**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934





For
      the
      quarterly period ended  **September
      30,
      2008**





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 ofincorporation
                  or organization)
              
              (I.R.S.
                  EmployerIdentification
                  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 a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company.
      See
      definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large accelerated filer o
            Accelerated filer oNon-accelerated filer o(Do
              not check if smaller reporting company)
            Smaller reporting company x




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
      November 13, 2008 was 46,261,604.











**Table
      of Contents**








**PART
      I - FINANCIAL INFORMATION**





ITEM
                1
            Financial
                Statements
            PageConsolidated
                balance sheets at September 30, 2008 and December 31,
                2007
            3Consolidated
                statements of operations for the three and nine month periods ended
                September 30, 2008 and 2007 and for the period from January 31, 1953
                (inception) to September 30, 2008
            4Consolidated
                statements of cash flows for the nine month periods ended
                September 30, 2008 and 2007 and for the period from January 31,
                1953 (inception) to September 30, 2008
            5Notes
                to consolidated financial statements
            6ITEM
                2
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            11ITEM
                3
            Quantitative
                and Qualitative Disclosure About Market Risk
            16ITEM
                4
            Controls
                and Procedures
            17**PART
                II - OTHER INFORMATION**ITEM
                5
            Other
                Information
            17ITEM
                6
            Exhibits
            19Signatures
            20




2


COASTAL
      CARIBBEAN OILS & MINERALS, LTD.


FORM
      10-Q


PART
      I -
      FINANCIAL INFORMATION


September 30,
      2008





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





**CONSOLIDATED
      BALANCE SHEETS**


(Expressed
      in U.S. dollars)





(A
      Bermuda Corporation)


A
      Development Stage Company





September 30,
                
                December
                    31,2008
                
                2007**Assets**
                
                (Unaudited)
                
                (Note)Current
                    assets:Cash
                    and cash equivalents
                
                $
                16,098
                
                $
                30,264Prepaid
                    expenses and other
                
                
                -
                
                
                30,040Total
                    current assets
                
                
                16,098
                
                
                60,304Certificates
                    of deposit, restricted
                
                
                84,668
                
                
                135,364Petroleum
                    leases
                
                
                2,174,836
                
                
                2,168,293Equipment,
                    net
                
                
                7,045
                
                
                8,935Total
                    assets
                
                $
                2,282,647
                
                $
                2,372,896**Liabilities
                    and Shareholders’ Equity**Current
                    liabilities:Accounts
                    payable and accrued liabilities
                
                $
                32,564
                
                $
                11,125Amounts
                    due to related parties
                
                
                664,942
                
                
                348,208Total
                    current liabilities
                
                
                697,506
                
                
                359,333Shareholders'
                    equity:Common
                    stock, par value $.12 per share:Authorized
                    - 250,000,000 sharesOutstanding
                    - 46,261,604 and 46,211,604 shares,respectively
                
                
                5,551,392
                
                
                5,545,392Capital
                    in excess of par value
                
                
                32,139,311
                
                
                32,137,81137,690,703
                
                
                37,683,203Deficit
                    accumulated during the development stage
                
                
                (36,105,562
                )
                
                (35,669,640
                )Total
                    shareholders’ equity
                
                
                1,585,141
                
                
                2,013,563Total
                    liabilities and shareholders’ equity
                
                $
                2,282,647
                
                $
                2,372,896







Note:
      The
      balance sheet at December 31, 2007 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
 September 30,
        2008




**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 September 30,
              
              Nine
                  months ended September 30,
              
              to
                September
                  30,2008
              
              2007
              
              2008
              
              2007
              
              2008**Interest
                  and other income**
              
              $
              1,587
              
              $
              8
              
              $
              3,960
              
              $
              4,815
              
              $
              3,983,874**Gain
                  on settlement**
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              8,124,0161,587
              
              
              8
              
              
              3,960
              
              
              4,815
              
              
              12,107,890**Expenses:**Legal
                  fees and costs
              
              
              37,640
              
              
              36,956
              
              
              115,006
              
              
              121,432
              
              
              17,533,901Administrative
                  expenses
              
              
              63,384
              
              
              63,862
              
              
              221,900
              
              
              223,490
              
              
              10,804,121Salaries
              
              
              31,250
              
              
              31,250
              
              
              93,750
              
              
              104,150
              
              
              4,240,181Shareholder
                  communications
              
              
              2,066
              
              
              469
              
              
              9,226
              
              
              10,697
              
              
              4,124,921Goodwill
                  impairment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              801,823Write
                  off of unproved properties
              
              
              -
              
              
              (34,766
              )
              
              -
              
              
              51,026
              
              
              6,631,505Exploration
                  costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              247,465Lawsuit
                  judgments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,941,916Minority
                  interests
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (632,974
              )Other
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              364,865Contractual
                  services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,155,728134,340
              
              
              97,771
              
              
              439,882
              
              
              510,795
              
              
              48,213,452**Income
                  tax benefit**
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -**Net
                  loss**
              
              $
              (132,753
              )
              $
              (97,763
              )
              $
              (435,922
              )
              $
              (505,980
              )Deficit
                    accumulated during the development stage
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (36,105,562
              )Weighted
                    average number of Shares outstanding (basic &
                    diluted)
              
              
              46,229,122
              
              
              46,221,604
              
              
              46,211,604
              
              
              46,211,604Net
                  loss per share (basic & diluted)
              
              $
              (.00
              )
              $
              (.00
              )
              $
              (.00
              )
              $
              (.00
              )





See
      accompanying notes.





