**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**


(Mark
      One)


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





For
      the
      quarterly period ended October 31, 2006





Or


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 000-51519





**True
                North Energy Corporation**(Exact
                name of small business issuer as specified in its
                charter)**Nevada**
            
            **98-043482**(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification No.)**2
                Allen Center, 1200 Smith Street, 16****th****Floor**
              **Houston,
                Texas 77002**(Address
                of principal executive offices)**(713)
                353-3948**(Registrant’s
                telephone number, including area code)(Former
                address if changed since last
                report)





Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months,
      and (2) has been subject to such filing requirements for the past 90 days.
      Yes
x No
o





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





As
      of
      December 8, 2006, there were 63,812,700 shares of the issuer’s common stock, par
      value $0.001, issued and outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes o No
x







**TRUE
      NORTH ENERGY CORPORATION**


**OCTOBER
      31, 2006 QUARTERLY REPORT ON FORM 10-QSB**


**TABLE
      OF CONTENTS**





**PAGE**Special
                Note Regarding Forward Looking Information
            1PART
                I - FINANCIAL INFORMATIONItem
                1.
            Financial
                Statements
            2Item
                2.
            Plan
                of Operation
            9Item
                3.
            Controls
                and Procedures
            12PART
                II - OTHER INFORMATIONItem
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            12Item
                5.
            Other
                Information
            14Item
                6.
            Exhibits
            22








**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





To
      the
      extent that the information presented in this Quarterly Report on Form 10-QSB
      for the three months ended October 31, 2006 discusses financial projections,
      information or expectations about our products, markets, revenues, or
      anticipated results, or otherwise makes statements about future events, such
      statements are forward-looking. We are making these forward-looking statements
      in reliance on the safe harbor provisions of the Private Securities Litigation
      Reform Act of 1995. Our actual results may differ significantly from those
      projected in the forward-looking statements. Factors that might cause or
      contribute to such differences include, but are not limited to, those discussed
      in the section “Plan of Operation” You should carefully review the risks
      described in our Annual Report and in other documents we file from time to
      time
      with the Securities and Exchange Commission. You are cautioned not to place
      undue reliance on the forward-looking statements, which speak only as of the
      date of this report. We undertake no obligation to publicly release any
      revisions to the forward-looking statements or reflect events or circumstances
      after the date of this document.




Although
      we believe that the expectations reflected in these forward-looking statements
      are based on reasonable assumptions, there are a number of risks and
      uncertainties that could cause actual results to differ materially from such
      forward-looking statements. These factors include, among others:




·
            The
                risks associated with oil and gas exploration;


·
            Our
                ability to raise capital to fund capital expenditures;


·
            Our
                ability to find, acquire, market, develop and produce new properties;


·
            Oil
                and gas price volatility;


·
            Uncertainties
                in the estimation of proved reserves and in the projection of future
                rates
                of production and timing of development expenditures;


·
            Operating
                hazards attendant to the natural gas and oil business;


·
            Downhole
                drilling and completion risks that are generally not recoverable
                from
                third parties or insurance;


·
            Availability
                and cost of material and equipment;


·
            Delays
                in anticipated start-up dates;


·
            Actions
                or inactions of third-party operators of our properties;


·
            Our
                ability to find and retain skilled personnel;


·
            Regulatory
                developments;


·
            Environmental
                risks; and


·
            General
                economic conditions.




1





**PART
      1 - FINANCIAL INFORMATION**




**ITEM
      1. FINANCIAL STATEMENTS**





**PAGE**Balance
                    Sheets as of October 31, 2006 (Unaudited) andApril
                    30, 2006 (Audited)
              
              3Statements
                  of Operations for the three and six-month periods ended October
                  31, 2006
                  and 2005 (Unaudited)and
                  for the period from April 7, 2004 (inception) to October 31, 2006
                  (Unaudited)
              
              4Statements
                  of Cash Flows for the six-month periods ended October 31, 2006
                  and 2005
                  (Unaudited) and forthe
                  period from April 7, 2004 (inception) to October 31, 2006
                  (Unaudited)
              
              5Notes
                  to Financial Statements (Unaudited)
              
              6




2


**TRUE
        NORTH ENERGY CORPORATION**
 **(An
        Exploration Stage Company)**
 **Balance
        Sheets**


**October
                31, 2006**
            
            **April
                30, 2006***(Unaudited)***Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            429,768
            
            $
            37,223Accounts
                receivable
            
            
            -
            
            
            -Total
                current assets
            
            
            429,768
            
            
            37,223Website
                development, net of accumulated amortization of $5,184 and $2,409,
                respectively
            
            
            18,742
            
            
            4,817Property
                and equipment (net of accumulated depreciation of $507 and $ -,
                respectively)
            
            
            10,717
            
            
            -Unproven
                oil and gas properties, using successful efforts accounting
                method
            
            
            3,757,709
            
            
            373,775Total
                assets
            
            $
            4,216,936
            
            $
            415,815**Liabilities
                and Stockholders’ Equity (Deficit)**Current
                liabilities:Accounts
                payable and accrued liabilities
            
            $
            36,888
            
            $
            16,097Deposits
                on stock purchase
            
            
            -
            
            
            50,000Total
                current liabilities
            
            
            36,888
            
            
            66,097Liabilities
                from discontinued operations
            
            
            -
            
            
            15,000Total
                liabilities
            
            
            36,888
            
            
            402,053Commitments
                and contingenciesStockholders’
                Equity (Deficit):Preferred
                Stock, $0.0001 par value; 20,000,000 shares authorized, no shares
                issued
                or outstanding
            
            
            -
            
            
            -Common
                Stock, par value $.0001; 100,000,000 shares authorized;
                63,305,555 and 60,100,000 shares issued and outstanding,
                respectively
            
            
            6,331
            
            
            6,010Additional
                paid-in capital
            
            
            6,178,547
            
            
            481,654Pre-exploration
                stage accumulated deficit
            
            
            (72,350
            )
            
            (72,350
            )Accumulated
                deficit during exploration stage
            
            
            (1,932,480
            )
            
            (80,596
            )Total
                stockholders’ equity (deficit)
            
            
            4,180,048
            
            
            334,718Total
                liabilities and stockholders’ equity (deficit)
            
            $
            4,216,936
            
            $
            415,815


*See
        notes to financial statements.*


3


**TRUE
      NORTH ENERGY CORPORATON**


**(An
      Exploration Stage Company)**


**Statements
      of Operations**


*(Unaudited)*


**Three
                Months Ended**
              **October
                31,**
            
            **Six
                Months Ended**
              **October
                31,**
            
            **From
                April 7, 2004 (Inception) to October 31,****2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **2006**Revenues
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Costs
                and expenses:Exploration
                costs
            
            
            637,575
            
            
            -
            
            
            739,180
            
            
            -
            
            
            739,180General
                and administrative:Officers
                and directors fees
            
