**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**





(Mark
                One)þ
            
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**For
                the fiscal year ended September 30, 2004****or**o
            
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934FOR
                THE TRANSITION PERIOD FROM ____________ TO ____________**Commission
                File Number 0-24012**





**DEEP
      WELL OIL & GAS, INC.**


(formerly
      ALLIED DEVICES CORPORATION)


(Name
      of
      small business issuer in its charter)





**Nevada**
            
            **13-3087510**(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)**510
                Royal Bank Building, 10117 Jasper Avenue, Edmonton, Alberta,
                Canada**
            
            **T5J
                1W8**(Address
                of principal executive offices)
            
            (Zip
                Code)





Issuer’s
      telephone number: **(780) 409-8144**





Securities
      registered under Section 12(b) of the Exchange Act:





Title
                of each class
            
            Name
                of each exchange on which registered**None**
            
            **None**





Securities
      registered under Section 12(g) of the Exchange Act:





**Common
                Stock, $0.001 par value per share**(Title
                of class)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15 (d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes o No þ





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. þ





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


Yes o No þ





The
      issuer had no revenues for its most recent fiscal year.





The
      aggregate market value of the registrant’s common stock held by non-affiliates
      computed by reference to the price at which the common equity was sold on
      December 29, 2006 was $10,522,788.














**(ISSUERS
      INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
      YEARS)**





Check
      whether the issuer has filed all documents and reports required to be filed
      by
      Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
      securities under a plan confirmed by a court. Yes o No þ





As
      of
      December 30, 2006, the Issuer had approximately 62,929,289 shares of common
      stock, $0.001 par value per share outstanding.




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










**TABLE
                OF CONTENTS****Page
                Number****GLOSSARY
                AND ABBREVIATIONS**
            
            5**CURRENCY
                EXCHANGE RATES**
            
            7**CAUTIONARY
                STATEMENT REGARDING FORWARD-LOOKING INFORMATION**
            
            7**PART
                I**ITEM
                1.
            DESCRIPTION
                OF BUSINESS
            
            7General
                Overview
            
            7Business
                Development
            
            7Business
                of Issuer
            
            8*Overview*
            
            8*Operations*
            
            9*Recent
                Developments*
            
            10*Sales
                and Marketing*
            
            10*Research
                and Development*
            
            11*Competition*
            
            11*Canadian
                Government and Environmental Regulations*
            
            11*Employees*
            
            12*Royalty
                Agreements*
            
            12*Risk
                Factors*
            
            13Reports
                to Security Holders
            
            16ITEM
                2.
            DESCRIPTION
                OF PROPERTY
            
            16Office
                Leases
            
            16Oil
                & Gas Properties
            
            16*Acreage*
            
            16*Reserves,
                Production and Delivery Commitments*
            
            17*Drilling
                Activity*
            
            17*Present
                Activities*
            
            18ITEM
                3.
            LEGAL
                PROCEEDINGS
            
            18ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            20**PART
                II**ITEM
                5.
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            
            21Market
                Price Information for Common Stock
            
            21Holders
                of Record
            
            22Dividends
            
            22Equity
                Compensation Plan Information
            
            22Stock
                Option Plan
            
            23Sales
                of Unregistered Securities
            
            23ITEM
                6.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            
            25**REPORT
                OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS**
            
            28




3




ITEM
                7.
            FINANCIAL
                STATEMENTS
            
            29Balance
                Sheet
            
            29Statement
                of Operations
            
            30Statement
                of Changes in Stockholders’ Equity
            
            31Statement
                of Cash Flows
            
            32Notes
                to Financial Statements
            
            33ITEM
                8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            
            42ITEM
                8A.
            CONTROLS
                AND PROCEDURES
            
            42ITEM
                8B.
            OTHER
                INFORMATION
            
            43**PART
                III**ITEM
                9.
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(a) OF THE EXCHANGE ACT
            
            43ITEM
                10.
            EXECUTIVE
                COMPENSATION
            
            47ITEM
                11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            
            49ITEM
                12.
            CERTAIN
                RELATIONSHIP AND RELATED TRANSACTIONS
            
            50ITEM
                13.
            EXHIBITS
            
            51ITEM
                14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            
            53**SIGNATURES**
            
            54


4


**GLOSSARY
      AND ABBREVIATIONS**





The
      following are defined terms and abbreviations used herein:





**API** –
      a scale developed
      by the American Petroleum Institute for measuring the density or gravity
      (heaviness) of oil; the higher the number, the lighter the oil.





**Barrel** –
the
      common unit for measuring petroleum, including heavy oil. One barrel contains
      approximately 159 L





**Battery** –
      equipment to process or store crude oil from one or more wells.





**Bbl
      or Bbls** –
means
      barrel or barrels.





**Bitumen** –
is
      a
      heavy, viscous form of crude oil, bitumen general has an API gravity of less
      than 10 degrees.





**Cdn** –
means
      Canadian dollars.





**Celsius** –
a
      temperature scale that registers the freezing point of water as 0 degrees and
      the boiling point as 100 degrees under normal atmospheric pressure. Room
      temperature is between 20 degrees and 25 degrees Celsius.





**Cold
      Flow** –
is
      a
      production technique where the oil is simply pumped out of the sands using
      specialized pumps called progressive cavity pumps.





**Conventional
      Crude Oil** –
Crude
      oil that flows naturally or that can be pumped without being heated or
      diluted.





**Core** –
a
      cylindrical rock sample taken from a formation for geological
      analysis.





**Crude
      Oil** –
oil
      that has not undergone any refining. Crude oil is a mixture of hydrocarbons
      with
      small quantities of other chemicals such as sulphur, nitrogen and oxygen. Crude
      oil varies radically in its properties, namely specific gravity and
      viscosity.





**Cyclic
      Steam Stimulation** –
is
      a
      thermal in situ recovery method, which consists of a three-stage process
      involving high-pressure steam injected into the formation for several weeks.
      The
      heat softens the oil while the water vapor helps to dilute and separate the
      oil
      from the sand grains. The pressure also creates channels and cracks through
      which the oil can flow to the well. When a portion of the reservoir is
      thoroughly saturated, the steam is turned off and the reservoir “soaks” for
      several weeks. This is followed by the production phase, when the oil flows,
      or
      is pumped, up the same wells to the surface. When production rates decline,
      another cycle of steam injection begins. This process is sometimes called
“huff-and-puff” recovery.





**Darcy
      (Darcies)** –
a
      measure of rock permeability (i.e., the degree to which natural gas and crude
      oil can move through the rocks).





**Density** –
the
      heaviness of crude oil, indicating the proportion of large, carbon-rich
      molecules, generally measured in kilograms per cubic metre (kg/m3) or degrees
      on
      the American Petroleum Institute (API) gravity scale.





**Development
      Well** –
is
      a
      well drilled within the proved area of a natural gas or oil reservoir to the
      depth of a stratigraphic horizon known to be productive.





**Diluents** –
light
      petroleum liquids used to dilute bitumen and heavy oil so they can flow through
      pipelines.





**Drill
      Stem Test (DST)** –
a
      method of formation testing. The basic drill stem test tool consists of a packer
      or packers, valves or ports that may be opened and closed from the surface,
      and
      two or more pressure-recording devices. The tool is lowered on the drill string
      to the zone to be tested. The packer or packers are set to isolate the zone
      from
      the drilling fluid column.





**Enhanced
      Oil Recovery** –
any
      method that increases oil production by using techniques or materials that
      are
      not part of normal pressure maintenance or water flooding operations. For
      example, natural gas can be injected into a reservoir to “enhance” or increase
      oil production.





**Exploratory
      Well** –
is
      a
      well drilled to find and produce natural gas or oil in an unproved area, to
      find
      a new reservoir in a field previously found to be productive of natural gas
      or
      oil in another reservoir, or to extend a known reservoir.





**Farmout** –
an
      arrangement whereby the owner of a lease assigns some portion (or all) of the
      lease to another company for drilling.





**Heavy
      Oil** –
oil
      having an API gravity less than 22.3 degrees.


5





**Horizontal
      Well** –
the
      drilling of a well that deviates from the vertical and travels horizontally
      through a producing layer.





**In
      situ** – *In
      situ* methods
      such as steam injection through horizontal or vertical wells are required if
      the
      oil sands deposits are too deep to mine from the surface. *In
      situ* means
“in place” in Latin.





**Lease** –
a
      legal
      document giving an operator the right to drill for or produce oil or gas; also,
      the land on which a lease has been obtained.





**Light
      Crude Oil** –
liquid
      petroleum which has a low density and flows freely at room temperature. Also
      called conventional oil, has an API gravity of at least 22 degrees and a
      viscosity less than 100 centipoise (cP).





**Oil
      Sands** –
are
      naturally occurring mixtures of bitumen, water, sand and clay that are found
      mainly in three areas of Alberta - Athabasca, Peace River and Cold Lake. A
      typical sample of oil sand might contain about 12 percent bitumen by
      weight.





**Pay
      Zone (Net Oil Pay)** –
the
      producing part of a formation.





**Permeability** –
the
      capacity of a reservoir rock to transmit fluids; how easily fluids can pass
      through a rock. The unit of measurement is the darcy or millidarcy.





**Porosity** –
the
      capacity of a reservoir to store fluids, the volume of the pore space within
      a
      reservoir, measured as a percentage.





**Primary
      Recovery** –
the
      production of oil and gas from reservoirs using the natural energy available
      in
      the reservoirs and pumping techniques.





**Saturation** –
the
      relative amount of water, oil and gas in the pores of a rock, usually as a
      percentage of volume.





**SEC** –
means
      United States Securities and Exchange Commission.





**Section** –
in
      reference to a parcel of land, means an area of land comprising approximately
      640 acres.





**Solution
      Gas** –
natural
      gas that is found with crude oil in underground reservoirs. When the oil comes
      to the surface, the gas expands and comes out of the solution.





**Steam-Assisted
      Gravity Drainage (SAGD)** –
pairs
      of horizontal wells (an upper well and a lower well) are drilled into an oil
      sands formation and steam is injected continuously into the upper well. As
      the
      steam heats the oil sands formation, the bitumen softens and drains into the
      lower well, from which it is produced to the surface.





**Upgrading** –
the
      process that converts bitumen and heavy oil into a product with a density and
      viscosity similar to conventional light crude oil.





**Viscosity** –
is
      a
      measure of a fluids resistance to flow. To simplify, the oil’s viscosity
      represents the measure for which the oil wants to stay put when pushed (sheared)
      by moving mechanical components. It varies greatly with temperature. The more
      viscous the oil the greater the resistance and the less easy it is for it to
      flow. Centipoise (cp) is the common unit for expressing absolute viscosity.
      Viscosity matters to producers because the oil’s viscosity at reservoir
      temperature determines how easily oil flows to the well for
      extraction.


6


**CURRENCY
      EXCHANGE RATES**





Our
      accounts are maintained in United States dollars. All dollar amounts herein
      are
      stated in United States dollars except where otherwise indicated.





The
      following table sets forth the rates of exchange for Canadian dollars per
      US$1.00 in effect at the end of the following periods and the average rates
      of
      exchange during such periods, based on the Bank of Canada average noon spot
      rate
      of exchange.





**Year**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003***Rate
                at end of year
            
            $
            1.1153
            
            $
            1.1611
            
            $
            1.2699
            
            $
            1.3536Average
                rate for the year
            
            $
            1.1425
            
            $
            1.2231
            
            $
            1.3256
            
            $
            1.3589




*
                For the period September 10 to September 30, 2003





Unless
      the context indicates another meaning, the terms the “Company”, “we”, “us” and
“our” refer to Deep Well Oil & Gas, Inc. and its subsidiaries. For
      definitions of some terms used throughout this report, see “Glossary and
      Abbreviations”.





**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING INFORMATION**





This
      Annual Report Form 10-KSB, including all referenced exhibits, may contain
      forward-looking statements within the meaning of Section 27A of the Securities
      Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
      1934,
      as amended. All statements other than statements of historical facts included
      or
      incorporated by reference in this report, including, without limitation,
      statements regarding the Company’s future financial position, business strategy,
      budgets, projected revenues, projected costs and plans and objectives of
      management for future operations, are forward-looking statements. In addition,
      forward-looking statements generally can be identified by the use of
      forward-looking terminology such as “may,” “will,” “expect,” “intend,”
“project,” “estimate,” “anticipate,” “believe,” “plan”, “future”, “strategy”, or
“continue”, or the negative thereof or variations thereon or similar
      terminology. Although the Company believes that the expectations reflected
      in
      such forward-looking statements are reasonable, it can give no assurance that
      such expectations will prove to have been correct. Various factors could cause
      actual results to differ materially from those expressed in the forward-looking
      statements, including those described in, but not limited to “Risk Factors” in
      this Form 10-KSB. The Company cautions readers not to place reliance on such
      statements. Unless otherwise required by applicable law, the company assumes
      no
      obligations to update these forward-looking statements to reflect actual
      results, changes in assumptions, or changes in other factors.





**PART
      I**





**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS**





**General
      Overview**





We
      are an
      emerging independent junior oil and gas exploration and development company
      headquartered in Edmonton, Alberta, Canada. The Company’s immediate corporate
      focus is to develop the existing land base that it presently controls in the
      Peace River Oil Sands area in North Central Alberta. Our principal office is
      located at 510 Royal Bank Building, 10117 Jasper Avenue, Edmonton, Alberta
      T5J
      1W8, our telephone number is (780) 409-8144 and our fax number is (780)
      409-8146. Our operations office is located at 460, 734 - 7 th Avenue
      SW, Calgary Alberta T2P 3P8, the telephone number is (403) 262-4705 and the
      fax
      number is (403) 262-5118. Deep Well Oil & Gas, Inc. is a Nevada corporation
      and trades on the pink sheets under the symbol DWOG. We maintain a website
      at
      www.deepwelloil.com.





**Business
      Development**





Deep
      Well
      Oil & Gas, Inc. (herein after referred to as “Deep Well”) was originally
      incorporated on July 18, 1988 under the laws of the state of Nevada as Worldwide
      Stock Transfer, Inc. On October 25, 1990, Worldwide Stock Transfer, Inc. changed
      its name to Illustrious Mergers, Inc. On June 18, 1991, a company known as
      Allied Devices Corporation was merged with and into Illustrious Mergers, Inc.,
      and its name was at that time changed to Allied Devices Corporation. On August
      19, 1996 a company called Absolute Precision, Inc., was merged with and into
      Allied Devices Corporation and it retained its name as Allied Devices
      Corporation.


7





On
      February 19, 2003 Deep Well’s Predecessor Company, Allied Devices Corporation,
      filed a Petition for Relief under Chapter 11 of the U.S. Bankruptcy Code in
      the
      United States Bankruptcy Court in and for the Eastern District of New York
      titled *In
      re: Allied Devices Corporation, et al* .,
      Chapter 11, Case No. 03-80962-511 (“the Bankruptcy Action”).





On
      September 10, 2003 after notice to all creditors and a formal hearing, U.S.
      Bankruptcy Judge Melanie L. Cyganowski issued an “Order Confirming Liquidating
      Plan of Reorganization” in the Bankruptcy Action (herein after referred to as
“Bankruptcy Order”). In conjunction with that Bankruptcy Order, Allied Devices
      Corporation’s liabilities, among other things, were paid off and extinguished.
      The Bankruptcy Order, among other things, implemented a change of control and
      a
      group of new investors took control of the Predecessor Company and changed
      its
      name to Deep Well Oil and Gas, Inc.





Upon
      emergence from Chapter 11 proceedings, Deep Well adopted fresh-start reporting
      in accordance with the American Institute of Certified Public Accountants
      Statement of Position 90-7, Financial Reporting By Entities in Reorganization
      Under the Bankruptcy Code (SOP 90-7). For financial reporting purposes, Deep
      Well adopted the provisions of fresh-start reporting effective September 10,
      2003. All periods presented prior to September 10, 2003, have been designated
      Predecessor Company.




On
      August
      18, 2004 Deep Well and Pan Orient Energy Corp. (formerly known as Maxen
      Petroleum Inc. herein after referred to as “Pan Orient”) jointly participated in
      a public offering of Crown Oil Sands Rights held by the Alberta Department
      of
      Energy, in which the joint parties successfully bid on 3 Peace River Oil Sands
      Development leases for a total of 31 sections covering 19,609 gross acres (7,936
      gross hectares). Deep Well acquired an undivided 80% working interest and Pan
      Orient acquired an undivided 20% working interest in the joint property.





On
      June
      7, 2005 Deep Well acquired 100% of the common shares of Northern Alberta Oil
      Ltd. (formerly known as Mikwec Energy Canada, Ltd., herein after referred to
      as
“Northern”) in exchange for 18,208,875 shares of Deep Well’s common stock. Under
      the terms of the agreement, Deep Well acquired one hundred percent (100%) of
      Northern’s issued and outstanding common stock and obtained exclusive options to
      acquire one hundred percent (100%) of Northern’s preferred stock. The agreement
      provided that one hundred percent (100%) of Northern’s common and preferred
      shareholders would exchange their Northern shares for newly issued shares of
      Deep Well’s restricted common stock. Deep Well, through its acquisition of
      Northern, acquired a net 80% working interest in 3 Peace River Oil Sands
      Development leases, 1 Oil Sands permit and 1 Petroleum and Natural Gas License
      for a total of 38.5 sections covering 24,354 gross acres (9,856 gross hectares).
      Through this acquisition the Company more than doubled its acreage position
      in
      the Peace River Oil Sands to 43,964 gross acres (17,792 gross hectares). Of
      the
      total acreage, 6.5 sections are classified as the Oil Sands Permit and Petroleum
      and Natural Gas License and were held by an injunction related to a court
      proceeding between Northern and Classic Energy Inc. The permit and license
      have
      now been released and as of November 21, 2005 were transferred to
      Northern.





On
      June
      29, 2005 pursuant to the authority contained in the Nevada Revised Statutes
      and
      Section 3.11 of the Bylaws of the Company, a new Board of Directors was elected
      by written consent of a majority of shareholders. The newly elected Board of
      Directors are Dr. Horst A. Schmid, Mr. Cyrus Spaulding, and Mr. Donald E. H.
      Jones.





On
      July
      1, 2005 the directors of Deep Well added Mr. Curtis Sparrow back to the Board
      of
      Directors.





On
      September 15, 2005 Deep Well Oil & Gas (Alberta) Ltd. (herein after referred
      to as “Deep Well Alberta”) a 100% wholly owned subsidiary company of Deep Well,
      was incorporated in the province of Alberta, Canada. Deep Well Alberta was
      incorporated in order to hold Deep Well’s Canadian oil sands leases other than
      the oil sands leases already held by Northern. At the time Deep Well owned
      100%
      of the 6,069,625 issued common shares of Northern but not the preferred shares
      of Northern. However, on June 7, 2005, the day Deep Well acquired the common
      shares of Northern, Deep Well entered into option agreements with the preferred
      shareholders of Northern to acquire 100% of the 432,500 Northern preferred
      shares in exchange for Deep Well shares.





On
      April
      2, 2006 the directors of Deep Well added Mr. David Roff to the Board of
      Directors. Mr. Roff accepted the position on April 3, 2006. Mr. Roff was
      formerly the President and sole Director of Deep Well from September 10, 2003
      until his resignation on February 6, 2004.





**Business
      of Issuer**





***Overview***





The
      Company’s primary interest is on exploration for and production of oil in the
      Peace River Oil Sands area located in North Central Alberta, Canada. The Company
      is engaged in the identification, acquisition, exploration and development
      of
      oil & gas prospects. Our immediate focus is the leases and permits the
      Company holds in the Peace River Oil Sands area. The Company’s main objective is
      to develop its existing land holdings as well as identify and develop other
      commercially viable oil & gas properties. Exploration and development for
      commercially viable production of any oil and gas company includes a high degree
      of risk which careful evaluation, experience and factual knowledge may not
      eliminate.


8





***Operations***





**Sawn
      Lake Heavy Oil Sands Project** ****





The
      Company beneficially owns an 80% working interest (subject to a Farmout
      Agreement) in 69.5 contiguous sections (43,964 gross acres or 17,792 gross
      hectares) in the Sawn Lake block of the Peace River Oil Sands area located
      in
      Alberta, Canada. Because of the earlier extensive exploration for light oil,
      other operators targeting the deeper Slave Point Formation have previously
      drilled in much of the same area as the Company’s lands. The Company is able to
      benefit from data collected by others pertaining to the drilling of more than
      seventy-five wells that penetrated and partially delineated the heart of the
      Bluesky Formation heavy oil reservoir.





On
      December 9, 2004 Deep Well signed a Joint Operating Agreement with 1132559
      Alberta Ltd. (herein after referred to as “1132559”) under which 1132559
      acquired a 10% working interest from Pan Orient in the joint lands covering
      3
      Peace River Oil Sands Development leases, totaling 31 sections.





On
      February 25, 2005 Deep Well and Northern signed a Farmout Agreement with Surge
      Global Energy, Inc. (herein after referred to as “Surge US”) and Signet Energy
      Inc. (formerly known as Surge Global Energy Canada Ltd., herein after referred
      to as “Signet”) (collectively, “Surge”). This agreement allows Surge to earn up
      to a 40% working interest in the farmout lands (50% of the Company’s share).
      Among other things the agreement called for Surge to drill 10 wells, pay
      $2,000,000 (less expenses related to financing) as a prospect fee, payable
      as
      ninety percent (90%) to Northern and ten percent (10%) to Deep Well, and grant
      us 33.33% of the shares of Surge US outstanding on the day the agreement was
      signed.





On
      February 28, 2005 Deep Well, Northern and Surge, mutually agreed that Deep
      Well
      would be responsible for the portion of the 6.5% royalty payable by Surge could
      be liable for on lands earned under the February 25, 2005 Farmout Agreement.
      This liability could arise by virtue of a royalty agreement between Northern
      and
      Nearshore Petroleum Corporation (“Nearshore”) dated December 13, 2003. Nearshore
      is a private corporation incorporated in Alberta, Canada, and is owned and
      controlled by Mr. Steven P. Gawne and his wife, Mrs. Rebekah J. Gawne, who
      each
      own 50%. Mr. Steven P. Gawne was formerly the President, Chief Executive Officer
      and Director of Deep Well Oil & Gas, Inc. from February 6, 2004 to June 29,
      2005.





On
      February 28, 2005 Nearshore, Northern and Surge, mutually agreed that an area
      of
      exclusion between Nearshore and Northern was terminated effective February
      17,
      2005 since the area of exclusion could interfere with the area of mutual
      interest provisions in the Farmout Agreement with Surge.





On
      March
      3, 2005 Deep Well, Northern and Surge, mutually agreed by letter amending
      agreement to extend the payment of the prospect fee under Article 13 of the
      Farmout Agreement dated February 25, 2005, whereby Surge was granted an
      extension for payment of the prospect fee to the closing date of March 18,
      2005.





On
      March
      10, 2005 Deep Well, Northern and Surge, mutually agreed by letter amending
      agreement that Surge US is only a party to the Farmout Agreement for the
      purposes of Article 14 of the Farmout Agreement dated February 25,
      2005.





On
      March
      10, 2005 Deep Well, Northern and Surge, mutually agreed by letter amending
      agreement to establish a procedure whereby Signet is to be appointed as the
      Operator under the Existing Joint Operating Agreements in respect of all Farmout
      Lands in which Signet earns an interest pursuant to Article 7 of the Farmout
      Agreement dated February 25, 2005.





On
      July
      14, 2005 the Company and Surge mutually agreed to amend the Farmout Agreement
      dated February 25, 2005, to extend the date to spud the first well until
      September 25, 2005.





On
      September 21, 2005 our farmout partner and operator was issued a permit by
      the
      Alberta Energy Utilities Board (herein after referred to as “EUB”) for a test
      well and on September 28, 2005, Signet, began drilling the Company’s first well
      at Sawn Lake, Alberta Canada. Signet did not spud the first well by the
      25 th of
      September 2005 and we noted them in default of the agreement.





On
      October 2005 the EUB granted our farmout partner and operator, Signet, an
      amendment to the original test well permit at Sawn Lake, Alberta Canada, to
      proceed with the drilling of the Company’s first well at Sawn Lake.