4


COASTAL
      CARIBBEAN OILS & MINERALS, LTD.


FORM
      10-Q


PART
      I -
      FINANCIAL INFORMATION


September 30,
      2008


**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, 1953(inception)Nine
                  months ended
              
              
              toSeptember
                  30,
              
              
              September
                  30,2008
              
              
              2007
              
              
              2008**Operating
                activities:**Net
                  loss
              
              $
              (435,922
              )
              $
              (505,980
              )
              $
              (36,105,562
              )Adjustments
                  to reconcile net loss to net cash used
                  in operating activities:Gain
                  on settlement
              
              
              -
              
              
              -
              
              
              (8,124,016
              )Goodwill
                  impairment
              
              
              -
              
              
              -
              
              
              801,823Minority
                  interest
              
              
              -
              
              
              -
              
              
              (632,974
              )Depreciation
              
              
              1,890
              
              
              1,890
              
              
              5,928Write
                  off of unproved properties
              
              
              -
              
              
              51,026
              
              
              6,690,752Common
                  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
              
              
              30,040
              
              
              29,256
              
              
              -Income taxes receivable
              
              
              -
              
              
              -
              
              
              -Accounts payable and accrued liabilities
              
              
              338,173
              
              
              204,494
              
              
              697,507Income taxes payable
              
              
              -
              
              
              -
              
              
              -Net
                  cash used in operating activities
              
              
              (65,819
              )
              
              (219,314
              )
              
              (36,219,869
              )**Investing
                  activities:**Additions
                  to oil, gas, and mineral propertiesnet
                  of assets acquired for common stock and reimbursements
              
              
              (224,363
              )
              
              (207,140
              )
              
              (6,427,452
              )Well
                  drilling costs
              
              
              -
              
              
              (51,026
              )
              
              (1,071,011
              )Sale
                  of unproved nonoperating interests
              
              
              217,820
              
              
              89,175
              
              
              512,434Net
                  proceeds from settlement
              
              
              -
              
              
              -
              
              
              8,124,016Proceeds
                  from relinquishment of surface rights
              
              
              -
              
              
              -
              
              
              246,733Redemption
                  (purchase) of certificate of deposit
              
              
              50,696
              
              
              (3,596
              )
              
              (84,668
              )Purchase
                  of minority interest in CPC
              
              
              -
              
              
              -
              
              
              (801,823
              )Purchase
                  of fixed assets
              
              
              -
              
              
              -
              
              
              (74,623
              )Net
                  cash provided by (used in) investing activities
              
              
              44,153
              
              
              (172,587
              )
              
              423,606**Financing
                  activities:**Loan
                  proceeds
              
              
              -
              
              
              126,000
              
              
              -Loans
                  from officers
              
              
              -
              
              
              -
              
              
              111,790Repayments
                  of loans from officers
              
              
              -
              
              
              -
              
              
              (111,790
              )Sale
                  of common stock net of expenses
              
              
              -
              
              
              -
              
              
              30,380,612Shares
                  issued upon exercise of options
              
              
              7,500
              
              
              -
              
              
              891,749Sale
                  of shares by subsidiary
              
              
              -
              
              
              -
              
              
              820,000Sale
                  of subsidiary shares
              
              
              -
              
              
              -
              
              
              3,720,000Net
                  cash provided by financing activities
              
              
              7,500
              
              
              126,000
              
              
              35,812,361Net
                  (decrease) increase in cash and cash equivalents
              
              
              (14,166
              )
              
              (265,901
              )
              
              16,098Cash
                  and cash equivalents at beginning of period
              
              
              30,264
              
              
              342,541
              
              
              -Cash
                  and cash equivalents at end of period
              
              $
              16,098
              
              $
              76,640
              
              $
              16,098




See
      accompanying notes.


5


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


**FORM
      10-Q**


**PART
      I - FINANCIAL INFORMATION**


**September
      30, 2008**


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





Note
      1.  Basis
      of Presentation





The
      accompanying unaudited consolidated financial statements include Coastal
      Caribbean Oils & Minerals, Ltd. (“the Company”) 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 and nine month
      periods ended September 30, 2008 are not necessarily indicative of the
      results that may be expected for the year ending December 31, 2008. 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, 2007.