            
            454,449
            
            
            -
            
            
            767,633
            
            
            -
            
            
            767,633Investor
                relations
            
            
            41,827
            
            
            -
            
            
            107,566
            
            
            -
            
            
            107,566Legal
                and accounting
            
            
            68,954
            
            
            1,742
            
            
            100,793
            
            
            13,842
            
            
            100,793Other
                G&A expenses
            
            
            53,589
            
            
            1,517
            
            
            139,880
            
            
            2,875
            
            
            219,874Depreciation
                and amortization
            
            
            2,331
            
            
            602
            
            
            3,282
            
            
            1,204
            
            
            3,884Total
                costs and expenses
            
            
            1,258,725
            
            
            3,861
            
            
            1,858,334
            
            
            17,921
            
            
            1,938,930Loss
                from operations
            
            
            (1,258,725
            )
            
            (3,861
            )
            
            (1,858,334
            )
            
            (17,921
            )
            
            (1,938,930
            )Other
                income:Interest
                income
            
            
            3,670
            
            
            -
            
            
            6,450
            
            
            -
            
            
            6,450Loss
                before income taxes
            
            
            (1,255,055
            )
            
            (3,861
            )
            
            (1,851,884
            )
            
            (17,921
            )
            
            (1,932,480
            )Income
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                loss
            
            $
            (1,255,055
            )
            $
            (3,861
            )
            $
            (1,851,884
            )
            $
            (17,921
            )
            $
            (1,932,480
            )Basic
                and diluted loss per common share
            
            $
            (0.02
            )
            
            -
            
            $
            (0.03
            )
            
            -Weighted-average
                common shares outstanding
            
            
            62,820,712
            
            
            10,000,000
            
            
            62,038,345
            
            
            10,000,000














*See
      notes to financial statements.*




4


**TRUE
      NORTH ENERGY CORPORATON**


**(An
      Exploration Stage Company)**


**Statements
      of Cash Flows**


*(Unaudited)*





**Six
                Months Ended October 31,**
            
            **From**
              **April
                7, 2004**
              **(Inception)
                to**
              **October
                31,****2006**
            
            **2005**
            
            **2006****Cash
                Flows From Operating Activities**Net
                loss
            
            $
            (1,851,884
            )
            $
            (17,921
            )
            $
            (1,973,083
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            40,603Net
                loss from continuing operations
            
            
            (1,851,884
            )
            
            (17,921
            )
            
            (1,932,480
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            3,282
            
            
            1,204
            
            
            3,884Stock-based
                compensation
            
            
            647,214
            
            
            -
            
            
            647,214Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            -
            
            
            -
            
            
            -Accounts
                payable and accrued liabilities
            
            
            20,791
            
            
            (8,221
            )
            
            36,823Liabilities
                from discontinued operations
            
            
            (15,000
            )
            
            -
            
            
            (48,346
            )Net
                cash used in operating activities
            
            
            (1,195,597
            )
            
            (24,938
            )
            
            (1,292,905
            )**Cash
                Flows From Investing Activities**Additions
                to oil and gas properties
            
            
            (3,383,934
            )
            
            -
            
            
            (3,383,934
            )Purchases
                of property and equipment
            
            
            (11,224
            )
            
            -
            
            
            (11,224
            )Website
                development
            
            
            (16,700
            )
            
            -
            
            
            (16,700
            )Net
                cash used in investing activities
            
            
            (3,411,858
            )
            
            -
            
            
            (3,411,858
            )**Cash
                Flows From Financing Activities**Proceeds
                from issuance of common stock
            
            
            5,000,000
            
            
            -
            
            
            5,100,000Net
                increase in cash and cash equivalents
            
            
            392,545
            
            
            (24,938
            )
            
            395,237Cash
                and cash equivalents, beginning of period
            
            
            37,223
            
            
            34,531
            
            
            34,531Cash
                and cash equivalents, end of period
            
            $
            429,768
            
            $
            9,593
            
            $
            429,768**Supplemental
                Disclosure of Cash Flow Information**Cash
                paid for interest
            
            $
            -
            
            $
            -
            
            $
            -Income
                taxes
            
            
            -
            
            
            -
            
            
            -











*See
      notes to financial statements.*





5


**TRUE
      NORTH ENERGY CORPORATION**


**(An
      Exploration Stage Company)**


**Notes
      to Financial Statements**


*(Unaudited)*


**NOTE
      1 - NATURE OF OPERATIONS**





The
      accompanying unaudited interim financial statements of True North Energy
      Corporation (the “Company”) have been prepared in accordance with accounting
      principles generally accepted in the United States of America and the rules
      of
      the Securities and Exchange Commission. These unaudited interim financial
      statements should be read in conjunction with the audited financial statements
      and notes thereto contained in the Company’s Annual Report on Form 10-KSB
      previously filed with the Securities and Exchange Commission.





In
      the
      opinion of management, all adjustments, consisting of normal recurring
      adjustments, necessary for a fair presentation of financial position and the
      results of operations for the interim periods presented have been reflected
      herein. The results of operations for interim periods are not necessarily
      indicative of the results to be expected for the full year. Notes to the
      financial statements that would substantially duplicate the disclosure contained
      in the Company’s audited financial statements for the year ended April 30, 2006
      as reported in Form 10-KSB have been omitted.





Certain
      reclassifications have been made to the prior year financial statements to
      conform with the current presentation.





**NOTE
      2 - GOING CONCERN**





These
      financial statements have been prepared on a going concern basis, which implies
      that the Company will continue to realize its assets and discharge its
      liabilities in the normal course of business. The continuation of the Company
      as
      a going concern is dependent upon continued financial support from its
      shareholders, the receipt of additional equity financing when and as needed
      to
      finance the Company’s ongoing business, and the attainment of profitable
      operations.





As
      of
      April 30, 2006, the Company had no revenues, negative working capital, and
      accumulated losses since its inception. These factors raise substantial doubt
      regarding the Company’s ability to continue as a going concern. The accompanying
      financial statements do not include any adjustments relative to the
      recoverability or classification of recorded assets or liabilities that might
      be
      necessary should the Company be unable to continue as a going concern.





**NOTE
      3 - STOCK-BASED COMPENSATION**





The
      Company accounts for stock-based compensation in accordance with Statement
      of
      Financial Accounting Standards No. 123(R), “Share-Based Payment.” SFAS 123(R)
      revised SFAS No. 123, “Accounting for Stock-Based Compensation” and superseded
      APB Opinion No. 25, “Accounting for Stock Issued to Employees.” In accordance
      with SFAS 123(R), stock-based compensation recognized during the three and
      six-month periods ended October 31, 2006 includes compensation expense for
      all
      share-based payments based on the grant date fair value. Such compensation
      expense is recognized over the related service period.





6


**TRUE
      NORTH ENERGY CORPORATION**


**(An
      Exploration Stage Company)**


**Notes
      to Financial Statements**


*(Unaudited)*


Stock-based
      compensation expense resulting from restricted stock granted to employees
      totaled $375,000 and $625,000 during the three and six-month periods ended
      October 31, 2006, respectively.





