**UNITED
          STATES**
 **SECURITIES
          AND EXCHANGE COMMISSION**
 Washington,
          DC 20549
 
 **FORM
            10-QSB/A**
 
 [X]
                Quarterly
                    Report pursuant to Section 13 or 15(d) of the Securities Exchange
                    Act of
                    1934For
                    the quarterly period endedMarch
                    31, 2006[]
                Transition
                    Report pursuant to 13 or 15(d) of the Securities Exchange Act
                    of
                    1934For
                    the transition period _________ to __________Commission
                    file number333-82636
 
 Delta
          Oil & Gas, Inc.
 (Exact
          name of small business issuer as specified in its charter)
 
 Colorado
                91-2102350(State
                    or other jurisdiction of incorporation or organization)
                (IRS
                    Employer Identification No.)
 
 1122
                    6thAvenue North
                  Seattle,
                    Washington 98109(Address
                    of principal executive offices)
 
 (866)
                    355 - 3644(Issuer’s
                    telephone number)__________________________________________________________________(Former
                    name, former address and former fiscal year, if changed since
                    last
                    report)
 
 Check
          whether the issuer (1) filed all reports required to be filed by Section
          13 or
          15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
          (or
          for such shorter period that the issuer was required to file such reports),
          and
          (2) has been subject to such filing requirements for the past 90 days [X]
          Yes [
          ] No
 
 Indicate
          by check mark whether the registrant is a shell company (as defined in
          Rule
          12b-2 of the Exchange Act). [ ] Yes [X] No
 
 State
          the
          number of shares outstanding of each of the issuer’s classes of common stock, as
          of the latest practicable date: 45,070,506 common shares as of May 1,
          2006
 
 Transitional
          Small Business Disclosure Format (check one): Yes [ ] No [X]
  Table
              of Contents
 
  TABLE
                    OF CONTENTS
                PagePART
                    I - FINANCIAL INFORMATIONItem
                    1.
                Financial
                    Statements
                3Item
                    2.
                Management’s
                    Discussion and Analysis
                4Item
                    3.
                Controls
                    and Procedures
                11PART
                    II - OTHER INFORMATIONItem
                    1.
                Legal
                    Proceedings
                12Item
                    2.
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                12Item
                    3.
                Defaults
                    Upon Senior Securities
                12Item
                    4.
                Submission
                    of Matters to a Vote of Security
                    Holders
                12Item
                    5.
                Other
                    Information
                12Item
                    6.
                Exhibits
                13
  
  2
 Table
              of Contents
  **PART
          I - FINANCIAL INFORMATION**
  **Item
          1. Financial Statements**
  Our
                    unaudited financial statements included in this Form 10-QSB are
                    as
                    follows:F-1
                Unaudited
                    Consolidated Balance Sheets for the three months
                    ended March 31, 2006;F-2
                Unaudited
                    Consolidated Statements of Operations for the three
                    months ended March 31, 2006;F-3
                Unaudited
                    Consolidated Statements of Cash Flows for the three
                    months ended March 31, 2006;F-4
                Notes
                    to Unaudited Consolidated Financial
                    Statements
 
 
 These
          unaudited consolidated financial statements have been prepared in accordance
          with accounting principles generally accepted in the United States of America
          for interim financial information and the SEC instructions to Form 10-QSB.
          In
          the opinion of management, all adjustments considered necessary for a fair
          presentation have been included. Operating results for the interim period
          ended
          March 31, 2006 are not necessarily indicative of the results that can be
          expected for the full year.
  3
 Table
              of Contents
 **DELTA
              OIL & GAS, INC.**
 **(A
                Development Stage Company)**
 
 **CONSOLIDATED
                BALANCE SHEETS**
 **(Unaudited)**
 **(Stated
                in U.S. Dollars)**
   **MARCH
                              31****2006**
                        
                        DECEMBER
                              312005**ASSETS****Current**Cash
                            and cash equivalents
                        **$**
                        **1,843,650**
                        
                        $
                        343,004Accounts
                            receivable
                        
                        **8,102**
                        
                        
                        10,068Prepaid
                            expenses
                        
                        **7,414**
                        
                        
                        1,615**1,859,166**
                        
                        
                        354,687**Natural
                            Gas And Oil Properties**Proved
                            property
                        
                        **1,272**
                        
                        
                        1,272Unproved
                            properties
                        
                        **2,590,816**
                        
                        
                        2,040,700**2,592,088**
                        
                        
                        2,041,972**Other
                            Equipment**Computer
                            equipment
                        
                        **3,492**
                        
                        
                        3,492Less:
                            Accumulated depreciation
                        
                        **(2,186)**
                        
                        
                        (2,033)**1,306**
                        
                        
                        1,459**$**
                        **4,452,560**
                        
                        $
                        2,398,118**LIABILITIES****Current**Accounts
                            payable and accrued liabilities
                        **$**
                        **40,072**
                        
                        $
                        93,318Promissory
                            note payable
                        
                        **39,933**
                        
                        
                        39,397**80,005**
                        
                        
                        132,715**Commitment
                            And Contractual Obligations**(Note 11)**STOCKHOLDERS’
                            EQUITY****Share
                            Capital**Authorized:100,000,000
                            common voting shares, par value $0.001 per share25,000,000
                            preferred shares, par value $0.001 per shareIssued
                            and outstanding:44,343,235
                            common shares at March 31, 2006 and
                          44,025,735
                            common shares at December 31, 2005
                        
                        **44,343**
                        
                        
                        44,026Additional
                            paid-in capital
                        
                        **3,372,765**
                        
                        
                        3,110,591Share
                            subscriptions received
                        
                        **1,999,995**
                        
                        
                        -Share
                            subscriptions receivable
                        
                        -
                        
                        
                        (16,000)**Deficit
                            Accumulated During The Development Stage**
                        
                        **(1,044,548)**
                        
                        
                        (873,214)**4,372,555**
                        
                        
                        2,265,403**$**
                        **4,452,560**
                        
                        $
                        2,398,118
   The
                accompanying notes are an integral part of these consolidated financial
                statements.
 F-1
 Table
              of Contents
 **DELTA
              OIL & GAS, INC.**
 **(A
              Development Stage Company)**
 
 **CONSOLIDATED
              STATEMENTS OF OPERATIONS**
 **(Unaudited)**
 **(Stated
              in U.S. Dollars)**
 CUMULATIVEPERIOD
                          FROMINCEPTIONJANUARY
                          9**THREE
                          MONTHS ENDED**
                      
                      
                      2001
                          TO**MARCH
                          31**
                      
                      
                      MARCH
                          31**2006**
                      
                      
                      2005
                      
                      
                      2006**Revenue**Natural
                          gas and oil sales
                      **$**
                      **2,188**
                      
                      $
                      1,936
                      
                      $
                      96,318**Costs
                          And Expenses**Natural
                          gas and oil operating
                        expenses
                      
                      **761**
                      
                      
                      1,322
                      
                      
                      35,530General
                          and administration
                      
                      **170,581**
                      
                      
                      34,826
                      
                      
                      511,092Depreciation
                          and depletion
                      
                      **153**
                      
                      
                      -
                      
                      
                      37,757Impairment
                          ofnatural
                          gas and gas
                        properties
                      
                      **-**
                      
                      
                      -
                      
                      
                      65,503Dry
                          well costs written off
                      
                      **-**
                      
                      
                      -
                      
                      
                      118,690Stock-based
                          compensation
                      
                      **5,991**
                      
                      
                      -
                      
                      
                      376,258**177,486**
                      
                      
                      36,148
                      
                      
                      1,144,830Less:
                          Interestincome
                      
                      **(3,964)**
                      
                      
                      -
                      
                      
                      (3,964)**173,522**
                      
                      
                      36,148
                      
                      
                      1,140,866**Net
                          Loss For The Period**
                      **$**
                      **(171,334)**
                      
                      $
                      (34,212)
                      
                      $
                      (1,044,548)**Basic
                          And Diluted Loss Per Common Share**
                      **$**
                      **(0.00)**
                      
                      $
                      (0.00)**Weighted
                          Average Number Of Outstanding Common Shares**
                      
                      **44,269,263**
                      
                      
                      41,296,750
  The
            accompanying notes are an integral part of these consolidated financial
            statements.
    F-2
 Table
              of Contents
 **DELTA
            OIL & GAS, INC.**
 **(A
            Development Stage Company)**
 