Note
      2.  Going
      Concern





As
      of
      September 30, 2008, the Company had no revenues, had recurring losses from
      operations and has had an accumulated deficit during the development
      stage.  The Company's current cash position is not adequate to fund
      existing operations or exploration and development of its oil and gas
      properties. Management currently has in place an agreement with a party covering
      part of the Company’s leases under which the party will drill a test well and
      have the option to purchase a 50% working interest in the leases covered by
      the
      agreement. If the party exercises the option, the Company would receive
      approximately $1,000,000, although there is no assurance drilling will be
      successful or the option will be exercised. The Company also has an agreement
      with another party, under which the party has the option to purchase a 50%
      working interest in the Company’s remaining Valley County leases by paying
      $1,000,000 in drilling costs on the Company’s behalf, although there is no
      assurance drilling will be successful or the option will be exercised. These
      situations raise substantial doubt about the Company's ability to continue
      as a
      going concern. These consolidated financial statements do not include any
      adjustments to reflect the possible future effects on the recoverability and
      classification of assets or amounts and classification of liabilities, which
      may
      result from the outcome of this uncertainty.





Note
      3.  Net
      income (loss) per share





Net
      income (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.





Note
      4. Oil
      & Gas Development Activity





***Montana
      Leases***





The
      Company’s primary presence in Montana is in Valley County, where it holds leases
      covering approximately 124,882 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 Valley County Leases are subject to various overriding
      royalty interests to others ranging up to 19.5%. These leases expire in years
      from 2011 to 2016.


6


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
        10-Q**
 **PART
        I - FINANCIAL INFORMATION**
 **September
        30, 2008**


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





Note
      4. Oil
      & Gas Development Activity (Continued)




The
      Company has an agreement with a consultant entity, controlled by one of the
      Company’s Directors, to identify Mississippian Lodgepole Reef prospects to be
      drilled on and near its Valley County Leases. Previously under the agreement,
      the Company was required to drill a test well on an identified Lodgepole Reef
      prospect by a certain deadline, however, there is no longer a drilling
      obligation under the agreement.





In
      May
      2008, the Company entered an agreement with Cobra Oil and Gas. Under the
      agreement, Cobra paid Coastal $180,000 for the option to acquire a half interest
      in approximately 87,000 acres of Coastal’s Valley County Leases. The agreement
      allowed the Company to pay its Lease rentals that were due June 1 st and
      brings in a new party to explore on the Leases. Cobra will have two years to
      exercise the option by spending $1,000,000 on behalf of the Company, drilling
      wells on the leases under the agreement. Those leases include approximately
      62,000 acres of leases that were formally under an agreement with F-Cross
      Resources that expired earlier this year and more than 20,000 acres of other
      leases Coastal held in Valley County.





In
      August
      2007, the Company entered into a farm-out agreement with Western Standard Energy
      Corp. (“Western Standard”) Under the agreement Western Standard paid $40,000 up
      front to Coastal and then paid an additional $255,000 to cover the costs of
      drilling the first well to test a shallow natural gas prospect in Valley County,
      Montana and $129,000 to cover associated lease rentals. Western Standard will
      have a 100% working interest in the well until payout when it will be reduced
      to
      80% with Coastal receiving the remaining 20% working interest.





The
      first
      well under this agreement was drilled during October 2007, to test a shallow
      natural gas prospect near the middle of the Company’s Valley County Leases. The
      well, known as the Federal 1-19 Well, had three objectives: to confirm the
      34,000 acre Starbuck East Prospect by finding that the Eagle formation was
      high
      to surrounding wells off the Prospect; to confirm that there were good natural
      gas shows in the Starbuck East Prospect; and to find commercial gas in either
      the Eagle formation or the Judith River formation. The first two objectives
      were
      met. Due to drilling damage, the third objective has not yet been
      met.





During
      October 2007, the Federal 1-19 well reached a total depth of 1,126 feet, and
      confirmed the structural high that was targeted. The well also had gas shows
      in
      two zones. Casing was run into the hole and operations to complete and test
      the
      well were scheduled to begin at the end of November, but were delayed by
      equipment repairs. The well is located on Federal land and the Bureau of Land
      Management would not allow the completion and testing operations or any further
      drilling to begin until July 2008, so operations were suspended until that
      time. The Company also received an additional $29,000 from Western Standard
      to cover additional
      drilling and other costs associated with the delay in well completion, which
      has
      been recorded as a reduction in capitalized petroleum lease costs. Western
      Standard paid the estimated well completion costs of $65,000 and operations
      to
      complete and test the well were performed in two stages during the third quarter
      and proceeded to the third stage subsequent to the end of the third quarter.
      In
      October 2008, the Company received approximately $29,000 from Western Standard
      to pay for the third stage of operations which included stimulation of the
      well,
      a common procedure in completing oil and gas wells.




7


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
        10-Q**
 **PART
        I - FINANCIAL INFORMATION**
 **September
        30, 2008**


**ITEM
        1**  **Financial
        Statements** **** (Continued)
 
 Note
        4. Oil
        & Gas Development Activity (Continued)


The
      Company was unable to determine by this well whether the target formations
      contain economic quantities of gas. Drilling damage in the well prevented the
      testing of either of the prospective formations at this location. Completion
      efforts found that the Eagle formation was damaged by the initial drilling
      and
      the formation was not able to be tested from this well. Further drilling into
      the Eagle formation during completion did not yield gas like the gas show seen
      from the upper part of the formation that was damaged. The Judith River
      formation, a secondary target, was damaged by drilling fluids lost into the
      formation while drilling through it to get to the Eagle formation, the primary
      target. Future wells to test this structure will incorporate the information
      obtained from these wells to prevent that damage from occurring again in other
      locations on the structure.