A
      summary
      of restricted stock grant activity during the six months ended October 31,
      2006
      is as follows:





**Shares**
            
            **Grant
                Date**
              **Fair
                Value**Outstanding
                on April 30, 2006
            
            
            -
            
            $
            -Granted
            
            
            5,000,000
            
            
            7,500,000Vested
            
            
            -
            
            
            -Forfeited/canceled
            
            
            -
            
            
            -Outstanding
                on October 31, 2006
            
            
            5,000,000
            
            $
            7,500,000





The
      Company accounts for stock-based compensation issued to non-employees in
      accordance with the provisions of SFAS 123 and EITF No. 96-18, “Accounting for
      Equity Investments That Are Issued to Non-Employees for Acquiring, or in
      Conjunction with Selling Goods or Services.” For expense purposes, the value of
      common stock issued to non-employees is determined based on the fair value
      of
      the services received or the fair value of the equity instruments issued,
      whichever value is more reliably measurable.





During
      the three-month period ended October 31, 2006, the Company recognized
      stock-based compensation totaling $22,214 related to services provided to the
      Company by members of its advisory board. A total of 7,145 shares of restricted
      stock were issued in November 2006 in connection with such services.





**NOTE
      4 - UNPROVEN OIL AND GAS PROPERTIES**





The
      Company is engaged in oil and gas exploration activities in Alaska, Texas and
      Louisiana. Presently, it has no developed properties or production. As of the
      balance sheet date, the Company expects to expend approximately $6.3 million
      over the next 12 months in connection with the development of its existing
      interests in Alaska, Texas and Louisiana. Of this amount, approximately $5.5
      million is expected to be spent during the remainder of the Company’s fiscal
      year ending April 30, 2007.




**NOTE
      5 - CAPITAL STOCK**





During
      the six months ended October 31, 2006, the Company sold a total of 3,205,555
      units to individual purchasers in reliance on Regulation S of the Securities
      Act
      of 1933, as amended. Each unit consisted of one share of the Company’s common
      stock and one common stock purchase warrant exercisable for the purchase of an
      additional share of common stock. Each common stock purchase warrant is
      exercisable for a period of three years.




7


**TRUE
        NORTH ENERGY CORPORATION**
 **(An
        Exploration Stage Company)**
 **Notes
        to Financial Statements**
 *(Unaudited)*


The
      following table summarizes the Company’s sales of units during the six months
      ended October 31, 2006:





**Warrant**
            
            **Relative
                Fair Value****Date**
            
            **Number**
              **Of
                Units**
            
            **Price**
              **Per
                Unit**
            
            **Total**
              **Proceeds**
            
            **Exercise**
              **Price**
            
            **Common
                Stock**
            
            **C/S
                Purchase Warrants**May
                9, 2006
            
            
            1,250,000
            
            $
            .80
            
            $
            1,000,000
            
            $
            1.60
            
            $
            618,000
            
            $
            382,000July
                27, 2006
            
            
            650,000
            
            
            1.00
            
            
            650,000
            
            
            1.70
            
            
            381,000
            
            
            269,000August
                11, 2006
            
            
            350,000
            
            
            1.00
            
            
            350,000
            
            
            1.70
            
            
            198,000
            
            
            152,000August
                28, 2006
            
            
            555,555
            
            
            3.60
            
            
            2,000,000
            
            
            5.00
            
            
            1,198,000
            
            
            802,000October
                2, 2006
            
            
            400,000
            
            
            2.50
            
            
            1,000,000
            
            
            3.50
            
            
            500,000
            
            
            500,000Total
            
            
            3,205,555
            
            
            
            
            $
            5,000,000
            
            
            
            
            $
            2,895,000
            
            $
            2,105,000





**NOTE
      6- RELATED PARTY TRANSACTIONS**





As
      of
      April 30, 2006 the Company had recognized a liability payable to its former
      president totaling $15,000. This obligation, which was unsecured, non-interest
      bearing and due on demand, is reported as “Liabilities from discontinued
      operations” in the accompanying balance sheets. The outstanding balance related
      to this obligation was repaid during August 2006.





**NOTE
      7 - SUBSEQUENT EVENTS**





*Sale
      of Units*


On
      November 13, 2006 the Company sold 400,000 units at a price of approximately
      $2.50 per unit or $1,000,000 on an aggregate basis to one purchaser in reliance
      on Regulation S of the Securities Act of 1933, as amended. Each unit consisted
      of one share of the Company’s common stock and one common stock purchase warrant
      exercisable for the purchase of an additional share of common stock. Each common
      stock purchase warrant is exercisable for a period of three years at an exercise
      price of $3.50 per share. The relative fair value of the common stock
      approximated $500,000 and the relative fair vale of the warrants approximated
      $500,000.





*Savant
      Agreement*


On
      November 22, 2006 the Company executed a Letter Agreement with Savant Alaska
      LLC
      (the “Savant Agreement”). Savant Alaska LLC (“Savant”) holds leases for the
      exploration and production of oil and natural gas in an area of Alaska that
      is
      contiguous to certain of the Company’s Alaskan interests. Savant plans to
      commence drilling of a test well at its Kupcake Prospect on or before March
      15,
      2007.





Under
      the
      terms of the Savant Agreement, the Company and Savant will pool their leasehold
      interests on a net acreage basis and jointly drill the test well. Working
      interests within the pooled area will approximate 91.5% for Savant and 8.5%
      for
      the Company. Net revenue interests will be equalized at 78.33%. Savant will
      be
      the operator of the pooled area.




8


**ITEM
      2.  PLAN OF OPERATION**





We
      began
      operations as an oil and gas exploration and development company in January
      2006. We are in the development stage and to date have had minimal operations
      and generated no revenues. Our ability to develop and maintain a meaningful
      level of revenues from operations is dependent on our ability to successfully
      drill exploration and development wells and complete producing property
      acquisitions.





Presently
      we are engaged in oil and gas exploration activities in Alaska, Texas and
      Louisiana. At this time, we have no developed properties or
      production.





*Alaska
      Leases*


In
      January and May 2006, we negotiated the acquisition of certain oil and gas
      leases consisting of approximately 25,000 acres in the Cook Inlet basin of
      Alaska and approximately 10,000 acres in the North Slope basin of Alaska. We
      anticipate closing the related purchase and sale agreements and registering
      all
      of the associated leases in our name by March 31, 2007. We will have a 100%
      working interest ownership in the Alaska leases, except to the extent we elect
      to sell off a portion of our interests.





During
      November 2006 we executed a Letter Agreement with Savant Alaska LLC. Savant
      holds leases for the exploration and production of oil and natural gas in an
      area of Alaska that is contiguous to certain of our Alaskan interests. Savant
      plans to commence drilling of a test well at its Kupcake Prospect on or before
      March 15, 2007. Under the terms of this agreement, we will pool certain of
      our
      leasehold interests with those of Savant on a net acreage basis and jointly
      drill the test well. Working interests within the pooled area will approximate
      91.5% for Savant and 8.5% for us. Savant will be the operator of the pooled
      area. Our share of drilling and testing costs relative to the Kupcake Prospect
      are expected to approximate $1.3 million.





*Texas
      and Louisiana Interests*


At
      present, we have interests in oil and gas exploration prospects located in
      the
      Texas counties of Live Oak and Newton and in the Jefferson Davis, Calcasieu
      and
      Pointe Coupee Parishes of Louisiana. To date, we have invested approximately
      $4.5 million in joint venture drilling projects.





