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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

                 For the quarterly period ended March 31, 2007
                                                -------------

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

           For the transition period from ____________ to_____________

                        Commission file number 0 - 24012

                               KODIAK ENERGY INC.
                      -------------------------------------
             (Exact name of registrant as specified in its charter)


            Delaware                                65-0967706
   -------------------------------                ----------------
   (State or other jurisdiction of                (I.R.S. Employer
    incorporation or organization)               Identification No.)


                     734 7th Avenue S.W. Calgary, AB T2P 3P8
            --------------------------------------------------------
               (Address of principal executive offices - Zip code)

                                 (403) 262-8044
                              --------------------
              (Registrant's telephone number, including area code)

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

     Yes  X     No
         ---       ---

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

     Yes        No  X
         ---       ---

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:

Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.

     Yes  X     No
         ---       ---

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 90,416,468

Transitional Small Business Disclosure Format (Check one):  Yes      No X
                                                                ---    ---



<PAGE>

                               KODIAK ENERGY INC.
                                      INDEX

PART I.  FINANCIAL INFORMATION                                               3

ITEM 1.  FINANCIAL STATEMENTS                                                3

           Consolidated Balance Sheets as of March 31, 2007
             (unaudited) and March 31, 2006                                  3

           Consolidated Statement of Shareholders' Equity
             (unaudited) for the three months ended March 31, 2007           4

           Consolidated Statements of Operations (unaudited)
             for the three months ended March 31, 2007 and 2006              4

           Consolidated Statements of Cash Flows (unaudited)
             for the three months ended March 31, 2007 and 2006              5

           Notes to Consolidated Financial Statements                        6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION          20

ITEM 3.  CONTROLS AND PROCEDURES                                            23

PART II. OTHER INFORMATION                                                  23

ITEM 1.  LEGAL PROCEEDINGS                                                  23

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                          23

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                    24

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                24

ITEM 5.  OTHER INFORMATION                                                  24

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                   25












<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

KODIAK ENERGY, INC.
Consolidated Balance Sheets
(Development Stage Company Going Concern Uncertainty - Note 1)
-------------------------------------------------------------------------------
                                                  March 31         December 31
                                                    2007              2006
                                                (Unaudited)         (Audited)
-------------------------------------------------------------------------------
Assets

Current Assets:
     Cash                                       $     223,446    $      448,346
     Accounts Receivable                              618,290           685,975
     Prepaid Expenses and Deposits (Note 4)           214,651           196,838
     --------------------------------------------------------------------------
                                                    1,056,387         1,331,159
     --------------------------------------------------------------------------
Other Assets (Note 6)                                  50,572            49,860
     --------------------------------------------------------------------------
Capital Assets (Note 7):
     Oil & Gas Properties                           5,690,940         1,270,253
     Property & Equipment                              76,543            55,803
     --------------------------------------------------------------------------
                                                    5,767,483         1,326,056
-------------------------------------------------------------------------------
                                                $   6,874,442    $    2,707,075
===============================================================================

Liabilities and Shareholders' Equity

Current Liabilities:
     Accounts Payable                               1,448,296           585,253
     Accrued Liabilities                            2,115,221           273,850
     --------------------------------------------------------------------------
                                                    3,563,517           859,103

Asset Retirement Obligations (Note 9)                  97,678            90,911
     --------------------------------------------------------------------------
                                                    3,661,195           950,014
Shareholders' Equity
         Share Capital (Note 10):
             Authorized:
             300,000,000 (2006 - 300,000,000)
             Common Shares Par Value .001 Each
             Issued & Outstanding 90,416,468
             (2006 - 89,946,468)Common Shares          90,416            89,946
             Shares Issuable                        1,660,000           538,328
             Additional Paid in Capital             5,681,466         5,143,608
             Deficit Accumulated during the
                      Development Stage            (4,377,818)       (4,063,776)
             Contributed Surplus (Note 11)            192,983            69,169
             Other Comprehensive Loss                 (33,800)          (20,214)
         ----------------------------------------------------------------------
                                                    3,213,247         1,757,061
-------------------------------------------------------------------------------
                                                $   6,874,442    $    2,707,075
===============================================================================

(See accompanying notes to the consolidated financial statements)


                                      -3-
<PAGE>

KODIAK ENERGY, INC.
Consolidated Statement of Shareholders' Equity - Unaudited
For the Three Months Ended March 31, 2007
(Development Stage Company Going Concern Uncertainty - Note 1)


<TABLE>
<CAPTION>

                                                          Deficit
                                                        Accumulated     Accumulated
                     Number of            Additional    during the         Other                                    Total
                      Common               Paid in      Development    Comprehensive   Contributed     Shares    Shareholders'
                      shares     Amount    Capital         Stage           Loss          Surplus      Issuable       Equity
-------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>         <C>       <C>          <C>             <C>             <C>           <C>         <C>
Balance at Dec 31,
2006                89,946,468  $ 89,946  $ 5,143,608  $ (4,063,776)   $    (20,214)   $     69,169  $  538,328  $   1,757,061

Net Loss                     -         -            -      (314,042)                                                  (314,042)

Foreign currency
  translation                -         -            -             -         (13,586)              -           -        (13,586)
                                                       ------------      -----------                             -------------
Total comprehensive
  loss                                                     (314,042)        (13,586)                                  (347,628)

Issuance of common
  stock                470,000       470      537,858             -               -                    (538,328)             -

Shares to be issued          -         -            -             -               -                   1,660,000      1,660,000

Share-based
  compensation                         -            -             -               -         123,814           -        123,814
------------------------------------------------------------------------------------------------------------------------------

Balance at Mar 31,
2007                90,416,468  $ 90,416  $ 5,681,466  $ (4,377,818)   $     (33,800)       192,983  $1,660,000  $   3,213,247
==============================================================================================================================

(See accompanying notes to the consolidated financial statements)

</TABLE>

Kodiak Energy Inc.
Consolidated Statements of Operations - Unaudited
(Development Stage Company Going Concern Uncertainty - Note 1)

                                                                     Cumulative
                                                                       Since
                                                         Three       Inception
                                                        Months       April 7,
                                                         Ended        2004 to
                                                       March 31,     March 31,
                                        Three Months     2006          2007
                                         Ended March  (Restated -   (Restated -
                                          31, 2007      Note 2)       Note 2)
                                        ----------------------------------------

REVENUES, net of royalties              $       385   $         -  $     27,519
                                        ----------------------------------------

EXPENSES
 Operating                                   10,636             -        24,208
 General and Administrative                 170,698       196,412     1,840,374
 Share-based Compensation                   123,814             -       192,983
 Depletion, Depreciation and Accretion        9,521         2,269     1,517,777
 Interest Expense                                 -             -       808,811
                                        ----------------------------------------
                                            314,669       198,681     4,384,153
                                        ----------------------------------------

 Loss Before Other Expenses(Income)         314,284       198,681     4,356,634

Other Expenses (Income)
 Loss from valuation adjustment                   -             -        25,000
 Interest Income                               (242)            -        (3,816)
                                        ----------------------------------------
                                               (242)            -        21,184
                                        ----------------------------------------

  NET LOSS                                  314,042       198,681     4,377,818
                                        ----------------------------------------

(See accompanying notes to the consolidated financial statements)

                                      -4-
<PAGE>

KODIAK ENERGY, INC.
Consolidated Statements of Cash Flows -
Unaudited (Development Stage Company
Going Concern Uncertainty - Note 1)

                                                                     Cumulative
                                                                       Since
                                                         Three       Inception
                                                        Months       April 7,
                                                         Ended        2004 to
                                                       March 31,     March 31,
                                        Three Months     2006          2007
                                         Ended March  (Restated -   (Restated -
                                          31, 2007      Note 2)       Note 2)
                                        ----------------------------------------
Operating Activities:

Net Loss                                $  (314,042)  $  (198,681) $ (4,377,818)