 **CONSOLIDATED
            STATEMENTS OF CASH FLOWS**
 **(Unaudited)**
 **(Stated
            in U.S. Dollars)**
  **THREE
                          MONTHS ENDED****MARCH
                        31**
                    
                    CUMULATIVEPERIOD
                                FROMINCEPTIONJANUARY
                            92001
                          TOMARCH
                        31**2006**
                    2005
                    
                    2006**Cash
                        Flows (Used By) Operating Activities**Net
                        loss for the period
                    **$**
                    **(171,334)**
                    $
                    (34,212)
                    
                    $
                    (1,044,548)Items
                        not involving cash:Depreciation
                        and depletion
                    
                    **153**
                    
                    -
                    
                    
                    37,757Impairment
                        of natural gas and oil properties
                    
                    **-**
                    
                    -
                    
                    
                    65,503Dry
                        well costs written off
                    
                    **-**
                    
                    -
                    
                    
                    118,690Stock-based
                        compensation
                    
                    **5,991**
                    
                    -
                    
                    
                    376,258**(165,190)**
                    
                    (34,212)
                    
                    
                    (446,340)Changes
                        in non-cash operating working capital items:Accounts
                        receivable
                    
                    **(1,966)**
                    
                    (369)
                    
                    
                    (8,102)Accounts
                        payable and accrued liabilities
                    
                    **(53,246)**
                    
                    5,296
                    
                    
                    40,072Accrued
                        interest payable
                    
                    **-**
                    
                    (17,362)
                    
                    
                    (11,396)Prepaid
                        expenses
                    
                    **(5,799)**
                    
                    (1,071)
                    
                    
                    (7,414)**(57,079)**
                    
                    (8,223)
                    
                    
                    13,160**Net
                        Cash (Used By) Operating Activities**
                    
                    **(222,269)**
                    
                    (47,718)
                    
                    
                    (433,180)**Cash
                        Flows (Used By) Investing Activities**Purchase
                        of natural gas and oil properties
                    
                    **(550,116)**
                    
                    (962,038)
                    
                    
                    (2,811,852)Purchase
                        of other equipment
                    
                    **-**
                    
                    (1,751)
                    
                    
                    (3,492)**Net
                        Cash (Used By) Investing Activities**
                    
                    **(550,116)**
                    
                    (963,789)
                    
                    
                    (2,815,344)**Cash
                        Flows From Financing Activities**Issue
                        of common stock and units, net
                    
                    **256,500**
                    
                    -
                    
                    
                    3,040,850Share
                        subscriptions received
                    
                    **1,999,995**
                    
                    1,140,000
                    
                    
                    1,999,995Share
                        subscriptions receivable
                    
                    **16,000**
                    
                    -
                    
                    
                    -Due
                        to related party
                    
                    **-**
                    
                    (13,122)
                    
                    
                    2,919Advances
                        payable
                    
                    **-**
                    
                    (7,974)
                    
                    
                    8,477Promissory
                        note payable
                    
                    **536**
                    
                    529
                    
                    
                    39,933**Net
                        Cash From Financing Activities**
                    
                    **2,273,031**
                    
                    1,119,433
                    
                    
                    5,092,174**Increase
                        (Decrease) In Cash And Cash Equivalents**
                    
                    **1,500,646**
                    
                    107,926
                    
                    
                    1,843,650**Cash
                        And Cash Equivalents (Excess Of Checks Issued Over Funds
                        On Deposit),
                        Beginning Of Period**
                    
                    **343,004**
                    
                    -
                    
                    
                    -**Cash
                        And Cash Equivalents (Excess Of Checks Issued Over Funds
                        On Deposit), End
                        Of Period**
                    **$**
                    **1,843,650**
                    $
                    107,926
                    
                    $
                    1,843,650**Supplemental
                        disclosure of cash flow information:**Cash
                        paid during the period for:Interest
                    **$**
                    **-**
                    $
                    -
                    
                    $
                    -Income
                        taxes
                    **$**
                    **-**
                    $
                    -
                    
                    $
                    -
   The
            accompanying notes are an integral part of these consolidated financial
            statements.
 F-3
 Table
              of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 
 
 **1.**
                          **BASIS
                              OF PRESENTATION**
 
 The
                    unaudited consolidated financial statements as of March 31, 2006
                    included herein
                    have been prepared without audit pursuant to the rules and regulations
                    of the
                    Securities and Exchange Commission. Certain information and footnote
                    disclosures
                    normally included in financial statements prepared in accordance
                    with United
                    States generally accepted accounting principles have been condensed
                    or omitted
                    pursuant to such rules and regulations. In the opinion of management,
                    all
                    adjustments (consisting of normal recurring accruals) considered
                    necessary for a
                    fair presentation have been included. It is suggested that these
                    consolidated
                    financial statements be read in conjunction with the December
                    31, 2005 audited
                    financial statements and notes thereto.
 
 
 **2.**
                          **OPERATIONS**
 
 a)
                          Organization
 
 Delta
                    Oil
& Gas, Inc. (“the Company”) was incorporated as a Colorado corporation on
                    January 9, 2001.
 
 The
                    Company is a development stage, independent natural gas and oil
                    company engaged
                    in the exploration, development and acquisition of natural gas
                    and oil
                    properties in the United States. The Company’s entry into the natural gas and
                    oil business began on February 8, 2001.
 
 During
                    the year ended December 31, 2004, the Company completed a forward
                    stock split on
                    the basis of 5 1⁄2 common shares for every one previously held common share,
                    common shares outstanding have been adjusted retroactively.
 
 b)
                          Development
                              Stage Activities
 
 The
                    Company is a development stage enterprise engaged in the exploration
                    for and
                    production of natural gas and oil in the United States. Since
                    January 9, 2001,
                    the Company has acquired an 8.9% working interest in a well which
                    commenced
                    production in February 2001.
  F-4
 Table
                        of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 
 
 **2.**
                          **OPERATIONS**(Continued)
 
 b)
                          Development
                              Stage Activities (Continued)
 
 The
                    Company is subject to several categories of risk associated with
                    its development
                    stage activities. Natural gas and oil exploration and production
                    is a
                    speculative business, and involves a high degree of risk. Among
                    the factors that
                    have a direct bearing on the Company’s prospects are uncertainties inherent in
                    estimating natural gas and oil reserves, future hydrocarbon production,
                    and cash
                    flows, particularly with respect to wells that have not been
                    fully tested and
                    with wells having limited production histories; access to additional
                    capital;
                    changes in the price of natural gas and oil; availability and
                    cost of services
                    and equipment; and the presence of competitors with greater financial
                    resources
                    and capacity.
 
 c)
                          Going
                              Concern
 
 The
                    accompanying financial statements have been prepared assuming
                    that the Company
                    will continue as a going concern.
 
 As
                    shown
                    in the accompanying financial statements, the Company has incurred
                    a net loss of
                    $1,044,548 since inception. To achieve profitable operations,
                    the Company
                    requires additional capital for obtaining producing oil and gas
                    properties
                    through either the purchase of producing wells or successful
                    exploration
                    activity. Management believes that sufficient funding will be
                    available to meet
                    its business objectives including anticipated cash needs for
                    working capital and
                    is currently evaluating several financing options. However, there
                    can be no
                    assurance that the Company will be able to obtain sufficient
                    funds to continue
                    the development of and, if successful, to commence the sale of
                    its products
                    under development. As a result of the foregoing, there exists
                    substantial doubt
                    about the Company’s ability to continue as a going concern. These financial
                    statements do not include any adjustments that might result from
                    the outcome of
                    this uncertainty.
  **3.**
                          **SUMMARY
                              OF SIGNIFICANT ACCOUNTING
                              POLICIES**
 
 a)
                          Basis
                              of Consolidation
 
 The
                    consolidated financial statements include the financial statements
                    of the
                    Company and its wholly-owned subsidiary, Delta Oil & Gas (Canada) Inc. All
                    significant inter-company transactions have been eliminated.
  F-5
 Table
                        of Contents
 **DELTA
                      OIL & GAS, INC.**
 **(A
                        Development Stage Company)**
 
 **NOTES
                        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                        31, 2006**
 **(Unaudited)**
 **(Stated
                        in U.S. Dollars)**
  
 **3.**
                              **SUMMARY
                                  OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)
 
 b)
                              Use
                                  of Estimates
                                