On
      November 15, 2005 as part of the settlement of the litigation as described
      in
      this report, the Company agreed to amend the Farmout Agreement signed on
      February 25, 2005, between the Company and Surge that had previously been
      terminated by Deep Well (as previously disclosed on Form 8-K on September 29,
      2005). The amendments to the agreement provided that; 1) all conditions of
      the
      Farmout Agreement will be deemed to have been satisfied on September 25, 2005;
      2) the earning period (the period during which Signet has to drill 10 wells)
      under the agreement will be extended until February 25, 2008; 3) Signet will
      have until September 25, 2006 to drill an option well (the second well); 4)
      an
      additional 6.5 sections of land will be added to the land subject to the
      agreement; 5) Signet will pay Deep Well $1,000,000 on November 15, 2005 in
      satisfaction of the prospect fee outstanding instead of after drilling the
      second well as stated in the Farmout Agreement, and 6) no shares of Surge US
      will be issued to Deep Well or Northern,instead the Company will receive
      7,550,000 common shares of Signet, a private subsidiary company of Surge US,
      bringing the Company’s current ownership in its farmout partner to approximately
      14%, fully diluted, as of September 30, 2006. Surge US will have a voting proxy
      on the 7,550,000 shares of Signet until February 25, 2007.


9





On
      July
      17, 2006 the Company, through its farmout partner and operator, Signet, had
      been
      issued the required licenses by the Government of Alberta to drill the next
      3
      horizontal wells in the Bluesky Formation of the Sawn Lake Heavy Oil Sands
      project. The next 3 wells to be drilled are within less than one mile (1.6
      km)
      of the first test well already drilled. Seismic and reservoir mapping were
      undertaken to be used to support and progress work on near and long term plans
      of development for the Sawn Lake heavy oil project. For further information
      on
      drilling and results see “Present Activities” under item 2 “Oil and Gas
      Properties” herein described in this report.





***Recent
      Developments***





In
      the
      fiscal years of 2005 and 2006 we completed three private placement transactions
      and one subscription agreement. For a description of these transactions, see
      “Sales of Unregistered Securities” under item 5 herein described in this
      report.





In
      the
      second quarter of our 2006 fiscal year, under the terms of the Farmout Agreement
      dated February 25, 2005, as amended, Signet, our farmout partner and operator,
      has earned a 40% net working interest in the test well spacing unit of
      36-091-13W5 and five additional sections for a total of 6 sections earned,
      as a
      result of drilling the first test well of the Sawn Lake Heavy Oil Sands
      Project.




On
      October 12, 2006 the 4-32 and 7-30 wells along with the 1-36 well which was
      production tested earlier in 2006, were suspended. Our farmout partner and
      operator, Signet, has undertaken a mapping of the reservoir to assist in its
      delineation for any future development of the Sawn Lake property. The three
      wells production tested were located in the thickest known oil pay zones of
      the
      reservoir. Although the results from the production tests indicated a lack
      of
      cold flow production from these locations, the compartmentalized nature of
      the
      reservoir and varying characteristics of these compartments may show different
      results with further evaluation. Such evaluation is more appropriately conducted
      through drilling and geological programs that are beyond the scope of the
      current Farmout Agreement. Negotiations to amend the Farmout Agreement are
      ongoing. As the focus of the operations to date has been on the cold flow
      productive potential of the formation, no assessment of the in-situ production
      capability has been made to date. For further information on drilling and
      results see item 2 “Oil and Gas Properties” herein described in this
      report.




***Sales
      and Marketing***





As
      we
      remain in the development stage, we have not yet generated any revenues, nor
      do
      we have any customers at this time. The principal target customers for our
      crude
      oil production are expected to be refiners, remarketers and other companies,
      some of which have pipeline facilities near our properties. In the event
      pipeline facilities are not conveniently available, we intend to truck our
      oil
      to storage, refining or pipeline facilities.





Market
      pricing for bitumen is seasonal with lower prices in and around the calendar
      year-end being the norm due to lower demand for asphalt and other bitumen
      derived products. By necessity, bitumen is regularly blended with diluent in
      order to facilitate its transportation via pipeline to North American markets.
      As such, the effective field price for bitumen is also directly impacted by
      the
      input cost of the diluent required, the demand and price of which is also
      seasonal in nature (higher in winter as colder temperatures necessitate more
      diluent for transportation). Consequently, bitumen pricing is notoriously weak
      in and around December 31 and not reflective of the annual average realized
      price or the economics of the “business” overall. We have been advised that, to
      price bitumen, marketers apply formulas that take as a reference point the
      prices published for crude oil of particular qualities such as “Edmonton light”,
“Lloydminster blend”, or the more internationally known “West Texas
      Intermediate” (herein after referred to as WTI). We also understand that the
      price of bitumen fluctuates widely during the course of a year, with the lowest
      prices typically occurring at the end of the calendar year because of decreased
      seasonal demand for asphalt and other bitumen-derived products coupled with
      higher prices for diluents added to facilitate pipeline transportation of
      bitumen.





We
      intend
      to sell our oil and gas production under both short-term (less than one year)
      and long-term (one year or more) agreements at prices negotiated with third
      parties. Under both short-term and long-term contracts, typically either the
      entire contract (in the case of short-term contracts) or the price provisions
      of
      the contract (in the case of long-term contracts) are renegotiated from
      intervals ranging in frequency from daily to annual.




We
      have not yet adopted any specific sales and marketing
      plans.


10




***Research
      and Development***





The
      Company had no material research and development costs for the fiscal years
      ended September 30, 2004 and 2003.





***Competition***





We
      operate in a highly competitive environment, competing with major integrated
      and
      independent energy companies for desirable oil and natural gas properties,
      as
      well as for the equipment, labour and materials required to develop and operate
      those properties. Many of our competitors have longer operating histories and
      substantially greater financial and other resources greater than ours. Many
      of
      these companies not only explore for and produce crude oil and natural gas,
      but
      also carry on refining operations and market petroleum and other products on
      a
      worldwide basis. Our larger competitors, by reason of their size and relative
      financial strength, can more easily access capital markets than we can and
      may
      enjoy a competitive advantage, whereas we may incur higher costs or be unable
      to
      acquire and develop desirable properties at costs we consider reasonable because
      of this competition. Larger competitors may be able to absorb the burden of
      any
      changes in laws and regulation in the jurisdictions in which we do business
      and
      handle longer periods of reduced prices of gas and oil more easily than we
      can.
      Our competitors may be able to pay more for productive oil and natural gas
      properties and may be able to define, evaluate, bid for and purchase a greater
      number of properties and prospects than we can. Our ability to acquire
      additional properties in the future will depend upon our ability to conduct
      efficient operations, evaluate and select suitable properties, implement
      advanced technologies and consummate transactions in a highly competitive
      environment.





Competitive
      conditions may be substantially affected by various forms of energy legislation
      and/or regulation considered from time to time by the government of Canada
      and
      other countries, as well as factors that we cannot control, including
      international political conditions, overall levels of supply and demand for
      oil
      and gas, and the markets for synthetic fuels and alternative energy sources.





***Canadian
      Government and Environmental Regulations***





Our
      business is governed by numerous laws and regulations at various levels of
      government .
      These
      laws and regulations govern the operation and maintenance of our facilities,
      the
      discharge of materials into the environment and other environmental protection
      issues. Under these laws and regulations, we could be liable for personal
      injury, clean-up costs and other environmental and property damages, as well
      as
      administrative, civil and criminal penalties. We do not believe that insurance
      coverage for the full potential liability of environmental damages is available
      at a reasonable cost and our operator of the properties with activity on them
      maintains limited insurance coverage. Accordingly, we could be liable, or could
      be required to cease production on properties, if environmental damage occurs.
      The costs of complying with environmental laws and regulations in the future
      may
      harm our business. Furthermore, future changes in environmental laws and
      regulations could occur that result in stricter standards and enforcement,
      larger fines and liability, and increased capital expenditures and operating
      costs, any of which could have a material adverse effect on our financial
      condition or results of operations.





Exploration
      and Production. Our
      operations are subject to federal and provincial governmental regulations.
      Such
      regulations include requiring licenses for the drilling of wells, regulating
      the
      location of wells and the method and ability to produce wells, surface usage
      and
      the restoration of land upon which wells have been drilled, the plugging and
      abandoning of wells and the transportation of production from wells. Our
      operations are also subject to various conservation regulations, including
      the
      regulation of the size of spacing units, the number of wells which may be
      drilled in a unit, the unitization or pooling of oil and gas properties, the
      rate of production allowable from oil and gas wells, and the ability to produce
      oil and gas.





Royalties
      and Incentives. Each
      province and the federal government of Canada have legislation and regulations
      governing land tenure, royalties, production rates and taxes, environmental
      protection and other matters under their respective jurisdictions. The royalty
      regime is a significant factor in the profitability of oil and natural gas
      production. Royalties payable on production from lands other than Crown lands
      are determined by negotiations between the parties. Crown royalties are
      determined by government regulation and are generally calculated as a percentage
      of the value of the gross production with the royalty rate dependent in part
      upon prescribed reference prices, well productivity, geographical location,
      field discovery date and the type and quality of the petroleum product produced.
      From time to time, the governments of Canada, Alberta, British Columbia and
      Saskatchewan have also established incentive programs such as royalty rate
      reductions, royalty holidays and tax credits for the purpose of encouraging
      oil
      and natural gas exploration or enhanced recovery projects. These incentives
      generally increase cash flow.


11





Pricing
      and Marketing. The
      price of oil, natural gas and NGLs sold is determined by negotiation between
      buyers and sellers. An order from the National Energy Board (herein after
      referred to as “NEB”) is required for oil exports from Canada. Any oil export to
      be made pursuant to an export contract of longer than one year, in the case
      of
      light crude, and two years, in the case of heavy crude, requires an exporter
      to
      obtain an export license from the NEB. The issue of such a license requires
      the
      approval of the Government of Canada. Natural gas exported from Canada is also
      subject to similar regulation by the NEB. Natural gas exports for a term of
      less
      than two years, or for a term of two to twenty years in quantities of not more
      than 20,000 Mcf per day, must be made pursuant to an NEB order. Any natural
      gas
      exports to be made pursuant to a contract of larger duration (to a maximum
      of 25
      years) or in larger quantities require an exporter to obtain a license from
      the
      NEB, which requires the approval of the Government of Canada. Exporters are
      free
      to negotiate prices and other terms with purchasers, provided that the export
      contracts meet certain criteria prescribed by the NEB. The governments of
      Alberta, British Columbia and Saskatchewan also regulate the volume of natural
      gas, which may be removed from those provinces for consumption elsewhere based
      on such factors as reserve availability, transportation arrangements and market
      considerations.





Environmental
      Regulation *.* The oil
      and natural gas industry is subject to environmental regulation pursuant to
      local, provincial and federal legislation. Environmental legislation provides
      for restrictions and prohibitions on releases or emissions of various substances
      produced or utilized in association with certain oil and gas industry
      operations. In addition, legislation requires that well and facility sites
      be
      monitored, abandoned and reclaimed to the satisfaction of provincial
      authorities. A breach of such legislation may result in the imposition of fines
      and penalties. We are committed to meeting our responsibilities to protect
      the
      environment and anticipate making increased expenditures of both a capital
      and
      expense nature as a result of the increasingly stringent laws relating to the
      protection of the environment.





The
      North American Free Trade Agreement *.* The
      North American Free Trade Agreement (herein after referred to as “NAFTA”) grants
      Canada the freedom to determine whether exports to the United States or Mexico
      will be allowed. In making this determination, Canada must ensure that any
      export restrictions do not (i) reduce the proportion of energy exported relative
      to the supply of the energy resource; (ii) impose an export price higher than
      the domestic price; or (iii) disrupt normal channels of supply. All parties
      to
      NAFTA are also prohibited from imposing minimum export or import price
      requirements.





Kyoto
      Protocol *.* The
      Kyoto Protocol requires Canada to reduce its greenhouse gas emissions to six
      percent below 1990 levels during the period between 2008 and 2012. The protocol
      is expected to affect the operation of all industries in Canada, including
      the
      oil and gas industry. As details of the implementation of emissions reduction
      legislation related to this protocol have yet to be finalized, the effect on
      our
      operations cannot be determined at this time.





Investment
      Canada Act .
      The *Investment Canada Act* requires
      notification and/or review by the Government of Canada in certain cases,
      including but not limited to, the acquisition of control of a Canadian Business
      by a non-Canadian. In certain circumstances, the acquisition of a working
      interest in a property which contains recoverable reserves will be treated
      as
      the acquisition of an interest in a “business”, and may be subject to either
      notification or review, depending on the size of the interest being acquired
      and
      the asset size of the business.





***Employees***





The
      Company currently has one full time employee, one part time employee and four
      prime subcontractors. For
      further information on our subcontractors see “Compensation Arrangements for
      Executive Officers” under item 10 “Executive Compensation” herein described in
      this report. We
      expect
      to hire from time to time, independent consultants and contractors during the
      stages of implementing our plans.





***Royalty
      Agreements***





In
      1996,
      Alberta announced a new generic royalty regime for oil sands based on
      recommendations from a joint industry/government national task force. Royalty
      is
      calculated using a revenue-less-cost calculation. In early project years before
      capital investment is recovered, the royalty rate is lower than the rate that
      is
      applied after capital is recovered. This helps project cash flows in early
      years. Once capital is recovered, the Province shares in project profits. The
      oil
      sands royalty regime applies to all new investments in the oil sands. Prior
      to a
      project’s payout date, the applicable royalty is 1% of project gross revenue.
      After a project payout, the applicable royalty is equivalent to the greater
      of
      25% of net project revenue or 1% of gross revenue. All costs (operating and
      capital) are 100% deductible in the year in which they are
      incurred.





Through
      the acquisition of Northern, Deep Well became a party to the following royalty
      agreements that were associated with purchase and sale agreements between
      Northern, Classic Energy Inc. (herein after referred to as “Classic”), Nearshore
      and 979708 Alberta Ltd. (herein after referred to as “979708”):


12





Baytex
      Energy Partnership (herein after referred to as “Baytex”) reserved an overriding
      royalty interest on the Petroleum & Natural Gas License lands located within
      our Sawn Lake properties, in consideration of entering into a petroleum, natural
      gas and related rights conveyance dated December 19, 2002 with 979708. Effective
      December 1, 2002, 979708 granted to Baytex a 5% non-convertible overriding
      royalty on 100% production. These properties comprise of 6.5 sections or 4,112
      gross acres (1,664 gross hectares) of Petroleum and Natural Gas. We are not
      planning to produce any non-oil sands lands as of the date of this report.
      979708 is a private corporation incorporated in Alberta, Canada, and is 50%
      owned and controlled by Nearshore. Nearshore
      is a private corporation incorporated in Alberta, Canada, and is owned and
      controlled by Mr. Steven P. Gawne and his wife, Mrs. Rebekah J. Gawne, who
      each
      own 50% of Nearshore. Mr.
      Steven P. Gawne was formerly the President, Chief Executive Officer and Director
      of Deep Well Oil & Gas, Inc. from February 6, 2004 to June 29,
      2005.





On
      December 12, 2003 Nearshore entered into a Royalty Agreement with Northern
      on 3
      Leases, 1 Permit and 1 Petroleum and Natural Gas License located within our
      Sawn
      Lake properties Northern granted and assigned a 6.5% gross overriding royalty
      to
      Nearshore on the leased substances on the land interests in which Northern
      holds
      in the above said Leases. Nearshore is a private corporation incorporated in
      Alberta, Canada, and is owned and controlled by Mr. Steven P. Gawne and his
      wife, Mrs. Rebekah J. Gawne, who each own 50% of Nearshore. Mr.
      Steven P. Gawne was formerly the President, Chief Executive Officer and Director
      of Deep Well Oil & Gas, Inc. from February 6, 2004 to June 29,
      2005.





***Risk
      Factors***





*An
      investment in our common stock is speculative and involves a high degree of
      risk
      and uncertainty. You should carefully consider the risks described below,
      together with the other information contained in our reports filed with the
      SEC,
      including the consolidated financial statements and notes thereto of our
      company, before deciding to invest in our common stock. The risks described
      below are not the only ones facing our company. Additional risks not presently
      known to us or that we presently consider immaterial may also adversely affect
      our company. If any of the following risks occur, our business, financial
      condition and results of operations and the value of our common stock could
      be
      materially and adversely affected.*





We
      Are
      A Development Stage Company Implementing A New Business Plan .
      We are
      a development stage company with only a limited operating history upon which
      to
      base an evaluation of our current business and future prospects, and we have
      just begun to implement our business plan. Since our inception, we have suffered
      recurring losses from operations and have been dependent on new investment
      to
      sustain our operations. During the years ended September 30, 2004 and 2003,
      we
      reported net losses of $525,754 and $50,000, respectively. In addition, our
      consolidated financial statements for the year ended September 30, 2003,
      contained a going concern qualification and we cannot give any assurances that
      we can achieve profits from operations.





The
      Successful Implementation Of Our Business Plan Is Subject To Risks Inherent
      In
      The Oil Business. Our oil
      operations are subject to the economic risks typically associated with
      exploration, development and production activities, including the necessity
      of
      significant expenditures to locate and acquire properties and to drill
      exploratory wells. In addition, the cost and timing of drilling, completing
      and
      operating wells is often uncertain. In conducting exploration and development
      activities, the presence of unanticipated pressure or irregularities in
      formations, miscalculations or accidents may cause our exploration, development
      and production activities to be unsuccessful. This could result in a total
      loss
      of our investment in a particular property. If exploration efforts are
      unsuccessful in establishing proved reserves and exploration activities cease,
      the amounts accumulated, as unproved costs will be charged against earnings
      as
      impairments. Our exploitation and development of oil and gas reserves depends
      upon access to the areas where our operations are to be conducted. We conduct
      a
      portion of our operations in regions where we are only able to do so on a
      seasonal basis. Unless the surface is sufficiently frozen, we are unable to
      access our properties, drill or otherwise conduct our operations as planned.
      In
      addition, if the surface thaws earlier than expected, we must cease our
      operations for the season earlier than planned. Our operations are affected
      by
      road bans imposed from time to time during the break-up and thaw period in
      the
      spring. Road bans are also imposed due to snow, mud and rock slides and periods
      of high water, which can restrict access to our well sites and production
      facility sites. Our inability to access our properties or to conduct our
      operations as planned will result in a shutdown or slow down of our operations,
      which will adversely affect our business.





We
      Expect Our Operating Expenses To Increase Substantially In The Future And May
      Need To Raise Additional Funds .
      We have
      a history of net losses and expect that our operating expenses will increase
      substantially over the next 12 months as we continue to implement our business
      plan. In addition, we may experience a material decrease in liquidity due to
      unforeseen capital calls or other events and uncertainties. As a result, we
      may
      need to raise additional funds, and such funds may not be available on
      favourable terms, if at all. If we cannot raise funds on acceptable terms,
      we
      may not be able to execute on our business plan, take advantage of future
      opportunities or respond to competitive pressures or unanticipated requirements.
      This may seriously harm our business, financial condition and results of
      operations.


13





Our
      Ability To Produce Sufficient Quantities Of Oil From Our Properties May Be
      Adversely Affected By A Number Of Factors Outside Of Our Control .
      The
      business of exploring for and producing oil and gas involves a substantial
      risk
      of investment loss. Drilling oil wells involves the risk that the wells may
      be
      unproductive or that, although productive, that the wells may not produce oil
      in
      economic quantities. Other hazards, such as unusual or unexpected geological
      formations, pressures, fires, blowouts, loss of circulation of drilling fluids
      or other conditions may substantially delay or prevent completion of any well.
      Adverse weather conditions can also hinder drilling operations. A productive
      well may become uneconomic due to pressure depletion, water encroachment,
      mechanical difficulties, etc., which impair or prevent the production of oil
      and/or gas from the well.





There
      can
      be no assurance that oil will be produced from the properties in which we have
      interests. Marketability of any oil that we acquire or discover may be
      influenced by numerous factors beyond our control. The marketability of our
      production will depend on the proximity of our reserves to and the capacity
      of,
      third party facilities and services, including oil and natural gas gathering
      systems, pipelines, trucking or terminal facilities, and processing facilities.
      The unavailability or insufficient capacity of these facilities and services
      could force us to shut-in producing wells, delay the commencement of production,
      or discontinue development plans for some of our properties, which would
      adversely affect our financial condition and performance. There may be periods
      of time when pipeline capacity is inadequate to meet our oil transportation
      needs. During periods when pipeline capacity is inadequate, we may be forced
      to
      reduce production or incur additional expense as existing production is
      compressed to fit into existing pipelines. Other risk factors include
      availability of drilling and related equipment, market fluctuations of prices,
      taxes, royalties, land tenure, allowable production and environmental
      protection. We cannot predict how these factors may affect our
      business.





In
      addition, the success of our business is dependent upon the efforts of various
      third parties that we do not control. We rely upon various companies to assist
      us in identifying desirable oil prospects to acquire and to provide us with
      technical assistance and services. We also rely upon the services of geologists,
      geophysicists, chemists, engineers and other scientists to explore and analyze
      oil prospects to determine a method in which the oil prospects may be developed
      in a cost-effective manner. In addition, we rely upon the owners and operators
      of oil drilling equipment to drill and develop our prospects to production.
      Although we have developed relationships with a number of third-party service
      providers, we cannot assure that we will be able to continue to rely on such
      persons. If any of these relationships with third-party service providers are
      terminated or are unavailable on commercially acceptable terms, we may not
      be
      able to execute our business plan.





We
      Do
      Not Control Our Operations .
      We do
      not operate our properties and we therefore have limited influence over the
      testing, drilling and production operations of our properties. Our lack of
      control could result in the following:





·
            The
                operator might initiate exploration or development on a faster or
                slower
                pace than we prefer;





·
            The
                operator might propose to drill more wells or build more facilities
                on a
                project than we have funds for or that we deem appropriate, which
                could
                mean that we are unable to participate in the project or share in
                the
                revenues generated by the project;





·
            If
                an operator refuses to initiate a project, we might be unable to
                pursue
                the project.





Any
      of
      these events could materially reduce the value of our properties.





We
      Are
      Party To Several Lawsuits And Will Be Adversely Affected If We Are Found To
      Be
      Liable In Connection With Any Legal Proceedings. **** We
      are
      party to several lawsuits described in this Form 10-KSB under the heading “Legal
      Proceedings”. We intend to vigorously defend ourselves against the claims made
      in the lawsuits, but we cannot predict the outcome of these proceedings, the
      commencement or outcome of any future proceedings against us, or whether any
      such proceeding would lead to monetary damages that would have a material
      adverse effect on our financial position.





Aboriginal
      Peoples May Make Claims Regarding The Lands On Which Our Operations Are
      Conducted. Aboriginal peoples have claimed aboriginal title and rights to a substantial
      portion of western Canada. If any aboriginal peoples file a claim claiming
      aboriginal title or rights to the lands on which any of our properties are
      located, and if any such claim is successful, it could have a material adverse
      effect on our operations.





The
      Energy Utilities Board (“EUB”) that governs our operations in Alberta, Canada
      have implemented a new directive (Directive 056) that the Alberta Government
      issued its First Nations Consultation Policy on Land Management and Resource
      Development on May 16, 2005. The EUB expects that all industry applicants must
      adhere to this policy and the consultation guidelines. These requirements and
      expectations apply to the licensing of all new energy developments and all
      modifications to existing energy developments, as covered in Directive 056.
      In
      the policy, the Alberta Government has developed consultation guidelines to
      address specific questions about how consultation for land management and
      resource development should occur in relation to specific activities. Prior
      to
      filing an application, the applicant must address all questions, objections,
      and
      concerns regarding the proposed development and attempt to resolve them. This
      includes concerns and objections raised by members of the public, industry,
      government representatives, First Nations, Métis, and other interested parties.
      If there are no outstanding concerns/objections and a confirmation of
      non-objection has been obtained if required. This process can cause significant
      delays in obtaining a drilling permit for exploration and/or a production well
      license for both oil and gas.