Adjustments to reconcile net loss to
net cash used in operating activities:
   Depletion, Depreciation and
     Accretion                                9,521         2,269     1,517,776
   Interest Expense                               -             -       808,811
   Share-Based Investor Relations
     Expense                                      -             -       337,500
   Share-Based Compensation                 123,814             -       192,983
   Foreign Currency Translation                (111)        2,973       (20,325)
   Contributions to Capital                       -             -           900
   Loss from Valuation Adjustment                 -             -        25,000

Changes in Non-Cash Working Capital
(Note 5)                                   (110,188)      (82,866)       (4,410)
                                        ----------------------------------------

Net Cash Used In Operating Activities      (291,006)     (276,304)   (1,519,583)

Investment Activities:
  Additions To Capital Assets            (1,668,110)     (318,669)   (4,519,557)
  Additions To Other Assets                    (712)       (2,812)      (50,572)
                                        ----------------------------------------

Net Cash Used In Investment Activities   (1,668,822)     (321,481)   (4,570,129)

Financing Activities
  Shares Issued                           1,734,928     1,191,020     6,313,158
                                        ----------------------------------------

Net Cash Provided By Financing
Activities                                1,734,928     1,191,020     6,313,158
                                        ----------------------------------------

Net Cash Increase (Decrease)               (224,900)      593,234       223,446
Cash beginning of period                    448,346       190,651             -
                                        ----------------------------------------
Cash end of period                      $   223,446       783,885       223,446
                                        ========================================

Noncash Financing and Investing
Activities

Accrued exploration and development
 costs on oil and gas properties          2,789,546       184,124     2,639,988

Shares issuable, net of issue costs       1,196,600      (882,826)    1,216,672


(See accompanying notes to the consolidated financial statements)

                                      -5-
<PAGE>

KODIAK ENERGY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2007 and 2006
Stated in US dollars


1.   ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTY

The accompanying consolidated financial statements include the accounts of
Kodiak Energy Inc. and subsidiaries (collectively "Kodiak", the "Company", "we",
"us" or "our") as at March 31, 2007 and December 31, 2006 and for the three
months ended March 31, 2007 and 2006 and for the cumulative period from April 7,
2004 (inception)until March 31, 2007, and are presented in accordance with
generally accepted accounting principles in the United States of America ("U. S.
GAAP"),except as outlined in Note 2.

The Company was incorporated under the laws of the state of placeStateDelaware
on December 15, 1999 under the name "Island Critical Care, Corp." with
authorized common stock of 50,000,000 shares with a par value of $0.001. On
December 30, 2004 the name was changed to "Kodiak Energy, Inc." and the
authorized common stock was increased to 100,000,000 shares with the same par
value. On January 17, 2005 the Company affected a reverse split of 100
outstanding shares for one share. These consolidated financial statements have
been prepared showing post split shares from inception. The Company was engaged
in the development of the manufacture and distribution of medical
instrumentation and it became inactive after the bankruptcy outlined below.

The Company is in the development stage and its efforts have been principally
devoted to the raising of capital, organizational infrastructure development and
the acquisition of oil and gas properties for the purpose of future extraction
of resources.

Bankruptcy
----------

On February 5, 2003 the Company filed a petition for bankruptcy in the District
of Prince Edward Island, Division No. 01-Prince Edward Island Court No. 1713,
Estate No. 51-104460, titled "Island Critical Care Corp.". The Company emerged
from bankruptcy pursuant to a Bankruptcy Court Order entered on April 7, 2004
with no remaining assets or liabilities and adopted Fresh Start Accounting.

The terms of the bankruptcy settlement included the authorization for the
issuance of 150,000 post split restricted common shares in exchange for $25,000,
which was paid into the bankruptcy court by the recipient of the shares.

The Company emerged from bankruptcy as a development stage company.

Going Concern Uncertainty
-------------------------

These consolidated financial statements have been prepared assuming the Company
will continue as a going concern, which presumes the realization of assets and
discharge of liabilities in the normal course of business for the foreseeable
future. The Company has not generated positive cash flow since inception and has
incurred operating losses and will need working capital for its future planned
activities. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Continuation of the Company as a going concern
is dependent upon obtaining sufficient working capital to finance ongoing
operations. The management of the Company has developed a strategy to address
this uncertainty, including additional loans from officers and equity funding;
however, there are no assurances that any such financing can be obtained on
favorable terms, if at all. These financial statements do not reflect the
adjustments or reclassification of assets and liabilities that would be
necessary if the Company were unable to continue its operations.

2.   RESTATEMENT

In November, 2006, it was determined that it was necessary to restate the
financial results for the year ended December 31, 2005 and for the periods ended
March 31, 2006 and June 30, 2006. The purpose of the restatements is to correct


                                      -6-
<PAGE>

errors found in accounting for transactions resulting from a lack of adequate
procedures necessary to insure that records were maintained in reasonable detail
to fairly reflect the transactions of the Company in the start up phase of
operations. More specifically the errors found are outlined as follows:

* Capitalization of items which should have been expensed under the successful
efforts method of accounting for oil and gas property
* Not recognizing the beneficial conversion feature of debt payable in common
shares of the Company
* Certain expenses paid after year end not being accrued for at period end
* Expensing costs relating to issuance of common shares
* Calculation errors made in the translation of Canadian operations to U.S.
dollars

The Company's quarterly reporting in 2005 was not affected as the operations of
the Company commenced in the fourth quarter.

In addition to the above noted errors, the Company changed its policy for
accounting for oil and gas properties. The Company decided to change its
accounting policy for oil and gas properties and adopt the full cost method to
better reflect the assets on a country-by-country basis and so the Company's
financial position is more comparable to its peers in the oil and gas industry.

Effects of the restatement by line item follow:

Consolidated Balance Sheet

                                          March 31,
                                            2006                      March 31,
                                        As Previously   Impact of       2006
                                          Reported       Errors     As Restated
                                        ----------------------------------------
                                        $  1,032,924  $  (249,039) $    783,885
Cash and Cash Equivalents
Other Receivables                             30,523       52,992        83,515
Share Subscriptions Receivable                     -      140,000       140,000
Prepaid Expenses                              80,426      (11,515)       68,911
Total Current Assets                       1,143,873      (67,562)    1,076,311

Other Assets                                       -       23,061        23,061

Oil & Gas Properties                         575,923      226,254       802,177
Furniture & Fixtures                          21,281       (3,512)       17,769
Accumulated Amortization                      (1,748)        (867)       (2,615)
Total Property, Plant & Equipment            595,456      221,875       817,331
Total Assets                               1,739,329      177,374     1,916,703

Accounts Payable                             155,101       82,383       237,484
Accrued Expenses                               4,590      113,497       118,087
Total Current Liabilities                    159,691      195,880       355,571
Asset Retirement Obligation                        -       51,843        51,843
Shares Issued                                 36,813            1        36,814
Shares Subscription                         (272,294)     272,294             -
Additional Paid in Capital                 2,229,409      642,656     2,872,065
Deficit Accumulated during the
  Development Stage                         (476,568)    (918,457)   (1,395,025)
Accumulated Other Comprehensive
  Loss                                        62,277      (66,843)       (4,566)
     Total Shareholders' Equity            1,579,638      (70,349)    1,509,289
     Total Liabilities &  Shareholders'
     Equity                             $  1,739,329  $   177,374  $  1,916,703


                                      -7-
<PAGE>

For the impact of the errors on the December 31, 2005 balance sheet refer to the
Amended Form 10-K for the year ended December 31, 2005.