                                The
                                  preparation of financial statements in conformity
                                  with accounting
                                  principles generally accepted in the United States
                                  requires management to
                                  make estimates and assumptions that affect the
                                  reported amounts of assets
                                  and liabilities, and disclosure of contingent assets
                                  and liabilities at
                                  the date of the financial statements, and the reported
                                  amounts of revenues
                                  and expenses during the reporting periods. Actual
                                  results could differ
                                  from those estimates. Significant estimates with
                                  regard to these financial
                                  statements include the estimate of proved natural
                                  gas and oil reserve
                                  quantities and the related present value of estimated
                                  future net cash
                                  flows therefrom (see “Supplemental Oil and Gas Disclosures -
                                  Unaudited”).
 
 c)
                                Natural
                                    Gas and Oil Properties
                                  
                                  The
                                    Company accounts for its oil and gas producing
                                    activities using the full
                                    cost method of accounting as prescribed by the
                                    United States Securities
                                    and Exchange Commission (“SEC”). Accordingly, all costs associated with
                                    the acquisition of properties and exploration
                                    with the intent of finding
                                    proved oil and gas reserves contribute to the
                                    discovery of proved
                                    reserves, including the costs of abandoned properties,
                                    dry holes,
                                    geophysical costs, and annual lease rentals are
                                    capitalized. All general
                                    corporate costs are expensed as incurred. In
                                    general, sales or other
                                    dispositions of oil and gas properties are accounted
                                    for as adjustments to
                                    capitalized costs, with no gain or loss recorded.
                                    Amortization of
                                    evaluated oil and gas properties is computed
                                    on the units of production
                                    method based on all proved reserves on a country-by-country
                                    basis.
                                    Unevaluated oil and gas properties are assessed
                                    at least annually for
                                    impairment either individually or on an aggregate
                                    basis. The net
                                    capitalized costs of oil and gas properties (full
                                    cost ceiling limitation)
                                    are not to exceed the sum of the related estimated
                                    future net revenues
                                    from proved reserves discounted at 10%, the lower
                                    of cost or estimated
                                    fair value of unproved properties included in
                                    the costs being amortized,
                                    if any, and the cost of unevaluated and unproved
                                    properties not being
                                    amortized, if any, net of tax considerations.
                                    Properties are included in
                                    the amortization pool immediately upon the determination
                                    that the well is
                                    dry.
                                  Unproved
                                      properties consist of lease acquisition costs
                                      and costs on wells currently
                                      being drilled on the properties. The recorded
                                      costs of the investment in
                                      unproved properties are not amortized until
                                      proved reserves associated
                                      with the projects can be determined or until
                                      they are
                                      impaired.
 F-6
 Table
                        of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 
 
 **3.**
                          **SUMMARY
                              OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)
 
 d)  Asset
                    Retirement Obligations
 
 The
                      Company has adopted Statement of Financial Accounting Standards
                      No. 143 (“SFAS
                      143”), “Accounting for Asset Retirement Obligations”, which requires that asset
                      retirement obligations (“ARO”) associated with the retirement of a tangible
                      long-lived asset, including natural gas and oil properties,
                      be recognized as
                      liabilities in the period in which it is incurred and becomes
                      determinable, with
                      an offsetting increase in the carrying amount of the associated
                      assets. The cost
                      of tangible long-lived assets, including the initially recognized
                      ARO, is
                      depleted, such that the cost of the ARO is recognized over
                      the useful life of
                      the assets. The ARO is recorded at fair value, and accretion
                      expense is
                      recognized over time as the discounted are accreted to the
                      expected settlement
                      value. The fair value of the ARO is measured using expected
                      future cash flow,
                      discounted at the Company’s credit-adjusted risk-free interest rate.
  The
                      Company determined that, pursuant to SFAS 143, the net effect
                      of the ARO
                      calculation to the Company’s income statement would be immaterial
                      to record in its financial statements for the year ended December
                      31, 2005.
  e)
                          Joint
                              Ventures
 
 All
                    exploration and production activities are conducted jointly with
                    others and,
                    accordingly, the accounts reflect only the Company’s proportionate interest in
                    such activities.
 
 f)
                          Revenue
                              Recognition
 
 The
                    Company uses the sales method of accounting for natural gas and
                    oil revenues.
                    Under this method, revenues are recognized upon the passage of
                    title, net of
                    royalties. Revenues from natural gas production are recorded
                    using the sales
                    method. When sales volumes exceed the Company’s entitled share, an overproduced
                    imbalance occurs. To the extent the overproduced imbalance exceeds
                    the Company’s
                    share of the remaining estimated proved natural gas reserves
                    for a given
                    property, the Company records a liability. At March 31, 2006,
                    the Company had no
                    overproduced imbalances.
 
 g)
                          Cash
                              and Cash Equivalent
 
 Cash
                    consists of cash on deposit with high quality major financial
                    institutions, and
                    to date has not experienced losses on any of its balances. The
                    carrying amounts
                    approximated fair market value due to the liquidity of these
                    deposits.
  F-7
 Table
                        of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 
 
 **3.**
                          **SUMMARY
                              OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)
 
 h)  Environmental
                    Protection and Reclamation Costs
 
 The
                    operations of the Company have been, and may be in the future
                    be affected from
                    time to time in varying degrees by changes in environmental regulations,
                    including those for future removal and site restorations costs.
                    Both the
                    likelihood of new regulations and their overall effect upon the
                    Company may vary
                    from region to region and are not predictable.
 
 The
                    Company’s policy is to meet or, if possible, surpass standards set by
                    relevant
                    legislation, by application of technically proven and economically
                    feasible
                    measures. Environmental expenditures that relate to ongoing environmental
                    and
                    reclamation programs will be charged against statements of operations
                    as
                    incurred or capitalized and amortized depending upon their future
                    economic
                    benefits. The Company does not currently anticipate any material
                    capital
                    expenditures for environmental control facilities because all
                    property holdings
                    are at early stages of exploration. Therefore, estimated future
                    removal and site
                    restoration costs are presently considered minimal.
 
 i)  Foreign
                    Currency Translation
 
 United
                    States funds are considered the Company’s functional currency. Transaction
                    amounts denominated in foreign currencies are translated into
                    their United
                    States dollar equivalents at exchange rates prevailing at the
                    transaction date.
                    Monetary assets and liabilities are adjusted at each balance
                    sheet date to
                    reflect exchange rates prevailing at that date, and non-monetary
                    assets and
                    liabilities are translated at the historical rate of exchange.
                    Gains and losses
                    arising from restatement of foreign currency monetary assets
                    and liabilities at
                    each year-end are included in statements of operations.
 j)
                          Other
                              Equipment
 
 Computer
                    equipment is stated at cost. Provision for depreciation on computer
                    equipment is
                    calculated using the straight-line method over the estimated
                    useful life of
                    three years.
 
 k)
                          Impairment
                              of Long-Lived Assets
 
 In
                    the
                    event that facts and circumstances indicate that the costs of
                    long-lived assets,
                    other than oil and gas properties, may be impaired, and evaluation
                    of
                    recoverability would be performed. If an evaluation is required,
                    the estimated
                    future undiscounted cash flows associated with the asset would
                    be compared to
                    the asset’s carrying amount to determine if a write-down to market value
                    or
                    discounted cash flow value is required. Impairment of oil and
                    gas properties is
                    evaluated subject to the full cost ceiling as described under
                    Oil and Gas
                    Properties.
  F-8
 Table
                        of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 
 
 **3.**
                          **SUMMARY
                              OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)
 
 l)
                          Loss
                              Per Share
 
 In
                    February 1997, the Financial Accounting Standards Board (“FASB”) issued
                    Statement of Financial Accounting Standards No. 128, "Earnings
                    Per Share" ("SFAS
                    128"). Under SFAS 128, basic and diluted earnings per share are
                    to be presented.
                    Basic earnings per share is computed by dividing income available
                    to common
                    shareholders by the weighted average number of common shares
                    outstanding in the
                    period. Diluted earnings per share takes into consideration common
                    shares
                    outstanding (computed under basic earnings per share) and potentially
                    dilutive
                    common shares.
 
 m)
                          Income
                              Taxes
 
 The
                    Company follows the liability method of accounting for income
                    taxes under which
                    deferred tax assets and liabilities are recognized for the future
                    tax
                    consequences of (i) temporary differences between the tax bases
                    of assets and
                    liabilities, and their reported amounts in the financial statements,
                    and (ii)
                    operating loss and tax credit carryforwards for tax purposes.
                    Deferred tax
                    assets are reduced by a valuation allowance when, based upon
                    management’s
                    estimates, it is more likely than not that a portion of the deferred
                    tax assets
                    will not be realized in a future period.
 
 n)
                          Financial
                              Instruments
 
 The
                    Company’s financial instruments consist of cash and cash equivalent,
                    accounts
                    receivable, prepaid expenses, accounts payable and accrued liabilities,
                    and
                    promissory note payable.
 