It
      is not
      unusual that the first well confirming a structure does not become a producing
      well. The test well did produce valuable information about the two gas bearing
      formations and their potential for economically feasible commercial gas
      production. Problems encountered in drilling the test well can now be avoided
      when future wells are drilled on the Starbuck East Prospect. With the first
      two
      objectives met, the Company will now focus on achieving the third objective,
      specifically finding commercial gas in either the Eagle or Judith River
      formations.





Now
      that
      the test well is completed, Western Standard has 30 days to exercise its option
      to purchase a 50% interest in approximately 42,000 (37,000 after some leases
      have expired) acres near the well location (referred to as “Valley County
      Shallow Gas Assembly”). The cost to exercise the option would be $1,000,000,
      payable in $200,000 installments based on certain milestones related to drilling
      step-out wells. The Company currently has permits to drill two of the step-out
      wells and is in the permitting process for permits to drill two additional
      step-out wells.





F-Cross
      Resources, LLC (“F-Cross”) will continue to hold its interest in the section in
      which it drilled a well under the September 2007 agreement which has otherwise
      expired. Under that agreement the Company received $50,000 from F-Cross
      Resources, LLC (“F- Cross”) when the two parties entered into a farm-out
      agreement covering approximately 64,000 acres (now 62,000 after some leases
      expired) on the northwest part of the Company’s Valley County Leases. Under the
      agreement, F-Cross had the option to drill a Lodgepole test well within six
      months and after drilling that well had the further option to acquire an
      interest in surrounding acreage. F-Cross is to pay for the cost of drilling
      the
      initial well and will receive a 100% working interest in the well until payout
      and an 80% working interest subsequent to payout. The first Lodgepole test
      well
      under the agreement was drilled in November, 2007, but the well is awaiting
      completion and testing of several zones which have potential for both oil and gas.
      Unlike the shallow gas well on Federal land, this well is located on State
      land
      and provided that there is no State objection, the Company expects F-Cross
      will
      resume operations to complete and test the well once the weather and regulators
      permit it, although to date those operations have not been resumed. 
F-Cross did not meet the requirements in the agreement and in late March the
      option to acquire an interest in additional acreage expired, leaving F-Cross
      with rights only in the section in which it drilled the well.




8


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
        10-Q**
 **PART
        I - FINANCIAL INFORMATION**
 **September
        30, 2008**


**ITEM
        1**  **Financial
        Statements** **** (Continued)
 
 Note
        4. 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 an entity controlled
      by one of the Company’s Directors and the Company has invested some additional
      funds to geochemically test and high-grade these and other prospects on the
      leases. Since that time, some of the leases have expired and the Company
      currently holds leases on approximately 8,510 net acres in North Dakota. The
      Company is obligated to drill a test well on the original leases totaling 7,031
      acres before January 31, 2009, and has the option to drill the remaining
      Lodgepole Reef prospects on these leases. That deadline has been extended in
      the
      past and may be extended again. The Company intends to team 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 $1,500,000, however, it is unlikely
      that the Company will be able to identify and contract with a team prospect
      prior to the expiration date. The leases making up the remaining acreage were
      leased by the Company and have no obligation associated with them.





In
      an
      effort to explore the North Dakota leases, in December of 2007 the Company
      entered a new farm-out agreement with Western Standard. Under the agreement,
      the
      Company assigned leases over four of its high-graded Lodgepole Reef prospects
      to
      Western Standard in return for $80,000. The Company received $40,000 in November
      2007, $25,000 in February 2008 and $15,000 in April 2008, which was recorded
      as
      a reduction in capitalized petroleum lease costs. The Company will also retain
      a
      back-in working interest of 20% in the leases after payout. Oil For America
      has
      agreed to waive the drilling obligation on these four prospects. The Company
      still retains additional Lodgepole reef prospects on its North Dakota leases
      that are not covered by this farm-out agreement.





Note
      5. Income
      Taxes





For
      the
      three and nine month periods ending September 30,
      2008 and 2007, the Company reported a loss for both financial statement
      reporting and income tax purposes. The Company has provided a 100% valuation
      allowance on its deferred tax asset as a result of its net operating loss
      carryforwards. The Company has approximately $10,000,000 in net operating loss
      carryforwards at December 31, 2007.





9


**COASTAL
          CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
          10-Q**
 **PART
          I - FINANCIAL INFORMATION**
 **September
          30, 2008**




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





Note
      6.  Related
      Party Transactions





Pursuant
      to a written agreement with respect to the Valley County Leases, the Company
      uses an entity controlled by an individual who is a shareholder, officer and
      director of the Company to perform geotechnical analysis of potential drilling
      sites at a cost of $1,000 per site. The Company paid no amounts to this entity
      for the three and nine month periods ended September 30,
      2008, and 2007, respectively.