Consolidated Statement of Operations

                                        Three Months
                                           Ended                    Three Months
                                          March 31,                    Ended
                                            2006                      March 31,
                                        As Previously   Impact of       2006
                                          Reported       Errors     As Restated
                                        ----------------------------------------
Administrative Expense                  $    175,881   $   20,531   $   196,412

Loss Before Other Expenses                  (175,881)    ($20,531)     (196,412)

Amortization of Furniture & Fixtures          (1,210)      (1,000)       (2,210)

Interest Income                               10,025      (10,025)            -

Net Loss                                   ($167,066)    ($31,556)    ($198,622)

Basic and Diluted Loss per
Share                                         ($0.01)           -        ($0.01)


Consolidated Statement of Cash Flow

                                        Three Months
                                           Ended                    Three Months
                                          March 31,                    Ended
                                            2006                      March 31,
                                        As Previously   Impact of       2006
                                          Reported       Errors     As Restated
                                        ----------------------------------------
Operating Activities

Net Loss From                              ($167,066)    ($31,556)    ($198,622)

Amortization of Furniture & Fixtures           1,210        1,000        2,210

Foreign Currency Translation                 103,946     (100,973)       2,973

Change in Other Receivables                  (24,053)     (46,786)      (70,839)

Change in  Prepaid Expenses                  (22,576)      21,515        (1,061)

Change in Accounts Payable                    53,846      (73,399)      (19,553)

Change in Accrued Expenses                         -        8,588         8,588
Change in Convertible Debt                         -      (41,189)      (41,189)

Net Cash Used in Operations                  (54,693)    (262,800)     (317.493)

Investment Activities

Additions to Property, Plant & Equipment    (315,882)    (186,912)     (502,794)

Other Assets                                       -       (2,812)       (2,812)


                                      -8-
<PAGE>

Change in Accounts Payable                         -      228,484       228,484

Change in Accrued Expenses                         -      (44,360)      (44,360)

Net Cash Used in Investing                  (315,882)      (5,600)     (321,482)

Financing Activities

Shares Issued                              1,167,706      204,503     1,372,209

Change in Other Receivables                        -     (140,000)     (140,000)

Net Cash Provided by Financing             1,167,706       64,503     1,232,209


Net Cash Increase                            797,131     (203,897)      593,234

Cash Beginning of Period                     235,793      (45,142)      190,651

Cash End of Period                      $  1,032,924  $  (249,039) $    783,885

For the impact of the errors on the Cumulative Since Inception April 7, 2004 to
March 31, 2006 refer to the impact of the errors in the Amended Form 10K/A for
the year ended December 31, 2005 and including the errors noted above.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

These consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Kodiak Petroleum ULC, Kodiak Petroleum (Montana),
Inc., and Kodiak Petroleum (Utah), Inc. All intercompany accounts and
transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------

The preparation of financial statements in conformity with U. S. GAAP requires
management to make certain estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Although these
estimates are based on the knowledge of current events and actions the Company
may undertake in the future, they may ultimately differ from actual results.
Included in these estimates are assumptions about allowances for valuation of
deferred tax assets. Accounts receivable are stated after evaluation as to their
collectability and an appropriate allowance for doubtful accounts is provided
where considered necessary. The provision for asset retirement obligations,
depletion, as well as management's impairment assessment on its oil and gas
properties and other long lived assets are based on estimates and by their
nature, these estimates are subject to measurement uncertainty and the effect on
the financial statements of changes in these estimates, in future periods, could
be significant.

Joint Venture Operations
------------------------

In instances where the Company's oil and gas activities are conducted jointly
with others, the Company's accounts reflect only its proportionate interest in
such activities.

Oil and Gas Properties
----------------------

Under the full cost method of accounting for oil and gas operations all costs
associated with the exploration for and development of oil and gas reserves are
capitalized on a country-by-country basis. Such costs include land acquisition
costs, geological and geophysical expenses, carrying charges on non-producing
properties, costs of drilling both productive and non-productive wells,
production equipment and overhead charges directly related to acquisition,


                                      -9-
<PAGE>

exploration and development activities. Proceeds from the sale of oil and gas
properties are applied against capitalized costs with no gain or loss
recognized, unless such a sale would significantly alter the rate of depletion
and depreciation in a particular country, in which case a gain or loss on
disposal is recorded.

Capitalized costs within each country are depleted and depreciated on the
unit-of-production method based on the estimated gross proved reserves as
determined by independent petroleum engineers. Oil and gas reserves and
production are converted into equivalent units on the basis of 6,000 cubic feet
of natural gas to one barrel of oil. Depletion and depreciation is calculated
using the capitalized costs, including estimated asset retirement costs, plus
the estimated future costs to be incurred in developing proved reserves, net of
estimated salvage value.

An impairment loss is recognized in net earnings if the carrying amount of a
cost center exceeds the "cost center ceiling". The carrying amount of the cost
center includes the capitalized costs of proved oil and natural gas properties,
net of accumulated depletion and deferred income taxes and the cost center
ceiling is the present value of the estimated future net cash flows from proved
oil and natural gas reserves discounted at ten percent (net of related tax
effects) plus the lower of cost or fair value of unproved properties included in
the costs being amortized (and/or the costs of unproved properties that have
been subject to a separate impairment test and contain no probable reserves).

Costs of acquiring and evaluating unproved properties and major development
projects are initially excluded from the depletion and depreciation calculation
until it is determined whether or not proved reserves can be assigned to such
properties. Costs of unproved properties and major development projects are
transferred to depletable costs based on the percentage of reserves assigned to
each project over the expected total reserves when the project was initiated.
These costs are assessed periodically to ascertain whether impairment has
occurred.

Property and Equipment
----------------------

Property and equipment is recorded at cost. Depreciation of assets is provided
by use of a declining balance method over the estimated useful lives of the
related assets. Expenditures for replacements, renewals, and betterments are
capitalized. Maintenance and repairs are charged to operations as incurred.

Asset Retirement Obligations
----------------------------

The Company recognizes a liability for asset retirement obligations in the
period in which they are incurred and in which a reasonable estimate of such
costs can be made. Asset retirement obligations include those legal obligations
where the Company will be required to retire tangible long-lived assets such as
producing well sites. The asset retirement obligation is measured at fair value
and recorded as a liability and capitalized as part of the cost of the related
long-lived asset as an asset retirement cost. The asset retirement obligation
accretes until the time the asset retirement obligation is expected to settle
while the asset retirement costs included in oil and gas properties are
amortized using the unit-of-production method.

Amortization of asset retirement costs and accretion of the asset retirement
obligation are included in depletion, depreciation and accretion. Actual asset
retirement costs are recorded against the obligation when incurred. Any
difference between the recorded asset retirement obligations and the actual
retirement costs incurred is recorded in depletion, depreciation and accretion.

Environmental
-------------

Oil and gas activities are subject to extensive federal, provincial, state and
local environmental laws and regulations. These laws, which are constantly
changing, regulate the discharge of materials into the environment and may
require the Company to remove or mitigate the environmental effects of the
disposal or release of petroleum or chemical substances at various sites.

Environmental expenditures are expensed or capitalized depending on their future
economic benefit. Expenditures that relate to an existing condition caused by
past operations and that have no future economic benefits are expensed.
Liabilities for expenditures of a non-capital nature are recorded when


                                      -10-
<PAGE>

environmental assessment and/or remediation is probable, and the costs can be
reasonably estimated. To date, the Company has not recognized any environmental
obligations as production has been insignificant and we have not actively
produced since October, 2006.

Income Taxes
------------

Income taxes are determined using the liability method in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using the enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period that
includes the enactment date. In addition, a valuation allowance is established
to reduce any deferred tax asset for which it is determined that it is more
likely than not that some portion of the deferred tax asset will not be
realized.

Share Based Compensation
------------------------

The Company records compensation expense in the Consolidated Financial
Statements for share based payments using the fair value method pursuant to
Financial Accounting Standards Board Statement ("FASB") No. 123R. The fair value
of share-based compensation to employees will be determined using an option
pricing model at the time of grant. Fair value for common shares issued for
goods or services rendered by non-employees are measured based on the fair value
of the goods or services received. Share-based compensation is expensed with a
corresponding increase to Contributed Surplus. Upon the exercise of the stock
options, consideration paid together with the previously recognized contributed
surplus is recorded as an increase in share capital.