 It
                    is
                    management’s opinion that the Company is not exposed to significant interest
                    or
                    credit risks arising from these financial instruments. The fair
                    value of these
                    financial instruments approximate their carrying values.
 
 o)
                          Stock-Based
                              Compensation
 
 The
                    Company accounts for employee stock-based compensation using
                    the intrinsic value
                    method prescribed in Accounting Principles Board Opinion No.
                    25 - “Accounting
                    for Stock Issued to Employees”, and related interpretations. Accordingly,
                    compensation cost for stock options is measured as the excess,
                    if any, of the
                    fair value of the Company’s common stock at the date of the grant over the
                    amount an employee must pay to acquire the common stock. Non-employee
                    stock-based compensation is accounted for using the fair value
                    method in
                    accordance with SFAS No. 123 - “Accounting for Stock-Based
                    Compensation”.
  F-9
 Table
                        of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 
 
 **4.**
                          **NATURAL
                              GAS AND OIL PROPERTIES**
 
 a)
                          Proved
                              Property
 
 In
                    February 2001, the Company acquired an 8.9% working interest
                    in a gas well
                    located in California at a cost of $90,000. The well commenced
                    production in
                    February 2001 following a redrill.
 
 **MARCH
                                31****2006**
                          
                          DECEMBER
                                312005Proved
                              property
                          **$**
                          **102,346**
                          
                          $
                          102,346Less:
                              Accumulated depletion
                          
                          **(101,074)**
                          
                          
                          (101,074)**$**
                          **1,272**
                          
                          $
                          1,272
 
 b)
                          Unproved
                              Properties
 
 **MARCH
                                31****2006**
                          
                          DECEMBER
                                312005Todd
                              CreekAcquisition
                              cost
                          **$**
                          **597,263**
                          
                          $
                          597,263Cash
                              call
                          
                          **590,925**
                          
                          
                          519,990HillspringAcquisition
                              cost
                          
                          **414,766**
                          
                          
                          414,766Cache
                              SloughCash
                              call
                          
                          **301,387**
                          
                          
                          301,387StrachanAcquisition
                              cost
                          
                          **261,475**
                          
                          
                          207,294Palmetto
                              PointAcquisition
                              cost
                          
                          **425,000**
                          
                          
                          -**$**
                          **2,590,816**
                          
                          $
                          2,040,700
  F-10
 Table
                        of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 
 
 **4.**
                          **NATURAL
                              GAS AND OIL PROPERTIES**(Continued)
 
 b)
                          Unproved
                              Properties (Continued)
 
 i)
                          Todd
                              Creek, Alberta, Canada
 
 In
                    January 2005, the Company acquired a 20% working interest in
                    13.75 sections
                    (8,800 acres) of land in Todd Creek, Alberta, Canada, at a cost
                    of $597,263. The
                    Company also has an option to acquire an additional 15% interest
                    in 7 additional
                    sections of land by participating in 20% of the drilling cost
                    by December 31,
                    2006. As at March 31, 2006, a cash call of $590,925 has been
                    paid as share of
                    costs for a proposed drilling program.
 
 ii)
                          Hillspring,
                              Alberta, Canada
 
 In
                    January 2005, the Company acquired a 10% working interest in
                    1 section (64
                    acres) of land in Hillspring, Alberta, Canada, at a cost of $414,766.
                    The
                    Company also had an option to acquire an additional 10% working
                    interest in an
                    additional 1.25 sections by paying $207,833 by July 1, 2005.
                    Later the Company
                    elected not to exercise this option and the option expired.
 
 Hillspring
                    Prospect
 
 This
                    option expired on July 1, 2005, but was later extended to December
                    29,
                    2006.
 
 iii)
                          Cache
                              Slough Prospect, California, USA
 
 In
                    May
                    2005, the Company entered into a participation agreement with
                    Production
                    Specialties Company (“PSC”) where the Company has been granted the right to earn
                    a 68% working interest in a test well and a 12.50% working interest
                    in certain
                    lands located in Solano County, California, by paying 18.75%
                    of the test well
                    operations. As at March 31, 2006, a cash call of $301,387 has
                    been paid as share
                    of costs for a proposed drilling program.
 
 Following
                    these payments, the Company will be responsible for 12.5% of
                    all additional
                    expenditures for drilling and production on the property and
                    be entitled to
                    receive 8.5% of all revenue generated by the property, which
                    is 12.5% of this
                    California company’s 68% interest.
  F-11
 Table
                        of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 
 
 **4.**
                          **NATURAL
                              GAS AND OIL PROPERTIES**(Continued)
 
 b)
                          Unproved
                              Properties (Continued)
 
 iv) Strachan
                    Prospect, Alberta, Canada
 
 In
                    September 2005, the Company entered into a participation and
                    farmout agreement
                    with Odin Capital Inc. (“Odin”) where the Company will participate for 4% share
                    of the costs of drilling a test well in certain lands located
                    in the Leduc
                    formation, Alberta, Canada. In exchange for the participation
                    costs, the Company
                    will earn interests in certain petroleum and natural gas wells
                    ranging from
                    1.289% to 4.0%. As at March 31, 2006, the Company has advanced
                    $261,475 as its
                    share of the costs in the Leduc formation property.
 
 A
                    director of the Company maintains a 50% ownership interest in
                    Odin.
 
 v)
                          Palmetto
                              Point Prospect, Mississippi
 
 On
                    February 21, 2006, the Company entered into an agreement (the
“Agreement”) with
                    0743608 B.C. Ltd., (“Assignor”) a British Columbia based oil and gas exploration
                    company, in order to accept an assignment of the Assignor’s ten percent (10%)
                    gross working and revenue interest in a ten-well drilling program
                    (the “Drilling
                    Program”) to be undertaken by Griffin & Griffin Exploration L.L.C.,
                    (“Griffin”) a Mississippi based exploration company.  Under the terms of
                    the Agreement, the Company paid the Assignor $425,000 as payment
                    for the
                    assignment of the Assignor’s 10% gross working and revenue interest in the
                    Drilling Program.  The Company also entered into a Joint Operating
                    Agreement directly with Griffin on February 24, 2006.
 
 The
                    Drilling Program on the acquired property interests is anticipated
                    to be
                    initiated by Griffin on or about May 1, 2006 and to be completed
                    by Griffin
                    within approximately 10 months.  The anticipated commencement date for the
                    drilling program was extended due to flooding of the road accessing
                    the well
                    sites attributable to the melting snow.  The prospect area owned or
                    controlled by Griffin on which the ten wells will be drilled,
                    is comprised of
                    approximately 1273 acres in Palmetto Point, Mississippi.  The exact
                    locations of the ten wells in which the Company will participate
                    are yet to be
                    determined.
  F-12
 Table
                        of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 
 **5.**
                          **ADVANCES
                              PAYABLE**
 
 Advances
                    payable are repayable on demand, unsecured and bear interest
                    at 6.5% per annum.
 
 **6.**
                          **PROMISSORY
                              NOTE PAYABLE**
 
 **MARCH
                                31****2006**
                          
                          DECEMBER
                                312005Unsecured
                              loan, repayable January 4, 2006, together with accrued
                              interest at a rate
                              of 6.5% per annum. As at March 31, 2006, the promissory
                              note was under
                              negotiations and the terms were not amended. Interest
                              continues to accrue
                              at 6.5% per annum.
                          **$**
                          **39,933**
                          
                          $
                          39,397
 
 **7.**
                          **SHARE
                              CAPITAL**
 
 a)
                          On
                              January 11, 2006, the Company issued 75,000 common
                              shares for exercise of
                              stock options at $0.80 per share.
 
 On
                    January 24, 2006, the Company issued 230,000 common shares for
                    exercise of stock
                    options at $0.80 per share.
 
 On
                    January 25, 2006, the Company issued 12,500 common shares for
                    exercise of stock
                    options at $1.00 per share.
 