The
      Company pays a monthly retainer to the law firm of Angerer & Angerer which
      has been litigation counsel to the Company for more than twenty-five years
      and
      continues to serve the Company in that capacity as well as others including
      general counsel services, management services, public relations, shareholder
      relations and representing the Company before state and federal agencies for
      permitting. The principals of the law firm include two individuals who are
      collectively shareholders, officers and a director of the Company. The Company
      expensed $108,000 and $108,000 in legal fees for the nine month periods ended
      September 30, 2008 and 2007, respectively, including $36,000 and $36,000 in
      legal fees for the three month periods ended September 30,
      2008 and 2007, respectively. The Company owes $204,000 in accrued legal fees
      to
      Angerer & Angerer as of September 30,
      2008.





The
      Company has retained the law firm of Igler & Dougherty, P.A. as securities
      counsel. One of the Company’s directors is a shareholder in the law firm. The
      Company expensed $12,447 and $10,716 in legal fees and costs for the nine month
      periods ended September 30, 2008
      and 2007, respectively, including $2,768 and $956 in legal fees for the three
      month periods ended September 30,
      2008 and 2007, respectively.





Note
      7.  Note
      Payable





The
      Company borrowed $126,000 in May 2007 to pay lease obligations that were due
      in
      June 2007. The note required the loan to be repaid prior to the spudding of
      the
      first well on any of the approximately 42,000 (37,000 after some leases have
      expired) acres of the Company’s leases that are covered by the loan agreement.
      Coastal assigned a 5% overriding royalty interest (before all expenses) in
      8/8ths of the oil or natural gas produced from those Valley County Montana
      leases to the lender. The loan was repaid on October 15, 2007, prior to the
      spudding of the first well on the acreage, out of the money advanced by Western
      Standard Energy Corp. to drill the first well under their agreement with the
      Company.





Note
      8.  Stock
      Transactions





In
      March
      2008, the Company received $7,500 from the exercise of outstanding stock options
      for 50,000 shares from Robert J. Angerer, Sr., a vice president and a director
      of the Company.








10


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
        10-Q**
 **PART
        I - FINANCIAL INFORMATION**
 **September
        30, 2008**


**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. Using this assessment, Management has determined that the
      Company’s leases are not impaired.





**Liquidity and Capital Resources**


**Liquidity**




The
      Company has no available cash, excluding certificate of deposits pledged for
      drilling permits, at September 30 ,
      2008,
      compared to $30,000 at December 31, 2007. Our current liabilities exceed
      our current assets by $680,000 at September 30,
      2008. We have suspended payments to our directors, general legal counsel, and
      employee since the second quarter of 2007 and have accrued $665,000 in expenses
      as of September 30,
      2008. We received $195,000 from the sale of unproved lease rights and redeemed
      a
      $50,000 certificate of deposit released from restrictions as a drilling bond
      during the nine months ended September 30,
      2008, which we used primarily to pay our annual lease payments and other
      operating expenses.




11


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
        10-Q**
 **PART
        I - FINANCIAL INFORMATION**
 **September
        30, 2008**


**ITEM
      2**   **Management's
      Discussion and Analysis of Financial Condition and** **Results
      of Operations** **** (Continued)





During
      2008, we received $180,000 and $40,000 respectively under farm-out agreements
      for lease and drilling rights on our Montana and North Dakota leases. During
      2007, we received approximately $309,000 under various agreements for lease
      and
      drilling rights and the options to acquire additional rights. Also during 2007,
      we received $255,000 that was used to drill one of the wells on our leases.





During
      2008, we have paid lease rentals of $201,000. We have additional lease payments
      of approximately $22,000 due in November 2008. We may need to sell additional
      lease rights to obtain the cash to make these payments, although there is no
      guarantee we will be able to sell additional lease rights. Western Standard
      has
      paid for estimated gas well completion costs of $65,000 and funds are in place
      for the completion and testing operations.





We
      received $7,500 in March 2008 from the exercise of outstanding stock options
      from Robert J. Angerer, Sr., our vice president and a director of the
      Company.





As
      of September 30,
      2008 ,
      we had no revenues, had recurring losses prior to 2005
      and
      since 2005, and had an accumulated deficit during the development stage. Our
      current cash position is not adequate to fund existing operations or exploration
      and development of its oil and gas properties. We
      currently have in place an agreement with a party covering part of our leases
      under which the party will drill a test well and have the option to purchase
      a
      50% working interest in the leases covered by the agreement. If the party
      exercised the option, we would receive approximately $1,000,000, although there
      is no assurance drilling will be successful or the option will be exercised.
      The
      Company also has an agreement with another party, under which the party has
      the
      option to purchase a 50% working interest in the Company’s remaining Valley
      County leases by paying $1,000,000 in drilling costs on the Company’s behalf,
      although there is no assurance drilling will be successful or the option will
      be
      exercised. These
      situations raise substantial doubt about our ability to continue as a going
      concern.