We
      hold a
      12.5% working interest in a well (McLean #1) in Live Oak County, Texas. Drilling
      of this well has been completed and the well logs indicate approximately 500
      feet of gross pay interval in the Wilcox formation. The well was fracture
      stimulated and
      extensively production tested. Initial test results reflect daily production
      levels as high as 1.2 million cubic feet per day of gas and approximately one
      thousand barrels per day of water.





The
      operator of the McLean #1 well, Bayou City Exploration, Inc., has elected to
      temporarily suspend activity related to this well pending further evaluation.
      Bayou City and its partners plan to purchase 3-D seismic data covering the
      entire prospect acreage. The McLean #1 well is part of an overall position
      of
      2,961 acres in Live Oak County owned by Bayou City and its partners. We have
      earned a 12.5% working interest in the entire prospect acreage through our
      participation in the McLean #1 well.




9





A
      number
      of factors will be considered in determining whether the McLean #1 well and
      related prospective acreage is deemed commercial. Those factors include, but
      are
      not limited to, the amount of estimated recoverable reserves, sustainability
      of
      gas flow rates, and development of a plan for the economic disposal of produced
      water.





During
      September 2006 we completed drilling of our second prospect well (Hankamer
      #1).
      This well was located in Newton County, Texas and reached its projected drilling
      depth of 13,000 feet. The well was drilled to test the productivity of Yegua
      Sands. The well was logged and deemed to be non-commercial. Consequently, the
      well was plugged and abandoned by the operator. Our total costs associated
      with
      this well approximated $627,000.





During
      October 2006, we entered into an agreement with BP America Production Company
      (“BP”) to participate in the drilling of a test well located in Pointe Coupee
      Parish, Louisiana. The targeted depth of this test well is 21,250 feet. We
      are
      obligated to pay 16.67% of the drilling costs of the BP test well regardless
      of
      whether it is successfully drilled to the target depth. In return, we will
      have
      the right to earn a 12.5% working interest in the well if it is successful.
      We
      paid our proportionate share ($2.6 million) of anticipated drilling costs of
      this well upon execution of the agreement.





Drilling
      of the BP Well commenced during July and reached a depth of 20,087 feet in
      early
      December. The well was logged and has an excess of thirty feet (30) of net
      pay.
      Due to the uncertainty of the aerial extent of the potential zone and the high
      cost of completion and surface facilities, BP has deemed the well not to be
      commercially viable at that depth. On December 11, 2006 we entered into a letter
      agreement with BP whereby we agreed with BP to deepen the well to an approximate
      depth of 21,400 feet and amended the BP Agreement to revise the objective depth
      from 21,250 feet to up to 21,500 feet. As of this date, BP well is drilling
      ahead at the depth of 21,200 feet.





*Future
      Plans*


We
      plan
      to invest approximately $6.3 million during the 12-month period ending October
      31, 2007 on exploration and development activities such as seismic data
      acquisition, technical studies, and participating in joint venture development
      and exploration drilling. As a result of the pooling of some of our acreage
      with
      Savant, we plan to participate in the drilling of one well on our Beaufort
      Sea
      Leases in Alaska during the next twelve months. Regarding our Cook Inlet Leases,
      our primary efforts will focus on acquiring additional seismic data, conducting
      further technical evaluation of our leases, and seeking compatible partners
      who
      may be interested in acquiring a portion of our current 100% working interest
      in
      those leases. Our objective in seeking such potential partners is to reduce
      our
      risk level and financial exposure.





We
      intend
      to continue to explore opportunities for the acquisition of additional leasehold
      interests in Alaska, Texas, Louisiana and Canada. We will continue to review
      prospects developed by third parties and, if the economics fit our business
      plan, participate in those projects. Currently, our acquisition efforts are
      focused on on-shore properties in the United States and Canada. We are biased
      toward acquisitions of long-lived reserves. We intend to target negotiated
      acquisitions and avoid competitive bidding situations.




We
      face
      competition for future acquisitions from firms that are more established,
      successful, better capitalized and, in many instances, willing to pay more
      for
      properties than what we might consider prudent. Our success will depend on the
      execution of our business plan to:




10





·
            Identify
                available transactions;


·
            Quickly
                evaluate which transactions are most promising; and


·
            Negotiate
                creative transaction structures.





We
      will
      require additional financing to meet our expected capital expenditure and
      working capital needs, including the cost of reviewing and negotiating
      transactions and other ordinary general and administrative costs. Our general
      and administrative costs likely will include such things as regulatory
      compliance costs, investor relations expenses, advisory services,
      Internet/web-hosting, officer's salaries, director's fees, insurance, office
      and
      general expenses, professional fees, travel and entertainment expenses, and
      rent
      and other customary expenses.





We
      estimate that our general and administrative costs will approximate $1.8 million
      during the next twelve months (exclusive of non-cash, stock-based compensation
      expenses resulting from the award of restricted stock grants to our officers
      and
      third parties). However, this estimate is subject to change and is dependent
      on
      the number of transactions in which we ultimately become involved. Additional
      funding also will be required for follow-on development of working interest
      obligations of any successful exploration prospects.





No
      assurance can be given that additional financing will be available to us as
      and
      when needed or, if available, the reasonableness of the terms on which such
      financing will be available.





Oil
      and
      gas exploration requires significant outlays of capital and in many situations
      may offer a limited probability of success. We hope to enhance our chances
      for
      success by effectively using available technology, rigorously evaluating
      sub-surface data, and, to the extent possible, managing dry hole and financial
      risks.





We
      intend
      to rely on synergistic partnering with sophisticated industry partners. An
      ideal
      partner for us would tend to be a regionally focused oil and gas company that
      has a large seismic database, a solid grasp on the prospect opportunity’s
      history, and experience using the technology required to exploit the prospect.
      There can be no assurance that we will be able to successfully negotiate any
      such partnering agreements or raise the necessary financing to invest in such
      a
      venture, or that any such venture ultimately will yield us revenues or profits.





Presently
      our staff consists of our two executive officers. We expect to expand the size
      of our executive leadership team during the next twelve months.





We
      intend
      to outsource certain technical and administrative functions on an as-needed
      basis in order to conduct our operating activities. Our management team will
      select and hire these contractors and manage and evaluate their work
      performance. We recently formed an advisory board composed of experienced
      independent and unrelated industry veterans to assist us with corporate
      governance, compliance, deal flow, financing efforts, and technical matters
      such
      as geoscience, drilling, engineering and risk management.




11





**ITEM
      3.**  **CONTROLS
      AND PROCEDURES**





(a)  *Evaluation
      of Disclosure Controls and Procedures.* Under
      the supervision and with the participation of our senior management consisting
      of our chief executive officer and chief financial officer, we conducted an
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
      the
      Securities Exchange Act of 1934, as amended, as of the end of the period covered
      by this report (the “Evaluation Date”). Based on this evaluation, our chief
      executive officer and chief financial officer concluded as of the Evaluation
      Date that our disclosure controls and procedures were not effective such that
      the information relating to us, including our consolidated subsidiary, required
      to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is
      recorded, processed, summarized and reported within the time periods specified
      in SEC rules and forms, and (ii) is accumulated and communicated to our
      management, including our chief executive officer and chief financial officer,
      as appropriate to allow timely decisions regarding required disclosure.
      Specifically, our auditors expressed concerns over our financial accounting
      and
      reporting processes over oil and gas activities and stock-based compensation.
      Subsequent to the period covered by this report we retained an experienced
      third
      party to oversee our accounting and financial reporting. Accordingly, we believe
      that the issues raised by our auditors have been adequately addressed and
      necessary controls and procedures implemented.