 On February
                      24, 2006, the Company sold 727,272 units at $2.75 per Unit
                      to a total of three
                      (3) investors. Each unit consisted of one (1) share of common
                      stock, par value
                      $0.001, and one (1) warrant (the "warrant") to purchase one
                      (1) share of common
                      stock, exercisable for three (3) years from the closing of
                      the offering. The
                      exercise price for the warrant was priced at $3.00. The total
                      gross proceeds the
                      Company received from this sale of securities was $1,999,995
                      during the period
                      ended March 31, 2006.  The Company paid $150,000 in commissions on this
                      private equity offering.  Assuming that all of the warrants are exercised
                      by the investors, the gross proceeds received from the warrants
                      will equal
                      $2,181,816. The Board of Directors approved the issuance of
                      the stock
                      certificates during the reporting period, but the physical
                      issuance of the stock
                      certificates did not occur until April 5, 2006.
 F-13
 Table
                          of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
 
 **7.**
                          **SHARE
                              CAPITAL**(Continued)
 
 b)
                          Stock
                              Options
 
 Compensation
                    expense related to stock options granted is recorded at their
                    fair value as
                    calculated by the Black-Scholes option pricing model. Compensation
                    expense of
                    $5,991 was recorded during the three months ended March 31, 2006
                    (March 31, 2005
                    - $Nil) related to options granted during the year ended December
                    31, 2005 but
                    vested during the three months ended March 31, 2006.
 
 The
                    changes in stock options are as follows:
 
 **NUMBER**
                          
                          **WEIGHTED**
                            **AVERAGE**
                            **EXERCISE**
                            **PRICE**Balance
                              outstanding, December 31, 2005
                          330,000
                          
                          $
                          0.81Exercised
                          (317,500)
                          
                          
                          (0.81)Balance
                              outstanding, March 31, 2006
                          12,500
                          
                          $
                          1.00
 
 The
                    following table summarized information about the stock options
                    outstanding at
                    March 31, 2006:
 
 **OPTIONS
                              OUTSTANDING**
                          
                          **OPTIONS
                              EXERCISABLE****EXERCISE****PRICE**
                          **NUMBER
                                OF****SHARES**
                          **REMAINING****CONTRACTUAL****LIFE
                              (YEARS)**
                          
                          **NUMBER
                                OF****SHARES**$
                          1.00
                          12,500
                          2.75
                          
                          6,250
 
 c)
                          Common
                              Stock Share Purchase Warrants
 
 As
                    at
                    March 31, 2006, share purchase warrants outstanding for the purchase
                    of common
                    shares as follows:
 **WARRANTS
                              OUTSTANDING****EXERCISE**
                            **PRICE**
                          **NUMBER
                              OF**
                            **SHARES**
                          **EXPIRY**
                            **DATE**$
                          1.50
                          1,200,000
                          May
                              2, 2010$
                          1.50
                          383,985
                          August
                              29, 2010$
                          1.50
                          900,000
                          December
                              19, 2010
  F-14
 Table
                        of Contents
 **DELTA
                    OIL & GAS, INC.**
 **(A
                    Development Stage Company)**
 
 **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **MARCH
                    31, 2006**
 **(Unaudited)**
 **(Stated
                    in U.S. Dollars)**
   **8.**
                          **RELATED
                              PARTIES**
 
 During
                    the period ended March 31, 2006, the Company paid $5,197 (March
                    31, 2005 - $Nil)
                    for management fees to a director of the Company.
 
 An
                    amount
                    of $933 at March 31, 2006 (December 31, 2005 - $805) is due to
                    a director of the
                    Company.
 
 **9.**
                          **COMMITMENT
                              AND CONTRACTUAL
                              OBLIGATIONS**
 
 A
                    lease
                    agreement for the Vancouver office commenced March 1, 2005 and
                    terminates on
                    February 28, 2006, and will subsequently be paid on a month-to-month
                    basis. The
                    lease agreement includes a fixed rental fee of $1,295 per month
                    plus additional
                    charges for services supplied by the landlord or incurred on
                    behalf of the
                    client in the previous month.
 
 On
                    March
                    1, 2005, the Company also rented an office on a month to month
                    basis for $243
                    per month.
 
 
 **10.**
                          **SUBSEQUENT
                              EVENTS**
  a)
                            Wordsworth
                                Prospect
 
 Subsequent
                    to the reporting period on April 20, 2006, the Company entered
                    into a farmout,
                    option and participation letter agreement (“FOP Agreement”) where it acquired
                    15% of a working interest in certain leasehold interests located
                    in southeast
                    Saskatchewan, Canada referred to as the Wordsworth area for the
                    purchase price
                    of $152,724. The Company is responsible for its proportionate
                    share of the costs
                    associated with drilling, testing, and completing the first test
                    well on the
                    property. In exchange for the Company paying its proportionate
                    share of the
                    costs associated with drilling, testing, and completing the first
                    test well on
                    the property, the Company will have earned 7.5% of the total
                    payout on the
                    Wordsworth prospect and an option to participate and acquire
                    a working interest
                    in a vertical test well drilled to 1200 meters to test the Mississippian
                    (Alida)
                    formation in LSD 13 of section 24, township 7, range 3 W2.
 
 On
                    or
                    before July 1, 2006, the first test well is anticipated to be
                    drilled. There can
                    be no assurance that any of the wells drilled in this prospect
                    will be
                    productive or that the Company will recover all or any portion
                    of its investment
                    in such wells.
 
 F-15
 Table
                        of
                        Contents
 **Item
            2.     Management’s Discussion and
            Analysis**
 
 **Forward-Looking
            Statements**
 
 Historical
            results and trends should not be taken as indicative of future operations.
            Management’s statements contained in this report that are not historical facts
            are forward-looking statements within the meaning of Section 27A of the
            Securities Act of 1933, as amended, and Section 21E of the Securities
            and
            Exchange Act of 1934 (the “Exchange Act”), as amended. Actual results may differ
            materially from those included in the forward-looking statements. The
            Company
            intends such forward-looking statements to be covered by the safe-harbor
            provisions for forward-looking statements contained in the Private Securities
            Litigation Reform Act of 1995, and is including this statement for purposes
            of
            complying with those safe-harbor provisions. Forward-looking statements,
            which
            are based on certain assumptions and describe future plans, strategies
            and
            expectations of the Company, are generally identifiable by use of the
            words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,”
“prospects,” or similar expressions. The Company’s ability to predict results or
            the actual effect of future plans or strategies is inherently uncertain.
            Factors
            which could have a material adverse affect on the operations and future
            prospects of the Company on a consolidated basis include, but are not
            limited
            to: changes in economic conditions, legislative/regulatory changes, availability
            of capital, interest rates, competition, and generally accepted accounting
            principles. These risks and uncertainties should be considered in evaluating
            forward-looking statements and undue reliance should not be placed on
            such
            statements. Further information concerning the Company and its business,
            including additional factors that could materially affect the Company’s
            financial results, is included herein and in the Company’s other filings with
            the SEC.
  **Business
            Development**
  We
            are
            engaged in the exploration, development, acquisition and operation of
            oil and
            gas properties. We participate in the oil and gas industry through the
            purchase
            of small interests in either producing wells or oil and gas exploration
            and
            development projects. Our current focus is on the exploration of our
            land
            portfolio comprised of working interests in highly prospective acreage
            in the
            Northern California, Palmetto Point, Mississippi, Southern Saskatchewan,
            Canada,
            and the Southern Alberta Foothills area in Canada.
 
 The
            disclosure that follows relates to each property for which we have an
            interest.
 
 Liberty
            Valance Well ****
 
 On
            February 7, 2001, we acquired an 8.9% working interest in a production
            gas well
            styled the Liberty Valance RD1 Gas Unit (“Liberty Valance” or the “well”). The
            well is located in the Rancho Capay Gas Field in Glenn County, California.
            We
            acquired this well for $90,000. The well is operated by Production Specialties
            Company (the “operator”). Based upon a reserve report, reserves in the Liberty
            Valance Well were estimated at 2443 (MCF) on December 31, 2005 translating
            in an
            estimate of $9,823 for the standardized measure of discounted cash flows
            remaining from reserves as of December 31, 2005.
  4
 Table
                of Contents
  Todd
            Creek **** Prospect
            and Hillspring
            Prospect
 
 On
            November 26, 2004, through our wholly owned Canadian subsidiary, Delta
            Oil &
Gas (Canada), Inc., we entered into two agreements (the "Agreements")
            with Win
            Energy Corporation, ("Win"), an Alberta based Oil & Gas Exploration Company,
            in order to acquire an interest in lands and leases owned by Win. On
            or about
            January 25, 2005, we paid Win the full purchase price set forth in the
            Agreements and acquired a working interest in two prospective properties
            known
            as Todd Creek and Hillspring. Both properties are located approximately
            90 miles
            south of Calgary, Alberta in the Southern Alberta Foothills belt.
 