**Capital
      Resources**





In
      Montana, we have obtained the rights to explore for oil and gas in one area
      which will be our primary area of focus. This primary area is a large assembly
      of leases covering approximately 124,882 net acres in Valley County, located
      in
      northeastern Montana close to known production from a Lodgepole reef. This
      area
      of Montana has a number of other producing formations in addition to the
      Lodgepole, including the Eagle sands. Currently we have two agreements with
      two
      different entities covering separate areas of the leases and exploration has
      begun on those leases. During 2006, we drilled two wells on lands outside these
      leases and they did not find economic quantities of oil or gas and were
      abandoned. We also hold leases in southwestern North Dakota and have an
      agreement covering four Lodgepole prospects on those leases.




12




**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
        10-Q**
 **PART
        I - FINANCIAL INFORMATION**
 **September
        30, 2008**








**ITEM
      2**   **Management's
      Discussion and Analysis of Financial Condition
      and** **Results
      of Operations** **** (Continued)





The
        first
        of the two agreements we entered into was a farm-out agreement with Western
        Standard Energy Corp. (“Western Standard”) in August 2007. Under the agreement,
        Western





The
      first
      well under this agreement was drilled during October 2007, to test a shallow
      natural gas prospect near the middle of the Company’s Valley County Leases. The
      well, known as the Federal 1-19 Well, had three objectives: to confirm the
      34,000 acre Starbuck East Prospect by finding that the Eagle formation was
      high
      to surrounding wells off the Prospect; to confirm that there were good natural
      gas shows in the Starbuck East Prospect; and to find commercial gas in either
      the Eagle formation or the Judith River formation. The first two objectives
      were
      met. Due to drilling damage, the third objective has not yet been met.





During
      October 2007, the Federal 1-19 well reached a total depth of 1,126 feet and
      confirmed the structural high that we believed to be there. The well also had
      gas shows in two zones. Casing was run into the hole and operations to complete
      and test the well were scheduled to begin at the end of November, but were
      delayed by equipment repairs. The well is located on Federal land and the Bureau
      of Land Management would not allow the completion and testing operations or
      any
      further drilling to begin between December 1st and July 1st, so operations
      were
      suspended until July. In December, we entered a Memorandum of Understanding
      with
      Western Standard which led to a farm-out agreement on our North Dakota Leases
      discussed below, but also allowed us to use $29,000 of the funds from Western
      Standard originally sent to cover completion to now cover lease rental and
      other
      costs associated with the delay in well completion. Western Standard paid the
      estimated well completion costs of $65,000 and operations to complete and test
      the well were performed in two stages during the third quarter and proceeded
      to
      the third stage subsequent to the end of the third quarter. In October 2008,
      the
      Company received approximately $29,000 from Western Standard to pay for the
      third stage of operations which included stimulation of the well, a common
      procedure in completing oil and gas wells.





The
      Company was unable to determine by this well whether the target formations
      contain economic quantities of gas. Drilling damage in the well prevented the
      testing of either of the prospective formations at this location. Completion
      efforts found that the Eagle formation was damaged by the initial drilling
      and
      the formation was not able to be tested from this well. Further drilling into
      the Eagle formation during completion did not yield gas like the gas show seen
      from the upper part of the formation that was damaged. The Judith River
      formation, a secondary target, was damaged by drilling fluids lost into the
      formation while drilling through it to get to the Eagle formation, the primary
      target. Future wells to test this structure will incorporate the information
      obtained from these wells to prevent that damage from occurring again in other
      locations on the structure.




13




**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
        10-Q**
 **PART
        I - FINANCIAL INFORMATION**
 **September
        30, 2008**
  ITEM
        2   **Management's
        Discussion and Analysis of Financial Condition
        and** **Results
        of Operations** **** (Continued)


It
      is not
      unusual that the first well confirming a structure does not become a producing
      well. The test well did produce valuable information about the two gas bearing
      formations and their potential for economically feasible commercial gas
      production. Problems encountered in drilling the test well can now be avoided
      when future wells are drilled on the Starbuck East Prospect. With the first
      two
      objectives met, we will now focus on achieving the third objective, specifically
      finding commercial gas in either the Eagle or Judith River formations.





Western
      Standard now has 30 days from the completion to exercise its option to purchase
      a 50% interest in approximately 42,000 (37,000 after some leases have expired)
      acres near the well location (referred to as “Valley County Shallow Gas
      Assembly”). The cost to exercise the option would be $1,000,000, payable in
      $200,000 installments based on certain milestones related to drilling step-out
      wells. We have received permits to drill two step-out wells and are currently
      in
      the permitting process for two more.





We
      entered the second agreement with Cobra Oil and Gas, in May of 2008. Under
      the
      agreement, Cobra has paid Coastal $180,000 for the option to acquire a half
      interest in approximately 87,000 acres of Coastal’s Valley County Leases. The
      agreement allowed us to pay our Lease rentals that were due June 1, 2008 and
      brings in a new party to explore on the Leases. Cobra will have two years to
      exercise the option by spending $1,000,000 on our behalf, drilling wells on
      the
      leases under the agreement. Those leases include approximately 62,000 acres
      of
      leases that were formally under an agreement with F-Cross Resources that expired
      earlier this year and more than 20,000 acres of other leases Coastal held in
      Valley County.