(b)  *Changes
      in Internal Control over Financial Reporting* .
      There
      were no changes in our internal control over financial reporting that occurred
      during the period covered by this report that have materially affected or are
      reasonably likely to materially affect our internal control over financial
      reporting.





**PART
      II**





**ITEM
      2.**  **UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





On
      December 4, 2006 we issued 100,000 shares of our common stock to one non-US
      person in connection with an April 2006 offshore transaction in reliance on
      Regulation S under the Securities Act of 1933, as amended. The subscription
      proceeds from such sale were received by us on April 21, 2006.





On
      November 29, 2006 we issued an aggregate of 7,145 shares of our common stock
      to
      our five advisory board members representing payment of the prorated quarterly
      fee due to them for the quarter ended October 31, 2006. The shares were issued
      in reliance on Section 4(2) of the Securities Act of 1933, as amended, since
      the
      foregoing issuance did not involve a public offering, the recipient had access
      to information that would be included in a registration statement, the recipient
      took the shares for investment and not resale, and we took appropriate measures
      to restrict resale.




12





On
      November 13, 2006 we sold 400,000 units at a price of approximately $2.50 per
      unit, or $1,000,000 on an aggregate basis, to one non-US purchaser in an
      offshore transaction in reliance on Regulation S under the Securities Act of
      1933, as amended. Each unit consisted of one share of our common stock and
      one
      common stock purchase warrant exercisable for the purchase of an additional
      share of common stock. Each warrant is exercisable for a period of three years
      at an exercise price of $3.50 per share.





On
      October 2, 2006 we sold 400,000 units at a price of approximately $2.50 per
      unit, or $1,000,000 on an aggregate basis, to one non-US purchaser in an
      offshore transaction in reliance on Regulation S under the Securities Act of
      1933, as amended. Each unit consisted of one share of our common stock and
      one
      common stock purchase warrant exercisable for the purchase of an additional
      share of common stock. Each warrant is exercisable for a period of three years
      at an exercise price of $3.50 per share.





On
      August
      28, 2006 we agreed to sell 555,555 units at a price of approximately $3.60
      per
      unit, or $2,000,000 on an aggregate basis, to one non-US person in an offshore
      transaction in reliance on Regulation S under the Securities Act of 1933, as
      amended. Each unit consists of one share of our common stock and one common
      stock purchase warrant exercisable for the purchase of an additional share
      of
      common stock. Each warrant is exercisable for a period of three years at an
      exercise price of $5.00 per share. Of the total proceeds, $500,000 was received
      on August 30, 2006 and $1,500,000 was received during September
      2006.





On
      August
      11, 2006 we sold 350,000 units at a price of $1.00 per unit, or $350,000 on
      an
      aggregate basis, to one non-US person in an offshore transaction in reliance
      on
      Regulation S under the Securities Act of 1933, as amended. Each unit consists
      of
      one share of our common stock and one common stock purchase warrant exercisable
      for the purchase of an additional share of common stock. Each warrant is
      exercisable for a period of three years at an exercise price of $1.70 per
      share.





On
      July
      27, 2006 we agreed to sell 650,000 units at a price of $1.00 per unit, or
      $650,000 on an aggregate basis, to one non-US person in an offshore transaction
      in reliance on Regulation S under the Securities Act of 1933, as amended. Each
      unit consists of one share of our common stock and one common stock purchase
      warrant exercisable for the purchase of an additional share of common stock.
      Each warrant is exercisable for a period of three years at an exercise price
      of
      $1.70 per share. Of the total proceeds, $150,000 was received on July 31, 2006,
      and $500,000 was received on August 30, 2006.




13





**ITEM
      5.**  **OTHER
      INFORMATION**





BP
      Development Agreement





On
      October 6, 2006 we entered into a development agreement (the “Development
      Agreement”), made effective as of October 1, 2006, with BP America Production
      Company (“BP”) respecting our participation in the drilling of a test well to a
      targeted depth of approximately 21,250 feet (the “Initial Well”) to test the
      Tuscaloosa B-1 Sand on the O. Jarreau Heirs No. 1 well located in Pointe Coupee
      Parish, Louisiana. There under, we are obligated to pay BP 16.67% of the
      drilling costs of the Initial Well regardless of whether the Initial Well is
      successfully drilled to the objective depth. BP has estimated that the drilling
      costs for the Initial Well will approximate $15,700,000. Our proportionate
      share
      of such estimated drilling costs is $2,617,190, which was paid by us upon
      execution of the Development Agreement. In consideration of the foregoing,
      we
      will have the right to earn a 12.5% working interest, as discussed in greater
      detail below.





When
      and
      if the casing point is reached on the Initial Well, BP shall provide us with
      written notice thereof. Such notice shall state whether BP proposes to attempt
      to complete the Initial Well as a producer, whether to the objective depth
      or in
      a shallower zone, or to abandon the Initial Well as a dry hole. If BP proposes
      to complete the Initial Well as a producer, such notice also will include an
      authority for expenditure (“AFE”), which will include, at a minimum, an estimate
      of completion costs for the Initial Well. Upon receipt thereof, we will have
      48
      hours to elect to participate therein. If we timely elect to participate, we
      will pay 12.5% of the costs of any newly acquired surface equipment associated
      with the Initial Well beyond the wellhead connections. If
      the
      completion attempt results in the production of oil and/or gas in commercial
      quantities, BP will serve as operator for the Initial Well.





If
      BP
      does not drill the Initial Well to the objective depth, we will have the right,
      but not the obligation, for a period of one year from the date the drilling
      rig
      used to drill the Initial Well is removed from the site location for the Initial
      Well, to participate in the drilling of a substitute well. BP has no obligation
      to drill a substitute well and we have no right to propose the drilling thereof.
      If BP proposes to drill a substitute well and we timely elect to participate
      therein, such substitute well shall be treated for purposes of the Development
      Agreement as the Initial Well and we will be obligated to pay 16.67% of the
      drilling costs for such substitute well.





When
      and
      if the Initial Well is drilled to the objective depth or, if applicable, a
      shallower depth, and successfully completed as a well capable of producing
      oil
      and/or gas in commercial quantities, BP shall assign to us 12.5% working
      interest in the Initial Well (10% working interest after payout) and a 12.5%
      interest (10% interest after payout) in BP’s interests (the “BP Interest”) in
      certain related leases and BP’s right to obtain, acquire or otherwise earn
      certain interests related to the contract area which covers an area of
      approximately 2,500 acres. These assignments will be limited as to those depths
      between the surface and the stratigraphic equivalent of the base of the
      objective zone (the “Earned Zone”).