 *Todd
            Creek*
 
 On
            January 25, 2005, we acquired a 20% working interest in 13.75 sections
            of land
            (8800 acres) in Todd Creek for the purchase price of $597,263 (US dollars).
            We
            also have an option to acquire an additional 15% interest in 7 additional
            sections of land (4,480 acres) which will terminate on December 31, 2006.
            Included in the acquisition of the Todd Creek prospect is a test well
            that has
            been drilled and cased. The Agreements with Win provide that they shall
            assume
            all costs of drilling and completing or abandoning the test well up to
            gross
            costs of $1,330,000. Thereafter, we will assume responsibility for 20%
            of all
            costs, risks, and expenses relating to the test well.
 
 During
            the second quarter of 2005, a well located in 13−28−9−2W5 in Alberta, Canada was
            drilled to a specifically targeted depth, evaluated, and tested. The
            operator
            encountered gas reservoirs and concluded that this well is a potential
            gas well.
            Based upon these results, several development wells are anticipated to
            be
            drilled in the fourth quarter of 2006.
 
 During
            the third quarter of 2005, another well was drilled located in 7−16−9−2W5 in
            Alberta, Canada and was previously drilled in October 2004. Following
            subsequent
            evaluation, the operator recommended that additional drilling take place
            on the
            7−16 well to increased depths. The operator conducted further testing and
            evaluation and concluded that it was not drilled deep enough and is currently
            suspended with no reserves assigned.
 
 *Hillspring*
 
 On
            January 25, 2005, we acquired a 10% working interest in one section of
            land (640
            acres) in Hillspring for the purchase price of $414,766 (US dollars).
            The
            operator drilled 4 test wells on the property adjacent to our interest
            and is
            currently reviewing the data from these wells. It is anticipated that
            a test
            well will be drilled on our property interest during the year ended 2006.
            Our
            acquisition of an interest in Hillspring Prospect included an option
            to acquire
            an additional 10% working interest in 1.25 sections in the immediate
            area for
            the sum of $207,833 (US dollars). This option expired on July 1, 2005,
            but was
            later extended to December 29, 2006.
 
 Cache
            Slough Prospect
 
 On
            May
            25, 2005, we entered into a Farmout Agreement (“Agreement”) with a California
            based oil and gas company. This California company has the right to acquire
            an
            oil and gas leasehold interest in certain lands located in Section 6,
            7, &
18, Township 4 North, Range 3 East,
  5
 Table
                of Contents
  M.D.B.M.,
            Solano County, California upon incurring expenditures for drilling and
            testing
            on the said property. This California company agreed to grant us a right
            to
            acquire 12.5% of their 68% interest upon us paying 18.75% of all costs
            associated with drilling, testing, and completing the first test well
            on the
            property. Following these payments, we will be responsible for 12.5%
            of all
            additional expenditures for drilling and production on the property and
            be
            entitled to receive 8.5% of all revenue generated by the property, which
            is
            12.5% of this California company's 68% interest.
 
 Drilling
            of the first well on this property commenced in July 2005. Preliminary
            drill
            logs indicated that this is a potential gas well and the operator then
            completed
            the well for testing. Further testing resulted in the discovery of natural
            gas
            with flow rates suitable for commercial production. The anticipated date
            to
            commence production was extended due to flooding in the area from higher
            than
            average rainfalls. We now expect to commence commercial production in
            June 2006.
            We anticipate that our plans for future drilling on this property will
            be
            completed in the second quarter of the 2006.
 
 Strachan
            Prospect ****
 
 On
            September 23, 2005, we entered into a Farmout Agreement (“Agreement”) with Odin
            Capital Inc. (“Odin”), a Calgary, Alberta corporation. **** A
            former
            member of our board of directors, Mr. Philipchuk, maintains a 50% ownership
            interest in Odin. Odin has the right to acquire an oil and gas leasehold
            interests in certain lands located in Section 9, Township 38, Range 9,
            West of
            the 5 th Meridian,
            Alberta, Canada (“Section 9”) upon incurring expenditures for drilling and
            testing on the property. In exchange for us paying 4.0000% of all costs
            associated with drilling, testing, and completing the test well on the
            property,
            which we also refer to as the Leduc formation test well, we will have
            earned:
  1.
                in
                    the Spacing Unit for the Earning Well:  i.
                a
                    2.000% interest in the petroleum and natural gas below the base
                    of the
                    Mannville excluding natural gas in the Leduc formation;
                    and  ii.
                a
                    4.000% interest in the natural gas in the Leduc formation before
                    payout
                    subject to payment of the Overriding Royalty which is convertible
                    upon
                    payout at royalty owners option to 50% of our Interest;
                    and  2.
                a
                    1.600% interest in the rights below the base of the Shunda formation
                    in
                    Section 10, Township 38, Range 9W5M.  3.
                a
                    1.289% interest in the rights below the base of the Shunda formation
                    in
                    Section 15 and 16, Township 38, Range 9W5M, down to the base
                    of the
                    deepest formation penetrated. 
 On
            October 6, 2005, drilling commenced Leduc formation test well. Under
            the terms
            of the Agreement, we advanced 110% of the anticipated costs prior to
            drilling.
            The total costs advanced by us prior to drilling were $253,977. The well
            was
            drilled to the targeted depth of 13,650 feet. Based on positive results
            indicating the presence of a potential gas well, the operator inserted
            casing
            into the total depth of the well and will perform a full testing program.
            If the
  6
 Table
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  additional
            testing returns positive results, this well will be tied a nearby pipeline
            to
            accommodate the natural gas production. We anticipate receiving results
            from
            further testing in May 2006.
 
 Palmetto
            Point Prospect ****
 
 On
            February 21, 2006, we entered into an agreement (the “Agreement”) with 0743608
            B.C. Ltd., (“Assignor”), a British Columbia based oil and gas exploration
            company, in order to accept an assignment of the Assignor's ten percent
            (10%)
            gross working and revenue interest in a ten−well drilling program (the “Drilling
            Program”) to be undertaken by Griffin & Griffin Exploration L.L.C.,
            (“Griffin”), a Mississippi based exploration company. Under the terms of the
            Agreement, we paid the Assignor $425,000 Dollars as payment for the assignment
            of the Assignor's 10% gross working and revenue interest in the Drilling
            Program. We also entered into a Joint Operating Agreement directly with
            Griffin
            on February 24, 2006.
 
 The
            Drilling Program on the acquired property interests was initiated by
            Griffin on
            May 12, 2006 and is anticipated to be completed by Griffin within approximately
            the next 10 months. The anticipated commencement date for the drilling
            program
            was extended due to flooding of the road accessing the well sites attributable
            to the melting snow. The prospect area on which the ten wells will be
            drilled
            consists of approximately 1273 acres in Palmetto Point, Mississippi.
            The exact
            locations of the ten wells in which we will participate are yet to be
            determined. There can be no assurance that any of the wells drilled will
            be
            productive or that we will recover all or any portion of our investment
            in such
            wells.
 
 Wordsworth
            Prospect
 
 Subsequent
            to the reporting period on April 20, 2006, we entered into a farmout,
            option and
            participation letter agreement (“FOP Agreement”) where we acquired 15% of a
            working interest in certain leasehold interests located in southeast
            Saskatchewan, Canada referred to as the Wordsworth area for the purchase
            price
            of $152,724. We are responsible for our proportionate share of the costs
            associated with drilling, testing, and completing the first test well
            on the
            property. In exchange for us paying our proportionate share of the costs
            associated with drilling, testing, and completing the first test well
            on the
            property, we will have earned 7.5% of the total payout on the Wordsworth
            prospect and an option to participate and acquire a working interest
            in a
            vertical test well drilled to 1200 meters to test the Mississippian (Alida)
            formation in LSD 13 of section 24, township 7, range 3 W2.
 