14





Market
      Fluctuations In The Prices Of Oil Could Adversely Affect Our
      Business .
      Prices
      for oil tend to fluctuate significantly in response to factors beyond our
      control. These factors include, but are not limited to, the continued threat
      of
      war in the Middle East and actions of the Organization of Petroleum Exporting
      Countries and its maintenance of production constraints, the U.S. economic
      environment, weather conditions, the availability of alternate fuel sources,
      transportation interruption, the impact of drilling levels on crude oil and
      natural gas supply, and the environmental and access issues that could limit
      future drilling activities for the industry.





Changes
      in commodity prices may significantly affect our capital resources, liquidity
      and expected operating results. Price changes directly affect revenues and
      can
      indirectly impact expected production by changing the amount of funds available
      to reinvest in exploration and development activities. Reductions in oil and
      gas
      prices not only reduce revenues and profits, but could also reduce the
      quantities of reserves that are commercially recoverable. Significant declines
      in prices could result in non-cash charges to earnings due to
      impairment.





Changes
      in commodity prices may also significantly affect our ability to estimate the
      value of producing properties for acquisition and divestiture and often cause
      disruption in the market for oil producing properties, as buyers and sellers
      have difficulty agreeing on the value of the properties. Price volatility also
      makes it difficult to budget for and project the return on acquisitions and
      development and exploitation of projects. We expect that commodity prices will
      continue to fluctuate significantly in the future.




Risks
      Related To Our Stock. Our
      common stock is traded on the pink sheets. There can be no assurance that an
      active public market will continue for the common stock, or that the market
      price for the common stock will not decline below its current price. Such price
      may be influenced by many factors, including, but not limited to, investor
      perception of us and our industry and general economic and market conditions.
      The trading price of the common stock could be subject to wide fluctuations
      in
      response to announcements of our business developments or our competitors,
      quarterly variations in operating results, and other events or factors. In
      addition, stock markets have experienced extreme price volatility in recent
      years. This volatility has had a substantial effect on the market prices of
      companies, at times for reasons unrelated to their operating performance. Such
      broad market fluctuations may adversely affect the price of our common
      stock.





Our
      stock
      price may decline by future sales of our shares or the perception that such
      sales may occur. If we issue additional shares of common stock in private
      financings under an exemption from the registration laws, then those shares
      will
      constitute “restricted shares” as defined in Rule 144 under the Securities Act.
      The restricted shares may only be sold if they are registered under the
      Securities Act, or sold under Rule 144, or another exemption from registration
      under the Securities Act.





Some
      of
      our outstanding restricted shares of common stock are either eligible for sale
      pursuant to Rule 144 or are required to be registered under the Securities
      Act
      for resale by the holders. We are unable to estimate the amount, timing, or
      nature of future sales of outstanding common stock. Sales of substantial amounts
      of our common stock in the public market may cause the stock’s market price to
      decline.





The
      Company’s common stock is considered to be a “penny stock” because it meets one
      or more of the definitions in the Exchange Act Rule 3a51-1, a Rule made
      effective on July 15, 1992. In particular, (i) our stock trades at a price
      less
      than five dollars ($5.00) per share; (ii) our common stock does not trade on
      a
“recognized” national exchange; (iii) it is NOT quoted on the NASD’s automated
      quotation system (herein after referred to as “NASDAQ”), or even if so, has a
      price less than five dollars ($5.00) per share; OR (iv) it is issued by a
      company with net tangible assets less than $2,000,000, if in business more
      than
      three years continuously, or $5,000,000, if in business less than a continuous
      three years, or with average revenues of less than $6,000,000 for the past
      three
      years. The principal result or effect of being designated a “penny stock” is
      that securities broker-dealers cannot recommend the stock but must trade in
      it
      on an unsolicited basis.





Risks
      Related to Broker-Dealer Requirements Involving Penny Stocks / Risks Affecting
      Trading and Liquidity .
      Section
      15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2
      promulgated thereunder by the Commission require broker-dealers dealing in
      penny
      stocks to provide potential investors with a document disclosing the risks
      of
      penny stocks and to obtain a manually signed and dated written receipt of the
      document before effecting any transaction in a penny stock for the investor’s
      account. These rules may have the effect of reducing the level of trading
      activity in the secondary market, if and when one develops.





Potential
      investors in the Company’s common stock are urged to obtain and read such
      disclosure carefully before purchasing any shares that are deemed to be “penny
      stock.” Moreover, Commission Rule 15g-9 requires broker-dealers in penny stocks
      to approve the account of any investor for transactions in such stocks before
      selling any penny stock to that investor. This procedure requires the
      broker-dealer to (i) obtain from the investor information concerning his or
      her
      financial situation, investment experience and investment objectives; (ii)
      reasonably determine, based on that information, that transactions in penny
      stocks are suitable for the investor and that the investor has sufficient
      knowledge and experience as to be reasonably capable of evaluating the risks
      of
      penny stock transactions; (iii) provide the investor with a written statement
      setting forth the basis on which the broker-dealer made the determination in
      (ii) above; and (iv) receive a signed and dated copy of such statement from
      the
      investor, confirming that it accurately reflects the investor’s financial
      situation, investment experience and investment objectives. Pursuant to the
      Penny Stock Reform Act of 1990, broker-dealers are further obligated to provide
      customers with monthly account statements. Compliance with the foregoing
      requirements may make it more difficult for investors in the Company’s stock to
      resell their shares to third parties or to otherwise dispose of them in the
      market or otherwise.


15





**Reports
      to Security Holders**





We
      are a
      Nevada corporation and our common stock is registered under section 12(g) of
      the
      Securities Exchange Act of 1934, as amended. Our annual report on Form 10-KSB,
      quarterly reports on Form 10-QSB, current reports on From 8-K and amendments
      to
      those reports can be accessed at the SEC’s website at
      www.sec.gov.





**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY**





**Office
      Leases**





The
      Company currently rents office space on a month by month basis for
      administrative operations for a nominal fee at 510 Royal Bank Building 10117
      Jasper Avenue, Edmonton Alberta T5J 1W8. The Company also has a shared office
      space for operations in Calgary, Alberta. The sub-lease of the Calgary office
      location is on month-by-month basis for a nominal fee.





**Oil
      and Gas Properties**





***Acreage***





The
      Company beneficially owns an 80% working interest (subject to a Farmout
      Agreement with Signet) in 69.5 contiguous sections (43,964 gross acres or 17,792
      gross hectares) in the Sawn Lake block of the Peace River Oil Sands area located
      in Alberta, Canada. On November 15, 2005, Deep Well and its farmout partner
      and
      operator Signet amended the Farmout Agreement and further agreed to acknowledge
      the original Farmout Agreement. Signet will own a 40% working interest once
      the
      obligations under the Farmout Agreement have been satisfied. In accordance
      with
      the Farmout Agreement, Signet must drill and complete 10 wells prior to February
      25, 2008, at no cost to the Company, to fully earn their 40% working interest
      in
      the project. Each well drilled earns Signet 6.0 sections. Signet will be the
      operator of the Sawn Lake oil sands project. The following table summarizes
      our
      gross and net developed and undeveloped oil and natural gas rights under lease
      as of September 30, 2004.





**OIL
                AND NATURAL GAS RIGHTS****as of September 30, 2004****Gross
                Hectares**
            
            **Net
                Hectares**
            
            **Gross
                Acres**
            
            **Net
                Acres****Developed
                Acreage**Sawn
                Lake – Peace River OS Area, Alberta, Canada
            
            
            None
            
            
            None
            
            
            None
            
            
            NoneTotal
            
            
            None
            
            
            None
            
            
            None
            
            
            None**Undeveloped
                Acreage**Sawn
                Lake – Peace River OS Area, Alberta, Canada
            
            
            7,936
            
            
            6,349*
            
            
            19,610
            
            
            15,688*Total
            
            
            7,936
            
            
            6,349
            
            
            19,610
            
            
            15,688




*80%
                working interest (pre-farmout)





A
      developed acre is considered to mean those acres spaced or assignable to
      productive wells, a gross acre is an acre in which a working interest is owned,
      and a net acre is the result that is obtained when fractional ownership working
      interest is multiplied by gross acres. The number of net acres is the sum of
      the
      factional working interests owned in gross acres expressed as whole numbers
      and
      fractions thereof.


16





Undeveloped
      acreage is considered to be those lease acres on which wells have not been
      drilled or completed to a point that would permit the production of commercial
      quantities of oil or natural gas, regardless of whether or not that acreage
      contains proved reserves, but does not include undrilled acreage held by
      production under the terms of a lease. As is customary in the oil and gas
      industry, we can generally retain our interest in undeveloped acreage by
      drilling activity that establishes commercial production sufficient to maintain
      the leases or by paying delay rentals during the remaining primary term of
      such
      a lease. The oil and natural gas leases in which we have an interest are for
      varying primary terms, and if production continues from our developed lease
      acreage beyond the primary term, we are entitled to hold the lease for as long
      as oil or natural gas is produced.





***Reserves,
      Production and Delivery Commitments***





Northern
      commenced oil and gas exploration activities in August 2004 with the first
      well
      being drilled on the project in September 2005. We did not engage in any
      production activities during the year ended September 30, 2004, 2003 and 2002,
      nor did we have any proved or probable reserves at the end of such periods,
      and
      thus, were not required to provide any of the production data required by
      Statement of Financial Accounting Standards No. 69. We do not have any
      obligations under existing delivery commitment contracts or agreements calling
      for the provision of fixed and determinable quantities of oil and gas over
      the
      next three years, and have therefore not filed any information or reports with
      any federal authority or agency, containing estimates of total, proved developed
      or undeveloped net oil or gas reserves.





***Drilling
      Activity***





The
      following tables summarize the results of our drilling activities during the
      years ended September 30, 2004, 2003 and 2002.





**Exploratory
                Wells year ended September 30**
            
            **2006**
            
            **2005**
            
            **2004****Gross**
            
            **Net**
            
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**Gas
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Oil
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Oil/Gas
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Evaluating
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Drilling
                at end of year
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Suspended
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Abandoned
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-****Total
                Exploratory Wells**
            
            
            -
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**





**Development
                Wells year ended September 30**
            
            **2006**
            
            **2005**
            
            **2004****Gross**
            
            **Net**
            
            **Gross**
            
            **Net**
            
            **Gross**
            
            **Net**Gas
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Oil
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Oil/Gas
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Evaluating
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Drilling
                at end of year
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**Suspended
            
            
            2
            
            
            0.8
            ******
            
            1
            
            
            0.4
            ******
            
            **-**
            
            
            **-**Abandoned
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **-****Total
                Development Wells**
            
            
            **2**
            
            
            **0.8**
            
            
            **1**
            
            
            **0.4**
            
            
            **-**
            
            
            **-**




****** 40%
        working interest


No
      wells
      were drilled for the years ended September 30, 2004, 2003 and
      2002.


17


***Present
      Activities***





The
      1-36
      well (1 st test
      well drilled at surface location 1-36-091-13W5) was successfully drilled and
      completed in late November of 2005 to a depth of 672 meters with a horizontal
      leg of over 600 meters within the Bluesky oil sands zone. Our farmout partner
      and operator, Signet, initiated production testing in January 2006 but was
      delayed due to mechanical issues with the well equipment, scheduling of service
      rigs, and the imposition of road bans in the area for the spring break-up.
      Production testing continued after the spring break-up and on March 23, 2006
      our
      farmout partner and operator, Signet, announced that the first horizontal test
      well, the 1-36 well, on our Sawn Lake property had been drilled and the
      reservoir had tested positive for cold flow crude oil pumping capability. The
      well was drilled to a vertical depth of 672 meters followed by a horizontal
      leg
      of 630 meters. Initial test results by third parties have concluded that the
      initial oil samples taken early in the flow period had been analyzed and
      determined to be 10.7 degree API with 3.1% sulphur. To date Signet has earned
      their interest in 6.0 sections, by drilling and completing the first well.
      Currently the well has been suspended for further evaluation.





The
      4-32
      well (2 nd well
      drilled at surface location 4-32-091-12W5) began drilling on August 13, 2006.
      This was the first of three additional wells that Signet was to drill over
      the
      next 90 days in the Bluesky Formation of the Sawn Lake area. This well was
      successfully drilled and completion commenced in September 2006 to a vertical
      depth of 675 meters with a horizontal leg of over 600 meters within the Bluesky
      oil sands zone. Initial production tests for cold flow pumping capability were
      negative but the log analysis confirmed 23 meters of net oil pay in the Bluesky
      reservoir. The API gravity is in the range of 6.7 to 7.6 degrees. The viscosity
      of the oil is between 263,000 and 475,000 centistokes extrapolated at 20 degrees
      Celsius, which is approximately the temperature of the formation at Sawn Lake.
      The viscosity of the oil extrapolated at 105 degrees Celsius is between 172
      and
      237 centistokes. Therefore at a temperature slightly greater than boiling water,
      the oil from this reservoir should become mobile and flow similar to that of
      medium gravity oil. The permeability is in the range of up to 8 Darcies with
      an
      average heavy oil saturation of 78 percent. Subsequent to the drilling and
      logging operations, tubing was run in preparation for potential Bluesky oil
      production. Currently the well has been suspended for further
      evaluation.





The
      7-30
      well (3 rd well
      drilled at surface location 7-30-091-12W5) began drilling on August 31, 2006.
      This was the second of three additional wells that Signet was to drill over
      the
      next 90 days in the Bluesky Formation of the Sawn Lake area. This well was
      successfully drilled and completion commenced in September 2006 to a vertical
      depth of 659 meters with a horizontal leg of over 600 meters within the Bluesky
      oil sands zone. Initial production tests for cold flow pumping capability were
      negative but the log analysis confirmed 22 meters of net oil pay in the Bluesky
      reservoir. The API gravity is in the range of 6.2 to 6.8 degrees. The viscosity
      of the oil is 290,000 centistokes extrapolated at 18 degrees Celsius. The
      permeability is in the range of up to 8 Darcies with an average heavy oil
      saturation of 68 percent. Subsequent to the drilling and logging operations,
      tubing was run in preparation for potential Bluesky oil production. Currently
      the well has been suspended for further evaluation.





The
      13-29
      well (proposed 4 th well
      surface location 13-29-091-12W5) was not drilled since it
      was determined by the operator that it would not provide any additional
      geological information in its delineation of the Sawn Lake Reservoir beyond
      that
      of the two recently drilled wells in the same vicinity.





Further
      exploratory work will be carried out to determine where the right Bluesky
      reservoir parameters might exist at Sawn Lake for cold flow and secondary
      recovery production. In general, the reservoir parameters at the location of
      the
      most recently drilled wells show promise and favourable parameters for a
      successful secondary recovery project. Consideration is also being given to
      determine the best technology under which oil can be produced from the Sawn
      Lake
      Heavy Oil Sands Project, taking into consideration the highly successful methods
      used by other nearby leaseholders producing from the same Formation. Under
      the
      present Farmout Agreement with Signet, Signet must drill 7 more horizontal
      wells
      by February 2008 at no cost to the Company, in order to fully earn the 40%
      working interest in the entire Sawn Lake Project.




**ITEM
      3.**  **LEGAL
      PROCEEDINGS**





**Deep
      Well Oil & Gas, Inc. vs. Surge Global Energy, Inc.**





On
      October 13, 2005 Surge filed against us with a Notice of Motion filed in Court
      of Alberta, District of Calgary. The motion among other things, requested a
      declaration from the Company that Signet has complied with their obligations
      under a particular Farmout Agreement and a declaration that Signet has earned
      50% of the Company’s interest in lands located at LSD 01-36-091-13-W5M.





On
      October 14, 2005 the Company served Surge with a lawsuit issued in the Alberta
      Court District of Calgary. The lawsuit among other things, seeks a declaration
      that the Farmout Agreement has been terminated, an order requesting Signet
      to
      reconvey to the Company title documents as defined in the Farmout Agreement,
      a
      declaration that Signet has failed to spud a test well pursuant to the terms
      of
      the Farmout, an order preventing Signet from entering the Farmout lands pending
      resolution to the lawsuit as well as other various declaratory and injunctive
      relief, including damages of $1,000,000 Cdn for trespass and punitive damages
      of
      $250,000 Cdn.


18





On
      October 21, 2005 the Company and Surge agreed to a consent order in the Court
      of
      Alberta, district of Calgary whereby both parties agreed to consolidate their
      actions. The consolidated action would continue under the Company action and
      would be tried at the same time.





On
      November 15, 2005 as part of a restructuring of Signet, both parties mutually
      agreed to dismiss their lawsuits against each other. The dismissals were part
      of
      the Farmout Amending and Farmout Acknowledgement Agreements entered into by
      the
      Company and Surge. The Farmout Amendment and Acknowledgement Agreement agreed
      to, upon Signet receiving a private placement for $8,550,000 Cdn in a
      convertible debenture and modify the February 25, 2005 Farmout Agreement. The
      significant amendments were to; 1.) Extend the earning period to February 25,
      2008; 2.) Extend the date for which Signet can spud an option well to September
      25, 2006; 3.) Recalculate the payment of the 2 nd portion
      of the prospect fee, being $1,000,000 to be paid by Signet to Northern and
      Deep
      Well Alberta and omit the conditions under which the $1,000,000 was paid, 4.)
      Signet issued to Northern and Deep Well Alberta 7,550,000 of its common shares
      giving the Company a beneficial interest in the Farmee of 31.47% before Signet
      issued shares under the private placement financing and 22.7% if the convertible
      debenture is converted on a fully diluted basis, and 5.) The Company must give
      up the right to acquire shares in Surge US.





**I.G.M.
      Resources Corp. vs. Deep Well Oil & Gas, Inc. et al**





On
      March
      10, 2005 I.G.M. Resources Corp. (herein after referred to as “IGM”) filed
      against Classic, 979708, Deep Well, Nearshore, Steven P. Gawne, Rebekah Gawne,
      Gawne Family Trust, 1089144 Alberta Ltd., John F. Brown, Diane Lynn McClaflin,
      Cassandra Doreen Brown, Elissa Alexandra Brown, Brown Family Trust, Priority
      Exploration Ltd., Northern and Gordon Skulmoski a Statement of Claim in the
      Court of Queen’s Bench of Alberta Judicial District of Calgary. This suit is
      part of a series of lawsuits or actions undertaken by IGM against some of the
      other above defendants.





IGM
      was
      and still is a minority shareholder of 979708. 979708 was in the business of
      discovering, assembling and acquiring oil & gas prospects. In 2002 and 2003,
      979708 acquired oil and gas prospects in the Sawn Lake area of Alberta. On
      or
      about the 14 th of July
      2003 all or substantially all the assets of 979708 were sold to Classic. IGM
      claims the value of the assets sold was far in excess of the value paid for
      those assets. On April 23, 2004 Northern purchased some of Classic’s assets that
      are under dispute by IGM. On June 7, 2005 Deep Well acquired all of the common
      shares of Northern thereby giving Deep Well an indirect beneficial interest
      in
      the assets IGM is claiming an interest in.





IGM
      seeks
      an order setting aside the transaction and returning the assets to 979708,
      compensation in the amount of $15,000,000 Cdn, a declaration of trust declaring
      that Classic, Northern and Deep Well Alberta, hold all of the assets acquired
      from 979708 and any property acquired by use of such assets or confidential
      information of 979708, in trust for the Plaintiff.





This
      lawsuit has been stayed pending the outcome of the other litigation by IGM
      against the other defendants.





The
      Company believes the claims are without merit and will vigorously defend
      them.





**Hardie
      & Kelly vs. Brown et al**





On
      June
      2, 2006 Hardie and Kelly, Trustee of the Estate of John Forbes Brown filed
      against John Forbes Brown, a bankrupt, Diane Lynn McClaflin, 1089144 Alberta
      Ltd., and Deep Well with an Amended Statement of Claim filed in the Court of
      Queen’s Bench of Alberta Judicial District of Calgary. John Forbes Brown was a
      former officer and then sub-contractor of Deep Well before and at the time
      he
      was assigned into bankruptcy on into July 12, 2004. The Plaintiff claims, in
      addition to other issues unrelated to Deep Well, that John Forbes Brown received
      4,812,500 Deep Well shares as a result of his employment in Deep Well and that
      John Forbes Brown improperly assigned these shares to the numbered company
      as a
      ruse entered into on the eve of insolvency by John Forbes Brown in order to
      facilitate the hiding of assets from his creditors and the trustee of his
      bankruptcy. The Plaintiff further claims that on August 23, 2004 John Forbes
      Brown advised the Plaintiff that he in fact owned the above shares and did
      not
      disclose this ownership in his bankruptcy statement of affairs filed. The
      Plaintiff further claims that John Forbes Brown would lodge the said shares
      with
      his lawyer until such time as these shares could be transferred to the
      Plaintiff. The Plaintiff further claims that unbeknownst to them John Forbes
      Brown surreptitiously removed the shares from his lawyer’s office and delivered
      them to Deep Well so that Deep Well could cancel them. The Plaintiff claims
      that
      Deep Well conspired with John Forbes Brown to defraud the creditors of John
      Forbes Brown by taking receipt and canceling the said shares. The Plaintiff
      claims that consideration paid by Deep Well for the said shares was invested
      in
      the home owned by John Forbes Brown and his wife. The Plaintiff seeks; 1.)
      An
      accounting of the proceeds and benefits derived by the dealings of the shares,
      2.) The home owned by John Forbes Brown and his wife, to be held in trust on
      behalf of the Plaintiff and an accounting of proceeds related to this trust,
      3.)
      The Plaintiff seeks damages from the Defendants because of their actions, 4.)
      A
      judgment for $15,612,645 Cdn, 5.) An order to sell John Forbes Brown’s home, and
      6.) Interest and costs.


19





The
      Company plans to vigorously defend itself against the Plaintiff’s
      claims.





**Menno
      Wiebe and Jacobean Resource International vs. Deep Well Oil & Gas, Inc. et
      al**





On
      October 23, 2006 Menno Wiebe and Jacobean Resources International served Deep
      Well, Doe individuals and Roe Corporations with a Complaint and Summons filed
      in
      the United States of America, District Court of Clark County, Nevada. The
      Complaint alleges a breach of contract in which the Plaintiffs are seeking
      monetary damages in excess of $10,000 plus an order directing Defendants to
      issue 56,500 shares of Deep Well stock to Plaintiffs. Mr. Menno Wiebe served
      as
      Director and Chief Operating Officer of Deep Well from July 6, 2004 until June
      29, 2005. Mr. Wiebe claims he was the Chief Operating Officer until October,
      2005. The Company believes that it has meritorious defenses to the plaintiff’s
      claims and intends to enter into mediation, as called for in the contract with
      Menno Wiebe.





**Star
      Capital Inc. vs. Deep Well Oil & Gas, Inc. et al**





On
      December 21, 2006 Deep Well, Deep Well Alberta and some of the directors of
      the
      Company in addition to other individuals were served with an Originating Notice
      of Motion, filed in the Court of Queen’s Bench of Alberta Judicial District of
      Calgary, by Star Capital Inc. whereby the Applicant claims that the Respondents;
      1.) Failed to provide shareholders with proper or any notice of Annual General
      Meetings, special meeting of shareholders, or both; 2.) Failed to hold Annual
      General Meetings in accordance with the provisions of the Alberta Business
      Corporations Act or, in the alternative, with the Nevada Revised Statutes;
      3.)
      Failed to appoint qualified auditors in accordance with the provisions of the
      Alberta Business Corporations Act or, in the alternative, the Nevada Revised
      Statutes; 4.) Failed to prepare and file audited financial statements in
      accordance with the provisions of the Alberta Business Corporations Act and
      the
      Alberta Securities Act or, in the alternative, the Nevada Revised Statutes;
      5.)
      Paid management fees in relation to either or both of Deep Well or Deep Well
      Alberta to directors, officers and third parties, including the individual
      Respondents themselves, that are unreasonable, oppressive and have been granted
      without proper regard for the interests of shareholders; 6.) In the case of
      the
      individual Respondents, engaged in wrongful self-dealing that is oppressive,
      prejudicial to, and unfairly disregards the interests of, shareholders; 7.)
      Issued capital stock of Deep Well, and instruments for the future purchase
      of
      such capital stock, in a manner that is oppressive, unfairly prejudicial to,
      and
      unfairly disregards the interests of shareholders; 8.) Failed to disclose,
      or
      failing to disclose in a timely manner, material information to the shareholders
      and the public, including, but not limited to, the fact of the transfer of
      assets from Deep Well to Deep Well Alberta and the existence of encumbrances
      of
      the oil sands assets, such as gross overriding royalties held by the Respondents
      Gary Tighe and Steve Gawne, which distorts the public market in the securities
      of the corporate Respondents and is otherwise oppressive, unfairly prejudicial
      to, and unfairly disregards the interests of shareholders, including the
      Applicant; 9.) Utilized majority shareholder approval for various transactions,
      including the appointment of directors, without calling annual or special
      meetings of shareholders, in a manner which is oppressive, unfairly prejudicial
      and unfairly disregards the minority shareholders and which is otherwise a
      breach of the fiduciary duties owed by the directors and officers to the
      corporations and to the minority shareholders.