F-Cross
      Resources, LLC (“F-Cross”) will continue to hold its interest in the section in
      which it drilled a well under the September 2007 agreement which has otherwise
      expired. Under that agreement we received $50,000 from F-Cross at the execution
      of a farm-out agreement covering approximately 64,000 acres (now 62,000 after
      some leases expired) on the northwest part of our Valley County Leases. Under
      the agreement, F-Cross had the option to drill a Lodgepole test well within
      six
      months and after that well had the further option to acquire an interest in
      surrounding acreage. F-Cross is to pay for the cost of drilling the initial
      well
      and will receive a 100% working interest in the well until payout and an 80%
      working interest after payout. F-Cross exercised its option and drilled the
      first Lodgepole test well during November, 2007. The well is awaiting completion
      and testing of several zones which have potential for both oil and gas. Unlike
      the shallow gas well on Federal land, this well is located on State land and
      provided that there is no State objection, we expect that F-Cross will resume
      operations to complete and test the well once the weather and state regulators
      permit it, however those operation have not yet been resumed.  F-Cross did
      not meet the requirements in the agreement and in late March the option to
      acquire an interest in additional acreage expired, leaving F-Cross with the
      interest in the section in which it drilled the well.


14
  **COASTAL
          CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
          10-Q**
 **PART
          I - FINANCIAL INFORMATION**
 **September
          30, 2008**
  ITEM
          2   **Management's
          Discussion and Analysis of Financial Condition
          and** **Results
          of Operations** **** (Continued)


The
      two
      wells we were involved with drilling during 2006 and that were abandoned during
      2007 were drilled in Montana, but in areas outside of and as far as 130 miles
      from our Valley County Leases and were farm-in wells on leases held by others.
      Both of those wells reached the targeted Lodgepole reefs, but no gas or oil
      was
      present in economic quantities. We will not pursue any further drilling in
      these
      areas. The second of these wells was drilled with partners and t here
      are
      approximately $115,000 in unpaid expenses related to this well that are
      collectively the responsibility of the various partners. This amount is not
      reflected as a liability in the accompanying financial statements.





In
      North
      Dakota, we control the working interest on approximately 8,510 net acres in
      Slope, Billings, and Stark Counties, on which a number of drillable prospects
      have been mapped to date. The depth of wells here is greater than in Montana
      (approximately 9,500 feet versus approximately 5,000 feet), and so the cost
      of
      drilling is higher. A typical North Dakota wildcat well costs about $1.5 million
      to drill. We intend to bring in others to share the risk and investment in
      wells
      we drill in North Dakota until we are in a stronger financial
      position.





Through
      our efforts to bring in others to explore our North Dakota leases, in December
      of 2007 we entered a new farm-out agreement with Western Standard. Under the
      agreement, we assigned leases over four of our high-graded Lodgepole Reef
      prospects to Western Standard in return for $80,000. We received $40,000 in
      November 2007, $25,000 in February 2008 and $15,000 in April 2008. We will
      also
      retain a back-in working interest of 20% in the leases after payout. The leases
      cover all rights below the Tyler formation, including the Lodgepole formation,
      with an 80% net revenue interest. We acquired these and other leases in the
      area
      in 2005 from Oil For America for $50,000 and we have invested some additional
      funds to geochemically test and high-grade these and other prospects on the
      leases. Oil For America has agreed to waive the drilling obligation on these
      four prospects. We will still retain additional Lodgepole reef prospects on
      our
      North Dakota leases not covered by this farm-out agreement.





As
      briefly described above, in the Memorandum of Understanding which gave rise
      to
      the new farm-out agreement, Western Standard also agreed that we could use
      the
      more than $29,000 originally forwarded to be used for completion of the first
      shallow gas well to cover the costs associated with the delay in operations,
      including annual rentals. This amount combined with the $80,000 paid for the
      four reef prospects helped cover our operations during the first half of
      2008.





**Results of Operations**





**Nine
      months ended September 30, 2008 vs. September 30,
      2007**





We
      did
      not conduct drilling activities for the nine months ended September 30, 2008
      or
      2007, due to weather and/or landowner access restrictions on our leases from
      January 1 st to July
      1 st .
      We
      performed some completion work in two stages during the 3 rd quarter
      and expect to finish the remainder of the operations, including completion
      work,
      stimulation and testing of the well, during the 4th  quarter
      of 2008. Substantially all the drilling activity on our leases for 2007 was
      financed under farm-out agreements with other entities, and we expect that
      to
      continue in 2008.


15
  **COASTAL
          CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
          10-Q**
 **PART
          I - FINANCIAL INFORMATION**
 **September
          30, 2008**
  ITEM
          2   **Management's
          Discussion and Analysis of Financial Condition
          and** **Results
          of Operations** **** (Continued)


Therefore,
      our expenses are primarily administrative and our 2008 expenses remained
      consistent with 2007 amounts. During 2007, we incurred $51,000 to prepare our
      2006 wells for abandonment.





Our
      interest income decreased in 2008 from 2007 due to lower cash
      balances.