 On
            or
            before July 1, 2006, the first test well is anticipated to be drilled.
            There can
            be no assurance that any of the wells drilled in this prospect will be
            productive or that we will recover all or any portion of our investment
            in such
            wells.
  **Results
            of Operations for the three months ended March 31, 2006 and
            2005**
  For
            the
            three month period ended March 31, 2006, our revenues generated from
            natural gas
            and oil sales increased to $2,188 compared to revenue of $1,936 for the
            same
            three month period in 2005. All revenue generated during the three month
            periods
            ended March 31, 2006 and 2005 was attributable to the Liberty Valance
            Well, our
            only producing property during this reporting period.
  7
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 We
            anticipate that our revenues will increase based upon the discovery of
            natural
            gas with flow rates suitable for commercial production in the first well
            drilled
            on the Cache Slough Prospect.
 
 We
            incurred costs and expenses in the amount of $177,486 for the three month
            period
            ended March 31, 2006 compared to costs and expenses of $36,148 for the
            same
            three month period in 2005. Our expenses for the months ended March 31,
            2006
            consisted of primarily of general and administrative expenses in the
            amount of
            $170,581and stock based compensation of $5,991. Our expense during the
            three
            months ended March 31, 2005 primarily consisted of general and administrative
            expenses in the amount of $34,826.
 
 The
            significant increase in costs and expenses is attributable to the issuance
            of
            stock-based compensation during the three months ended March 31, 2006
            and an
            increase in general and administrative fees consisting primarily of professional
            fees associated with the acquisition of the additional interests in oil
            and gas
            properties during the reporting period. As a result of the acquisition
            of
            additional oil and gas interests during and subsequent to the reporting
            period,
            we anticipate that our operating expenses will continue to increase in
            2006.
 
 Our
            net
            loss for the three months ended March 31, 2006 was $171,334, compared
            to a net
            loss of $34,212 in the prior three month period ended March 31,
            2005.
  **Liquidity
            and Capital Resources**
  As
            of
            March 31, 2006, we had current assets of $1,859,166, including cash on
            hand in
            the amount of $1,843,650. Our total current liabilities as of March 31,
            2006
            were $80,005. As a result, we had a working capital of $1,779,161on March
            31,
            2006.
 
 The
            revenue we currently generate does not exceed our operating expenses.
            As a
            result, we needed additional financing in order to sustain our business
            operations and acquire additional properties. We primarily relied on
            financing
            activities including issuance of common stocks and units as well as share
            subscription receipts to fund our operations during the three months
            ended March
            31, 2006. During the months ended March 31, 2006, we received gross proceeds
            in
            the amount of $2,000,000 from the sale of our equity securities. Our
            management
            anticipates that we have sufficient capital to finance our operations
            at the
            current level for the remainder of the fiscal year ended December 31,
            2006.
 
 Operating
            activities used $222,269 in cash for the three months ended March 31,
            2006. Our
            net loss of $171,334 was the primary component of our negative operating
            cash
            flow. Investing activities during the months ended March 31, 2006 consisted
            of
            $550,116 for the purchase of natural gas and oil properties. Cash flows
            provided
            by financing activities during the three months ended March 31, 2006
            primarily
            consisted of $1,999,995 related to the issuance of common stock.
 
 The
            underlying drivers that resulted in material changes and the specific
            inflows
            and outflows of cash in the months ended March 31, 2006 are as
            follows:
  a.
                Property
                    acquisition costs, and  b.
                Financing
                    from the issuance of common stock.  8
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  **Off
            Balance Sheet Arrangements**
  As
            of
            March 31, 2006, there were no off balance sheet arrangements.
  **Going
            Concern**
  The
            accompanying financial statements have been prepared assuming that we
            will
            continue as a going concern. As shown in the accompanying financial statements,
            we have incurred a net loss of $1,044,548 since inception. These financial
            statements do not include any adjustments that might result from the
            outcome of
            this uncertainty.
 
 **Critical
            Accounting Policies**
 
 In
            December 2001, the SEC requested that all registrants list their most
“critical
            accounting polices” in the Management Discussion and Analysis. The SEC indicated
            that a “critical accounting policy” is one which is both important to the
            portrayal of a company’s financial condition and results, and requires
            management’s most difficult, subjective or complex judgments, often as a result
            of the need to make estimates about the effect of matters that are inherently
            uncertain. We believe that the following accounting policies fit this
            definition.
 
 **Joint
            Ventures**
 
 All
            exploration and production activities are conducted jointly with others
            and,
            accordingly, the accounts reflect only our proportionate interest in
            such
            activities.
 
 **Natural
            Gas and Oil Properties**
 
 We
                account for our oil and gas producing activities using the full cost
                method of
                accounting as prescribed by the United States Securities and Exchange
                Commission
                (“SEC”). Accordingly, all costs associated with the acquisition of properties
                and exploration with the intent of finding proved oil and gas reserves
                contribute to the discovery of proved reserves, including the costs
                of abandoned
                properties, dry holes, geophysical costs, and annual lease rentals
                are
                capitalized. All general corporate costs are expensed as incurred.
                In general,
                sales or other dispositions of oil and gas properties are accounted
                for as
                adjustments to capitalized costs, with no gain or loss recorded.
                Amortization of
                evaluated oil and gas properties is computed on the units of production
                method
                based on all proved reserves on a country-by-country basis. Unevaluated
                oil and
                gas properties are assessed at least annually for impairment either
                individually
                or on an aggregate basis. The net capitalized costs of oil and gas
                properties
                (full cost ceiling limitation) are not to exceed the sum of the related
                estimated future net revenues from proved reserves discounted at
                10%, the lower
                of cost or estimated fair value of unproved properties included in
                the costs
                being amortized, if any, and the cost of unevaluated and unproved
                properties not
                being amortized, if any, net of tax considerations. Properties are
                included in
                the amortization pool immediately upon the determination that the
                well is dry. Unproved
                    properties consist of lease acquisition costs and costs on wells
                    currently being
                    drilled on the properties. The recorded costs of the investment
                    in unproved
                    properties are not amortized until proved reserves associated
                    with the projects
                    can be determined or until they are impaired.
 **R** **evenue
            Recognition**
  We
            use
            the sales method of accounting for natural gas and oil revenues. Under
            this
            method, revenues are recognized upon the passage of title, net of royalties.
            Revenues from natural gas production are recorded using the sales method.
            When
            sales volumes exceed our entitled share, an overproduced imbalance occurs.
            To
            the extent the overproduced imbalance exceeds our share
  9
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  of
            the
            remaining estimated proved natural gas reserves for a given property,
            we record
            a liability. At March 31, 2006, we had no overproduced imbalances.
  **Recently
            Issued Accounting Pronouncements** ****
  FASB
            Interpretation No. (“FIN”) 47 -
“Accounting for Conditional Asset Retirement Obligations” issued by FASB in
            March 2005. FIN 47 clarifies that an entity must record a liability for
            a
            conditional asset retirement obligation if the fair value of the obligation
            can
            be reasonably estimated. This Interpretation also clarifies the circumstances
            under which an entity would have sufficient information to reasonably
            estimate
            the fair value of an asset retirement obligation. This Interpretation
            is
            effective no later than the end of fiscal years ending after December
            15, 2005.
            We do not expect this guidance to have a material impact on its financial
            statements.
  Staff
            Position No. FAS 115-1 - “The
            Meeting of Other-Than-Temporary Impairment and Its Application to Certain
            Investments” (“FSP 115-1”) issued by FASB in November 2005. FSP 115-1 provides
            accounting guidance for identifying and recognizing other-than-temporary
            impairments of debt and equity securities, as well as cost method investments
            in
            addition to disclosure requirements. FSP 115-1 is effective for reporting
            periods beginning after December 15, 2005, and earlier application is
            permitted.
            We have determined that the adoption of FSP 115-1 does not have an impact
            on our
            result of operations or financial position.
 
 Statement
            of Financial Accounting Standards No. 123 (revised
            2004) (“SFAS 123 (revised 2004)”) - “Share-Based Payment” issued by FASB in
            December 2004. This Statement requires that the cost resulting from all
            share-based transactions be recorded in the financial statements. The
            Statement
            establishes fair value as the measurement objective in accounting for
            share-based payment arrangements and requires all entities to apply a
            fair-value-based measurement in accounting for share-based payment transactions
            with employees. The Statement also establishes fair value as the measurement
            objective for transactions in which an entity acquires goods or services
            from
            non-employees in share-based payment transactions. The Statement replaces
            FASB
            Statement No. 123 “Accounting for Stock-Based Compensation” and supersedes APB
            Opinion No. 25 “Accounting for Stock Issued to Employees”. The provisions of
            this Statement will be effective for us beginning with its fiscal year
            ending
            2007. We have determined that the adoption of SFAS 123 (revised 2004)
            does not
            have an impact on our results of operations or financial position.
 