The
      Company plans to vigorously defend itself against the claims.




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





There
      was
      no matter submitted during the fiscal year 2004 covered by this report to a
      vote
      of security holders, through the solicitation of proxies or
      otherwise.





On
      June
      29, 2005 a majority of the shareholders of Deep Well, by written resolution,
      replaced the Deep Well’s Board of Directors, consisting of Mr. Steven P. Gawne,
      Mr. Curtis Sparrow, Mr. Leonard F. Bolger, Mr. Menno Wiebe and Dr. Horst A.
      Schmid, with a new Board of Directors, consisting of Mr. Cyrus Spaulding, Mr.
      Donald E. H. Jones and Dr. Horst A. Schmid. Dr. Horst A. Schmid was re-appointed
      to the Board as Chairman and appointed Chief Executive Officer and President.
      Mr. Cyrus Spaulding was appointed Chief Operating Officer. On July 1, 2005
      Mr.
      Curtis Sparrow accepted a re-appointed to the Board for Directors. Mr. Curtis
      Sparrow continued to be Chief Financial Officer, Corporate Secretary and
      Treasurer of the Company.




20


**PART
      II**





**ITEM 5.**
            **MARKET
                FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER****MATTERS**





The
      common stock of the Predecessor Company of Deep Well was originally listed
      on
      NASDAQ as of November 17, 1994, however the predecessor company no longer met
      listing criteria for NASDAQ and its common stock was delisted to the OTC
      Bulletin Board on September 16, 2002. Subsequent to this delisting, the
      Predecessor Company did not, on a timely basis, file a Form 10-Q for the quarter
      ended December 31, 2002 and accordingly, its stock was delisted to the pink
      sheets on March 25, 2003.





**Market
      Price Information for Common Stock**





Deep
      Well’s stock is currently quoted on the pink sheets under the trading symbol
      DWOG. The
      following table sets forth the high and low sales prices for Deep Well common
      stock as reported on the pink sheets for the periods indicated below. This
      table
      gives effect to both the 2-1 split of March 10, 2004 and the 3-1 split of May
      14, 2004. These quotations reflect inter-dealer prices, without retail mark-up,
      mark-down or commission and may not necessarily represent actual
      transactions:




**High
                (US$)**
            
            **Low
                (US$)**Fiscal
                2003First
                Quarter
            
            $
            0.24
            
            $
            0.12Second
                Quarter
            
            $
            0.13
            
            $
            0.01Third
                Quarter
            
            $
            0.03
            
            $
            0.002Fourth
                Quarter
            
            $
            0.002
            
            $
            0.0003Fiscal
                2004First
                Quarter
            
            $
            0.55
            
            $
            0.05Second
                Quarter
            
            $
            1.30
            
            $
            1.05Third
                Quarter
            
            $
            1.55
            
            $
            0.48Fourth
                Quarter
            
            $
            1.42
            
            $
            0.80Fiscal
                2005First
                Quarter
            
            $
            1.03
            
            $
            0.53Second
                Quarter
            
            $
            0.90
            
            $
            0.35Third
                Quarter
            
            $
            0.58
            
            $
            0.30Fourth
                Quarter
            
            $
            0.68
            
            $
            0.31Fiscal
                2006First
                Quarter
            
            $
            1.31
            
            $
            0.37Second
                Quarter
            
            $
            2.98
            
            $
            1.15Third
                Quarter
            
            $
            2.85
            
            $
            1.45Fourth
                Quarter
            
            $
            1.76
            
            $
            0.58Fiscal
                2007First
                Quarter
            
            $
            0.66
            
            $
            0.33





On
      February 27, 2004 the Board of Directors unanimously approved a forward stock
      split of Deep Well’s common stock at a ratio of two (2) shares for every one (1)
      share held. The forward split became effective on March 10, 2004. After the
      split, Deep Well had 12,337,156 shares of common stock issued and outstanding.
      Prior to the effective date of the split, Deep Well had 6,168,578 shares of
      common stock outstanding. In connection with the stock split Deep Well increased
      its authorized common shares in proportion to the forward stock split. Deep
      Well’s authorized common stock after the forward stock split consisted of
      100,000,000 shares of common stock. Prior to the split, Deep Well was authorized
      to issue 50,000,000 shares of common stock. In connection with the forward
      split, Deep Well amended its articles of incorporation with the state of Nevada.
      Deep Well did not obtain a shareholder vote of the forward stock split and
      a
      shareholder vote was not required by Nevada law.


21





On
      May 4,
      2004 our Board of Directors unanimously approved a forward stock split of our
      common stock at a ratio of three (3) shares for every one (1) share held. The
      forward split became effective on May 14, 2004. After the split, Deep Well
      had
      37,011,468 shares of common stock issued and outstanding. Prior to the effective
      date of the split, Deep Well had 12,337,156 shares of common stock outstanding.
      In connection with the stock split Deep Well increased its authorized common
      shares in proportion to the forward stock split. Deep Well’s authorized common
      stock after the forward stock split consisted of 300,000,000 shares of common
      stock. Prior to the split, Deep Well was authorized to issue 100,000,000 shares
      of common stock. In connection with the forward split, Deep Well amended its
      articles of incorporation with the state of Nevada. Deep Well did not obtain
      a
      shareholder vote of the forward stock split and a shareholder vote was not
      required by Nevada law.





On
      June
      7, 2005 Deep Well completed the acquisition of 6,069,625 shares of common stock,
      representing 100% of the outstanding common stock of Northern, pursuant to
      an
      Exchange Agreement, dated as of July 8, 2004, between the Deep Well, Northern
      and all shareholders of Northern, as amended by an amending agreement dated
      April 25, 2005. In addition to the common stock of Northern, Deep Well was
      granted options to acquire 432,500 shares of preferred stock of Northern and
      the
      preferred shareholders of Northern have the ability to require Deep Well to
      acquire such shares. In accordance with the terms of the Agreements, common
      shareholders of Northern received three (3) shares of the Deep Well’s restricted
      common stock for each one (1) share of Northern’s common stock and preferred
      shareholders of Northern will receive thirty (30) shares of the Deep Well’s
      restricted common stock for each one (1) share of Northern’s preferred stock
      held by such shareholders.





**Holders
      of Record**





As
      of
      January 5, 2007 we had approximately 187 holders of record of our shares of
      common stock. The Company estimates that investment dealers and other nominees
      hold common shares for approximately 2,821 beneficial holders.





**Dividends**





The
      Company has not paid cash dividends since inception. The Company intends to
      retain all of its earnings, if any, for use in its business and does not
      anticipate paying any cash dividends in the foreseeable future. The payment
      of
      any future dividends will be at the discretion of the Board of Director’s and
      will depend upon a number of factors, including future earnings, the success
      of
      the company’s business activities, capital requirements, the general financial
      condition and future prospects of the company, general business conditions
      and
      such other factors as the Board of Directors may deem relevant.





**Equity
      Compensation Plan Information**





The
      following table provides information as of September 30, 2004 with respect
      to
      shares of Deep Well common stock that may be issued under our existing equity
      compensation plans.





**Equity
                Compensation Plan Category**
            
            **(a)**
              **Number
                of Securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
            
            **(b)**
              **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
            
            **(c)**
              **Number
                of Securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))**Equity
                compensation plans approved by security holders
            
            
            None
            
            
            None
            
            
            NoneEquity
                compensation plans not approved by security holders
            
            
            None
            
            
            None
            
            
            None**Total**
            
            
            **None**
            
            
            **None**
            
            
            **None**




22





**Stock
      Option Plan**





On
      November 28, 2005 the Board of Directors of Deep Well adopted the Deep Well
      Oil
& Gas, Inc. Stock Option Plan. The Stock Option Plan, which will be
      administered by the Board, permits options to acquire shares of the Deep Well’s
      common stock to be granted to directors, senior officers and employees of the
      Company, as well as certain consultants and other persons providing services
      to
      the Company. This Stock Option Plan was adopted to provide an incentive to
      the
      retention of directors, officers and employees as well as consultants the
      Company may wish to retain in the future. The maximum number of common shares
      that may be reserved for issuance under the Stock Option Plan may not exceed
      10%
      of the Company’s issued and outstanding common shares, subject to adjustment as
      contemplated by the Stock Option Plan. The aggregate number of common shares
      with respect to which options may be granted to any one person (together with
      their associates) in any one year, together with all other incentive plans
      of
      the Company, may not exceed 500,000 common shares, and in total may not exceed
      2% of the total number of common shares outstanding. On November 28, 2005,
      the
      Board granted 375,000 options to acquire common shares to each director of
      Deep
      Well and granted 187,500 options to acquire common shares to a director of
      a
      subsidiary of Deep Well. The exercise price of such options is $0.71 per share.
      In each case, the vesting of such director options will occur only if the holder
      of the options continues to provide services to the Company during the immediate
      annual period preceding the relevant vesting date. The options will terminate
      at
      the close of business five years from the date of grant. In addition, on
      November 28, 2005, the Board granted 390,000 options to acquire common shares
      to
      certain corporations providing consulting services to the Company. Each of
      such
      consultants are wholly owned by directors of the Company. The exercise price
      of
      such options is $0.71 per share. In each case, the vesting of such consultant
      options will occur only if the holder of the options continues to provide
      services to the Company on the relevant vesting date. The options will terminate
      at the close of business five years from the date of grant.





**Sales
      of Unregistered Securities**





On
      September 10, 2003 in accordance with the terms of the bankruptcy order, Deep
      Well was, without solicitation of or notice to shareholders, authorized to
      issue
      (i) 2,000,000 post-reverse split shares of its restricted common stock, and
      (ii)
      4,000,000 post-reverse split common shares, legend free, at the sole discretion
      of Deep Well. On September 10, 2003, Deep Well issued 2,000,000 post-reverse
      split shares of its restricted common stock to members of its new management.
      The shares were issued pursuant to Section 3 (a)7 of the Securities Act of
      1933.





From
      February 4, 2004 to February 6, 2004 in accordance with the terms of the
      bankruptcy order, Deep Well issued 4,000,000 post-reverse split, legend free,
      to
      22 purchasers for gross consideration of $50,000, or $0.0125 per share, which
      was paid into the bankruptcy court by the recipients of the shares. The shares
      were issued pursuant to Section 3 (a)7 of the Securities Act of
      1933.





On
      March
      10, 2005 Deep Well closed on a transaction pursuant to a certain Securities
      Purchase Agreement (herein after referred to as “SPA”), with two accredited
      investors pursuant to which we sold an aggregate of (i) 1,875,000 shares of
      Deep
      Well’s common stock, par value $.001 per share, at a purchase price of $.40 per
      share, and (ii) 750,000 warrants to purchase shares of Deep Well common stock,
      for an aggregate purchase price of $750,000. Deep Well issued the aforementioned
      securities to the investors pursuant to Rule 506 of Regulation D as promulgated
      under the Securities Act of 1933, as amended, and/or Section 4(2) of the Act.
      Each of the warrants is exercisable from March 10, 2005 until March 9, 2010,
      at
      an exercise price equal to $0.50 per share. The exercise price of the warrants
      will be adjusted from time to time upon the occurrence of certain events, as
      provided in the warrants. In addition, Deep Well entered into a Registration
      Rights Agreement (herein after referred to as “RRA”) with the investors, dated
      as of March 10, 2005, pursuant to which Deep Well is obligated to prepare and
      file a registration statement no later than 45 days after the closing date
      registering the number of shares of our common stock which is at least equal to
      (i) the aggregate number of shares of common stock issued under the SPA plus
      (ii) 125% of the aggregate number of shares of common stock issuable upon
      exercise of the warrants. Deep Well must use its reasonable best efforts to
      cause the registration statement to become effective as soon as practicable
      following the filing, but in no event later than 120 days after the closing
      date. If the registration statement is not filed within 45 days after the
      closing date or declared effective within the time specified in the preceding
      paragraph, Deep Well is required to make payments to the investors equal to
      2%
      of the purchase price and an additional 2% of the purchase price for each
      subsequent 30-day period as to which the registration statement has not be
      filed
      or declared effective. Effective on January 22, 2007, and filed on form 8-K
      on
      January 31, 2007, the Company entered into a Settlement Agreement and Release
      of
      All Claims (the “Settlement Agreement”) with the investors who were in receipt
      of the above issued shares with respect to allegations made by the investors
      that the Company had breached the SPA and the RRA.





The
      Settlement Agreement provides, without any party acknowledging any liability,
      for:





·
            the
                amendment of the SPA to delete certain restrictions on the Company’s
                ability to enter into any future
                financings;




23





·
            the
                termination of the RRA;·
            the
                issuance to the Investors of an aggregate of 1,600,000 (one million
                six
                hundred thousand) shares of common stock of the Company (the “Shares”),
                including the granting of certain piggyback registration rights related
                thereto; and·
            the
                full and final settlement of all existing or potential claims between
                the
                Company and the Investors arising under the SPA and the
                RRA.





The
      foregoing summary is qualified in its entirety by the terms of the complete
      Settlement Agreement, which is incorporated herein by reference.





On
      August
      12, 2005 pursuant to subscription agreements, we the Company closed a private
      placement to three investors of an aggregate of 500,000 units at a price of
      $0.40 per unit, for total proceeds of $200,000. Each unit consists of one common
      share and one common share purchase warrant, with each warrant entitling its
      holder to acquire one share of our common stock at an exercise price of $0.60.
      The exercise price of the warrants will be adjusted from time to time upon
      the
      occurrence of certain events, as provided in the warrants. The warrants expire
      on August 12, 2008. The units were issued pursuant to Regulation S. In addition,
      on August 12, 2005, pursuant to a Debt Settlement Agreement, one holder of
      $84,378.40 of our indebtedness exchanged its indebtedness for 210,946 units
      at a
      deemed exchange price of $0.40 per unit. Each unit consists of one common share
      and one common share purchase warrant, with each warrant entitling its holder
      to
      acquire one common share of Deep Well, at an exercise price of $0.60. The
      exercise price of the warrants will be adjusted from time to time upon the
      occurrence of certain events, as provided in the warrants. The warrants expire
      on August 12, 2008. The units were issued pursuant to Section 3(a)(9) of the
      Securities Act of 1933 Act and Regulation S.





On
      October 11, 2005 pursuant to subscription agreements, the Company closed a
      private placement to three investors of an aggregate of 3,150,000 units at
      a
      price of $0.40 per unit, for total gross proceeds of $1,260,000. Each unit
      consists of one common share and one common share purchase warrant, with each
      warrant entitling its holder to acquire one share of our common stock at an
      exercise price of $0.60 per common share. The exercise price of the warrants
      will be adjusted from time to time upon the occurrence of certain events, as
      provided in the warrants. The warrants expire on October 11, 2008. The units
      were issued pursuant to Regulation S. In connection with the private placement,
      a finder’s fee of $36,000 was paid to Nika Management S.A., resulting in total
      net proceeds to our company from the private placement of
      $1,224,000.





On
      January 13, 2006 pursuant to subscription agreements, we closed a private
      placement to three investors of an aggregate of 51,200 units at a price of
      $1.50
      per unit, for total gross proceeds of $76,800. Each unit consists of one common
      share and one common share purchase warrant, with each warrant entitling its
      holder to acquire one share of our common stock at an exercise price of $2.25
      per common share. The exercise price of the warrants will be adjusted from
      time
      to time upon the occurrence of certain events, as provided in the warrants.
      The
      warrants expire on January 13, 2009. The units were issued pursuant to
      Regulation S. In addition, on January 13, 2006, pursuant to a Debt Settlement
      Agreement, one holder of $38,293 of our indebtedness exchanged its indebtedness
      for 21,800 units at a deemed exchange price of $1.50 per unit. Each unit
      consists of one common share and one common share purchase warrant, with each
      warrant entitling its holder to acquire one common share of Deep Well, at an
      exercise price of $2.25. The exercise price of the warrants will be adjusted
      from time to time upon the occurrence of certain events, as provided in the
      warrants. The warrants expire on January 13, 2009. The units were issued
      pursuant to Section 3(a)(9) of the 1933 Act and Regulation S. In connection
      with
      the private placement, a finder’s fee of $7,680 was paid to Solomon Group Inc.,
      resulting in total net proceeds to our company from the private placement of
      $69,120.





On
      February 23, 2006 pursuant to an exercised option agreement the Company entered
      into on June 7, 2005, the Company issued 4,707,750 Deep Well common shares
      in
      exchange for 156,925 of the outstanding preferred shares of Northern. The common
      shares were issued pursuant to Section 3(a)(9) of the 1993 Act.





On
      June
      13, 2006 further pursuant to an exercised option agreement the Company entered
      into on June 7, 2005, the Company issued 2,867,250 Deep Well common shares
      in
      exchange for 95,575 of the outstanding preferred shares of Northern. The common
      shares were issued pursuant to Section 3(a)(9) of the 1993 Act.





On
      July
      28, 2006 a warrantholder of the Company acquired 100,000 common shares upon
      exercising warrants at an exercise price of $0.60 per common share for total
      gross proceeds to the Company of $60,000. The common shares were issued pursuant
      to Section 4(2) under the 1933 Act.





On
      September 11, 2006 a warrantholder of the Company acquired 50,000 common shares
      upon exercising warrants at an exercise price of $0.60 per common share for
      total gross proceeds to the Company of $30,000. The common shares were issued
      pursuant to Section 4(2) under the 1933 Act.




24




**ITEM
      6.**  **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS**





*You
      should read the following discussion and analysis in conjunction with our 2004
      audited consolidated financial statements. 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.*





*Our
      financial statements and information are reported in U.S. dollars and are
      prepared based upon American generally accepted accounting
      principals.*





**Executive
      Overview**





We
      are an
      emerging independent junior oil and gas exploration and development company
      headquartered in Edmonton, Alberta, Canada. The Company’s immediate corporate
      focus is to develop the existing land base that it presently controls in the
      Peace River Oil Sands area in North Central Alberta. The Company beneficially
      owns an 80% working interest (subject to a Farmout Agreement with Signet) in
      69.5 contiguous sections (43,964 gross acres or 17,792 gross hectares) in the
      Sawn Lake block of the Peace River Oil Sands area located in Alberta, Canada.
      On
      February 25, 2005, we entered into a Farmout Agreement. This agreement allows
      Signet to earn up to a 40% working interest in the farmout lands (50% of the
      Company’s share). Among other things the agreement called for Signet to drill 10
      wells, pay the Company a $2,000,000 US prospect fee and give us 33.33% of the
      outstanding shares of Surge on the day the agreement was signed. On November
      15,
      2005, the Company and its farmout partner Signet amended the Farmout Agreement
      and further agreed to acknowledge the original Farmout Agreement. Signet will
      own a 40% working interest once the obligations under the Farmout Agreement
      have
      been satisfied. In accordance with the Farmout Agreement, Signet, must drill
      10
      wells prior to February 25, 2008, at no cost to the Company, to fully earn
      their
      40% working interest in the project. In addition, the Company owns approximately
      14%, fully diluted, of the common shares of its farmout partner and operator
      Signet.





Upon
      emergence from Chapter 11 proceedings on September 11, 2003, Deep Well adopted
      fresh-start reporting in accordance with the American Institute of Certified
      Public Accountants Statement of Position 90-7, Financial Reporting By Entities
      in Reorganization Under the Bankruptcy Code. In connection with the adoption
      of
      fresh-start reporting, a new entity was created for financial reporting
      purposes. For financial reporting purposes, Deep Well adopted the provisions
      of
      fresh-start reporting effective September 10, 2003. All periods presented prior
      to September 10, 2003, have been designated Predecessor Company. Since
      our
      inception date we have not earned any revenues from our operations. As of
      September 30, 2004 we had $499,765 cash on hand and liabilities in the amount
      of
      $304,331. Since our inception we have incurred a net loss of $575,754. The
      net
      loss is attributable to us having no revenues to offset our expenses from fees
      related to the creation and operation of our business.





During
      the fiscal year 2005 we entered into an agreement with Signet Energy Inc.,
      whereby Signet, as operator, is to drill and complete 10 wells prior to February
      25, 2008. Under this agreement Signet is obligating to pay our share of the
      costs associated with the first ten wells drilled on our leases. Currently
      our
      working capital is not sufficient to enable us to perform the recommended
      further exploration and development phases after the initial ten well program,
      and accordingly further finances will be required by us to continue work on
      our
      property.





Under
      the
      agreement with Signet, notice to the Company of Signet’s intent to drill the
      next option well was due on December 16, 2006. At this time, Signet has chosen
      not to elect to drill additional option wells to earn additional sections
      pursuant to the amended Farmout Agreement with the Company. Negotiations to
      amend the current Farmout Agreement are being considered.





**Plan
      of Operations to Date**





·
            In
                August 2004 Deep Well acquired 3 Peace River Oil Sands Development
                leases
                for a total of 31 sections covering 19,609 gross acres (7,936 gross
                hectares) with a net working interest of 80%.





·
            In
                September 2004 a $1,000,000 unsecured convertible debenture was issued
                for
                net cash of $879,000, after commissions of
                $121,000.





·
            In
                December 2004 Deep Well signed a Joint Operating Agreement with 1132559
                Alberta Ltd.




25




·
            In
                February 2005 the Company signed a Farmout Agreement with Signet,
                whereby
                Signet must drill 10 wells, at no cost to the Company, to earn up
                to a 40%
                interest in the joint lands and pay a prospect fee of $2,000,000
                ($1,000,000 being deferred).  ·
            In
                March 2005 Deep Well raised $750,000 through a security purchase
                and
                registration rights agreement.





·
            In
                June 2005 through an acquisition of Northern, Deep Well more than
                doubled
                its oil sands lease holdings, in which Deep Well acquired a net 80%
                working interest in an additional 3 Peace River Oil Sands Development
                leases, 1 Oil Sands permit and 1 Petroleum and Natural Gas License
                for a
                total of 38.5 sections covering 24,354 gross acres (9,856 gross
                hectares).





·
            In
                June 2005 a new Board of Directors was elected by written resolution
                of a
                majority of shareholders.





·
            In
                July 2005 the directors re-appointed Mr. Curtis Sparrow to the
                Board.





·
            In
                July 2005 the company moved its corporate head office to Edmonton,
                Alberta. The Company retained an office in Calgary, Alberta for
                Operations.





·
            In
                August 2005 the Company raised $200,000 through a private placement
                and
                issued shares pursuant to a debt settlement arrangement of $84,378
                of our
                indebtedness.





·
            In
                September 2005 the Company began drilling their first well at Sawn
                Lake,
                Alberta Canada.





·
            In
                October 2005 the Company raised $1,260,000 through a private
                placement.





·
            In
                November 2005 the Company amended the Farmout Agreement with Signet,
                in
                which the $1,000,000 deferred portion of the $2,000,000 prospect
                fee must be paid immediately, along with 7.55 million common shares
                of Signet. At September 30, 2006, the Company owned 17.84% of
                the common shares of Signet.





·
            In
                January 2006 the Company raised $76,800 through a private placement
                and
                issued shares pursuant to a debt settlement arrangement of $38,293
                of our
                indebtedness.





·
            In
                April 2006 the directors re-appointed Mr. David Roff to the
                Board.





·
            In
                August and September of 2005 the Company drilled 2 more wells at
                Sawn
                lake, Alberta.





·
            In
                October 2006 the first 3 wells drilled by the Company were suspended
                for
                further evaluation.





·
            In
                January 2007 the Company entered into a settlement agreement and
                release
                of all claims with certain
                investors.