BP
      has
      the right, but not the obligation, at any time after we earn our proportionate
      share in the BP Interests, to propose and drill an additional well to a proposed
      depth deeper than the base of the Earned Zone (a “Deep Test Well”). In such
      instance, BP will provide us with an AFE for the Deep Test Well. Thereafter,
      we
      will have thirty (30) days to elect to participate therein. Our participation
      will require us to pay 16.67% of the drilling costs in such Deep Test Well
      to
      the casing point, 12.5% of the completion costs associated with the Deep Test
      Well and 12.5% of any newly acquired surface equipment associated with the
      Deep
      Test Well beyond the wellhead connections. If the completion attempt results
      in
      the production of oil and/or gas in commercial quantities, BP will serve as
      operator for the Deep Test Well.




14





Drilling
      of the BP Well commenced during July and reached a depth of 20,087 feet in
      early
      December. The well was logged and has an excess of thirty feet (30) of net
      pay.
      Due to the uncertainty of the aerial extent of the potential zone and the high
      cost of completion and surface facilities, BP has deemed the well not to be
      commercially viable at that depth. On December 11, 2006 we entered into a letter
      agreement with BP whereby we agreed with BP to deepen the well to an approximate
      depth of 21,400 feet and amended the BP Agreement to revise the objective depth
      from 21,250 feet to up to 21,500 feet. As of this date, BP well is drilling
      ahead at the depth of 21,200 feet.





Advisory
      Board





On
      October 5, 2006 we created an advisory board and appointed five persons to
      serve
      thereon. Each advisory board member (an “Advisor”) has an extensive background
      in oil and gas and/or financial matters. The Advisors will provide us with
      advice and assistance with strategic business and financial matters. Each
      Advisor will devote a minimum of 30 days annually to the provision of the
      advisory services. We have entered into engagement letters with each of the
      Advisors. There under, the term of engagement of each Advisor is one year.
      Each
      Advisor and we have the right to terminate the engagement upon 30 days prior
      written notice. The engagement will be automatically extended for additional
      one
      year periods, if not terminated by us or the Advisor at least 30 days prior
      to
      the applicable anniversary date. In consideration of the services being
      provided, each Advisor is entitled to receive the following:





·
            50,000
                shares of our restricted common stock payable at the end of each
                12 month
                period of service;





·
            A
                quarterly fee consisting of 5,000 shares of our restricted common
                stock
                payable within ten days of the end of each fiscal quarter. In connection
                with the quarter ended October 31, 2006 the quarterly fee was prorated
                and
                each Advisor received 1,429 shares.





·
            Reimbursement
                of all reasonable and customary out of pocket business expenses incurred
                in the performance of his duties under the letter agreement. Expenses
                in
                excess of $5,000 require prior approval by
                us.





If
      the
      engagement is terminated by an Advisor for any reason prior to the first
      anniversary of the engagement date, such Advisor shall be entitled to be paid
      an
      amount equal to all reimbursable expenses the Advisor has incurred in providing
      services prior to the termination date, and all quarterly fees payable and
      earned by the Advisor with respect to the advisory services rendered prior
      to
      the date of termination, based on the days of service from the end of the
      previous quarter for which such Advisor received quarterly fees to the date
      of
      termination.




15




If
      we
      terminate an Advisor’s engagement for any reason prior to the first anniversary
      of the date of engagement, the 50,000 restricted shares issuable to Advisor
      shall be otherwise issuable to Advisor on the first anniversary date on a
      prorated basis based on the months of service from the start of the engagement
      to the date of termination. Furthermore, in such event the quarterly fees
      otherwise payable to Advisor shall be paid to Advisor on prorated basis based
      on
      the days of service from the end of the previous quarter for which Advisor
      received quarterly fees to the date of termination.





The
      advisory board consists of James Gouveia, George Lindahl III, J. Lanier Yeates,
      Jeffrey B. Ahbe, and Neville W. Patterson. The background of each member is
      provided below.





*James
      (Jim) Gouveia, P. Eng.*





Mr.
      Gouveia is a Partner in Rose & Associates LLP., a Houston, Texas based firm
      that provides consultancy and training services to exploration and production
      companies in designing, implementing and sustaining risk analysis systems.
      He is
      a lead partner for S.E. Asia and the Russian Federation. Mr. Gouveia is a
      recognized expert in portfolio and project risk management and has 26 years
      of
      experience as a practicing reservoir engineer, commercial analyst, evaluations
      engineer, and multi-disciplinary sub-surface manager. He has provided expert
      guidance to major oil and gas industry clients on the characterization and
      economic analysis of tight gas, heavy oil, international, offshore development
      and coal bed methane unconventional resource. Mr. Gouveia has provided
      independent reserve and chance assessments for exploration prospects in major
      oil and gas basins all over the world. He is active member of the petroleum
      industry in the major oil and gas centers in North America - Calgary, Denver,
      Houston and New Orleans. Mr. Gouveia is a past Director of Risk Management
      for
      Amoco Energy North America and holds a Bachelor of Applied Science degree in
      Chemical Engineering from the University of Toronto.





*George
      Lindahl III*





Mr.
      Lindahl is a Managing Partner in Sandefer Capital Partners located in Houston,
      Texas. Mr. Lindahl is a past Vice Chairman of Anadarko Petroleum and past
      Chairman and CEO of Union Pacific Resources. He served as an Executive Vice
      President of Walker Energy and has over 30 years of oil and gas industry
      experience within both technical arenas as a geologist and a geophysicist and
      in
      executive and managerial roles. Mr. Lindahl is currently serving as a Board
      Member of the Houston Producer’s Forum, Houston Museum of Natural Science, Texas
      Business Hall of Fame, and as a Chairman of the Board of the Lead Now
      Ministries. He is currently a Director of EVEP, a public Exploration and
      Production Master Limited Partnership. Mr. Lindahl graduated from the University
      of Alabama with a Bachelor of Science in Geology. He has completed Graduate
      Studies at Tulane University and is a graduate of the Advanced Management
      Program at the Harvard Business School.





16


*J.
      Lanier Yeates*





Mr.
      Yeates is the Houston partner of the Gordon Arata McCollam & Eagan Law Firm.
      Mr. Yeates is licensed to practice law in Texas and Louisiana. His practice
      is
      focused on the energy industry. Mr. Yeates has taught Louisiana Oil and Gas
      Law
      as a member of the Adjunct Faculty of the University of Houston Law Center
      and
      has served as both a member of the Advisory Council of the Louisiana Mineral
      Law
      Institute and its Chairman for multiple terms. Mr. Yeates served as
      Vice-Chairman of the American Bar Association Energy Policy Committee and the
      Oil & Natural Gas Exploration and Production Committee. He has served on the
      Technical Subcommittee of the AAPL-OCS Committee’s Deepwater Offshore Operating
      Agreement Model Form Subcommittee, which developed a deepwater offshore
      operating agreement that was adopted in 2000 by the AAPL as a model form. Mr.
      Yeates was appointed for two terms by Governor George W. Bush and served as
      Vice
      Chairman of the Spindletop Centennial Celebration Commission and planned the
      100 th anniversary celebration of the discovery of the Lucas Gusher in the Spindletop
      Field.