 Statement
            of Financial Accounting Standards No. 151 (“SFAS
            151”) - “Inventory Costs” issued by FASB on November 30, 2004. The adoption of
            SFAS 151 does not have an impact on our results of operations or financial
            position.
 
 Statement
            of Financial Accounting Standards No. 153 (“SFAS
            153”) - “Exchanges of Non-monetary Assets - an amendment of APB Opinion No. 29”
- issued by FASB in December 2004. We have determined that the adoption
            of SFAS
            153 does not have an impact on our results of operations or financial
            position.
  10
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  **Item
            3.     Controls and
            Procedures**
  We
            carried out an evaluation of the effectiveness of the design and operation
            of
            our disclosure controls and procedures (as defined in Exchange Act Rules
            13a−15(e) and 15d−15(e)) as of March 31, 2006. This evaluation was carried out
            under the supervision and with the participation of our Chief Executive
            Officer
            and Chief Financial Officer, Mr. Douglas Bolen. Based upon that evaluation,
            our
            Chief Executive Officer and Chief Financial Officer concluded that, as
            of March
            31, 2006, our disclosure controls and procedures are effective. There
            have been
            no significant changes in our internal controls over financial reporting
            during
            the quarter ended March 31, 2006 that have materially affected or are
            reasonably
            likely to materially affect such controls.
 
 Disclosure
            controls and procedures are controls and other procedures that are designed
            to
            ensure that information required to be disclosed in our reports filed
            or
            submitted under the Exchange Act are recorded, processed, summarized
            and
            reported, within the time periods specified in the SEC's rules and forms.
            Disclosure controls and procedures include, without limitation, controls
            and
            procedures designed to ensure that information required to be disclosed
            in our
            reports filed under the Exchange Act is accumulated and communicated
            to
            management, including our Chief Executive Officer and Chief Financial
            Officer,
            to allow timely decisions regarding required disclosure.
  **Limitations
            on the Effectiveness of Internal Controls**
  Our
            management does not expect that our disclosure controls and procedures
            or our
            internal control over financial reporting will necessarily prevent all
            fraud and
            material error. Our disclosure controls and procedures are designed to
            provide
            reasonable assurance of achieving our objectives and our Chief Executive
            Officer
            and Chief Financial Officer concluded that our disclosure controls and
            procedures are effective at that reasonable assurance level. Further,
            the design
            of a control system must reflect the fact that there are resource constraints,
            and the benefits of controls must be considered relative to their costs.
            Because
            of the inherent limitations in all control systems, no evaluation of
            controls
            can provide absolute assurance that all control issues and instances
            of fraud,
            if any, within the Company have been detected. These inherent limitations
            include the realities that judgments in decision-making can be faulty,
            and that
            breakdowns can occur because of simple error or mistake. Additionally,
            controls
            can be circumvented by the individual acts of some persons, by collusion
            of two
            or more people, or by management override of the internal control. The
            design of
            any system of controls also is based in part upon certain assumptions
            about the
            likelihood of future events, and there can be no assurance that any design
            will
            succeed in achieving its stated goals under all potential future conditions.
            Over time, control may become inadequate because of changes in conditions,
            or
            the degree of compliance with the policies or procedures may
            deteriorate.
  11
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  **PART
            II - OTHER INFORMATION**
  **Item
            1.     Legal
            Proceedings**
  We
            are
            not a party to any pending legal proceeding. We are not aware of any
            pending
            legal proceeding to which any of our officers, directors, or any beneficial
            holders of 5% or more of our voting securities are adverse to us or have
            a
            material interest adverse to us.
  **Item
            2.     Unregistered Sales of Equity
            Securities and Use of Proceeds**
  The
            information set forth below relates to our issuances of securities without
            registration under the Securities Act during the reporting period which
            were not
            previously included in a Current Report on Form 8-K.
 
 On
            February 24, 2006, we sold 727,272 Units at $2.75 per Unit to a total
            of three
            (3) investors. Each Unit consisted of one (1) share of common stock,
            par value
            $0.001, and one (1) Warrant (the "Warrant") to purchase one (1) share
            of common
            stock, exercisable for three (3) years from the closing of the offering.
            The
            exercise price for the Warrant was priced at $3.00. The total gross proceeds
            we
            received from this sale of securities was $1,999,995. We paid $150,000
            in
            commissions on this private equity offering. Assuming that all of the
            warrants
            are exercised by the investors, the gross proceeds received from the
            exercise of
            the warrants will equal $2,181,816.
 
 We
            completed these sales of unregistered securities pursuant to Regulation
            S of the
            Securities Act. Each purchaser represented to us that he was a non−US person as
            defined in Regulation S. We did not engage in a distribution of this
            offering in
            the United States. Each purchaser represented his intention to acquire
            the
            securities for investment only and not with a view toward distribution.
            We
            requested our stock transfer agent to affix appropriate legends to the
            stock
            certificate issued to each purchaser in accordance with Regulation S
            and the
            transfer agent affixed the appropriate legends. Each investor was given
            adequate
            access to sufficient information about us to make an informed investment
            decision. None of the securities were sold through an underwriter and
            accordingly, there were no underwriting discounts or commissions involved.
            No
            registration rights were granted to any of the purchasers.
  **Item
            3.     Defaults upon Senior
            Securities**
  None.
  **Item
            4.     Submission of Matters to a Vote of
            Security Holders**
  No
            matters have been submitted to our security holders for a vote, through
            the
            solicitation of proxies or otherwise, during the quarterly period ended
            March
            31, 2006.
  **Item
            5.     Other
            Information**
  None
  12
 Table
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  **Item
            6.      Exhibits**
  Exhibit
                      Number
                  Description3.1
                  Articles
                      of Incorporation, as amended13.2
                  By-laws,
                      as amended110.1
                  Agreement
                      to Acquire Interest in Todd Creek210.2
                  Agreement
                      to Acquire Interest in Hillspring210.3
                  Amendment
                      to Todd Creek and Hillspring Agreements210.4
                  Farmout
                      Agreement relating to Cache Slough Prospect310.5
                  Farmout
                      Agreement with Odin Capital Inc. relating to Leduc formation
                      test well410.6
                  Drilling
                      Program Agreement between Griffin & Griffin Exploration L.L.C. and
                      0743608 B.C. Ltd.510.7
                  Assignment
                      Agreement between Delta Oil & Gas, Inc. and 0743608 B.C. Ltd510.8
                  Farmout,
                      Option & Participation Agreement related to Wordsworth Prospect631.1
                  Certification
                      of Chief Executive Officer pursuant to 18
                      U.S.C. Section 1350, as adopted pursuant to Section 302 of
                      the
                      Sarbanes-Oxley Act of 200231.2
                  Certification
                      of Chief Financial Officer pursuant to 18
                      U.S.C. Section 1350, as adopted pursuant to Section 302 of
                      the
                      Sarbanes-Oxley Act of 200232.1
                  Certification
                      of Chief Executive Officer and Chief
                      Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
                      pursuant
                      to Section 906 of the Sarbanes-Oxley Act of
                      2002
 
 1 Incorporated
            by reference to Registration Statement on Form SB-2 filed on February
            13,
            2002
 2 Incorporated
            by reference to current report on Form 8-K filed on February 15,
            2005
 3 Incorporated
            by reference to current report on Form 8-K filed on September 29,
            2005
 4 Incorporated
            by reference to current report on Form 8-K filed on May 26, 2005
 5 Incorporated
            by reference to current report on Form 8-K filed on February 27,
            2006
 6 Incorporated
            by reference to registration statement on Form 10-SB filed on May 12,
            2006
  13
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  **SIGNATURES**
 
 In
            accordance with the requirements of the Securities and Exchange Act of
            1934, the
            Registrant has duly caused this report to be signed on its behalf by
            the
            undersigned, thereunto duly authorized.
 
 **Delta
                        Oil & Gas, Inc.**Date:
                    January
                        8, 2007By:     
                        /s/ Douglas Bolen
                      Douglas
                        Bolen
                      Title:**Chief
                        Executive Officer & Chief Financial
                        Officer**