Foreign Currency Translation
----------------------------

The functional currency for the Company's foreign operations is the Canadian
dollar. The translation from the applicable foreign currencies to U.S. dollars
is performed for balance sheet accounts using current exchange rates in effect
at the balance sheet date, while income, expenses and cash flows are translated
at the average exchange rates for the period. The resulting translation
adjustments are recorded as a component of other comprehensive income. Gains or
losses resulting from foreign currency transactions are included in other
income/expenses.

Revenue Recognition
-------------------

Revenues from the sale of petroleum and natural gas are recorded when title
passes from the Company to its petroleum and/or natural gas purchaser and
collectibility is reasonably assured.

Loss Per Common Share
---------------------

Basic earnings/loss per common share is computed by dividing net earnings/loss
by the weighted average number of common shares outstanding for the period.
Diluted earnings/loss per common share is computed after giving effect to all
dilutive potential common shares that were outstanding during the period.
Dilutive potential common shares consist of incremental shares issuable upon
exercise of stock options and warrants, contingent stock, conversion of
debentures and preferred stock outstanding. The dilutive effect of potential
common shares is not considered in the EPS calculations for these periods as the
impact would have been anti-dilutive.

4.   PREPAID EXPENSES AND DEPOSITS

Included in Prepaid Expenses and Deposits is an amount of $172,483 (2006 -
$170,884) representing the Company's share of a refundable work deposit with the
Northwest Territories.


                                      -11-
<PAGE>

5.   CHANGES IN NON-CASH WORKING CAPITAL

                                                                   Cumulative
                                    Three Months  Three Months  Since Inception,
                                       Ended         Ended       April 7, 2004
                                      March 31,    March 31,      to March 31,
                                        2007          2006           2007
Operating Activities:

   Accounts Receivable                   (4,253)       (70,839)        (37,089)
   Prepaid Expenses                     (19,767)        (1,061)        (67,662)
   Accounts Payable                     (15,685)       (19,554)         97,720
   Accrued Liabilities                  (70,483)         8,588           2,621

            Total                      (110,188)       (82,866)         (4,410)

6.   OTHER ASSETS

Other assets represent long term deposits required by regulatory authorities for
environmental obligations relating to well abandonment and site restoration
activities.

                                                         March 31,  December 31,
                                                           2007        2006
                                                         --------   ------------

    Alberta Energy and Utility Board Drilling Deposit    $ 24,276     $ 23,808
    Alberta Energy Royalty Deposit                          4,054        4,074
    British Columbia Oil and Gas Commission Deposit        22,242       21,978
                                                         --------     --------

                                                         $ 50,572     $ 49,860
                                                         --------     --------

7.   CAPITAL ASSETS
                                                                      Net Book
                                                  Accumulated          Value
                                                  Depreciation         March
                                     Cost        and Depletion        31, 2007
                                     ----        -------------        --------
Oil and Gas Properties:

Canada                            $6,602,762      $ 1,476,657       $5,126,105
United States                        564,835                -           564,835
                                  ----------------------------------------------

Sub-total                          7,167,597        1,476,657        5,690,940

Furniture and Fixtures                98,034           21,492           76,543
                                  ----------------------------------------------

Total                             $7,265,631      $ 1,490,418       $5,767,483
                                  ----------------------------------------------









                                      -12-
<PAGE>

                                                                      Net Book
                                                  Accumulated          Value
                                                  Depreciation        December
                                     Cost        and Depletion        31, 2006
                                     ----        -------------        --------
Oil and gas Properties:

Canada                            $2,182,075      $ 1,476,657       $  705,418
United States                        564,835                -          564,835
                                  ----------------------------------------------

Sub-total                          2,746,910        1,476,657        1,270,253

Furniture and Fixtures                69,564           13,761           55,803
                                  ----------------------------------------------

Total                             $2,816,474      $ 1,490,418       $1,326,056
                                  ----------------------------------------------

During the three months ended March 31, 2007, the Company has capitalized $5,576
(March 31, 2006 - $ Nil) of general and administrative personnel costs
attributable to acquisition, exploration and development activities.

Unproved Properties
-------------------

Included in oil and gas properties are costs of $5,126,105 (December 31, 2006 -
$866,152) related to Canadian unproved properties and $564,835 (December 31,
2006 - $564,835) related to United States unproved properties, valued at cost,
that have been excluded from costs subject to depletion.

Ceiling Test
------------

The Company has performed ceiling tests for its Canadian and United States
geographical cost centers and has determined that no impairment exists as at
March 31, 2007. As at December 31, 2006, it was determined that impairment
existed in the Canadian cost center and consequently, a write-down of $1,419,946
was recorded as depletion and depreciation expense.

8.   CONVERTIBLE DEBT

Debt of $41,189 as at December 31, 2005 was non-interest bearing and convertible
to common shares of the Company pursuant to the stock for services compensation
plan. A beneficial conversion feature of $808,811 was calculated on the debt for
the year ended December 31, 2005 representing the difference between the
conversion price and the fair value of the common stock at the commitment date.
This amount is recorded as interest expense and an increase in additional paid
in capital. The Company issued 1,000,000 shares in January, 2006 to settle this
debt pursuant to the stock for services compensation plan. Debt was reduced by
$41,189 and Shares Issued increased by $1,000 and Additional Paid-in Capital
increased by $40,189.

9.   ASSET RETIREMENT OBLIGATIONS

Changes in the carrying amounts of the asset retirement obligations associated
with the Company's oil and natural gas properties are as follows:

------------------------------------------------------------------------------
Asset Retirement Obligations, December 31, 2005                             -
------------------------------------------------------------------------------
Obligations incurred                                                   86,193
------------------------------------------------------------------------------
Accretion                                                               4,718
------------------------------------------------------------------------------
Asset retirement obligations, December 31, 2006                        90,911
------------------------------------------------------------------------------
Obligations incurred                                                    4,881
------------------------------------------------------------------------------
Accretion                                                               1,886
------------------------------------------------------------------------------
Asset retirement obligations, March 31, 2007                           97,678
------------------------------------------------------------------------------



                                      -13-
<PAGE>

At March 31, 2007, the estimated total undiscounted amount required to settle
the asset retirement obligations was $ 149,051 (December 31, 2006 - $126,307.
These obligations will be settled at the end of the useful lives of the
underlying assets, which currently extends up to 8 years into the future. This
amount has been discounted using a credit adjusted risk-free interest rate of
7.5% and a rate of inflation of 2.5%.

10.  SHARE CAPITAL

Authorized:
March 31, 2007 and December 31, 2006 - 300,000,000 common shares at $0.001 par
value

At the annual general meeting held on July 18, 2006, the shareholders of the
Company voted in favor of increasing the authorized common shares to
300,000,000.

The following share capital transactions occurred during the periods:

--------------------------------------------------------------------------------
                                                                Additional Paid
Issued                                   Number     Par Value      in Capital
-------------------------------------------------- ---------- -----------------
Balance December 31, 2005                 474,028       $474         $ 834,561
-------------------------------------------------- ---------- -----------------
Private Placement, net of costs(a)     16,000,000     16,000           756,655
-------------------------------------------------- ---------- -----------------
Private Placement, net of costs(b)        933,324        933         1,259,067
-------------------------------------------------- ---------- -----------------
Issued for service(c)                   1,000,000      1,000            40,189
-------------------------------------------------- ---------- -----------------
2:1 Stock split(d)                     18,407,352     18,407           (18,407)
-------------------------------------------------- ---------- -----------------
Issued for service, net of costs(e)     7,500,000      7,500           314,474
-------------------------------------------------- ---------- -----------------
2:1 Stock split(f)                     44,314,714     44,315           (44,315)
-------------------------------------------------- ---------- -----------------
Private Placement, net of costs(g)      1,130,000      1,130         1,766,130
-------------------------------------------------- ---------- -----------------
Private Placement, net of costs(h)        187,050        187           235,254
-------------------------------------------------- ---------- -----------------
Balance December 31, 2006              89,946,468     89,946         5,143,608
-------------------------------------------------- ---------- -----------------
Private Placement, net of costs (h)        30,000         30            38,298
-------------------------------------------------- ---------- -----------------
Private Placement, net of costs (i)       440,000        440           499,560
-------------------------------------------------- ---------- -----------------
Balance March 31, 2007                 90,416,468    $90,416        $5,681,466
-------------------------------------------------------------------------------