Mr.
      Yeates currently serves as Chairman-Elect of the Board of Directors of the
      LSU
      Foundation and President of Campanile Charities, Inc. He is a past President
      of
      the LSU Law Alumni Association. His memberships include the United States
      Supreme Court Bar Association, the State Bar of Texas, and the College of the
      State Bar of Texas, the Pro-Bono College of the State Bar of Texas, the
      Louisiana State Bar Association, the American Bar Association, the Houston
      Bar
      Association, and the American Law Institute. Mr. Yeates is a graduate of the
      Louisiana State University Law School where he served as Associate Editor of
      the
      Louisiana Law Review and was graduated Order of the Coif. Mr. Yeates has
      published numerous articles and other publications and has been a frequent
      speaker on subjects of importance to the energy industry. In 2004, he published
      his first novel, *Bay
      of One Hundred Fires* .





*Jeffrey
      B. Ahbe*





Mr.
      Ahbe
      is the President of Ahbe Capital Investment Group Inc., located in Denver,
      Colorado and is a co-founder of PMT Energy LLC. Mr. Ahbe’s oil and gas career
      spans over 23 years. He has served as an Executive Vice President of Union
      Pacific Resources Canada and held numerous executive positions with that company
      including General Manager of North America operating divisions. While at Union
      Pacific, Mr. Ahbe was a key member of the team that completed the acquisition
      of
      Norcen Canada and the merger between Union Pacific Resources and Anadarko
      Petroleum. Mr. Ahbe has worked extensively over the years with the financial
      and
      investment banking communities and has worked with corporate and regulatory
      leaders in the United States, Canada and overseas. Mr. Ahbe is currently a
      member of the board of Eastern Platinum Limited (trading on Toronto and London
      exchanges), Barplats Investments Limited (trading on the Johannesburg Stock
      Exchange), and is a director and principal of several privately held companies,
      including First Platinum Inc. Pty. (S.A.), SRH LLC, Montana Eagle LLC, and
      Hat
      Tricks Inc. Mr. Ahbe has served as a past director of the Colorado Oil and
      Gas
      Association. He received both his Bachelors and Masters of Sciences Degrees
      from
      Purdue University and has completed the Executive Program in Business at
      Northwestern University’s Kellogg Business School.




17




*Neville
      W. Patterson*





Mr.
      Patterson is presently the President of W.A. Fritze (North America) Inc., a
      privately held wine and spirits trading company. The company’s main business
      activities are conducted in North America, Europe, Argentina and South Africa.
      Mr. Patterson has thirty-three years of international corporate and
      entrepreneurial experience spanning four continents. Since 1974, Mr. Patterson
      has served in various senior corporate finance and treasury positions, both
      overseas and in North America, with Mobil Oil, Turbo Resources, Unilever and
      Wiggens Teape (formerly a subsidiary of British American Tobacco). Mr. Patterson
      has gained extensive experience and knowledge of the operations of various
      offshore financial markets, including “The Baltic Exchange,” the world’s premier
      marketplace for the ocean going oil tankers.





Oil
      and Gas Leases





*Cook
      Inlet Leases*





On
      January 23, 2006 we acquired rights in State of Alaska Oil and Gas Leases ADL
      389208, 389932, 390087, 390383, 390567, and 390572 (the “Issued Leases”) from
      Massimiliano Pozzoni pursuant to an Asset Purchase Agreement (the “Pozzoni
      Agreement”) among us, Massimiliano Pozzoni and Kevin Moe. We are presently
      working to have the leases registered in our name and expect to complete this
      process in the near future. Pursuant to the Pozzoni Agreement, we also acquired
      Mr. Pozzoni’s rights in State of Alaska Oil and Gas Leases ADL 390722, 390723
      and 390745 (the “Un-Issued Leases”).





The
      Issued Leases and Un-Issued Leases involve land in the Cook Inlet area of
      Alaska. The Un-Issued Leases were issued by the State of Alaska on October
      1,
      2006 and we are in the process of having those leases assigned and registered
      from the sellers to us. Rental fees are due on a yearly basis. All of the leases
      are in full force and effect and are free and clear of any liens or
      encumbrances. Such leases provide for a net revenue interest of 87.5% prior
      to
      an overriding 5% royalty.





In
      connection with the acquisition of the Cook Inlet leases described above, we
      assumed an obligation to drill or cause to be drilled, at our sole expense,
      a
      test well on at least one of ADL 390087, ADL 390722, or ADL 390723. This test
      well must be drilled to completion or abandonment to a bottom-hole depth and
      location at least sufficient to test both the West Foreland and Hemlock
      Formations. Failure to drill the Cook Inlet test well to completion or
      abandonment by November 27, 2010 will result in our forfeiture of leases ADL
      390087, ADL 390722 and ADL 390723.





*Beaufort
      Sea Leases*





Effective
      May 9, 2006 we entered into a purchase agreement (the “Beaufort Sea Agreement”)
      whereby we acquired rights in State of Alaska Oil and Gas Leases ADL 390834,
      390839, 390840 and 390841 (the “Beaufort Sea Leases”) from two unrelated persons
      (the “Sellers”). The Beaufort Sea Agreement was amended on July 31, 2006 (the
“Amended Beaufort Sea Agreement”) to extend certain timelines contained therein.
      The total purchase price for the Beaufort Sea Leases was $276,480 (the “Purchase
      Price”). The Beaufort Sea Leases cover an aggregate of approximately 10,000
      acres of land, both onshore and offshore in the Beaufort Sea area on the North
      Slope of Alaska.




18





As
      of
      December 13, 2006 the Sellers had received a High Bidder Notice from the State
      of Alaska Department of Natural Resources. All funds have been paid to State
      of
      Alaska for these leases. At such time that the Beaufort Sea Leases are issued
      to
      Sellers, the Sellers shall own or otherwise have the right to assign and convey
      or cause to be assigned and conveyed the Beaufort Sea Leases, all of which
      shall
      be free and clear of any liens and encumbrances and provide for a net revenue
      interest to the holder of not less than 83.33334% prior to reservation of a
      5%
      overriding royalty. Such overriding royalty also shall apply to all renewals
      and
      extensions of the Beaufort Sea Leases.





We
      deposited the Purchase Price plus an additional $10,240 (aggregate amount of
      $286,720) in an escrow account as required by the Beaufort Sea Agreement. At
      closing, a portion of the escrowed funds totaling $81,920 will be used to retire
      balances due to the State of Alaska related to these leases. In addition,
      $10,240 of the escrowed funds will be used to pay the first year of rental
      payments associated therewith.





Under
      the
      Amended Beaufort Sea Agreement, the Beaufort Sea Agreement shall become null
      and
      void if closing of the transaction does not occur by the close of business
      on
      December 31, 2006. In such event, neither the Sellers nor we shall have any
      further rights or obligations under the Beaufort Sea Agreement. We are currently
      negotiating with the Sellers to further extend the termination date of the
      Beaufort Sea Agreement from December 31, 2006 to March 31, 2007.





*Bayou
      City Agreements*





Effective
      June 7, 2006 we entered into oil and gas well participation agreements with
      Bayou City Exploration, Inc. (the "Bayou City Agreements"). Under the terms
      of
      the Bayou City Agreements, we agreed to participate in the drilling of test
      wells on three oil and gas prospects located in Louisiana and Texas. These
      oil
      and gas prospects include the Zodiac II Prospect located in Jefferson Davis
      and
      Calcasieu Parishes in Louisiana and the Jaboncillo Windfall and Frost National
      Bank Deep Prospects located in Live Oak County, Texas.





