**UNITED
      STATES SECURITIES AND EXCHANGE**


**COMMISSION**


Washington,
      D. C. 20549





**FORM
      10-Q/A**


**Amendment
      (No. 1)**





(Mark
      One)


**[X]
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE**


**ACT
      OF 1934**


**For
      the Quarterly Period Ended June 30, 2006**





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


**OF
      1934**


**For
      the transition period from _____________ to
      ___________________**





*Commission
      file number: 000-51425*





**RANCHER
      ENERGY CORP.**


(Exact
      name of registrant as specified in its charter)





Nevada
            98-0422451(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                No.)





1050-17 th Street,
      Suite 1700


Denver,
      Colorado 80265


(Address
      of Principal Executive Office)


(303)-629-1122


(Registrant's
      Telephone Number including area code)





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





Yes X No
      __





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated file, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated filer ___       Accelerate filer
      ___      Non-accelerated filer X





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





Yes
      __No X





As
      of
      August 25, 2006, 38,350,000 shares of the issuer's common stock, $.00001 par
      value, were outstanding.


1





**RANCHER
      ENERGY CORP.**





**Table
      of Contents**





**PART
      I. FINANCIAL INFORMATION**





PageExplanatory
                Note Concerning Amendment to Form 10-Q
            3Item
                1.
            Financial
              StatementsFinancial
                StatementsBalance
                SheetsJune
                30, 2006 (Unaudited) & March 31, 2006
            4Unaudited
                Statements of OperationsThree
                months ended June 30, 2006 & 2005
            5Unaudited
                Statements of Cash FlowsThree
                months ended June 30, 2006 & 2005
            6Notes
                  to Financial Statements
            7Item
                2.
            Management's
              Discussion
              & Analysis of Financial Condition & Results of
              Operations
            14Item
                3.
            Quantitative
                & Qualitative Disclosures About Market Risk
            18Item
                4.
            Controls &
              Procedures
            18PART
                II. OTHER INFORMATIONItem
                1.
            Legal
              Proceedings
            19Item
                1A.
            Risk Factors
            19Item
                2.
            Unregistered
              Sales of
              Equity Securities & Use of Proceeds
            19Item
                3.
            Defaults Upon
              Senior
              Securities
            19Item
                4.
            Submission
              of Matters
              to a Vote of Security Holders
            19Item
                5.
            Other
              Information
            19Item
                6.
            Exhibits
            19SIGNATURES
            21








2











EXPLANATORY
      NOTE CONCERNING AMENDMENT TO FORM 10-Q





This
      quarterly report on Form 10-Q/A is being filed as an amendment to our quarterly
      report on Form 10-Q, which was originally filed on August 22, 2006.
 Our independent accountants had not yet completed their review of the
      quarterly report at that time. W e
      have
      made certain revisions and reclassifications of dollar amounts in our financial
      statements in order to recognize a $30,000 imputed non-cash finance charge
      in
      connection with a $500,000 loan, as explained in Note 5 to the financial
      statements.  In addition, in Note 1 to our financial statements we have
      added a discussion and information concerning SFAS 123(R) and the manner in
      which we have accounted for stock-based compensation.  Except for this
      disclosure that was added to Note 1, our accounting for stock-based compensation
      has remained unchanged from the financial statements in our Form 10-Q as
      originally filed.  In the opinion o f our
      management, the foregoing changes, vis-à-vis our Form 10-Q as originally filed,
      are not material to an understanding of the Form 10-Q as a whole.














3





**Part
      I. FINANCIAL INFORMATION**





**RANCHER
                ENERGY CORP.**
              **(A
                DEVELOPMENT STAGE COMPANY)****BALANCE
                SHEETS**June
                30,
            
            March
                31,2006
            
            2006(Unaudited)**ASSETS**CURRENT
                ASSETSCash
                & cash equivalents
            $
            796,116
            $
            46,081Accounts
                receivable
            
            40,344
            
            --Total
                Current Assets
            
            836,460
            
            46,081EQUIPMENT,
                net
            
            9,310
            
            476OIL
                & GAS PROPERTIES, using full cost accounting method
            
            621,607
            
            --TOTAL
                ASSETS
            $
            1,467,377
            $
            46,557**LIABILITIES
                & STOCKHOLDERS’ EQUITY**CURRENT
                LIABILITIESAccounts
                payable
            $
            71,149
            $
            477Payroll
                taxes payable
            