**Plan
      of Operations over the next 12 months**





The
      Company’s current and near term development plan is to drill in accordance with
      the current Farmout Agreement, in which our farmout partner and operator,
      Signet, must drill 7 more horizontal wells by February 25, 2008 at no cost
      to us
      in order to fully earn their 40% working interest in the entire Sawn Lake
      project. Negotiations to amend the current Farmout Agreement are being
      considered. The early focus of the Company’s drilling program is to define the
      heavy oil reservoir one section at a time and attempt to initiate production
      in
      order to generate an early positive cash flow. Of the ten well program under
      our
      Farmout Agreement the initial test well and two additional option wells have
      been drilled and 7 wells are waiting on drilling. We are further evaluating
      these wells to determine and consider the best technology under which oil can
      be
      produced from the Sawn Lake project.





**Reorganization
      and Raising Capital**





On
      February 19, 2003 the Company filed a Petition for Relief under Chapter 11
      of
      the U.S. Bankruptcy Code in the United States Bankruptcy Court in and for the
      Eastern District of New York titled In re: Allied Devices Corporation, et al.,
      Chapter 11, Case No. 03-80962-511 “the Bankruptcy Action”. On September 10,
      2003, after notice to all creditors and a formal hearing, U.S. Bankruptcy Judge
      Melanie L. Cyganowski issued an “Order Confirming Liquidating Plan of
      Reorganization” in the Bankruptcy Action. In conjunction with that Bankruptcy
      Order, the Company’s liabilities, among other things, were paid off and
      extinguished.





During
      fiscal years 2005 and 2006 we financed our business operations through private
      offerings of our common stock and realized gross proceeds of $2,286,800 from
      these offerings. In these offerings we sold units comprised of common stock
      and
      warrants to purchase additional common stock. At September 30, 2006 we had
      an
      aggregate of 4,533,946 outstanding warrants from these offerings with exercise
      prices ranging from $0.50 to $2.25. If all of the warrants sold in the offerings
      are exercised per their terms, we may realize aggregate proceeds of
      approximately $2,765,818. However, the warrant holders have complete discretion
      as to when, or if, the warrants are exercised and we cannot guarantee that
      the
      warrant holders will exercise any of the warrants.





The
      Company currently lacks the capital resources to carry out its business plan. We
      anticipate that we will raise funds during the next twelve months through
      private placements of our common stock under exemptions from the registration
      requirements provided by Canadian, United States and state and provincial
      securities laws. The purchasers and manner of issuance will be determined
      according to our financial needs and the available exemptions. We also note
      that
      if we issue more shares of our common stock, then our stockholders may
      experience dilution in the value per share of their common stock. We may not
      be
      able to raise sufficient funding from stock sales for long term operations
      and,
      if so, we may be forced to delay our business plans until adequate funding
      is
      obtained. We believe debt financing will not be an alternative for funding
      in
      the exploration stage of our Company due to the risky nature of business. The
      lack of tangible assets until such time as an economically viable well can
      be
      demonstrated, places debt financing beyond the credit-worthiness required by
      most banks.




26




**Significant
      Changes in Number of Employees**





The
      Company currently has one full time employee, one part time employee and four
      prime subcontractors. For
      further information on subcontractors see “Compensation Arrangements for
      Executive Officers” under item 10 “Executive Compensation” herein described in
      this report. We
      expect
      to hire from time to time, independent consultants and contractors during the
      stages of implementing our plans.





**Industry
      Outlook**





Alberta
      oil sands property has become an increasingly sought after and valuable asset.
      According to the Alberta Energy Utilities Board, the average price per hectare
      paid for oil sands leases was about 5.5 times higher in 2005-06 than in 2004-05.
      In 2004-05, the average price per hectare was $314.04 Cdn; and in 2005-06,
      it
      was up to $1,725.22 Cdn per hectare. Oil sands mineral rights for 291,518
      hectares were sold in 2004-05, and for a record 741,809 hectares in 2005-06.
      With very high prices per hectare and the large number of hectares sold,
      revenues from oil sands lease sales in 2005-06 were at a record high, at almost
      $1.3 billion Cdn. This was about 14 times higher than in 2004-05, when revenues
      from oil sands lease sales were about $92 million Cdn. In February 2006 Royal
      Dutch Shell paid $496 million Cdn for 10 oil sands leases covering 88,576
      hectares, this property is located approximately 140 kilometers east of our
      acreage where we hold an 80% (subject to a Farmout Agreement) working interest
      in 17,792 gross hectares. In May of 2006 Shell Canada acquired BlackRock
      Ventures Inc. for approximately $2.4 billion Cdn. In September 2006 Royal Dutch
      Shell once again purchased an additional 5 oil sands leases for $101 million
      Cdn.





As
      the
      world’s oil supplies become depleted, we believe that there will be more
      reliance on heavy oil. No assurance can be made or given that we will
      successfully engage in the oil and gas business or the heavy oil business,
      nor
      can any assurance be given that even if we are remotely or relatively
      successful, that we will have a profit or that our stock will appreciate in
      value.





**Off
      Balance Sheet Arrangements**





The
      Company does not have any off-balance sheet arrangements.


27




**MADSEN & ASSOCIATES, CPA’S
              INC.**
            
            684
                East Vine St. #3Certified Public Accountants and Business
              Consultants
            
            Murray,
                Utah 84107Telephone
                801-268-2632Fax
                801-262-3978




Board
      of
      Directors


Deep
      Well
      Oil & Gas, Inc.


Edmonton,
      Alberta, Canada





**REPORT
      OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS**





We
      have
      audited the accompanying balance sheet of Deep Well Oil & Gas, Inc.
      (exploration stage company) at September 30, 2004 and the statements of
      operations, stockholders’ equity, and cash flows for the year ended September
      30, 2004 and the period September 10, 2003 to September 30, 2003 and the period
      September 10, 2003 (inception of exploration stage) to September 30, 2004.
      These
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audit in accordance with auditing standards generally accepted
      in
      the United States of America. Those standards require that we plan and perform
      the audit to obtain reasonable assurance about whether the financial statements
      are free of material misstatement. An audit includes examining, on a test basis,
      evidence supporting the amounts and disclosures in the financial statements.
      An
      audit also includes assessing the accounting principles used and significant
      estimates made by management, as well as evaluating the overall financial
      statement presentation. We believe that our audit provides a reasonable basis
      for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Deep Well Oil & Gas, Inc. at
      September 30, 2004 and the statements of operations, and cash flows for the
      year
      ended September 30, 2004 and the period September 10, 2003 to September 30,
      2003
      and the period September 10, 2003 (inception of exploration stage) to September
      30, 2004 in conformity with accounting principles generally accepted in the
      United States of America




Salt
                  Lake City, UtahNovember
                  29, 2006
              /s/
                  Madsen & Associates, CPA’s Inc.




28


**DEEP
      WELL OIL & GAS, INC.**


**(Exploration
      Stage Company)**


**BALANCE
      SHEET**


**September

      30, 2004**





**ASSETS**CURRENT
                ASSETSCash
            
            $
            499,765Accounts
                receivable
            
            
            17,879Prepaid
                expenses
            
            
            34,641Total
                Current Assets
            
            
            552,285LOANS
                RECEIVABLE - related parties
            
            
            119,790OIL
                AND GAS PROPERTIES
            
            
            111,392$
            783,467**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**CURRENT
                LIABILITIESAccounts
                payable - related parties
            
            $
            128,525Account
                payable
            
            
            64,500Notes
                and accrued interest payable
            
            
            111,306Total
                Current Liabilities
            
            
            304,331CONVERTIBLE
                DEBENTURES AND ACCRUED INTEREST
            
            
            1,004,890STOCKHOLDERS’
                DEFICIENCYCommon
                stock300,000,000
                shares authorized at $0.001 par value;31,236,468
                shares issued and outstanding
            
            
            31,236Capital
                in excess of par value
            
            
            18,764Deficit
                accumulated during exploration stage - datedSeptember
                10, 2003 - note 1
            
            
            (575,754
            )Total
                Stockholders’ Deficiency
            
            
            (525,754
            )$
            783,467


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


29


**DEEP
      WELL OIL & GAS, INC.**


**(Exploration
      Stage Company)**


**STATEMENT
      OF OPERATIONS**


**For
      the Year Ended September 30, 2004 and the Period**


**September
      10, 2003 to September 30, 2003 and the Period**


**September
      10, 2003 (inception of exploration stage) to September 30,
      2004**





**Sept.
                30, 2004**
            
            **Sept.
                30, 2003**
            
            **Sept.
                10, 2003 to Sept. 30, 2004**REVENUES
            
            $
            -
            
            $
            -
            
            $
            -EXPENSESAdministrative
            
            
            544,199
            
            
            50,000
            
            
            594,199NET
                LOSS FROM OPERATIONS
            
            
            (544,199
            )
            
            (50,000
            )
            
            (594,199
            )OTHER
                INCOME AND EXPENSEInterest
            
            
            (6,421
            )
            
            -
            
            
            (6,421
            )Settlement
                of debt
            
            
            24,866
            
            
            -
            
            
            24,866NET
                LOSS
            
            $
            (525,754
            )
            $
            (50,000
            )
            $
            (575,754
            )NET
                LOSS PER COMMON SHAREBasic
                and diluted
            
            $
            (0.02
            )
            $
            -WEIGHTED
                AVERAGEOUTSTANDING
                SHARES - stated in 1,000’sBasic
            
            
            31,236
            
            
            36,020





The
      accompanying notes are an integral part of these financial
      statements


30


**DEEP
      WELL OIL & GAS, INC.**


**(Exploration
      Stage Company)**


**STATEMENT
      OF CHANGES IN STOCKHOLDERS’ EQUITY**


**For
      the Period September 10, 2003 (inception of exploration stage) to September
      30,
      2004**





**Common
                Stock**
            
            **Capital
                Excess of**
            
            **Accumulated****Shares**
            
            **Amount**
            
            **Par
                Value**
            
            **Deficit**Balance
                September 10, 2003 - note 1
            
            
            991,912
            
            $
            992
            
            $
            (992
            )
            $
            -Issuance
                of common stock pursuantto
                bankruptcy agreementSeptember
                10, 2003
            
            
            36,019,556
            
            
            36,019
            
            
            13,981
            
            
            -Net
                operating loss for the periodSeptember
                10 to September 30, 2003
            
            
            -
            
            
            -
            
            
            -
            
            
            (50,000
            )Return
                and cancellation of common shares
            
            
            (5,775,000
            )
            
            (5,775
            )
            
            5,775
            
            
            -Net
                operating loss for the year endedSeptember
                30, 2004
            
            
            -
            
            
            -
            
            
            -
            
            
            (525,754
            )**Balance
                September 30, 2004**
            
            
            31,236,468
            
            $
            31,236
            
            $
            18,764
            
            $
            (575,754
            )




The
      accompanying notes are an integral part of these financial
      statements


31


**DEEP
      WELL OIL & GAS, INC.**


**(Exploration
      Stage Company)**


**STATEMENT
      OF CASH FLOWS**


**For
      the Year Ended September 30, 2004 and the Period**


**September
      10, 2003 to September 30, 2003 and the Period**


**September
      10, 2003 (inception of exploration stage) to September 30,
      2004**




**Sept.
                30, 2004**
            
            **Sept.
                30, 2003**
            
            **Sept.
                10, 2003 to Sept. 30, 2004****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            
            $
            (525,754
            )
            $
            (50,000
            )
            $
            (575,754
            )Adjustments
                to reconcile net loss to netcash
                provided by operating activitiesCommissions
                withheld from loan proceeds
            
            
            121,000
            
            
            **-**
            
            
            121,000Changes
                in accounts receivable
            
            
            (17,879
            )
            
            **-**
            
            
            (17,879
            )Changes
                in prepaid expenses
            
            
            (34,641
            )
            
            **-**
            
            
            (34,641
            )Changes
                in accounts payable
            
            
            204,336
            
            
            **-**
            
            
            204,336Net
                Change in Cash From Operations
            
            
            (252,938
            )
            
            **-**
            
            
            (302,938
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Loans
                - related parties
            
            
            (119,790
            )
            
            **-**
            
            
            (119,790
            )Purchase
                of oil and gas properties
            
            
            (111,392
            )
            
            **-**
            
            
            (111,392
            )(231,182
            )
            
            **-**
            
            
            (231,182
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Loans
                - related parties
            
            
            104,885
            
            
            **-**
            
            
            104,885Proceeds
                from issuance of common stock
            
            
            **-**
            
            
            50,000
            
            
            50,000Proceeds
                from debentures net of commissions
            
            
            879,000
            
            
            **-**
            
            
            879,000983,885
            
            
            50,000
            
            
            1,033,885Net
                change in Cash
            
            
            499,765
            
            
            **-**
            
            
            499,765Cash
                at Beginning of Period
            
            
            **-**
            
            
            **-**
            
            
            **-**Cash
                at End of Period
            
            $
            499,765
            
            $
            -
            
            $
            499,765**SUPPLEMENTAL
                DISCLOSURES**Interest
                expense
            
            $
            6,421




The
      accompanying notes are an integral part of these financial
      statements


32


**DEEP
      WELL OIL & GAS, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**September
      30, 2004**




**Note
      1.**   **ORGANIZATION**





The
      Company, and its former subsidiaries, were engaged in the manufacture and
      distribution of standard and custom precision mechanical assemblies and
      components throughout the United States.





On
      February 19, 2003 the Company file a petition for bankruptcy in the United
      States Bankruptcy Court under Chapter 11 in the Eastern District of New York
      titled “Allied Devices Corporation, Case No. 03-80962-511”. The Company emerged
      from bankruptcy pursuant to a Bankruptcy Court Order entered on September 10,
      2003 with no remaining assets or liabilities.





The
      terms
      of the bankruptcy settlement included (1) a reverse common stock split of 30
      shares of outstanding stock for one share (2) increasing the authorized common
      capital stock from 25,000,000 to 50,000,000 shares with a par value of $.001
      (3)
      a change in the name of the Company from “Allied Devices Corporation” to “Deep
      Well Oil & Gas, Inc.” (4) and the authorization for the issuance of
      2,000,000 pre-split restricted common shares and 4,000,000 pre-split common
      shares in exchange for $50,000, which was paid into the bankruptcy court by
      the
      recipients of the shares.





Restated
      and amended articles of incorporation completing the terms of the bankruptcy
      have been filed in the state of Nevada.





Upon
      emergence from bankruptcy proceedings, the Company adopted fresh-start reporting
      in accordance with the Statement of Position 90-7. In connection with the
      adoption of fresh-start reporting, a new entity was created, for financial
      reporting purposes, effective September 10, 2003. In adopting the requirements
      of fresh-start reporting the company was required to value its remaining assets
      and liabilities at fair value and eliminate any accumulated deficit with the
      statement of operations to begin on September 10, 2003. The Company’s current
      activity is the exploration of oil and gas properties which is not comparable
      to
      the Predecessor Company’s operations, therefore, there is no basis for
      comparisons between the Company’s current activities and the Predecessor
      Company’s operations.




**Note
      2.**   **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Accounting
      Methods**





The
      Company recognizes income and expenses based on the accrual method of
      accounting.





**Dividend
      Policy**





The
      Company has not yet adopted a policy regarding payment of
      dividends.





**Financial
      and Concentrations Risk**





The
      Company does not have any concentration or related financial credit risk except
      that cash in maintained in banks over the insured amounts of $100,000, however,
      the amounts are maintained in banks of high quality.





**Income
      Taxes**





The
      Company utilizes the liability method of accounting for income taxes. Under
      the
      liability method deferred tax assets and liabilities are determined based on
      the
      differences between financial reporting and the tax bases of the assets and
      liabilities and are measured using the enacted tax rates and laws that will
      be
      in effect, when the differences are expected to reverse. An allowance against
      deferred tax assets is recorded, when it is more likely than not, that such
      tax
      benefits will not be realized.


33





**Note
      2.**   **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (continued)**





On
      September 30, 2004, the Company had a net operating loss available for carry
      forward of $575,754. The income tax benefit of approximately $173,000 from
      the
      loss carry forward has been fully offset by a valuation reserve because the
      use
      of the future tax benefit is undeterminable since the Company has no operations.
      The loss carryover will expire in 2024.





**Revenue
      Recognition**





The
      Company is in the business of exploring for, developing, producing and selling
      crude oil and natural gas. Crude oil revenue is recognized when the product
      is
      taken from the storage tanks on the lease and delivered to the purchaser.
      Natural gas revenues are recognized when the product is delivered into a third
      party pipeline downstream of the lease. Occasionally the Company may sell
      specific leases and the gain or loss associated with these transactions will
      be
      shown separately from the profit or loss from the operations or sales of oil
      and
      gas products.





**Advertising
      and Market Development**





The
      Company expenses advertising and market development costs as
      incurred.





**Basic
      and Diluted Net Income (Loss) Per Share**





Basic
      net
      income (loss) per share amounts are computed based on the weighted average
      number of shares actually outstanding. Diluted net income (loss) per share
      amounts are computed using the weighted average number of common shares and
      common equivalent shares outstanding as if shares had been issued on the
      exercise of the common share rights unless, the exercise becomes antidilutive
      and then only the basic per share amounts are shown in the report.





**Financial
      Instruments**





The
      carrying amounts of financial instruments are considered by management to be
      their estimated fair values due to their short term maturities.





**Foreign
      Currency Translation**





Part
      of
      the transactions of the Company were completed in Canadian dollars and have
      been
      translated to US dollars as incurred, at the exchange rate in effect at the
      time, and therefore, no gains or losses are recognized from the translations.
      US
      dollars are considered to be the functional currency.





**Estimates
      and Assumptions**





Management
      uses estimates and assumptions in preparing financial statements in accordance
      with generally accepted accounting principles. Those estimates and assumptions
      affect the reported amounts of the assets and liabilities, the disclosure of
      contingent assets and liabilities, and the reported revenues and expenses.
      Actual results could vary from the estimates that were assumed in preparing
      these financial statements.





**Environmental
      Requirements**





At
      the
      report date environmental requirements related to the mineral claims acquired
      are unknown and therefore an estimate of any future cost cannot be
      made.





**Recent
      Accounting Pronouncements**





The
      Company does not expect that the adoption of other recent accounting
      pronouncements will have a material impact on its financial
      statements.


34


**Note
      3.**   **OIL
      AND GAS PROPERTIES**





The
      Company has acquired a 40% interest in three oil and gas properties, after
      a
      farmout agreement on February 25, 2005, located in North Central Alberta, Canada
      with a life of 15 years for $111,392. The terms include certain commitments
      related to oil sand leases which require the payments of rents as long as the
      leases are non-producing. As of September 30, 2004, the payments due under
      this
      commitment are as follows:





2005
            
            $
            8,4692006
            
            
            8,4692007
            
            
            8,4692008
            
            
            8,4692009
            
            
            8,469Subsequent
            
            
            84,690





The
      Company follows the successful efforts method of accounting for costs of oil
      and
      gas properties. Under this method, acquisition costs of oil and gas properties
      and costs of drilling and equipping wells are initially capitalized and if
      subsequently determined to be unsuccessful, are expensed. All other explorations
      costs, including geological and geophysical costs and carrying and maintenance
      costs, are charged to exploration expenses when incurred.





Producing,
      non-producing, and unproven properties, are assessed annually, or more
      frequently as economic events indicates, for potential impairment. This consists
      of comparing the carrying value of the asset with its fair market value, based
      on the expected future cash flows. Estimates of expected future cash flows
      represent management’s best estimated based on reasonable assumptions. Proven
      oil and gas properties are reviewed for impairment on a field-by field basis.
      Management evaluates the carrying value of non-producing properties and may
      consider them impaired for lack of drilling activities. No impairment losses
      were recognized in fiscal 2004.





Capitalized
      costs of proven oil and gas properties will be expensed using the
      unit-of-production method when the property is placed in
      production.





Substantially
      all of the Company’s oil and gas activities are conducted jointly with others.
      This report reflects only the Company’s proportionate interest in such
      activities.




**Note
      4.**   **NOTES
      AND ACCRUED INTEREST PAYABLE**





The
      Company has demand, 12% interest bearing loans outstanding of $111,306,
      including accrued interest payable to September 30, 2004.




**Note
      5.**   **CONVERTIBLE
      DEBENTURES AND ACCRUED INTEREST PAYABLE**





During
      September 2004 a $1,000,000 unsecured convertible debenture was issued for
      net
      cash of $879,000, after commissions of $121,000. The debenture bears interest
      at
      8.5% per year and is due on September 6, 2007. The debenture is convertible
      into
      common shares at the rate of one common share and one common share warrant,
      at
      the option of the debenture holder, with the conversion terms for the stock
      and
      the warrant shown in the following:





-
      October
      6, 2004 to September 6, 2005 at $1.00 per share


-
      September 7, 2005 to September 6, 2006 at $1.50 per share


-
      September 7, 2006 to September 6, 2007 at $2.00 per share





If
      at any
      time during the term of the debenture the average bid and ask price of the
      Company’s common shares is three dollars per share or more for thirty
      consecutive calendar days, the Company will have the option to convert the
      outstanding debentures into common stock a the prices above. The amount shown
      in
      the balance sheet includes accrued interest payable on September 30,
      2004.


35


**Note
      5.**   **CONVERTIBLE
      DEBENTURES AND ACCRUED INTEREST PAYABLE (continued)**





The
      debentures were paid in full during December 2005 with the proceeds from the
      issuance of common capital stock and the warrants were cancelled as part of
      the
      payoff, therefore, no value was recognized for the warrants.





**Note
      6.**   **SIGNIFICANT
      TRANSACTIONS WITH RELATED PARTIES**





Officers,
      directors, their families, or their controlled entities, have acquired 25%
      of
      the Company’s outstanding common capital stock. Included in the accounts payable
      and accrued liabilities are amounts payable to related parties of $128,525
      resulting from directors fees and expenses paid for the Company. The amounts
      due
      are unsecured, non-interest bearing and have no fixed terms of
      repayment.





There
      are
      no interest, demand loans due from related parties $119,790.





**Note
      7.**   **COMMON
      CAPITAL STOCK**





The
      outstanding common capital stock on February 19, 2003 (the date the Company
      filed for bankruptcy) was 5,048,742 pre-split shares. As part of the settlement
      from the bankruptcy the Company completed a reverse stock split, reducing the
      outstanding shares to 165,233, and the rights to issue 6,000,000 common shares,
      in exchange for $50,000. (note 1)





On
      February 27, 2004, (effective March 10, 2004) the Company completed a forward
      stock split of its common stock at the rate of two shares for each outstanding
      share and on May 7, 2004 (effective May 14, 2004) a forward stock split of
      three
      shares for each outstanding share.





In
      connection with the stock splits the authorized common shares was increased
      to
      300,000,000 from 50,000,000 with a par value of $.001.





The
      equivalent post split shares outstanding are shown from inception with a par
      value of $.001.





**Note
      8.**   **SUBSEQUENT
      EVENT**





On
      June
      7, 2005, the Company acquired all of the outstanding common capital stock of
      Northern Alberta Oil Ltd. “Northern”, a privately held Alberta, Canada,
      Corporation, (formerly Mikwec Energy Canada Ltd.), and six options to acquire
      all of the outstanding preferred stock, in exchange for 18,208,875 newly issued
      restricted common shares of the Company, which represents 37% of the outstanding
      stock of the Company after the acquisition.





The
      acquisition was reported using the purchase method of accounting. The purchase
      price was considered to be $2,572,869, based on the estimated fair value of
      the
      shares given in exchange, and was allocated among the estimated fair values
      of
      the assets and liabilities of Northern on June 7, 2005 as follows:





**Book
                Value**
            
            **Fair
                Value**Current
                assets
            
            $
            42,565
            
            $
            42,565Oil
                and Gas properties
            
            
            965,808
            
            
            2,530,304Less
                liabilities
            
            
            -
            
            
            -Total
            
            $
            1,008,373
            
            $
            2,572,869




36


**Note
      8.**   **SUBSEQUENT
      EVENT (continued)**





Included
      in the following are the unaudited combined pro-forma balance sheets of Deep
      Well Oil and Gas, Inc. and Northern Alberta Oil Ltd. and the combined statements
      of operations for the year ended September 30, 2005, as if the acquisition
      of
      Northern had taken place on October 1, 2004. The unaudited pro forma financial
      information is not necessarily indicative of any future results.





