
 **FORM
        10-Q**
 
 **PART
        II - FINANCIAL INFORMATION**





**ITEM
      6**  **Exhibits**




31.1
            Certification
                pursuant to Rule 13a-14 by Phillip W.
                Ware





32.1
            Certification pursuant to Section 906 by Phillip
              W.
              Ware




15


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**




**FORM
      10-Q**




**March
      31, 2006**








**SIGNATURES**





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











**COASTAL
                CARIBBEAN OILS & MINERALS, LTD.**
              RegistrantDate: April
              27, 2006
            By:
            /s/ Phillip
              W. WarePhillip W. Ware
              Chief Executive Officer,
                President and Treasurer








16