**Three
      months ended September 30, 2008 vs. September 30,
      2007**





We
      conducted initial completion activities in the third quarter of 2008, but did
      not conduct any drilling activities in 2007. We expect to finish completion
      and
      testing operations during the 4th  quarter
      of 2008. Substantially all the drilling activity on our leases for 2007 was
      financed under farm-out agreements with other entities, and we expect that
      to
      continue in 2008. Therefore, our expenses are primarily administrative and
      our
      2008 expenses remained consistent with 2007 amounts. During 2007, we sold
      certain piping and other well supplies for $17,000, which reduced the cost
      of
      preparing the 2006 wells for abandonment.





Our
      interest income decreased in 2008 from 2007 due to lower cash
      balances.





**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 September 30,
      2008.





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




**a.**
              
              **Evaluation
                  of disclosure controls and procedures.**


We
      maintain controls and procedures designed to ensure that information required
      to
      be disclosed in the reports that the Company files or submits under the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the rules and forms of the Securities
      and
      Exchange Commission. Our Chief Executive Officer and our Chief Financial
      Officer, after evaluating the effectiveness of our “disclosure controls and
      procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange
      Act”) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this
      quarterly report, have concluded that our disclosure controls and procedures
      are
      effective based on their evaluation of these controls and procedures required
      by
      paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.





**b.**
            
            **Changes
                in internal controls.**The Company made no changes in its internal control over financial
                reporting that occurred during the Company’s first fiscal quarter that has
                materially affected, or which is reasonably likely to materially
                affect
                the Company’s internal control over financial
                reporting.




16




**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **FORM
        10-Q**
 **PART
        I - FINANCIAL INFORMATION**
 **September
        30, 2008**





**c.**
              
              **Limitations
                    on the Effectiveness of Controls********Our management, including our ChiefExecutive
                    and Chief Financial Officer, does not expect that our disclosure
                    controls
                    and internal controls will prevent all error and all fraud. A
                    control
                    system, no matter how well conceived and operated, can provide
                    only
                    reasonable, not absolute, assurance that the objectives of the
                    control
                    system are met. Further, the design of a control system must
                    reflect the
                    fact that there are resource constraints, and the benefits of
                    controls
                    must be considered relative to their costs. Because of the inherent
                    limitations in all control systems, no evaluation of controls
                    can provide
                    absolute assurance that all control issues and instances of fraud,
                    if any,
                    within the Company have been detected. These inherent limitations
                    include
                    the realities that judgments in decision-making can be faulty,
                    and that
                    breakdowns can occur because of simple error or mistake. Additionally,
                    controls can be circumvented by the individual acts of some persons,
                    by
                    collusion of two or more people, or by management override of
                    the control.


The
      design of any system of controls also is based in part upon certain assumptions
      about the likelihood of future events, and there can be no assurance that any
      design will succeed in achieving its stated goals under all potential future
      conditions; over time, controls may become inadequate because of changes in
      conditions, or the degree of compliance with the policies or procedures may
      deteriorate. Because of the inherent limitations in a cost-effective control
      system, misstatements due to error or fraud may occur and not be
      detected.




17
 COASTAL
        CARIBBEAN OILS & MINERALS, LTD.
 FORM
        10-Q
 PART
        II -
        OTHER INFORMATION
 September
        30, 2008
 **ITEM
      5**  **Other
      Information**




The
      Internal Revenue Code of 1986, as amended, provides special rules for
      distributions received by U.S. holders on stock of a passive foreign investment
      company (PFIC), as well as amounts received from the sale or other disposition
      of PFIC stock. Under the PFIC rules, a non-U.S. corporation will be classified
      as a PFIC for U.S. federal income tax purposes in any taxable year in which,
      after applying certain look-through rules, either (1) at least 75 percent of
      its
      gross income is passive income or (2) at least 50 percent of the gross value
      of
      its assets is attributable to assets that produce passive income or are held
      for
      the production of passive income.





The
      Company believes that it would not be classified as a PFIC for the year 2007,
      because it derived the majority of its gross income in 2007 from the sale of
      interests in parts of its leases to other companies through farm-out agreements,
      and received a relatively small amount of interest the Company. However, the
      Company may have
      been considered a PFIC in previous years, which could result in negative tax
      consequences to a shareholder. The determination of whether the Company will
      be
      considered a PFIC for United States federal income tax purposes is an annual
      determination that cannot be made until the close of the fiscal year. Also,
      how
      the Company was classified last year does not affect how it will be classified
      this year.





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 2004 and in 2006, 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, 2007.








18


COASTAL
        CARIBBEAN OILS & MINERALS, LTD.
 FORM
        10-Q
 September
        30, 2008




**ITEM
      6**  **Exhibits**




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




32.1Certification
      pursuant to Section 906 by Phillip W.
      Ware











19


COASTAL
        CARIBBEAN OILS & MINERALS, LTD.
 FORM
        10-Q
 September
        30, 2008




**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:
              November
              13, 2008
            By:
            /s/ Phillip
              W. WarePhillip
              W. Ware
              Chief
                Executive Officer,
              President
                and Treasurer




20