With
      respect to the two prospects located in Live Oak County, Texas (the "Live Oak
      Prospects"), we will earn a 16.67% working interest in the Live Oak Prospects
      before payout and a 12.5% working interest after payout by participating in
      the
      drilling of the required test wells. “Payout” is defined as that point in time
      when there has been recovered from one hundred percent (100%) of production,
      less only royalties, overriding royalties and production taxes, an amount of
      money equal to one hundred percent (100%) of the drilling, completion and
      operating costs (during the payout period) of the initial test well.





We
      further agreed to pay 16.67% of all well costs to the initial casing point
      on
      the initial test well drilled on each Live Oak Prospect, to pay 16.67% of all
      well completion costs, and to pay our proportionate share of the prospect costs
      including geological and geophysical costs, third party prospect fees, land
      brokerage costs, lease bonus, and all other costs associated with the respective
      Live Oak Prospects. Such prospect costs totaled $20,375 with regard to the
      Jaboncillo Windmill Prospect and $94,888 with regard to the Frost National
      Bank
      Deep Prospect.




19





We
      will
      earn a 25% working interest in the initial test well drilled on the Zodiac
      Prospect at such time as the test well has reached the objective depth. We
      agreed to pay 33.33% of well costs to the casing point on the test well drilled
      on the Zodiac Prospect, to pay 25% of all well completion costs, and to pay
      our
      proportionate share of prospect costs including geological and geophysical
      costs, third party prospect fees, land brokerage costs, lease bonus, and all
      other similar costs associated with the Zodiac Prospect. Our prospect costs
      relating to the Zodiac Prospect totaled $272,070, which we paid on November
      13,
      2006.





Prospect
      costs for each prospect are fully refundable in the event the applicable
      agreement is rescinded by Bayou City for any reason or Bayou City fails to
      cause
      the initial test well to be drilled for any reason.





Drilling
      has been completed and the test well (the “McLean #1 Well) was fracture
      stimulated on the Frost National Bank Deep Prospect. During initial production
      tests, the well produced more than one million cubic feet of gas and
      approximately one thousand barrels of water per day. The operator, Bayou City,
      has elected to temporarily suspend the McLean #1 Well pending further
      evaluation.





Bayou
      City and its partners plan to purchase 3-D seismic data covering the entire
      Prospect acreage. The McLean #1 Well is part of an overall position of 2,961
      acres in Live Oak County owned by Bayou City and its partners. We have earned
      a
      12.5% working interest in the entire prospect acreage through our participation
      in the McLean #1 Well. To date, we have incurred $132,000 in drilling costs
      and
      $227,000 in completion costs related to this prospect.





Drilling
      is expected to commence on the Jaboncillo Windfall Prospect on or before January
      31, 2007, subject to rig availability and resolution of a land/lease issue.
      Drilling had been expected to commence by August 1, 2006 but was delayed due
      to
      an illegal lease trespass by a third party. The current lease owner is working
      to resolve this matter.





On
      November 16, 2006 a drilling contract was executed relative to the Zodiac II
      Prospect. The drilling rig was mobilized and is on the drilling location (the
      “18-1 Well”) in Calcasieu Parish, Louisiana. Drilling operations commenced on
      December 7, 2006. Estimated gross drilling and completion costs for the 18-1
      test well approximate $1.5 million and $793,000, respectively. Our share of
      the
      drilling cost is $503,299, which was paid by us on November 19, 2006.





*Whitmar
      Agreement*





On
      July
      28, 2006 we entered into a participation agreement with Whitmar Exploration
      Company (“Whitmar”) related to participation in the drilling of a 13,000-foot
      test well to test the Yegua Sands on the Deweyville Prospect located in Newton
      County, Texas and Calcasieu Parish, Louisiana. We made an initial payment to
      Whitmar of $100,000 in connection with this participation agreement. Of this
      amount, $42,500 represented our proportionate share of leasehold costs while
      the
      remaining $57,500 represented a deposit on our share of drilling costs for
      the
      test well.




20




Our
      participation reflected a 10% working interest and 72% net revenue interest
      whereby we were required to pay 12.5% of drilling costs to the casing point
      and
      10% of all costs after the casing point. Our estimated shares of such costs
      approximated $552,000 for drilling and, if applicable, $114,000 for completion.
      The balance ($497,250) of our share of estimated drilling costs was paid during
      August 2006. Under the agreement, we also have the right to participate in
      one
      additional well on the prospect on a proportionate basis.





During
      September 2006, the test well reached its target drill depth of 13,000 feet.
      The
      well was logged and deemed non-commercial. As a result, the well was plugged
      and
      abandoned. Our share of the abandonment costs totaled $29,825.





*Savant
      Agreement*





On
      November 22, 2006 we executed a Letter Agreement with Savant Alaska LLC (the
      “Savant Agreement”). Savant Alaska LLC (“Savant”) holds leases for the
      exploration and production of oil and natural gas in an area of Alaska that
      is
      contiguous to certain of our Alaskan interests. Savant plans to commence
      drilling of a test well at its Kupcake Prospect on or before March 15, 2007.





Under
      the
      terms of the Savant Agreement, we will pool our leasehold interests with Savant
      on a net acreage basis and jointly drill the test well. Working interests within
      the pooled area will approximate 91.5% for Savant and 8.5% for us. Net revenue
      interests will be equalized at 78.33%. Savant will be the operator of the pooled
      area.





The
      dry
      hole cost of the test well is estimated to be $13,353,000. Should the test
      well
      be prospective, there is a requirement for additional testing. The testing
      cost
      is estimated to be $2,225,000. It is anticipated that drilling will take 32
      days
      with the testing portion of the program requiring an additional 13 days. Our
      share of the dry hole cost is estimated to be $1,120,000 and our share of the
      testing cost is estimated to be $188,000. These costs may be lowered as the
      operator is actively pursuing additional partners for the project. The operator
      is currently in the process of finalizing an agreement for a drilling rig in
      order to meet the drilling window in the first quarter of 2007.





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**ITEM
      6.**  **EXHIBITS**





(a)  Exhibits.








Exhibit
                  No.
              Description


10.1
            
            Form
                of Engagement Letter Agreement with Advisory Board Members dated
                October
                5, 2006


10.2
            
            Letter
                Agreement dated November 13, 2006 (executed November 22, 2006) with
                Savant
                Alaska LLC regarding Kupcake Prospect


10.3
            
            Letter
                Agreement dated December 11, 2006 with BP America Production
                Company 31.1
            
            Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal
              Executive Officer 31.2
            
            Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal
              Financial Officer 32.1
            
            Rule 1350 Certification of Chief Executive
              Officer 32.2
            
            Rule 1350 Certification of Chief Financial
              Officer








**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




TRUE
              NORTH ENERGY
              CORPORATIONDate: December
              14, 2006
            By:
            /s/ John
              FolnovicJohn
              FolnovicPresident,
              Chief
              Executive Officer




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