Shares Issuable                             2007                  2006
                                    --------------------- ---------------------
                                      Number      Value     Number      Value
                                    ---------  ---------- -----------  --------
Opening Balance                       470,000  $  538,328  16,000,000  $773,637
Issued during the period             (470,000)   (538,328)(16,000,000) (773,637)
Private Placement, net of costs (h)         -           -      30,000    38,328
Private Placement, net of costs (i)         -           -     440,000   500,000
Private Placement, net of costs (j)   420,000     475,000           -         -
Private Placement, net of costs (k) 1,040,000   1,185,000           -         -
                                    ---------  ---------- -----------  --------
Closing Balance                     1,460,000  $1,660,000     470,000  $538,328
                                    ---------  ---------- -----------  --------

         (a)  On January 13, 2006, 16,000,000 shares of common stock were issued
              pursuant to two private placements that closed December 22, 2005
              (13,650,000 shares for gross proceeds of $300,000) and December
              30, 2005 (910,000 shares, for gross proceeds of $500,000)
              respectively, recorded as "Shares Issuable" at December 31, 2005
              in the amount of $773,637 (net of share issue costs of $26,363) as
              the share certificates were not issued until January 13, 2006.

         (b)  The Company closed a private placement in January for 933,324
              common shares at a price of $1.50 per share for gross proceeds of
              $1,400,000. Share issue costs associated with this private
              placement totaled $140,000.

         (c)  The Company issued 1,000,000 shares in January, 2006 to settle
              debt of $41,189 (Note 7) pursuant to the stock for services
              compensation plan. A beneficial conversion feature of $808,811 was
              calculated on the debt for the year ended December 31, 2005
              representing the difference between the conversion price and the
              fair value of the common stock at the commitment date. This amount
              was recorded as interest expense and an increase in additional
              paid in capital for the year ended December 31, 2005.

                                      -14-
<PAGE>

         (d)  On February 20, 2006 the Company's stock split forward by paying a
              stock dividend to our existing shareholders. All shareholders of
              record on February 14, 2006 received 1 dividend share for every
              share they owned amounting to 18,407,362 shares of common stock
              issued.

         (e)  During 2006, the Company issued 7,500,000 common shares, pursuant
              to an S8 registration, for services provided to the Company that
              have been recorded under the provisions of SFAS No. 123R relating
              to transactions with non-employees where the fair value of the
              investor relations services rendered has been recorded as General
              & Administrative Expense and an increase in Additional Paid In
              Capital (less share issue costs of $15,526. The recorded value of
              the transaction was $337,500 and was based on the value of the
              invoices rendered for the services provided and an allowance for
              the lack of liquidity in the market for the Company's common
              shares. These transactions were in the normal course of business
              and agreed to by the non-employees and the Company based on
              negotiation and accordingly had been measured at the exchange
              amounts.

         (f)  On May 1, 2006 the Company's stock split forward by paying a stock
              dividend to our existing shareholders. All shareholders of record
              on April 28, 2006 received 1 dividend share for every share they
              owned amounting to 44,314,714 shares of common stock issued.

         (g)  In June 2006 the Company closed a private placement for 1,130,000
              units at a price of $1.70 per unit for gross proceeds of
              $1,921,000. Each unit entitled the subscriber to one common share
              of the Company and one warrant. Share issue costs associated with
              this private placement totaled $153,740.

         (h)  In December 2006, the Company closed private placements for 54,365
              units (217,450 common shares) at a price per unit of $6.40 Cdn.
              ($1.60 Cdn. per share) for aggregate proceeds of $348,000. Each
              unit entitles the subscriber to three flow-through common shares
              and one common share. The flow-through shares entitle the holder
              to a Canadian Exploration Expense deduction under the Canada
              Income Tax Act. Of these shares, 30,000 were classified, net of
              share issue costs of $38,328, as Shares To Be Issued as at
              December 31, 2006 as the share certificates were not issued until
              February, 2007.

         (i)  On December 22, 2006, the Company received proceeds for a private
              placement of 440,000 units at a price of $1.25 per unit that
              closed on February 20, 2007 for gross proceeds of $550,000. Each
              unit entitled the subscriber to one common share of the Company
              and one warrant. These common shares were classified, net of share
              issue costs of $50,000, as Shares To Be Issued as at December 31,
              2006 as the share certificates were not issued until February,
              2007. Each warrant entitles the warrant holder to exchange one
              warrant for one common share at a price at a price of $1.50 until
              December 22, 2008.

         (j)  On February 20, 2007, the Company closed a private placement for
              420,000 units at a price of $1.25 per unit for gross proceeds of
              $525,000. Each unit entitled the subscriber to one common share of
              the Company and one warrant. These common shares were classified,
              net of share issue costs of $50,000, as Shares To Be Issued as at
              March 31, 2007 as the share certificates were not issued until
              April, 2007. Each warrant entitles the warrant holder to exchange
              one warrant for one common share at a price at a price of $1.50
              until February 20, 2009.

         (k)  During March, 2007, the Company received proceeds from a private
              placement for 1,040,000 units at a price of $1.25 per unit that
              closed in April, 2007 for gross proceeds of $1,300,000. Each unit
              entitled the subscriber to one common share of the Company and one
              warrant. These common shares were classified, net of share issue
              costs of $115,000, as Shares To Be Issued as at March 31, 2007 as
              the share certificates were not issued until April, 2007. Each
              warrant entitles the warrant holder to exchange one warrant for
              one common share at a price at a price of $1.50 until April, 2009.


                                      -15-
<PAGE>

At March 31, 2007, the following common shares were reserved for issuance:

                                                       Weighted
                                      Equivalent       Average       Option
                         Exercise       Shares         Years to      Shares
                         Price ($)    Outstanding       Expiry       Vested
                         ---------    -----------      ---------     ------

   Stock Option Plan    $1.28-$1.50    1,505,000         4.62          Nil
   June 2006 Warrants   $2.50-$3.50    1,130,000         4.50            -
   February 2007
    Warrants               $1.50         860,000         1.96            -

Pursuant to private placements in 2006 and 2007, the Company had 1,890,000
warrants outstanding as of March 31, 2007 (December 31, 2006 - 1,130,000). Each
of the 1,130,000 June 2006 warrants entitle the warrant holder to exchange one
warrant for one common share at a price of $2.50 until June 30, 2008 and $3.50
from July 1, 2008 to June 30, 2011. Of the 2007 warrants, 860,000 warrants
entitle the warrant holder to exchange one warrant for one common share at a
price of $1.50 until February 20, 2009 and 1,040,000 warrants isssuable will
entitle the warrant holder to exchange one warrant for one common share at a
price of $1.50 until May 10, 2009.

The Company has a stock option plan under which it may grant options to its
directors, officers, employees and consultants for up to a maximum of 10% of its
issued and outstanding common shares at market price at the date of grant for up
to a maximum term of five years. Options are exercisable one-third equally on
the first three anniversary dates of the option term and thereafter until
expiry. As at March 31, 2007, no options had been exercised and none of the
outstanding options were exercisable. On October 23, 2006, the Company granted
options for 1,000,000 common shares to five directors of the Company. Also on
October 23, 2006 the Company granted options for 280,000 common shares to an
officer of the Company, which options were cancelled in December 2006. On
December 1, 2006, the Company granted options for 125,000 common shares to a
consultant of the Company. During the first quarter of 2007, the Company granted
options for 380,000 common shares to an officer and a consultant of the Company.