**Deep
                Well Oil & Gas, Inc.**
            
            **Northern
                Alberta Oil Ltd.**
            
            **Pro
                Forma Adjustments**
            
            **Notes**
            
            **Combined
                Totals**BALANCE
                SHEETSASSETSCurrent
                assets
            
            $
            552,285
            
            $
            4,891
            
            $
            -
            
            
            
            
            $
            557,176Oil
                and gas properties
            
            
            119,790
            
            
            965,808
            
            
            1,564,496
            
            
            a)
            
            
            2,650,094Loans
                receivable
            
            
            111,392
            
            
            135,043
            
            
            (84,437
            )
            
            b)
            
            
            161,998$
            783,467
            
            $
            1,105,742
            
            $
            1,480,059
            
            
            
            
            $
            3,369,268LIABILITITESCurrent
                and long term liabilities
            
            $
            1,309,221
            
            $
            1,124,856
            
            $
            (84,437
            )
            
            b)
            
            $
            2,349,640SHAREHOLDER’S
                EQUITY
            
            
            (525,754
            )
            
            (19,114
            )
            
            1,564,496
            
            
            a)
            
            
            1,019,628$
            783,467
            
            $
            1,105,742
            
            $
            1,480,059
            
            
            
            
            $
            3,369,268Pro
                forma adjustmentsa)
              Acquisition of Northern Alberta Oil Ltd.b)
              Inter-company transfersOPERATING
                STATEMENTSExpensesGeneral
                and administrative
            
            $
            681,399
            
            $
            815,803
            
            
            
            
            
            
            
            $
            1,497,202Interest
                expense
            
            
            91,677
            
            
            3,914
            
            
            
            
            
            
            
            
            95,591Net
                loss
            
            $
            (773,076
            )
            $
            (819,717
            )
            
            
            
            
            
            
            $
            (1,592,793
            )Loss
                Per Share - Basic and diluted
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (0.05
            )





On
      June
      7, 2005 Deep Well (parent), through its acquisition of Northern (subsidiary),
      acquired a net 80% working interest in 3 Peace River Oil Sands Development
      Leases, 1 Oil Sands Permit and 1 Petroleum and Natural Gas License for a total
      of 38.5 sections covering 24,354 gross acres (9,856 gross hectares). Through
      this acquisition the Company increased its position in the Peace River Oil
      Sands
      to 43,964 gross acres (17,792 gross hectares). Of the total acreage, 6.5
      sections are classified as the Oil Sands Permit and Petroleum and Natural Gas
      License, and was held by an injunction related to a court proceeding involving
      Northern and Classic Energy Inc. The permit and license have now been released
      and as of November 21, 2005 were transferred to Northern.





On
      November 15, 2005, the Company and its subsidiary, entered into an agreement
      to
      amend the farmout agreement with Signet Energy Inc. (“Signet”), a private
      company, owned by Surge Global Energy, Inc. (“Surge US”) (collectively “Surge”).
      Under this new amended farmout agreement Signet Energy Inc., as operator,
      assumed the farmout obligations, including completing, at its expense, the
      drilling of 10 wells to earn up to a 40% working interest in the Sawn Lake
      Oil
      Sands Project.


37


**Note
      8.**   **SUBSEQUENT
      EVENT (continued)**





On
      November 15, 2005, as part of the settlement of legal action the Company, and
      its subsidiary, and surge, agreed to amend the farmout agreement signed on
      February 25, 2005, between the Company, and Surge, that had previously been
      terminated by the Company (disclosed on Form 8-K on September 29, 2005). The
      amendments to the agreement provided that; (1) all conditions of the farmout
      agreement will be deemed to have been satisfied on September 25, 2005; (2)
      the
      earning period (i.e. the period during which Signet has to drill 10 wells)
      under
      the agreement will be extended until February 25, 2008; (3) Signet will have
      until September 25, 2006 to drill an option well; (4) an additional 6.5 sections
      of land will be added to the land subject to the agreement; (5) Signet will
      pay
      the Company $1,000,000 USD on November 15, 2005 in satisfaction of the prospect
      fee outstanding, instead of after drilling the second well as stated in the
      farmout agreement, and (6) no shares of Surge US will be issued to the Company.
      Instead, the Company or its subsidiaries will receive 7,550,000 common shares
      of
      Signet Energy Inc., bringing the Company’s ownership in its farmout partner to
      approximately 14% as of September 30, 2006.





**Sales
      of Unregistered Securities**





On
      March
      10, 2005, the Company issued 1,875,000 private placement common shares as $0.40
      per share and 750,000 warrants to purchase shares of our common stock, for
      an
      aggregate purchase price of $750,000. Each warrant is exercisable from March
      10,
      2005 until March 9, 2010, at an exercise price of $0.50 per share. The exercise
      price of the warrants will be adjusted from time to time upon the occurrence
      of
      certain events, as provided in the warrants. In addition, we entered into a
      Registration Rights Agreement with the investors, dated as of March 10, 2005,
      in
      which we are obligated to prepare and file a registration statement, no later
      than 45 days after the closing date, to register the number of shares of our
      common stock which is at least equal to (i) the aggregate number of shares
      of
      common stock issued under the Securities Purchase Agreement plus (ii) 125%
      of
      the aggregate number of shares of common stock issuable upon exercise of the
      warrants. We must use our reasonable best efforts to cause the registration
      statement to become effective as soon as practicable following the filing,
      but
      in no event later than 120 days after the closing date. If the registration
      statement is not filed within 45 days after the closing date, or declared
      effective within the time specified, we are required to make payments to the
      investors equal to 2% of the purchase price and an additional 2% of the purchase
      price for each subsequent 30-day period to which the registration statement
      has
      not be filed or declared effective.





On
      August
      12, 2005, we completed a private placement of 500,000 units at a price of $0.40
      per unit, for $200,000. Each unit consists of our common share and one common
      share purchase warrant, with each warrant entitling its holder to acquire one
      share of our common stock at an exercise price of $0.60. The exercise price
      of
      the warrants will be adjusted from time to time upon the occurrence of certain
      events, as provided in the warrants. The warrants expire on August 12, 2008.
      In
      addition, on August 12, 2005, pursuant to a Debt Settlement Agreement, one
      holder of $84,378.40 of our indebtedness exchanged its debt for 210,946 units
      at
      a price of $0.40 per unit. Each unit consists of one common share and one common
      share purchase warrant, with each warrant entitling the holder to acquire one
      common share of the Company at $0.60 per share. The exercise price of the
      warrants will be adjusted from time to time upon the occurrence of certain
      events, as provided in the warrants. The warrants expire on August 12, 2008.





On
      October 11, 2005, we completed a private placement of 3,150,000 units at a
      price
      of $0.40 per unit for $1,260,000. Each unit consists of one common share and
      one
      common share purchase warrant, with each warrant entitling its holder to acquire
      one share of our common stock at a price of $0.60 per share. The exercise price
      of the warrants will be adjusted from time to time upon the occurrence of
      certain events, as provided in the warrants. The warrants expire on October
      11,
      2008. In connection with the placement a finder’s fee of $36,000 was paid to
      Nika Management S.A.





On
      January 13, 2006, we completed a private placement of 51,200 units at a price
      of
      $1.50 per unit, for $76,800. Each unit consists of one common share and one
      common share purchase warrant, with each warrant entitling its holder to acquire
      one share of our common stock at an exercise price of $2.25 per common share.
      The exercise price of the warrants will be adjusted from time to time upon
      the
      occurrence of certain events, as provided in the warrants. The warrants expire
      on January 13, 2009. In addition, on January 13, 2006, pursuant to a Debt
      Settlement Agreement, one holder of $38,293 of our indebtedness exchanged its
      debt for 21,800 units at a price of $1.50 per unit. Each unit consists of one
      common share and one common share purchase warrant, with each warrant entitling
      its holder to acquire one common share of the Company at a price of $2.25.
      The
      exercise price of the warrants will be adjusted from time to time upon the
      occurrence of certain events, as provided in the warrants. The warrants expire
      on January 13, 2009. In connection with the private placement, a finder’s fee of
      $7,680 was paid to Solomon Group Inc.


38


**Note
      8.**   **SUBSEQUENT
      EVENT (continued)**





On
      February 23, 2006, pursuant to an exercise option agreement the Company entered
      into on June 7, 2005, the Company issued 4,707,750 of its common shares in
      exchange for 156,925 of the outstanding preferred shares of Northern Alberta
      Oil
      Ltd (subsidiary).





On
      June
      13, 2006 pursuant to an exercise option agreement the Company entered into
      on
      June 7, 2005, the Company issued 2,867,250 common shares in exchange for 95,575
      of the outstanding preferred shares of Northern Alberta Oil Ltd.
      (subsidiary)





On
      July
      28, 2006 a warrant holder of the Company acquired 100,000 common shares, upon
      exercising warrants, at an exercise price of $0.60 per share for $60,000.





On
      September 11, 2006 a warrant holder of the Company exercised 50,000 warrants
      for
      50,000 common shares at an exercise price of $0.60 per common share $30,000.





**Compensation
      to Directors**





On
      November 28, 2005, the Company adopted a stock-based compensation plan, under
      which each director would receive 75,000 shares upon becoming a director and
      an
      additional 100,000 shares for each year or part of a year served as a director.
      Directors of subsidiaries, who are not already directors of the Company, would
      receive 37,500 shares upon becoming a director and an additional 50,000 shares
      for each year or part of a year served as a director.





Since
      the
      acquisition of Northern Alberta Oil Ltd. the Company and Northern have entered
      into the following contracts with the following companies for the services
      of
      their officers.





1)
            Portwest
                Investments Ltd., a company owned 100% by Dr. Horst A. Schmid for
                providing services to the Company as Chief Executive Officer and
                President
                for $12,500 Cdn per month.





2)
            Concorde
                Consulting, a company owned 100% by Mr. Curtis J. Sparrow for providing
                services as Chief Financial Officer to the Company for $15,000 Cdn
                per
                month.





3)
            Trebax
                Projects Ltd., a company 100% owned by Mr. Cyrus Spaulding for providing
                services as Chief Operating Officer for the Company for $130 Cdn
                per
                hour.





4)
            Brave
                Consulting, a company 50% owned by Mr. David Roff for providing consulting
                services to the Company for $8,000 Cdn per
                month.





On
      November 28, 2005, the Board granted 390,000 options to each of the first three
      companies, listed above, to be vested one third each year over three years,
      to
      acquire 1,170,000 common shares of the Company at an options price of $0.71
      with
      an expiration date of five years from November 28, 2005.





**Note
      9.**   **LEGAL
      ACTIONS**





**Deep
      Well Oil & Gas, Inc. vs. Surge Global Energy, Inc.**





On
      October 13, 2005 Surge Global Energy, Inc. and Surge Global Energy (Canada)
      Ltd.
      (now known as Signet Energy Inc. “Signet”) collectively, (“Surge”) filed against
      us with a Notice of Motion filed in Court of Alberta, District of Calgary.
      The
      motion among other things, requested a declaration from Deep Well that Signet
      has complied with their obligations under a particular Farmout agreement and
      a
      declaration that Signet has earned 50% of Deep Well’s interest in lands located
      at LSD 01-36-091-13-W5M.





On
      October 14, 2005, Deep Well Oil & Gas, Inc. and Northern Alberta Oil Ltd.
      (collectively “Deep Well”) filed against Surge a lawsuit issued in the Alberta
      Court District of Calgary. The lawsuit among other things, seeks a declaration
      that the Farmout Agreement has been terminated, an order requesting Signet
      to
      reconvey to Deep Well title documents as defined in the Farmout Agreement,
      a
      declaration that Signet has failed to spud a test well pursuant to the terms
      of
      the Farmout, an order preventing Signet from entering the Farmout lands pending
      resolution to the lawsuit as well as other various declaratory and injunctive
      relief, including damages of $1,000,000 Cdn for trespass and punitive damages
      of
      $250,000 Cdn.


39


**Note
      9.**   **LEGAL
      ACTIONS (continued)**





On
      October 21, 2005, Deep Well and Surge agreed to a consent order in the Court
      of
      Alberta, district of Calgary whereby both parties agreed to consolidate their
      actions. The consolidated action would continue under the Deep Well action
      and
      would be tried at the same time.





On
      November 15, 2005, as part of a restructuring of Signet both parties mutually
      agreed to dismiss their lawsuits against each other. The dismissals were part
      of
      the Farmout Amending and Farmout Acknowledgement Agreement entered into by
      the
      Company, and its subsidiaries, and Surge. The Farmout Amendment and
      Acknowledgement Agreement agreed to, Signet receiving a private placement for
      $8,550,000 Cdn in a convertible debenture and modify the February 25, 2005
      Farmout Agreement. The significant amendments were to; 1.) extend the earning
      period to February 25, 2008; 2.) extend the date for which Signet can spud
      an
      option well to September 25, 2006; 3.) recalculate the payment of the
      2 nd portion
      of the prospect fee, being $1,000,000 to be paid by Signet to Deep Well’s
      subsidiaries and omit the conditions under which the $1,000,000 was paid, 4.)
      Signet issued to Deep Well’s subsidiaries 7,550,000 of its common shares giving
      Deep Well’s subsidiaries a beneficial interest in Signet of 31.47% before Signet
      issued shares under the private placement financing and 22.7% if the convertible
      debenture is converted on a fully diluted basis, and 5.) Deep Well and its
      subsidiaries give up the right to acquire shares in Surge Global Energy, Inc.




**I.G.M.
      Resources Corp. vs. Deep Well Oil & Gas, Inc. et al**





On
      March
      10, 2005, I.G.M. Resources Corp. (“IGM”) filed against Classic Energy Inc.,
      979708 Alberta Ltd., Deep Well, Nearshore Petroleum Corporation, Mr. Steven
      P.
      Gawne, Rebekah Gawne, Gawne Family Trust, 1089144 Alberta Ltd., John F. Brown,
      Diane Lynn McClaflin, Cassandra Doreen Brown, Elissa Alexandra Brown, Brown
      Family Trust, Priority Exploration Ltd., Northern Alberta Oil Ltd. and Gordon
      Skulmoski a Statement of Claim in the Court of Queen’s Bench of Alberta Judicial
      District of Calgary. This suit is part of a series of lawsuits or actions
      undertaken by IGM against some of the other above defendants.





IGM
      was
      and still is a minority shareholder of 979708 Alberta Ltd. (“979708”). 979708
      was in the business of discovering, assembling and acquiring oil & gas
      prospects. In 2002 and 2003, 979708 acquired oil and gas prospects in the Sawn
      Lake area of Alberta. On or about the 14 th of July,
      2003 all or substantially all the assets of 979708 were sold to Classic Energy
      Inc. IGM claims the value of the assets sold was far in excess of the value
      paid
      for those assets. On April 23, 2004 Northern Alberta Oil Ltd. purchased some
      of
      Classic Energy Inc.’s assets that are under dispute by IGM. On June 7, 2005 Deep
      Well acquired all of the common shares of Northern Alberta Oil Ltd. thereby
      giving Deep Well an indirect beneficial interest in the assets IGM is claiming
      an interest in.





IGM
      seeks
      an order setting aside the transaction and returning the assets to 979708,
      compensation in the amount of $15,000,000 Cdn, a declaration of trust declaring
      that Classic Energy Inc., Northern Alberta Oil Ltd and Deep Well Oil & Gas,
      Inc., hold all of the assets acquired from 979708 and any property acquired
      by
      use of such assets or confidential information of 979708, in trust for the
      Plaintiff.





This
      lawsuit has been stayed pending the out come of the other litigation by IGM
      against the other defendants. The Company believes the claims are without merit
      and will vigorously defend them.





**Hardie
      & Kelly vs. Brown et al**





On
      June
      2, 2006, Hardie and Kelly, Trustee of the Estate of John Forbes Brown filed
      against John Forbes Brown, a bankrupt, Diane Lynn McClaflin, 1089144 Alberta
      Ltd., and Deep Well an Amended Statement of Claim filed in the Court of Queen’s
      Bench of Alberta Judicial District of Calgary. John Forbes Brown was a former
      officer and then sub-contractor of Deep Well before and at the time he was
      assigned into bankruptcy on into July 12, 2004. The Plaintiff claims, in
      addition to other issues unrelated to Deep Well, that John Forbes Brown received
      4,812,500 Deep Well shares as a result of his employment in Deep Well and that
      John Forbes Brown improperly assigned these shares to the numbered company
      as a
      ruse entered into on the eve of insolvency by John Forbes Brown in order to
      facilitate the hiding of assets from his creditors and the trustee of his
      bankruptcy. The Plaintiff further claims that on August 23, 2004 John Forbes
      Brown advised the Plaintiff that he in fact owned the above shares and did
      not
      disclose this ownership in his bankruptcy statement of affairs filed. The
      Plaintiff further claims that John Forbes Brown would lodge the said shares
      with
      his lawyer until such time as these shares could be transferred to the
      Plaintiff. The Plaintiff further claims that unbeknownst to them John Forbes
      Brown *surreptitiously* removed
      the shares form his lawyer’s office and delivered them to Deep Well so that Deep
      Well could cancel them. The Plaintiff claims that Deep Well conspired with
      John
      Forbes Brown to defraud the creditors of John Forbes Brown by taking receipt
      and
      canceling the said shares. The Plaintiff claims that consideration paid by
      Deep
      Well for the said shares was invested in the home owned by John Forbes Brown
      and
      his wife. The Plaintiff seeks; 1.) an accounting of the proceeds and benefits
      derived by the dealings of the shares, 2.) The home owned by John Forbes Brown
      and his wife, to be held in trust on behalf of the Plaintiff and an accounting
      of proceeds related to this trust, 3.) the Plaintiff seeks damages from the
      Defendants because of their actions, 4.) a judgment for $15,612,645.Cdn 5.)
      an
      order to sell John Forbes Brown’s home, and 6.) interest and costs.




40




**Note
      9.**   **LEGAL
      ACTIONS (continued)**





The
      Company plans to vigorously defend itself against the Plaintiff’s
      claims.





**Menno
      Wiebe and Jacobean Resource International vs. Deep Well Oil & Gas, Inc. et
      al**





On
      October 23, 2006, Menno Wiebe and Jacobean Resources International served Deep
      Well, Doe individuals and Roe Corporations with a Complaint and Summons filed
      in
      the United States of America, District Court of Clark County, Nevada. The
      Complaint alleges a breach of contract in which the Plaintiffs are seeking
      monetary damages in excess of $10,000 plus an order directing Defendants to
      issue 56,500 shares of Deep Well Oil & Gas, Inc. stock to Plaintiffs. Mr.
      Menno Wiebe claims he was the Chief Operating Officer until October 2005. The
      Company believes that it has meritorious defenses to some of the plaintiff’s
      claims and intends to enter into mediation, as called for in the contract with
      Menno Wiebe.





**Star
      Capital Inc. vs. Deep Well Oil & Gas, Inc. Et al**





On
      December 21, 2006 an Originating Notice of motion, was filed in the Court of
      Queen’s Bench of Alberta Judicial District of Calgary, by Star Capital Inc. (the
      “Applicant”) against Deep Well, Deep Well Oil & Gas (Alberta) Ltd., and some
      of the directors of the Company and its subsidiaries in addition to other
      individuals (the “Respondents”). The Applicant claims that the Respondents; 1.)
      failed to provide shareholders with proper or any notice of Annual General
      Meetings, special meeting of shareholders, or both; 2.) failed to hold Annual
      General Meetings in accordance with the provisions of the Alberta Business
      Corporations Act, or in the alternative, with the Nevada Revised Statutes;
      3.)
      failed to appoint qualified auditors in accordance with the provisions of the
      Alberta Business Corporations Act or, in the alternative, Nevada Revised
      Statutes; 4.) failed to prepare and file audited financial statements in
      accordance with the provisions of the Alberta Business Corporations Act and
      the
      Alberta Securities Act or, in the alternative, Nevada Revised Statutes; 5.)
      paid
      management fees in relation to either or both of Deep Well or Deep Well Alberta,
      to directors, officers and third parties, including the individual Respondents
      themselves, that are unreasonable, oppressive and have been granted without
      proper regard for the interests of shareholders; 6.) in the case of the
      individual Respondents, engaged in wrongful self-dealing that is oppressive,
      prejudicial to, and unfairly disregards the interests of, shareholders; 7.)
      issued capital stock of Deep Well, and instruments for the future purchase
      of
      such capital stock, in a manner that is oppressive, unfairly prejudicial to,
      and
      unfairly disregards the interests of shareholders; 8.) failed to disclose,
      or
      failing to disclose in a timely manner, material information to the shareholders
      and the public, including, but not limited to, the fact of the transfer of
      assets from Deep Well to Deep Well Alberta and the existence of encumbrances
      of
      the oil sands assets, such as gross overriding royalties held by the Respondents
      Gary Tighe and Steve Gawne, which distorts the public market in the securities
      of the corporate Respondents and is otherwise oppressive, unfairly prejudicial
      to, and unfairly disregards the interests of shareholders, including the
      Applicant; 9.) utilize majority shareholder approval for various transactions,
      including the appointment of directors, without calling annual or special
      meetings of shareholders, in a manner which is oppressive, unfairly prejudicial
      and unfairly disregards the minority shareholders and which is otherwise a
      breach of the fiduciary duties owed by the directors and officers to the
      corporations and to the minority shareholders.





The
      Company plans to vigorously defend itself against the claims.


41


**ITEM
              8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL****DISCLOSURE**





On
      August
      10, 2004 Deep Well (“the Registrant”) changed accountants from Madsen &
Associates, CPA’s Inc. to Deloitte & Touche LLP. The Registrant decided to
      dismiss Madsen & Associates, CPA’s Inc. as its independent accountants.
      Madsen & Associates, CPA’s Inc. report on the financial statements for the
      period from September 10, 2003 to September 30, 2003 as contained in Form
      10-K/A, Amendment Number 2, which was filed on May 13, 2004, was not subject
      to
      an adverse or qualified opinion or a disclaimer of opinion and were not modified
      as to uncertainty, audit scope or accounting principles for the period from
      September 10, 2003 to September 30, 2003 or for either of the past two years.
      Madsen & Associates, CPA’s Inc. report on the financial statements for the
      period from September 10, 2003 to September 30, 2003 raises substantial doubt
      about the Registrant’s ability to continue as a going concern and that
      continuation of the Registrant as a going concern is dependent upon obtaining
      additional working capital. The decision to change accountants was approved
      by
      the Registrant’s Board of Directors; and during the period from our engagement
      of Madsen & Associates, CPA’s Inc. on February 9, 2004 to the date we
      dismissed Madsen & Associates, CPA’s Inc. on August 10, 2004, there were no
      disagreements with Madsen & Associates, CPA’s Inc. related to accounting
      principles or practices, financial statement disclosure, or auditing scope
      or
      procedure, which disagreements if not resolved to the satisfaction of Madsen
      & Associates, CPA’s Inc. would have caused Madsen & Associates, CPA’s
      Inc. to make reference to the subject matter of the disagreement in connection
      with its report. On August 10, 2004, the Registrant engaged Deloitte &
Touche LLP as its independent accountants. The Registrant did not consult with
      Deloitte & Touche LLP., its new independent accountants, regarding any
      matter prior to its engagement; and the Registrant has provided to Madsen &
Associates, CPA’s Inc., its former accountant, a copy of the disclosures and the
      Registrant has requested a letter from Madsen & Associates, CPA’s Inc.
      addressed to the Commission, confirming certain statements made by the
      Registrant. Changes in the Registrant’s certifying accountant, Letter of Madsen
& Associates, CPA’s Inc. has been filed on Form 8-K on August 16, 2004, and
      incorporated herein by reference..