A summary of the status of the stock option plan is as follows:

                                                                   Weighted
                                                        Number     Average
                                             Expiry    of Option   Exercise
                                              Date      Shares      Price
                                             ------    ---------   --------

   Balance December 31, 2005                                   -         -

   Options Granted October 23, 2006         Oct 23/11  1,280,000    $ 1.50
   Options Cancelled                                    (280,000)     1.50
   Options Granted December 1, 2006         Dec 1/11     125,000      1.28
                                                       --------------------
   Balance December 31, 2006                           1,125,000      1.48

   Options Granted January 3, 2007          Jan 3/12     280,000      1.29
   Options Granted February 1, 2007         Feb 1/12     100,000      1.35
                                                       --------------------

   Balance March 31, 2007                              1,505,000    $ 1.43
                                                       ====================

11.  SHARE-BASED COMPENSATION

Stock Options

In accordance with Financial Accounting Standards Board Statement ("FASB") No.
123R, the Company uses the Black-Scholes option pricing method to determine the
fair value of each option granted and the amount is recognized as additional
expense in the statement of earnings over the vesting period of the option. The
fair value of each option granted has been estimated using the following average
assumptions:

                                                           2007         2006
                                                         --------     --------

Risk free interest rate                                    3.99%        3.98%
Expected holding period                                   3 years      3 years
Share price volatility                                      75%          75%
Estimated annual common share dividend                       -            -



                                      -16-
<PAGE>

For options granted during the three months ended March 31, 2007, the fair value
totaled $410,445 (December 31, 2006 - $ 1,082,000). The amount of share-based
compensation expense recorded during the three months ended March 31, 2007 is
estimated to be $ 123,814 (December 31, 2006 - $69,169) and which amounts have
been credited to Contributed Surplus. The balance of the fair value of the
options to be expensed in future periods is $1,299,462 (December 31, 2006
-$1,012,831) over a vesting period of three years.


12.  INCOME TAXES

The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for
Income Taxes, which requires the establishment of deferred tax assets and
liabilities for the recognition of future deductions or taxable amounts and
operating loss and tax credit carry forwards. Deferred federal income tax
expense or benefit is recognized as a result of the change in the deferred tax
asset or liability during the year using the currently enacted tax laws and
rates that apply to the period in which they are expected to affect taxable
income. Valuation allowances are established, if necessary, to reduce deferred
tax assets to the amounts that will more likely than not be realized.

The Company's provision for income taxes reflects the U.S. federal income taxes
calculated at the federal statutory rate of 35%, U.S. state taxes calculated at
the statutory rate of 7% net of any federal income tax benefit and the Canadian
taxes calculated at their federal and provincial combined rates of 41% net of
any U.S. federal income tax benefits. These rates closely approximate the
Company's respective effective tax rates.

At March 31, 2007, the Company's deferred tax asset is attributable to its net
operating loss carry forward of approximately $710,000 (December 31, 2006 -
$647,000), which will expire if not utilized in the years 2024, 2025 and 2026.
Of this amount, approximately $400,000 (December 31, 2006 - $397,000 is
attributable to the Company's Canadian operations. As reflected below, this
benefit has been fully offset by a valuation allowance based on management's
determination that it is not more likely than not that some or all of this
benefit will be realized.

For the periods ended March 31, 2007, December 31, 2006 and for the cumulative
period April 7, 2004 (Date of Inception) to March 31, 2007, a reconciliation of
income tax benefit at the U.S. federal statutory rate to income tax benefit at
the Company's effective tax rates is as follows.

                                            2007         2006      Cumulative
                                        ----------  -----------   -----------
Income tax benefit at statutory rate    $  123,000  $ 1,080,000   $ 1,622,000
Permanent Differences                            -     (132,000)     (412,000)
State tax benefit, net of
 federal taxes                                   -        1,000        12,000
Foreign taxes, net of federal benefit       (7,000)      12,000         8,000
Change in valuation allowance             (116,000)    (961,000)   (1,230,000)
                                        ----------  -----------   -----------

Income tax benefit at effective rate    $        -  $         -    $        -
                                        ==========  ===========   ===========

Deferred tax assets (liabilities) at March 31, 2007 and December 31, 2006 are
comprised of the following:

                                                          2007          2006
                                                      ------------  -----------
Deferred tax assets
    Deferred costs                                    $    447,000  $   443,000
    Deferred deduction on share-based
          compensation expense                              73,000       24,000
    Net operating loss carryover                           710,000      647,000
                                                      ------------  -----------

        Total deferred tax asset                         1,230,000    1,114,000

Deferred tax liabilities                                         -            -
                                                      ------------  -----------

                                                         1,230,000    1,114,000
Less valuation allowance for net deferred tax asset     (1,230,000)  (1,114,000)
                                                      ------------  -----------

Net deferred tax asset                                $          -  $         -
                                                      ============  ===========

                                      -17-
<PAGE>

13.  LOSS PER SHARE

A reconciliation of the numerator and denominator of basic and diluted loss per
share is provided as follows:
                                                                       2006
                                                                   (As Restated
                                                       2007          - Note 2)
                                                   ------------    -------------
Numerator:
Numerator for basic and diluted loss per share
   Net Loss                                        $   (314,042)       (198,681)
--------------------------------------------------------------------------------

Denominator:
Denominator for basic loss per share
   Weighted average shares outstanding               90,765,579      23,763,875

Denominator for diluted loss per share
   Weighted average shares outstanding               92,047,115      23,763,875

Basic and diluted loss per share                   $      (0.00)   $      (0.01)
================================================================================

14.  FINANCIAL INSTRUMENTS

The Company, as part of its operations, carries a number of financial
instruments. It is management's opinion that the Company is not exposed to
significant interest, credit or currency risks arising from these financial
instruments except as otherwise disclosed.

The Company's financial instruments, including cash, accounts receivable,
accounts payable and accrued liabilities are carried at values that approximate
their fair values due to their relatively short maturity periods.

15.  RELATED PARTY TRANSACTIONS

Officers and Directors of the Company purchased 10,200,000 common shares of the
Company on December 22, 2005 at $0.02 per share for $204,000. These shares were
not issued by the transfer agent until January 13, 2006 and were reflected in
shareholders' equity as part of the caption "Shares to be Issued" at December
31, 2005.

A director of the Company purchased 50,000 common shares of the Company on
December 28, 2005 at $.50 per share for $25,000. These shares were not issued by
the Transfer Agent until January 13, 2006 and were reflected in shareholders'
equity as part of the caption "Shares To Be Issued" at December 31, 2005.

During the year ended December 31, 2006, the Company issued 2,000,000 common
shares of the Company in consideration for corporate development services
rendered to the Company by an individual, whom beneficially owns 9.3% of the
Company. The shares were valued at market price of $.05 per share and were
recorded as General and Administrative Expense and an addition to Additional
Paid in Capital.

For the three months ended March 31, 2007, the Company paid $22,297 (March 31,
2006 - $19,922) to Sicamous Oil & Gas Consultants Ltd., a company owned by the
President & Chief Operating Officer of the Company for consulting services
rendered by him.


                                      -18-
<PAGE>

For the three months ended March 31, 2007, the Company paid $12,819 (March 31,
2006 - $13,661) to MHC Corp., a company owned by the Chief Executive Officer of
the Company for consulting services rendered by him.

During the three months ended March 31, 2007, the Company paid $28,971 (March
31, 2006 - $ nil) to the Chief Financial Officer of the Company for financial
consulting services rendered by him.

These related party transactions were in the normal course of business and
agreed to by the related parties and the Company based on negotiations and Board
approval and accordingly had been measured at the exchange amounts.

As at March 31, 2007 and December 31, 2006, no amounts were owing to any related
parties for services rendered.

16.  SEGMENTED INFORMATION

The Company's geographical segmented information is as follows:

                                             Three Months Ended March 31, 2007
                                            -----------------------------------
                                               U. S.      Canada        Total
                                            ---------    ---------    ---------
Revenue                                     $       -          385          385
Net Loss                                        2,629      311,413      314,042
Capital Assets                                564,835    5,202,648    5,767,483
Total Assets                                  649,012    6,225,430    6,874,442
Capital Expenditures                                -    4,457,656    4,457,656

                                             Three Months Ended March 31, 2006
                                            -----------------------------------
                                               U. S.      Canada        Total
                                            ---------    ---------    ---------
Revenue                                     $       -            -            -
Net Loss                                         (179)     198,502      198,681
Capital Assets                                132,000      681,655      813,655
Total Assets                                  141,821    1,631,206    1,773,027
Capital Expenditures                                -      502,793      502,793

17.  SUBSEQUENT EVENTS

Thunder Acquisition
-------------------

Subsequent to March 31, 2007, the Company entered into an agreement with certain
shareholders of Thunder River Energy, Inc. ("Thunder") whereby the Company has
agreed to acquire no less than 51% and up to 56% of the outstanding common
shares of Thunder in consideration for options granted to the Thunder
shareholders to acquire 7,446,949 common shares of the Company at an issue price
of $2.00 per common share. It is estimated that a definitive agreement between
the Company, Thunder and the Thunder shareholders will be executed following the
completion of due diligence in May, 2007. The exchange of shares and resultant
acquisition by the Company of control of Thunder contemplated by the agreements
will be subject to certain conditions being met by the closing date of the
definitive agreement. Included in such conditions will be the completion of
audited financial statements of Thunder for the period from July 1, 2004 to
March 31, 2007 and the approval of the transaction by the shareholders of the
Company and Thunder and other regulatory bodies as required in Canada and the
United States. Thunder is an Alberta company with undeveloped oil and gas
properties in the Northwest Territories of Canada and New Mexico.

Financings
----------

Subsequent to March 31, 2007, the Company closed private placement financings
comprising 2,447,900 units at a price per unit of $1.25 for proceeds of
$3,059,875, less estimated share issue costs of $280,000 and net proceeds of
$2,779,875. Each unit consists of one common share of the Company and one
warrant. Each warrant entitles the warrant holder to exchange one warrant for
one common share at a price of $1.50 until May 10, 2009.


                                      -19-
<PAGE>

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

All statements contained herein that are not historical facts, including, but
not limited to, statements regarding the Company's current business strategy,
the Company's projected sources and uses of cash, and the Company's plans for
future development and operations, are based upon current expectations. These
statements are forward-looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plans on
terms satisfactory to the Company; competitive factors; changes in labor,
equipment and capital costs; changes in regulations affecting the Company's
business; future acquisitions or strategic partnerships; general business and
economic conditions; and factors described from time to time in the reports
filed by the Company with the Securities and Exchange Commission. The Company
cautions readers not to place undue reliance on any such forward-looking
statements, which statements are made pursuant to the Private Litigation Reform
Act of 1995 and, as a result, are pertinent only as of the date made.

PLAN OF OPERATION

The Company has carried out the following activities during the year to date
2007 period and during the next twelve months, the Company plans to aggressively
pursue the development of its asset base.

Canada

MANYBERRIES - SOUTHEAST ALBERTA

Great North Oil Corp. acquired 9 sections or 5,760 acres of contiguous,
undeveloped Petroleum and Natural Gas rights in the extreme southeast of
Alberta, which are prospective for oil and natural gas in multiple formations.
The land block is in close proximity to a mature field that has produced several
million barrels of oil as well as newly developing shallow gas plays. These gas
plays were passed over in the past due to low natural gas pricing; however, with
high density drilling programs, these plays have become very successful in
recent years. Success rate for shallow gas on wells drilled on adjacent blocks
has exceeded 98%. These lands have been developed with a high density drilling
(down spacing) program by Canadian Natural Gas Limited, Enerplus Resources Fund
and Encana Corporation. As many as 16 wells per section are permitted by the
Alberta Energy and Utilities Board, with low impact drilling programs (low
cost), multiple zone completions. Four wells per section are permitted without
downspacing applications. In addition there are secondary targets below the
Viking and Sawtooth formations.

The Company drilled two wells and recompleted one other well in March of 2006 on
the Manyberries property, which earned the Company a 66 2/3% interest in the
lands. The Company will earn the final 33 1/3% after drilling one additional
well. 60 km of seismic information was also purchased and processed. We are
currently licensing five wells. We expect to drill these wells in the first half
of 2007. Upon confirmation of sufficient reserves, pipelines will be constructed
to tie the wells into existing gas facilities.

PROVINCE/GRANLEA - SOUTHEAST ALBERTA

The Company, jointly with a partner, purchased 2 sections or 1280 acres gross
(640 net to the Company) of petroleum and natural gas rights at a provincial
land sale on September 22, 2005.

A 2D seismic program was completed on the property; a well was drilled and
completed to the Sawtooth formation; surface facilities were installed and a
pipeline tie-in was completed. Production commenced in September, 2006. In
October, substantial increase in water rates resulted in the well being shut in
until it is re-evaluated.

LUCY - NORTHERN BRITISH COLUMBIA

The Company has a 10% working interest in a well in Northern British Columbia,
located 40 miles northeast of Fort Nelson, targeting natural gas. The Lucy test
well is located approximately 8 miles south of the CDC Mel d-8-I 94-P-04 well
which has produced 63 BCF to date. Wells drilled in the giant Yoyo (9 miles

                                      -20-
<PAGE>

south) and Sierra (18 miles south) gas fields have produced an average 80-100
BCF per well from fully developed reefs of the Devonian Pine Point formation.

An independent resource assessment of the Lucy prospect has been completed by
Chapman Petroleum Engineering with (if successful) production rate and recovery
estimates of 2.5MMscf/d and 3.0 BCF (low case), 6 MMCF/d and 8.0 BCF (best
estimate) and 10 MMCF/d and 15.0 BCF (high case) per well. The prospect is
interpreted to be a lower reef build up than the large pools mentioned above
with anticipated recoveries more similar to the smaller pools in the mentioned
fields.

The Lucy/Highwood Lands (BC P&NG Lease #44104) consist of approximately three
square miles (799 hectares) located in the North Yoyo Otter Park shale basin.
Seismic covering the Lucy prospect indicates a possible Pine Point (Keg River)
lower level reef build up equivalent in age to the nearby Mel, Yoyo, and Sierra
reefs.

The Lucy prospect is in the vicinity of active gas operations. Service and
support facilities are readily available.

The first well was drilled in December 2006. After some difficult drilling
conditions, the lower zones have been abandoned. This property will be evaluated
for further operations.

LITTLE CHICAGO - NORTHWEST TERRITORIES

The Company is Operator of the this project under an original Farm-out agreement
with the two 50% working interest owners of the 200,000 acre Exploration License
413 ("EL 413") in the Mackenzie River Valley centered along the planned
Mackenzie Valley Pipeline. Under the Farm-out agreement, as at March 31, 2007,
the Company had spent approximately $5,500,000 to acquire 2D seismic data on the
farm-out Lands, thus earning a 12.5% working interest in the property. Kodiak
has also processed 50 km of existing seismic data in Q4 of 2006. Seismic and
Gravity Survey data is now being processed. Current plans include a three-well
drilling program during the 2007-2008 winter drilling season.

During the first quarter of 2007, Kodiak signed a letter of intent to acquire a
majority interest in Thunder River Energy, Inc., one of the two 50% Farmors in
the project. When the acquisition closes, Kodiak will have a 50% working
interest in "EL 413".

FORT MCMURRAY - NORTHERN ALBERTA

Kodiak, jointly with two partners, acquired two blocks of Petroleum & Natural
and Gas ("PN&G") licenses over 64 sections of land near Fort McMurray in North
Eastern Alberta.

The licenses are for all P&NG Rights from the base of the Woodbend formation to
15 m into the top of the Precambriam section subject to a 2.5% gross overriding
royalty reserved for the Seller in the subject lands. Kodiak's initial working
interest shall be 50%. One partner will also have a 50% working interest.

Western Crown Corporation will have a 10% carried working interest in the
subject lands and in the first two wells drilled. Western Crown shall have the
option to convert its carried working interest into a 1/6 interest received
proportionately from each of Kodiak and EnerPro Energy Corp. until and including
June 30, 2007 where Western Crown makes full and complete payment of its share
of all Joint Venture costs up to the time of election including interest at
Purchaser's average bank prime rate plus three (3.0 %) percent.