Effective
      April 22, 2005 Deloitte & Touche LLP (the “Predecessor Accountant”) resigned
      as the independent auditors for the Company. Madsen & Associates (the
“Successor Accountant”) was appointed as the Company’s new independent
      accountants. The Company’s Board of Directors approved this action on April 22,
      2005. During the last two fiscal years ended September 30, 2004 and 2003 and
      the
      subsequent periods to April 22, 2005 (i) there were no disagreements between
      the
      Company and Deloitte & Touche LLP on any matter of accounting principles or
      practices, financial statement disclosure or auditing scope or procedure which,
      if not resolved to the satisfaction of Deloitte & Touche LLP would have
      caused Deloitte & Touche LLP to make reference to the matter in its reports
      on the Company’s financial statements, and (ii) Deloitte & Touche LLP’s
      reports did not contain an adverse opinion or a disclaimer of opinion, or was
      qualified or modified as to uncertainty, audit scope, or accounting principles.
      During the last two most recent fiscal years ended September 30, 2004 and 2003
      and the subsequent periods to April 22, 2005, there were no reportable events
      as
      the term described in Item 304(a)(1)(iv) of Regulation S-B. The Company has
      not
      previously consulted with the Successor Accountant regarding the application
      of
      accounting principles to a specific completed or contemplated transaction or
      the
      type of audit opinion that might be rendered on the Company’s financial
      statements. Changes in registrant’s certifying accountant, Letter of Deloitte
& Touche LLP has been filed on Form 8-K on August 10, 2005, and incorporated
      herein by reference.





**ITEM
      8A.**  **CONTROLS
      AND PROCEDURES**





**Disclosure
      Controls and Procedures**





As
      of the
      end of our fiscal year ended September 30, 2004, an evaluation of the
      effectiveness of our “disclosure controls and procedures” (as such term is
      defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
      of
      1934), as amended was carried out by our management with the participation
      of
      our principal executive officer and principal financial officer. Based upon
      that
      evaluation, our principal executive officer and principal financial officer
      have
      concluded that as of the end of that fiscal year, our disclosure controls and
      procedures were not effective to ensure that information required to be
      disclosed by us in reports that we file or submit under the Exchange Act is
      (i)
      recorded, processed, summarized and reported within the time periods specified
      in SEC rules and forms and (ii) accumulated and communicated to our management,
      including our principal executive officer and principal financial officer,
      to
      allow timely decisions regarding required disclosure.





**Changes
      in Internal Control Over Financial Reporting**





During
      the fiscal year ended September 30, 2004, there were no changes in our internal
      control over financial reporting that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.


42





**ITEM
      8B.**  **OTHER
      INFORMATION**





During
      the fourth quarter of the fiscal year covered by this Form 10-KSB, Deep Well
      reported all information that was required to be disclosed in a report on Form
      8-K, except for the following:





**Amendments
      to Articles of Incorporation or Bylaws; Change in Fiscal
      Year**





On
      February 6, 2004 the Board approved and accepted the amended Bylaws of Deep
      Well, of which a copy of the amended Bylaws are filed herewith.





On
      July
      6, 2004 the Board added Mr. Menno Wiebe to the Board of Directors and was also
      appointed Chief Operating Officer. Mr. Wiebe served as Director and Chief
      Operating Officer for the Company until June 29, 2005.





**Unregistered
      Sales of Equity Securities**





On
      September 9, 2004 a $1,000,000 unsecured convertible debenture was issued for
      net cash of $879,000, after commissions of $121,000. The debenture bears
      interest at 8.5% per year and is due on September 6, 2007. The debenture is
      convertible into common shares at the rate of one common share and one common
      share warrant, at the option of the debenture holder, with the conversion terms
      for the stock and the warrant shown in the following:





·
            October
                6, 2004 to September 6, 2005 at $1.00 per
                share





·
            September
                7, 2005 to September 6, 2006 at $1.50 per
                share





·
            September
                7, 2006 to September 6, 2007 at $2.00 per
                share





If
      at any
      time during the term of the debenture the average bid and ask price of the
      Company’s common shares is three dollars per share or more for thirty
      consecutive calendar days, the Company will have the option to convert the
      outstanding debentures into common stock a the prices above. The debentures
      were
      paid in full during December 2005 with the proceeds from the issuance of common
      capital stock and the warrants were cancelled as part of the
      payoff.





**Other
      Events**





On
      February 23, 2006 pursuant to an exercised option agreement the Company entered
      into on June 7, 2005 and filed on form 8-K on June 10, 2005, the Company issued
      4,707,750 Deep Well common shares in exchange for 156,925 of the outstanding
      preferred shares of Northern. The common shares were issued pursuant to Section
      3(a)(9) of the 1993 Act.





On
      June
      13, 2006 further pursuant to an exercised option agreement the Company entered
      into on June 7, 2005, and filed on form 8-K on June 10, 2005, the Company issued
      2,867,250 Deep Well common shares in exchange for 95,575 of the outstanding
      preferred shares of Northern. The common shares were issued pursuant to Section
      3(a)(9) of the 1993 Act.





**PART
      III**





**ITEM
      9.**  **DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT**





**Directors
      and Executive Officers**





The
      executive officers and directors of Deep Well are as follows:


**As
        at September 30, 2004**


**Name**
            
            **Age**
            
            **Position/Office**Mr.
                Steven P. Gawne
            
            55
            
            Director
              President
                and Chief Executive OfficerMr.
                Curtis Sparrow
            
            47
            
            Director
              Chief
                Financial Officer, Secretary and TreasurerDr.
                Horst A. Schmid
            
            71
            
            Director
                and Chairman of the BoardMr.
                Leonard F. Bolger
            
            73
            
            DirectorMr.
                Menno Wiebe
            
            56
            
            Director
              Chief
                Operating Officer (July 6, 2004 until June 29, 2005Mr.
                John F. Brown
            
            50
            
            Chief
                Operating Officer (February 9, 2004 until June 7,
                2004




43


**As
        at September 30, 2005**


**Name**
            
            **Age**
            
            **Position/Office**Dr.
                Horst A. Schmid
            
            72
            
            Director
                and Chairman of the Board
              President
                and Chief Executive OfficerMr.
                Curtis Sparrow
            
            48
            
            Director
              Chief
                Financial Officer, Secretary and TreasurerMr.
                Cyrus Spaulding
            
            49
            
            Director
              Chief
                Operating OfficerMr.
              Donald E.H. Jones
            
            52
            
            Director


**As
        at September 30, 2006**


**Name**
            
            **Age**
            
            **Position/Office**Dr.
                Horst A. Schmid
            
            73
            
            Director
                and Chairman of the Board
              President
                and Chief Executive OfficerMr.
                Curtis Sparrow
            
            49
            
            Director
              Chief
                Financial Officer, Secretary and TreasurerMr.
                Cyrus Spaulding
            
            50
            
            Director
              Chief
                Operating OfficerMr.
              Donald E.H. Jones
            
            53
            
            DirectorMr. David
              Roff
            
            35
            
            Director





**Biographies
      of Directors and Executive Officers**





Brief
      biographies of the executive officers and directors of Deep Well are set forth
      below. All directors hold office until the next Annual Stockholders’ Meeting or
      until their death, resignation, retirement, removal, disqualification or until
      their successors have been elected and qualified. Vacancies in the existing
      Board may be filled by majority vote of the remaining directors. Officers of
      the
      Company serve at the will of the Board of Directors. As of September 30, 2004
      there are no written employment contracts outstanding.





Dr.
      Horst
      A. Schmid has served as Director and Chairman of the Board since February 6,
      2004 to present. Since June 29, 2005 to present he has been the Chief Executive
      Officer and President of Deep Well. From September 1996 to present, Dr. Schmid
      has been Director, President and Chief Executive Officer of Portwest Investment
      Ltd., a private firm, located in Edmonton, Alberta, Canada. Prior to that,
      Dr.
      Schmid spent 15 years as Cabinet Minister for the Government of Alberta and
      10
      years as Commissioner General for Trade and Tourism. During that time he was
      involved in numerous successful overseas negotiations for the Alberta Oil &
Gas Industry, achieving major contracts for Alberta Equipment/Production/Service
      Companies. Dr. Schmid has also served as independent Director and Chairman
      of
      Aspire Capital Inc. since 1998. He is the recipient of many Canadian and
      International Awards for his accomplishments. Dr. Schmid received an Honorary
      Law Degree from the University of Alberta.





Mr.
      Steven P. Gawne served as Deep Well’s President and Chief Executive Officer and
      a Director from February 6, 2004 until June 29, 2005. Since March 1998, Mr.
      Gawne has been the President and Director of Nearshore Petroleum Corporation,
      a
      private corporation registered in Alberta, Canada that conducts business in
      oil
      and gas exploration. From March 2001 to present, Mr. Gawne has been the
      President of Priority Exploration Ltd., a private corporation registered in
      Alberta, Canada that also conducts business in oil and gas exploration. From
      September 1998 to January 2000, Mr. Gawne was a Director and Vice President
      of
      Exploration of ENN Hydrocarbons, Ltd., a private corporation registered in
      Alberta, Canada that conducts business in oil and gas exploration in Alberta,
      Canada. Mr. Gawne attended the University of Waterloo located in Waterloo,
      Ontario and majors in Geology.




44




Mr.
      Curtis Sparrow served as Director of Deep Well from February 6, 2004 until
      June
      29, 2005. On July 1, 2005, Mr. Sparrow accepted a reappointment back to the
      Board of Directors. From February 9, 2004 to present Mr. Sparrow has been the
      Chief Financial Officer, Corporate Secretary and Treasurer of Deep Well. Since
      before May 1994, Mr. Sparrow has been a self-employed management consultant.
      Mr.
      Sparrow has been involved in the oil and gas industry in various capacities
      for
      over 25 years. He held directorships and senior officer positions with junior
      exploration and development companies before becoming a self-employed
      consultant. He has since participated in the marketing side of the oil and
      gas
      industry, and was part of an acquisition team formed to assess and develop
      a bid
      for a multi-billion dollar integrated oil company. His experience also includes
      corporate and project management, international businesses and mining. Mr.
      Sparrow received his Bachelor of Science Degree in Engineering and Masters
      Degree in Business Administration from the University of Alberta in May 1978
      and
      May 1992, respectively. Mr. Sparrow is also a registered Professional
      Engineer .





Mr.
      Menno
      Wiebe served as Director and Chief Operating Officer of Deep Well from July
      6,
      2004 until June 29, 2005. Early in his career Mr. Wiebe participated in the
      evaluation of the heavy oil sands in the Fort McMurray, Alberta, area as a
      geologist with Hudson’s Bay Oil and Gas Company Limited. From 1975 to 1983, Mr.
      Wiebe served roles as a chief geologist and a senior staff geologist with
      Occidental Petroleum Corporation in postings in Libya, Scotland and the United
      States. In 1983 Mr. Wiebe joined Bow Valley Industries (SEA) Ltd. and served
      4
      years in the Jakarta, Indonesia, office as the Exploration Manager, directing
      extensive drilling programs in the Java Sea and North Sumatra, Indonesia. Mr.
      Wiebe then joined Husky Oil International Inc. as its regional representative
      for exploration operations in Indonesia. In 1991, Mr. Wiebe joined Hall-Houston
      Oil Company, a U.S. based private exploration company, as Vice-President and
      General Manager, representing the company, and establishing and staffing an
      office, in Kuala Lumpur, Malaysia for its exploration projects in that region.
      In 1991, Mr. Wiebe joined Pertacal Energy Inc., an oil & gas exploration
      company with projects in the UK, France and Yemen, serving in a variety of
      capacities, including as a consultant, Vice President, President, Chief
      Executive Officer and a director. Mr. Wiebe obtained his Bachelor of Science
      Degree in Geology from the University of Manitoba in 1970 and a Masters in
      Business Administration from the University of Warwick in 1993.





Mr.
      Leonard F. Bolger served as a Director of Deep Well from February 6, 2004 until
      June 29, 2005. From January 2000 to present, Mr. Bolger has been the Co-Chairman
      of Alberta Energy Research Institute. From March 1990 to present, Mr. Bolger
      has
      been the Chairman of the Board of Advatech Canada International, Inc., a private
      housing export and construction firm located in Calgary, Canada. Prior to 1990,
      Mr. Bolger had 31 years of oil and gas related experience. Mr. Bolger received
      a
      Bachelors Degree in Engineering from the University of Toronto in May
      1954.





Mr.
      Cyrus
      Spaulding has been Deep Well’s Chief Operating Officer and Director from June
      29, 2005 to present. Early in his career he joined Husky Oil Operations Ltd.
      as
      a reservoir engineering technologist where he provided data analysis on
      secondary recovery schemes for heavy oil projects. In the mid 1990’s he joined
      Colt Engineering Corporation as the lead engineer for the Amoco Primrose
      Commercial SAGD project. He is a registered Professional Engineer with over
      17
      years experience in the oil and gas industry. He has worked on projects in
      Canada as well as overseas. His experience includes gas plants, hydrocarbon
      liquids fractionation plants, heavy oil pilot plants and heavy oil commercial
      plants. He has also worked with a major oil and gas company in Alberta providing
      forecasting and analysis on heavy oil projects. Mr. Spaulding is a graduate
      of
      Lakehead University





Mr.
      Donald E. H. Jones has been a Director of Deep Well from June 29, 2005 to
      present. Mr. Jones brings over 30 years of broad oil, natural gas and
      petrochemical experience to the Company. His experience spans the manufacturing
      and service sectors, engineering and project management in the EPC environment.
      He has also worked at a senior management level for companies with both new
      and
      established oil and gas properties. In addition to the above mentioned work
      experience, Mr. Jones was Project Manager, including field construction,
      commissioning, and optimization on past SAGD Pilot Facilities which laid the
      ground work for commercial scale production and processing of heavy oil. A
      graduate of the University of Calgary, Mr. Jones is a registered Professional
      Engineer. He has significant domestic and international experience having worked
      in Canada, Africa, Russia, Kazakhstan and South East Asia.





Mr.
      David
      Roff is currently serving as a Director of Deep Well since his reappointed
      on
      April 3, 2006. He was the former President and Sole Director of Deep Well from
      September 10, 2003 until February 6, 2004. Mr. Roff is the co-president of,
      Brave Consulting, a private consulting and investment corporation and has held
      this position since 2001. Brave Consulting was engaged by Deep Well in July
      2005
      until the present to advise on investment strategies and governance. Mr. Roff
      has extensive experience working with small cap public companies for ten years.
      Prior to that, Mr. Roff was a management consultant for Coopers & Lybrand
      Consulting where he advised large financial institutions, investment fund
      complexes and other organizations on technology and internal control strategies.
      Mr. Roff is a Chartered Accountant with a B.A. degree from the University of
      Western Ontario.





**Family
      Relationships**





There
      are
      no family relationships among the executive officers and directors.




45




**Significant
      Employees**





Mr.
      John
      Brown received up to the year ended September 30, 2004 compensation from Deep
      Well in the amount of $15,379.82 US for his services to Deep Well. On November
      15, 2004, the company entered into an employment agreement with Mr. John Brown
      paying him $10,000 Cdn per month for services to the Company. Mr. John Brown
      served as Deep Well’s Chief Operating Officer from February 9, 2004 to June 7,
      2004.





Mr.
      Menno
      Wiebe replaced Mr. John Brown as Chief Operating Officer on July 6, 2004. Mr.
      Menno Wiebe served as Chief Operating Officer of the Company from July 6, 2004
      until June 29, 2005. Mr. Wiebe is claiming $37,985.76 Cdn in his claim against
      the Company. None of this amount was paid as of the year end. Mr. Cyrus
      Spaulding replaced Mr. Menno Wiebe as Chief Operating Officer on June 29,
      2005.





The
      Company currently has one full time employee, one part time employee and four
      prime subcontractors. For
      further information on subcontractors see “Compensation Arrangements for
      Executive Officers” under item 10 “Executive Compensation” herein described in
      this report. We
      expect
      to hire from time to time, independent consultants and contractors during the
      stages of implementing our plans.





**Involvement
      in Certain Legal Proceedings**





No
      bankruptcy petition has been filed by or against any business of which any
      director was a general partner or executive officer either at the time of the
      bankruptcy or within two years prior to that time.





No
      director has been convicted in a criminal proceeding and is not subject to
      a
      pending criminal proceeding (excluding traffic violations and other minor
      offences).





No
      director has been subject to any order, judgments, or decree, not subsequently
      reversed, suspended or vacated, of any court of competent jurisdiction,
      permanently or temporarily enjoining, barring, suspending or otherwise limiting
      his involvement in any type of business, securities or banking activities;
      and





No
      director has been found by a court of competent jurisdiction (in a civil
      action), the Commission or the Commodity Futures Trading Commission to have
      violated a federal or state securities or commodities law, that has not been
      reversed, suspended, or vacated.





**Audit
      Committee Financial Expert**





We
      do not
      have an audit committee financial expert, on our Board of Directors. We believe
      that the cost related to retaining an audit committee financial expert at this
      time is prohibitive and that, because, of our limited operations the services
      of
      an audit committee financial expert are not warranted at this time.





**Identification
      of Audit Committee**





On
      February 9, 2004 our Board of Directors, in accordance with Section 3(a)(58)(A)
      of the Securities Exchange Act of 1934 as amended, appointed an audit committee.
      The Board of Directors has designated an audit committee to oversee management’s
      conduct of our accounting and financial reporting processes. The audit committee
      reviews our financial reports and other financial information disclosed to
      the
      public, the government and various regulatory bodies, our system of internal
      accounting, our financial controls, and the annual independent audit of our
      financial statements. The audit committee also oversees compliance with legal
      and regulatory requirements. On February 9, 2004 to August 14, 2004, the audit
      committee members were Mr. Curtis Sparrow and Mr. Leonard F. Bolger. Mr. Leonard
      F. Bolger serves as Chair of the audit committee. On August 14, 2004 the Board
      of Directors determined that it was necessary to ratify the members of the
      Audit
      Committee and therefore the Board of Directors approved the appointment of
      Dr.
      Horst A. Schmid and Mr. Leonard F. Bolger as the only two independent members
      of
      the Audit Committee.





On
      February 9, 2004 the Board of Directors appointed a compensation committee,
      a
      corporate governance committee and a corporate environmental policy
      committee.


46





**Section
      16 (a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Exchange Act requires the Company’s officers, directors and persons
      who beneficially own more than 10% of a registered class of the Company’s equity
      securities to file reports of ownership and changes in ownership with the
      Securities and Exchange Commission, and to furnish to the Company copies of
      such
      reports. Based solely on the review of copies of the forms received, by the
      Company, during the September 30, 2004  fiscal year, were late in
      filing of Form 3 for Mr. Steven P. Gawne, Mrs. Rebekah Gawne, Mr. Leonard F.
      Bolger, Mr. John Brown, Ms. Cassandra Brown, Ms. Elissa Brown, Mr. Curtis
      Sparrow, Nearshore Petroleum Corporation, 1089144 Alberta Ltd., Dr. Horst A.
      Schmid and Mr. Menno Wiebe. In addition, Nearshore Petroleum Corporation was
      late in filing a Form 4 as required under Section 16(a)(2) of the Securities
      Act.





**Code
      of Ethics**





As
      of
      September 30, 2004 the Company had not yet adopted a formal code of ethics
      governing its executive officers and directors. We
      have
      not adopted a code of ethics because we have minimal operations. Our
      Board
      of Directors will address this issue in the fu ture
      to
      determine the adoption of a code of ethics. In the meantime, our management
      intends to promote honest and ethical conduct, full and fair disclosure in
      our
      reports to the SEC, and compliance with applicable governmental laws and
      regulations.




**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





**Summary
      Compensation Table**





The
      following table provides information about the compensation paid to, earned
      or
      received during the last three fiscal years ended September 30, 2004, 2003
      and
      2002 by the executive officers listed below (the “Named Executive Officers”).
      None of our executive officers received salary and bonus in excess of $100,000
      during fiscal 2004.


**Long
                        Term Compensation****Annual
                        Compensation**
                    
                    **Awards**
                    
                    **Payouts****Name
                        and Principal Position**
                    
                    **Year**
                    
                    **Salary**
                    
                    **Bonus**
                    
                    **Other**
                    
                    **Restricted
                        Stock Award (s)**
                    
                    **Securities
                        Underlying Options/ SARs**
                    
                    **LTIP
                        Payouts**
                    
                    **All
                        Other Compensation**Mr.
                        Steven P. Gawne (1)
                    
                    
                    2004
                    
                    $
                    99,704.96
                        US
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    
                    -
                    
                    $
                    -
                    
                    $
                    -President
                        and
                    
                    
                    2003
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Chief
                        Executive Officer
                    
                    
                    2002
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Mr.
                        Curtis Sparrow (2)
                    
                    
                    2004
                    
                    $
                    68,471.64
                        US
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    
                    -
                    
                    $
                    -
                    
                    $
                    -Chief
                        Financial Officer
                    
                    
                    2003
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -2002
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Mr.
                        John F. Brown (3)
                    
                    
                    2004
                    
                    $
                    15,379.82
                        US
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    
                    -
                    
                    $
                    -
                    
                    $
                    -Chief
                        Operating Officer
                    
                    
                    2003
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -From
                        February 9, 2004 to
                    
                    
                    2002
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -June
                        7, 2004Mr.
                        Menno Wiebe (4)
                    
                    
                    2004
                    
                    $
                    37,985.76
                        Cdn
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    
                    -
                    
                    $
                    -
                    
                    $
                    -Chief
                        Operating Officer
                    
                    
                    2003
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -From
                        July 6, 2004 to
                    
                    
                    2002
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -June
                        29, 2005Mr.
                        David Roff
                    
                    
                    2004
                    
                    $
                    Nil
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -
                    
                    
                    -
                    
                    $
                    -
                    
                    $
                    -President
                        and Chief
                    
                    
                    2003
                    
                    
                    Nil
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Executive
                        Officer From
                    
                    
                    2002
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -September
                        10, 2003 to February 6, 2004
  (1)
                    Nearshore Petroleum Corporation, a company owned 50% by Mr. Steven
                    P. Gawne and
                    50% by his wife, Rebekah Gawne accrued the above fee for Mr.
                    Gawne’s services.
                    $22,053.15 of these fees remained unpaid as of the year end.
                    Mr. Steven P. Gawne
                    ceased to be an officer and director of the company on June 29,
                    2005. Mr. Steven
                    P. Gawne and Nearshore Petroleum Corporation also received compensation
                    from
                    Northern Alberta Oil Ltd. during fiscal 2004 of $100,000 Cdn
                    and $243,425 Cdn
                    respectively, which is not included above. Nearshore also was
                    granted a royalty
                    by Northern of 6.5% on 4 townships of north central Alberta.
 (2)
                  Concorde Consulting, a company owned 100% by Mr. Curtis Sparrow
                  has accrued a
                  fee for consulting services, but none this fee was paid as of the
                  year end. Mr.
                  Curtis Sparrow also accrued a director’s fee for his services on the Board of
                  Directors, but none these fees were paid as of the year end. Mr.
                  Sparrow, nor
                  Concorde received any compensation from Northern during this year
                  end.
  (3)
                Mr.
                John F. Brown served as Chief Operating Officer of the Company from
                February 9,
                2004 until June 7, 2004. None of the above fees remained unpaid as
                of the year
                end. Mr. Brown also received compensation from Northern Alberta Oil
                Ltd. during
                fiscal 2004 of $43,261.85 Cdn. Mr. Brown’s daughter also received compensation
                from Deep Well of $5,816.12. Neither of these amounts are included
                above.
 (4)
                  Mr.
                  Menno Wiebe served as Chief Operating Officer of the Company from
                  July 6, 2004
                  until June 29, 2005. Mr. Wiebe is claiming the above amount in
                  his claim against
                  the Company. None of this amount was paid as of the year
                  end.
  47


The
      Board
      is currently reviewing all compensation paid to executives of the company.





**Compensation
      of Directors**





On
      November 28, 2005 the Company adopted a cash compensation plan where each
      director is paid the amount of $500 for each meeting of the Board of Directors
      that they attend, plus, we reimburse each director for actual expenses incurred
      in connection with Board meeting attendance. The Chairman of the Board is paid
      $1,000 for each Board meeting plus expenses incurred in connection with Board
      meeting attendance. None of these Director’s fees were paid in the September 30,
      2004 year end.





During
      fiscal year 2004 there were no stock options granted to any of the named
      directors or executive officers.





On
      November 28, 2005 the Company adopted a stock-based compensation plan, under
      which each director of Deep Well was awarded options to acquire 75,000 shares
      upon becoming a director and an additional 100,000 shares for each year or
      part
      of a year served as a director. Directors of subsidiaries, who are not already
      directors of Deep Well, were awarded options to acquire 37,500 shares upon
      becoming a director and an additional 50,000 shares for each year or part of
      a
      year served as a director. The exercise price of such options is $0.71 per
      share. For further information see the Company’s Form 8-K filed with the SEC
      March 3, 2006.