A Joint Operating Agreement shall be drafted and agreed between the parties
allowing Kodiak to be operator of one license and EnerPro operator of the other
license. Kodiak shall have first right of operatorship for whichever license it
chooses.

Kodiak and its partner are planning a seismic program for 2007. Along with the
current seismic program a review of seismic shot in 2003 will take place. The
2003 seismic program showed the potential for several gas wells. Following the
seismic program, the Company is will plan a drilling program later in 2007.



                                      -21-
<PAGE>

United States

NEW MEXICO

Kodiak Energy, Inc. has acquired 95% of 55,000 acres of property located in
Northeast New Mexico. The land is held by Thunder River Energy, Inc. Kodiak has
a letter of intent to acquire a majority interest in Thunder.

Natural gas and commercial volumes of CO2, has been found in existing wells in
the area. There is potential for oil and helium resources at shallow depth.
Kodiak plans to conduct an initial seismic program in 2007. Once completed, the
results will be analyzed.

The Company plans to re-enter the existing Roxana well at Sofia and drill test
wells on each of the Sofia and Spear Draw anticlines. We anticipate drilling in
mid 2007. The existing infrastructure offers the possibility of dynamic short
term growth and significant near term cash flow

MONTANA

Under a joint venture agreement, Kodiak committed to pay 100% of the capital
costs of the seismic and a 3 or 4 well drilling program to a maximum of US
$600,000. Kodiak will earn a 50% working interest in the wells and well spacing,
as well as the right to participate on a 50% basis going forward. Our partner
will remain as the operator of the project.

Our partner has 100,000 contiguous undeveloped acres of petroleum and natural
gas rights in the area, as well as some excess capacity in facilities and
pipelines.

Two wells were drilled in the third quarter of 2006; one is cased for subsequent
evaluation of the multiple zones found and one was abandoned. A third well is
licensed and will be drilled depending upon the results of testing on the first
well. Subsequent to the drilling, any successful wells will be tied into
existing facilities in 2007. We anticipate costs of approximately $400,000 for
this project for mid 2007.

Financial Condition and Changes in Financial Condition

The Company had no operating revenues for the quarters ended March 31, 2007 or
2006, except for $385 in 1st Quarter 2007 resulting from a 4th Quarter 2006
operating revenue under-accrual.

Net Loss for the quarter ended March 31, 2007 totaled $314,042 (2006 -
$201,910). The loss comprises expenses relating to personnel consulting, office,
general and administration, investor relations, public company expenses, audit
costs, legal and accounting fees.

Liquidity and Capital Resources:

Since inception to March 31, 2007, we have funded our operations from the sale
of securities and loans from shareholders.

As of March 31, 2007, our assets totaled $6,874,442, (December 31, 2006 -
$2,707,075) which consisted of cash and other current assets of $1,056,387 (2006
- $1,331,159); oil and gas properties and equipment of $5,767,483 (2006 -
$1,326,056) and other assets of $50,572 (2006 - $49,860). Our total liabilities
were $3,563,517 (December 31, 2006 - $859,103) which were primarily accounts
payable and accrued liabilities relating to capital activities during the
quarter ended March 31, 2007. We had shareholders' equity of $3,213,247
(December 31, 2006 - $1,757,061).

During the three months ended March 31, 2007, the company raised $1,660,000, net
of issue costs, in private placement financing proceeds. Subsequent to March 31,
2007, the Company raised an additional $1,594,875 in private placement
financings, net of issue costs. These financings aggregating $3,754,875, net of
share issue costs have enabled the Company to finance its on-going capital
expenditures and general and administrative expenses. Additional financing will
be required to enable the Company to carry out the balance of its planned
activities for 2007.

RAISING CAPITAL

The Company currently lacks the internal cash flow and capital resources to
fully implement and carry out its 2007 business plans as described herein. We

                                      -22-
<PAGE>

expect to raise additional capital, either through debt, equity or a combination
thereof. In the event that additional capital is raised at some time in the
future, existing shareholders will experience dilution of their interest in the
Company.

ITEM 3. CONTROLS AND PROCEDURES

During the process of preparing for the Company's third quarter 2006 financial
report the CFO identified errors in the accounting records that originated in
the fourth quarter of 2005, the first quarter ended March 31, 2006 and the
second quarter ended June 30, 2006. The errors arose as a result of a lack of
adequate procedures and documentation necessary to ensure that records were
maintained in reasonable detail to fairly reflect the transactions of the
Company in the start up phase of operations.

After discussing these matters with management the CFO, at that time,
recommended to the Audit Committee that previously reported financial results be
restated to reflect correction of these errors. The Audit Committee agreed with
this recommendation. Pursuant to the recommendation of the Audit Committee, the
Board of Directors determined at its meeting on November 3, 2006, that
previously reported results for the Company be restated. On December 14, 2006
financial statements for the above noted periods were refiled.

Evaluation of Disclosure Controls and Procedures

During the third quarter the CFO, at that time, evaluated the disclosure
controls and procedures and identified a lack of sufficient procedures,
documentation and qualified personnel to ensure the records fairly reflected the
transactions of the Company resulting in a material weakness in the Company's
internal control over financial reporting. Solely as a result of the material
weakness, management concluded that the disclosure controls and procedures were
not effective as of December 31, 2005, March 31, 2006 or June 30, 2006.

Remediation of Material Weakness in Internal Control

During December, 2006 and the first quarter of 2007, the company has hired
additional qualified personal in addition to hiring a new CFO to prepare the
financial statements. The new staff have implemented adequate procedures and
documentation necessary to ensure the records fairly reflect the transactions of
the Company.

Under the direction of the Chief Executive Officer and Chief Financial Officer,
we have evaluated our disclosure controls and procedures as currently in effect,
including the remedial actions discussed above, and we have concluded that, as
of this date, our disclosure controls and procedures are effective.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

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

On February 20, 2007, pursuant to subscription agreements, the Company closed a
private placement with an investor for 420,000 units at a $1.25 price per unit
for gross proceeds of $525,000. Each unit entitled the subscriber to one common
share of the Company and one common share purchase warrant. Each warrant
entitles the warrant holder to exchange one warrant for one common share of the
Company at a price of $1.50 until February 20, 2009. The Common shares were
issued pursuant to Regulation S ("Regulation S") under the Securities Act of
1933, as amended (the "1933 Act").

During March, 2007, the Company received proceeds from private placements for
1,040,000 units at a price of $1.25 per unit that closed in May, 2007 for gross
proceeds of $1,300,000. Each unit entitled the subscriber to one common share of
the Company and one warrant. These common shares were classified, net of share
issue costs of $115,000, as Shares To Be Issued as at March 31, 2007 as the
share certificates were not issued until May, 2007. Each warrant entitles the
warrant holder to exchange one warrant for one common share at a price at a
price of $1.50 until May, 2009.



                                      -23-
<PAGE>

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

Item 5. OTHER INFORMATION

None.





















                                      -24-
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS

   31.1 - Certification of Chief Executive Officer Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002

   31.2 - Certification of Chief Financial Officer to Section 302 of the
          Sarbanes-Oxley Act of 2002

   32   - Certification of Chief Executive Officer and Chief Financial Officer
          Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

REPORTS ON FORM 8-K

On January 11, 2007 we filed an 8K under item 5.02 Election of Directors and
Appointment of Principal Officers.

On February 15, 2007 we filed an 8K under item 1.01 Entry into a Material
Definitive Agreement; Item 3.02 Unregistered Sales of Equity Securities and Item
9.01 Financial Statements and Exhibits.

On February 26, 2007 we filed an 8K under item 1.01 Entry into a Material
Definitive Agreement; Item 3.02 Unregistered Sales of Equity Securities and Item
9.01 Financial Statements and Exhibits.


                                   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.


                                              KODIAK ENERGY, INC.
                                               (Registrant)


Dated: May 15, 2007                           By: /s/  Mark Hlady
                                                 -------------------
                                                 Mark Hlady
                                                 CEO, and Chairman














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