No
      named
      directors or executive officers exercised any stock options during fiscal years
      2004, 2005 or 2006.





**Compensation
      Arrangements for Executive Officers**





The
      Company has entered into the following contracts with the following companies
      for services of certain officers and/or directors of the Company:





1.
            Portwest
                Investments Ltd., a company owned 100% by Dr. Horst A. Schmid for
                providing services as Chief Executive Officer and President for $12,500
                Cdn per month.





2.
            Concorde
                Consulting, a company owned 100% by Mr. Curtis Sparrow for providing
                services as Chief Financial Officer for $15,000 Cdn per
                month.





3.
            Trebax
                Projects Ltd., a company 100% owned by Mr. Cyrus Spaulding for providing
                services as Chief Operating Officer for $130 Cdn per
                hour.





4.
            Brave
                Consulting, a company 50% owned by Mr. David Roff, a former President
                of
                the Company, has been a consultant to Deep Well since July 15, 2005.
                Brave
                consulting, a private corporation 50% owned by Mr. Roff and the other
                50%
                is owned by a non-related third party, was paid a fee of $4,000 Cdn
                per
                month from July 2005 until October 2005. From November 2005 until
                present,
                Brave consulting is being paid a consulting fee of $8,000 Cdn per
                month





On
      November 28, 2005 the Board granted 390,000 options to acquire common shares
      to
      the above corporations providing consulting services to the Company or its
      subsidiary. Each of such consulting contractors is a corporation wholly owned
      by
      directors or executive officers of the Company. For further information see
      the
      Company’s Form 8-K filed with the SEC March 3, 2006.


48


**ITEM
              11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND****RELATED
                STOCKHOLDER MATTERS**





The
      following table sets forth the number and percentage of the shares of the
      Company’s Common Stock owned of record and beneficially by each person or entity
      owning more than 5% of such shares and by all executive officers, officers
      and
      directors, as a group at September 30, 2004:


**SECURITY
        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS**
 **As
        of September 30, 2004**


**Name
                and Address of Beneficial Owner**
            
            **Title
                of Class**
            
            **Number
                of Shares Beneficially Owned**
            
            **Percentage
                of Class Beneficially Owned (1)**
            
            **Nature
                of Ownership**Nearshore
                Petroleum Corporation (2)
              Suite
                3175, 246 Stewart Green SW
              Calgary,
                Alberta T3H 3C8 Canada
            
            
            Common
            
            
            4,875,000
            
            
            15.6%
            
            
            IndirectC.
                Ruiz Tighe (3)
              89
                Arbour Ridge Heights NW
              Calgary,
                Alberta T3G 3Z2 Canada
            
            
            Common
            
            
            1,947,000
            
            
            6.2%
            
            
            Direct/IndirectPortwest
                Investment Ltd. (4)
              Suite
                510, 10117 Jasper Avenue
              Edmonton,
                Alberta T5J 1W8 Canada
            
            
            Common
            
            
            1,950,000
            
            
            6.2%
            
            
            Direct697580
                Alberta Ltd.
              1425
                Ranchlands Road NW
              Calgary,
                Alberta T3G 1N2
            
            
            Common
            
            
            1,800,000
            
            
            5.8%
            
            
            DirectRainbow
                Enterprises Ltd.
              First
                Bourbon House/Bourbon St.
              P.O.
                Box 1695
              Castries
                St. Lucia, British Virgin Islands
            
            
            Common
            
            
            1,800,000
            
            
            5.8%
            
            
            Direct


(1)
            Based
            on 31,236,468 common shares outstanding on September 30,
            2004.
  (2)
            The
            President as of September 30, 2004, Mr. Steven P. Gawne’s indirect beneficial
            ownership consists of Nearshore Petroleum Corporation owning 4,875,000
            shares.
            Nearshore Petroleum Corporation is a private corporation registered in
            Alberta,
            Canada, which is 50% owned and controlled by Mr. Steven P. Gawne and
            50% owned
            and controlled by his wife, Rebekah Gawne. As a result of Mr. Steven
            P. Gawne’s
            and Nearshore’s ownership of 100,000 each of preferred shares of Northern which
            as a result of the June 7, 2005 acquisition on Northern by the Company
            at Mr.
            Gawne’s or Nearshore’s option can convert to 3,000,000 shares of Deep Well
            common stock each. This means that Mr. Steven P. Gawne’s indirect beneficial
            ownership could consist of Nearshore Petroleum Corporation owning 7,875,000
            shares and Mr. Gawne owning 3,000,000 shares directly.
  (3)
          C.
          Ruiz Tighe beneficially and indirectly owns 147,000 shares of our common
          stock
          held by 1004731 Alberta Ltd., a corporation registered in Alberta, Canada,
          which
          is 100% owned by C. Ruiz Tighe. C. Ruiz Tighe directly holds 1,800,000
          shares of
          our common stock.
  (4)
        Portwest Investment Ltd. is a private corporation registered in Alberta,
        Canada,
        which is 100% owned by Dr. Horst A. Schmid.


**SECURITY
        OWNERSHIP OF MANAGEMENT**
 **As
        of September 30, 2004**





**Name
                and Address of Beneficial Owner**
            
            **Title
                of Class**
            
            **Number
                of Shares Beneficially Owned**
            
            **Percentage
                of Class Beneficially Owned (1)**
            
            **Nature
                of Ownership**Mr.
                Steven P. Gawne (2)
              Director,
                President and Chief Executive Officer
              Suite
                3175, 246 Stewart Green SW
              Calgary,
                Alberta T3H 3C8 Canada
            
            
            Common
            
            
            4,875,000
            
            
            15.6%
            
            
            IndirectMr.
                Curtis Sparrow
              Director,
                Chief Financial Officer, Corporate Secretary and Treasurer
              Suite
                510, 10117 Jasper Avenue
              Edmonton,
                Alberta T5J 1W8 Canada
            
            
            
            
            
            NoneDr.
                Horst A. Schmid (3)
              Director
                and Chairman of the Board
              Suite
                510, 10117 Jasper Avenue
              Edmonton,
                Alberta T5J 1W8 Canada
            
            
            Common
            
            
            1,950,000
            
            
            6.2%
            
            
            IndirectMr.
                Leonard F. Bolger
              Director
              Suite
                3175, 246 Stewart Green SW
              Calgary,
                Alberta T3H 3C8 Canada
            
            
            
            
            
            NoneMr.
                John F. Brown
              Chief
                Operating Officer
              Suite
                3175, 246 Stewart Green SW
              Calgary,
                Alberta T3H 3C8 Canada
            
            
            Common
            
            
            (4
            )Mr.
                Menno Wiebe (5)
              Director
                and Chief Operating Officer
              Bankers
                Hall W Tower 10th,
                888 3rd St SW
              Calgary
                Alberta T2P5C5 Canada
            
            
            Common
            
            
            900,000
            
            
            2.9%
            
            
            DirectAll
                Officers and Directors as a Group
            
            
            
            
            
            7,725,000
            
            
            24.7%


(1)
          Based
          on 31,236,468 common shares outstanding on September 30, 2004.
  (2)
          See
          footnote 2 in the table above.
  (3)
          Our
          Chairman of the Board of Directors Dr. Horst A. Schmid’s indirect beneficial
          ownership consists of Portwest Investment Ltd. owning 1,950,000 shares.
          Portwest
          Investment Ltd. is a private corporation registered in Alberta, Canada,
          which is
          owned and controlled by Dr. Horst A. Schmid.
  (4)
          In
          the litigation Hardie vs. Brown, Mr. Brown’s receiver claims that Mr. Brown was
          the beneficial owner of 5,775,000 common shares of the Company.
  (5)
          In
          the litigation Wiebe vs Deep Well, Mr. Wiebe claims to have an option for
          an
          additional 900,000 vested over three years.
  49


**Changes
      in Control**





Deep
      Well
      is not aware of any arrangement that may result in a change in control of Deep
      Well or its subsidiary companies.





**ITEM
      12.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS**





For
      the
      year ending September 30, 2004 Nearshore Petroleum Corporation, which is 50%
      owned and controlled by Mr. Steven P. Gawne and 50% owned and controlled by
      his
      wife, Rebekah Gawne, invoiced the Company $99,704.96 US for the services of
      Mr.
      Steven Gawne. Mr. Steven Gawne and Nearshore Petroleum Corporation also received
      compensation from Northern during fiscal 2004 of $100,000 Cdn and $243,425
      Cdn
      respectively. Nearshore Petroleum Corporation was also granted a royalty by
      Northern of 6.5% on 4 townships of north central Alberta within which Northern
      acquired leases, as filed herewith.





On
      June
      7, 2005, in connection with the Company's acquisition of Northern, the Company
      entered into Put Call Option Agreements with each of Northern’s preferred
      shareholders. Pursuant to these agreements, the Company was given the right
      to
      acquire the preferred stock of Northern held by the preferred stockholders,
      and
      such stockholders were given the right to require the Company to purchase such
      shares. The option agreements provide that upon exchange, the preferred
      stockholders of Northern will receive thirty shares of the Company's common
      stock for each share of Northern’s preferred stock held by such stockholders.
      Three out of the six option agreements were entered into with affiliates of
      the
      Company: Mr. Steven Gawne, Nearshore Petroleum Corporation and Edmonton
      International Airport Hotel Ltd. (“Edmonton”) (a company wholly owned by Curtis
      Sparrow). On February 23, 2006, Mr. Steven Gawne and Nearshore partially
      exercised their rights under the option agreements, and the Company issued
      300,000 Deep Well common shares to each of Mr. Gawne and Nearshore in exchange
      for 20,000 of the outstanding preferred shares of Northern. The common shares
      were issued pursuant to Section 4(2) of the 1933 Act.





On
      August
      12, 2005 Barbara Spaulding, the wife of Mr. Cyrus Spaulding our current director
      and Chief Operating Officer, subscribed for 250,000 units of the Company,
      pursuant to a private placement transaction, for an aggregate price of $100,000.
      Each unit consists of one common share and one common share purchase warrant,
      with each warrant entitling its holder to acquire one share of our common stock
      at an exercise price of $0.60. The exercise price of the warrants will be
      adjusted from time to time upon the occurrence of certain events, as provided
      in
      the warrants. The warrants expire on August 12, 2008. The units were issued
      pursuant to Regulation S. During the years 2005 and 2006, Barbara Spaulding
      also
      subscribed personally for 579,700 common shares of the Company.




On
        October 11, 2005 Mr. Harvey Roff, the father of Mr. David Roff our current
        director, subscribed for 25,000 units of the Company, pursuant to a private
        placement transaction, for an aggregate price of $10,000. Each unit consists
        of
        one common share and one common share purchase warrant, with each warrant
        entitling its holder to acquire one share of our common stock at an exercise
        price of $0.60 per common share. The exercise price of the warrants will
        be
        adjusted from time to time upon the occurrence of certain events, as provided
        in
        the warrants. The warrants expire on October 11, 2008. The units were issued
        pursuant to Regulation S (“Regulation S”).


50




**ITEM
        13.** **EXHIBITS
        AND REPORTS ON FORM 8-K** ****





**Exhibit
                No.**
            
            **Description**2.1
            
            Liquidating
                Plan of Reorganization of Allied Devices Corporation, now known as
                Deep
                Well Oil & Gas, Inc. filed with Form 10-K/A on January 28, 2004, and
                incorporated herein by reference2.2
            
            Order
                and Plan of Reorganization of the U.S. Bankruptcy Court in and for
                the
                Eastern District of New York, In re: Allied Devices Corporation,
                Chapter
                11, Case No. 03-80962-511, dated September 10, 2003 filed with Form
                10K/A
                on January 28, 2004, and incorporated herein by
                reference3.1
            
            Restated
                and Amended Articles of Incorporation filed with and accepted by
                the
                Secretary of State of Nevada on October 22, 2003 filed with Form
                10-K/A on
                January 28, 2004, and incorporated herein by reference3.2
            
            Amended
                Articles of Incorporation filed with the State of Nevada on February
                27,
                2004 filed with Form 8-K on March 5, 2004, and incorporated herein
                by
                reference3.3
            
            Amended
                Articles of Incorporation filed with the State of Nevada on May 5,
                2004
                filed with Form 8-K on March 7, 2004, and incorporated herein by
                reference3.4
            
            Registrant’sBy-laws, filed herewith4.1
            
            Form
                of Warrant issued pursuant to the Securities Purchase Agreement and
                Registration Rights Agreement dated March 10, 2005, filed with Form
                8-K on
                March 14, 2005, and incorporated herein by reference4.2
            
            Form
                of Warrant issued pursuant to the Subscription Agreement dated August
                12,
                2005 by and among the Company with three investors related to the
                Private
                Placement offering, and Debt Settlement Agreement, filed with Form
                8-K on
                August 17, 2005, and incorporated herein by reference4.3
            
            Form
                of Warrant issued pursuant to the Subscription Agreement dated October
                11,
                2005 by and among the Company with three investors related to the
                Private
                Placement offering, filed with Form 8-K on October 19, 2005, and
                incorporated herein by reference4.4
            
            Form
                of Warrant issued pursuant to the Subscription Agreement dated January
                13,
                2006 by and among the Company with three investors related to the
                Private
                Placement offering, and Debt Settlement Agreement, filed with Form
                8-K on
                March 6, 2006, and incorporated herein by reference10.1
            
            Gross
                Overriding Royalty Agreement dated December 19, 2002 between Baytex
                Energy
                Ltd. and 979708 Alberta Ltd., and filed herewith10.2
            
            Gross
                Overriding Royalty Agreement dated December 12, 2003 between Mikwec
                Energy
                Canada Limited (now known as Northern Alberta Oil Ltd.), and Nearshore
                Petroleum Corporation, and filed herewith10.3
            
            Joint
                Operating Agreement dated April 26, 2004 between Mikwec Energy Canada
                Limited (now known as Northern Alberta Oil Ltd.), and Maxen Petroleum Inc.
                (now known as Pan Orient Energy Corp.), and filed
                herewith10.4
            
            Consulting
                Agreement by and between Deep Well and Menno Wiebe dated June 8,
                2004, and
                filed herewith10.5
            
            Exchange
                Agreement between Deep Well and Northern (formerly Mikwec) dated
                July 8,
                2004, filed with Form 8-K on November 5, 2004, and incorporated herein
                by
                reference10.6
            
            Employment
                Letter Agreement by and between Deep Well and John Brown dated November
                15, 2004, and filed herewith10.7
            
            Joint
                Operating Agreement dated December 9, 2004 between Deep Well and
                1132559
                Alberta Ltd., and filed herewith10.8
            
            Farmout
                Agreement dated February 25, 2005 by and between the Company, Deep
                Well
                Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global Energy,
                Inc., Signet Energy, Inc. (formerly known as Surge Global Energy
                (Canada)
                Ltd.), filed herewith10.9
            
            Assumption
                of Liabilities and Indemnity Agreement dated February 28, 2005 by
                and
                between Deep Well Oil & Gas, Inc. and Signet Energy, Inc. (formerly
                known as Surge Global Energy (Canada) Ltd.), filed
                herewith10.10
            
            Termination
                Agreement dated February 28, 2005 by and between Nearshore Petroleum
                Corporation, Northern Alberta Oil Ltd. and Signet Energy, Inc. (formerly
                known as Surge Global Energy (Canada) Ltd.), filed
                herewith10.11
            
            Farmout
                Amending Agreement dated March 3, 2005 by and between the Company,
                Deep
                Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global
                Energy, Inc., Signet Energy, Inc. (formerly known as Surge Global
                Energy
                (Canada) Ltd.), filed herewith




51




10.12
            
            Two
                Farmout Amending Agreements dated March 10, 2005 by and between the
                Company, Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and
                Surge Global Energy, Inc., Signet Energy, Inc. (formerly known as
                Surge
                Global Energy (Canada) Ltd.), filed herewith10.13
            
            Form
                of Securities Purchase Agreement and Registration Rights Agreement
                dated
                March 10, 2005, by and among the Company and each of Provident Premier
                Master Fund, Ltd. and Grey K Fund LP, filed with Form 8-K on March
                14,
                2005, and incorporated herein by reference10.14
            
            Form
                of Amending Agreement dated as of April 25, 2005, filed with Form
                8-K on
                June 10, 2005, and incorporated herein by reference10.15
            
            Form
                of Termination, Option and Put Agreement, filed with Form 8-K on
                June 10,
                2005, and incorporated herein by reference10.16
            
            Consulting
                agreement by and between Northern and Portwest Investments Ltd.,
                dated
                July 1, 2005, and filed herewith10.17
            
            Consulting
                agreement by and between Northern and Concorde Consulting, dated
                July 1,
                2005, and filed herewith10.18
            
            Farmout
                Amending Agreement dated July 14, 2005 by and between the Company,
                Deep
                Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global
                Energy, Inc., Signet Energy, Inc. (formerly known as Surge Global
                Energy
                (Canada) Ltd.), filed herewith10.19
            
            Form
                of Subscription Agreement dated August 12, 2005 by and among the
                Company
                with three investors related to the Private Placement offering, and
                Debt
                Settlement Agreement, filed with Form 8-K on August 17, 2005, and
                incorporated herein by reference10.20
            
            Consulting
                agreement by and between the Northern and Trebax Projects Ltd., effective
                September 1, 2005, and filed herewith10.21
            
            Form
                of Subscription Agreement dated October 11, 2005, by and among the
                Company
                with three investors related to the Private Placement offering, filed
                with
                Form 8-K on October 19, 2005, and incorporated herein by
                reference10.22
            
            Farmout
                Amending Agreement dated November 15, 2005 by and between the Company,
                Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global
                Energy, Inc., Signet Energy, Inc. (formerly known as Surge Global
                Energy
                (Canada) Ltd.), filed herewith10.23
            
            Farmout
                Acknowledgement Agreement dated November 15, 2005 by and between
                the
                Company, Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and
                Surge Global Energy, Inc., Signet Energy, Inc. (formerly known as
                Surge
                Global Energy (Canada) Ltd.), filed herewith10.24
            
            Deep
                Well Oil & Gas, Inc. Stock Option Plan (“The Plan”), effective
                November 28, 2005, filed with Form 8-K on March 3, 2006, and incorporated
                herein by reference10.25
            
            Sample
                Stock Option Agreements with all Directors, filed
                herewith10.26
            
            Sample
                Stock Option Agreements with all Contractors, filed
                herewith10.27
            
            Sample
                Indemnity Agreement with all Directors, filed herewith10.28
            
            Form
                of Subscription Agreement dated January 13, 2006 by and among the
                Company
                with three investors related to the Private Placement offering, and
                Debt
                Settlement Agreement, filed with Form 8-K on March 6, 2006, and
                incorporated herein by reference10.29
            
            Settlement
                Agreement & Release of All Claims, dated as of January 29, 2007, by
                and among the Company and Grey K Fund LP, Grey K Offshore Fund Ltd.,
                Provident Premier Master Fund Ltd., Atlas Master Fund Ltd. and Gemini
                Master Fund, Ltd., filed with From 8-K on January 31, 2007, and
                incorporated herein by reference.16.1
            
            Changes
                in registrant’s certifying accountant, Letter of Madsen & Associates,
                CPA’s Inc. filed with Form 8-K on August 16, 2004, and incorporated herein
                by reference16.2
            
            Changes
                in registrant’s certifying accountant, Letter of Deloitte & Touche LLP
                filed with Form 8-K on August 10, 2005, and incorporated herein by
                reference21.1
            
            Subsidiaries
                of Registrant, filed herewith31.1
            
            Certification
                of President and Chief Executive Officer Pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002, filed herewith31.2
            
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002, filed herewith32.1
            
            Certification
                of President and Chief Executive Officer Pursuant to Section 906
                of the
                Sarbanes-Oxley Act of 2002, filed herewith32.2
            
            Certification
                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002, filed herewith





52




**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**





The
      following table is a summary of the fees billed to us by Sellers & Andersen,
      LLC, Madsen & Associates and Deloitte & Touche LLP for professional
      services for the fiscal years ended September 30, 2004 and September 30, 2003:





**Fee
                Category**
            
            **Fiscal
                2004 Fees**
            
            **Fiscal
                2003 Fees**Audit
                Fees
            
            $
            29,328.94
            
            $
            5,950.00Audit
                Related Fees
            
            
            8,646.42
            
            
            -Tax
                Fees
            
            
            1,016.63
            
            
            -All
                Other Fees
            
            
            -
            
            
            -Total
                Fees
            
            $
            38,991.99
            
            $
            5,950.00





**Audit
      Fees**





Our
      board
      of directors appointed Madsen & Associates, CPA’s Inc. as independent
      auditors to audit our financial statements for the fiscal year ending September
      30, 2004. The aggregate fees billed by Sellers & Andersen, LLC, Madsen &
Associates and Deloitte & Touche LLP for professional services rendered for
      the audit of our annual financial statements included in this annual report
      on
      Form 10-KSB for the fiscal year ended September 30, 2004 and the period
      September 10, 2003 to September 30, 2003 and the period September 10, 2003
      (inception of exploration stage) to September 30, 2004, was $29,328.94,
      $5,950.00 and $35,278.94, respectfully.





**Audit
      Related Fees**





The
      aggregate fees billed of
      assurance and related services by the independent auditors that are reasonably
      related to the performance of the audit or review of our financial statements
      and are not reported above under “Audit Fees” are fees disclosed under this
      category include consultation regarding our correspondence with the SEC and
      other accounting consulting. Our audit-related and review fees for the fiscal
      years ended September
      30, 2004 and the period September 10, 2003 to September 30, 2003 and the period
      September 10, 2003 (inception of exploration stage) to September 30, 2004 were
      $ 8,646.42 ,
      $0 and
      $ 8,646.42 respectively.





**Tax
      Fees**





For
      the
      fiscal years ended September 30, 2004 and 2003, the aggregate fees billed for
      tax compliance, by Sellers & Andersen, LLC, Madsen & Associates and
      Deloitte & Touche LLP were $1,016.63 and $0, respectively.





**All
      Other Fees**





For
      the
      fiscal years ended September 30, 2004 and 2003, the aggregate fees billed by
      Sellers & Andersen, LLC, Madsen & Associates and Deloitte & Touche
      LLP for other non-audit professional services, other than those services listed
      above, totaled $0 and $0, respectively.





**Audit
      Committee Pre-Approval Policies and Procedures**





The
      Securities and Exchange Commission has adopted rules that require that before
      Madsen & Associates, CPA’s Inc. is engaged by us or our subsidiaries to
      render any auditing or permitted non-audit related service, the engagement
      be:





·
            approved
                by our audit committee; or





·
            entered
                into pursuant to pre-approval policies and procedures established
                by the
                audit committee, provided the policies and procedures are detailed
                as to
                the particular service, the audit committee is informed of each service,
                and such policies and procedures do not include delegation of the
                audit
                committee’s responsibilities to
                management.





Our
      board
      of directors, acting as our audit committee, pre-approves all services provided
      by our independent auditors. Our board of directors does not have records of
      what percentage of the above fees were pre-approved. All of the above services
      and fees were reviewed and approved by the audit committee either before or
      after the respective services were rendered.





The
      audit
      committee has considered the nature and amount of the fees billed by Madsen
      & Associates, CPA’s Inc., and believes that the provision of the services
      for activities unrelated to the audit is compatible with maintaining Madsen
      & Associates, CPA’s Inc. independence.


53


**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.




**DEEP
                WELL OIL & GAS, INC.**By
            /s/ Horst
              A.
              SchmidDr.
                Horst A. Schmid
              Chairman
                  of the Board


Date
            February
                21, 2007




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.




By
              /s/ Horst
                A.
                SchmidDr.
                  Horst A. Schmid
                Chief
                      Executive Officer and President
                    (Principal
                        Executive
                        Officer)
 Date
              February
                  21, 2007
  By
                /s/
                  Curtis SparrowMr.
                      Curtis Sparrow
                    Chief
                        Financial
                        Officer(Principal
                      Financial and Accounting
                      Officer)
 Date
                February
                    21, 2007
 By
                      /s/
                        David RoffMr.
                              David Roff
                            Director
 Date
                      February
                          21, 2007
 54