            934
            
            1,593Payable
                for purchase of oil & gas properties
            
            500,000
            
            --Total
                Current Liabilities
            
            572,083
            
            2,070DEBT
                CONVERTIBLE INTO COMMON SHARES
            
            501,644
            
            --COMMITMENTS
                & CONTINGENCIES
            
            --
            
            --STOCKHOLDERS’
                EQUITYCommon
                stock, 100,000,000 shares authorized, $0.00001par
                value, 30,500,000 & 28,500,0000 shares issued &
                outstandingat
                June 30, 2006 & March 31, 2006, respectively
            
            305
            
            285Additional
                paid-in capital
            
            1,524,299
            
            570,809Accumulated
                deficit during development stage
            
            (1,130,954)
            
            (526,607)TOTAL
                STOCKHOLDERS’ EQUITY
            
            393,650
            
            44,487TOTAL
                LIABILITIES & STOCKHOLDERS’ EQUITY
            $
            1,467,377
            $
            46,557





The
          accompanying notes are an integral part of these financial
          statements.
 4





**RANCHER
                ENERGY CORP.****(A
                DEVELOPMENT STAGE COMPANY)****UNAUDITED
                STATEMENTS OF OPERATIONS**FromFebruary
                4, 2004Three
                Months Ended
            
            (Inception)
                toJune
                30,
            
            June
                30,2006
            
            2005
            
            2006REVENUE
            $
            --
            $
            --
            $
            --OPERATING
                EXPENSESLegal
                & accounting fees
            
            22,742
            
            15,096
            
            89,346Mining
                exploration expense
            
            --
            
            --
            
            51,904Payroll
                & benefits
            
            479,023
            
            3,232
            
            508,387Consulting
                & other professional fees
            
            38,000
            
            --
            
            401,096Depreciation
            
            --
            
            52
            
            414Other
                general & administrative expenses
            
            31,303
            
            2,889
            
            46,528TOTAL
                EXPENSES
            
            571,068
            
            21,269
            
            1,097,675LOSS
                FROM OPERATIONS
            
            (571,068)
            
            (21,269)
            
            (1,097,675)OTHER
                INCOME (EXPENSE)Interest
                & other income
            
            1,365
            
            --
            
            1,365Imputed
                finance charges on issuance of debt convertible into shares of common
                stock
            
            (30,000)
            
            --
            
            (30,000)Interest
                expense
            
            (4,644)
            
            --
            
            (4,644)TOTAL
                OTHER EXPENSE
            
            (33,279)
            
            --
            
            (33,279)INCOME
                TAXES
            
            --
            
            --
            
            --NET
                LOSS
            $
            (604,347)
            $
            (21,269)
            $
            (1,130,954)BASIC
                & DILUTEDNET
                LOSS PER SHARE
            $
            (.02)
            $
            nilWEIGHTED
                AVERAGE SHARESOUTSTANDING
                USED IN BASIC ANDDILUTED
                PER SHARE CALCULATION
            
            29,027,000
            
            70,000,000








The
          accompanying notes are an integral part of these financial
          statements.
 5





**RANCHER
                ENERGY CORP.****(A
                DEVELOPMENT STAGE COMPANY)****UNAUDITED
                STATEMENTS OF CASH FLOWS**FromFebruary
                4,2004Three
                Months Ended
            
            (Inception)
                toJune
                30,
            
            June
                30,2006
            
            2005
            
            2006**CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            $
            (604,347)
            $
            (21,269)
            $
            (1,130,954)Adjustments
                to reconcile net loss to net cash used byoperating
                activities:Abandonment
                of office equipment
            2,284
            
            --
            
            2,284Expenses
                paid by shareholder
            --
            
            --
            
            11,904Common
                stock issued for services
            --
            
            --
            
            363,096Options
                on Common stock issued for services
            
            423,500
            
            --
            
            423,500Imputed
                finance charges on issuance of debt convertible into shares of common
                stock
            
            30,000
            
            
            
            30,000Depreciation
            
            --
            
            52
            
            414Increase
                in accounts receivable
            
            (40,344)
            
            (1,904)
            
            (40,344)Increase
                (decrease) in accounts payable
            
            57,102
            
            (802)
            
            72,793Increase
                (decrease) in payroll taxes payable
            
            (659)
            
            --
            
            934Net
                cash used in operating activities
            (132,464)
            
            (23,923)
            
            (266,373)**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Purchase
                of equipment
            
            (11,118)
            
            --
            
            (12,008)Additions
                to oil & gas properties
            
            (106,393)
            
            --
            
            (121,607)Net
                cash used in investing activities
            
            (117,511)
            
            --
            
            (133,615)**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from sale of common stock & warrants
            
            500,010
            
            196,094
            
            696,094Proceeds
                from issuance of convertible debt
            
            650,000
            
            --
            
            650,000Payments
                on convertible debt
            
            (150,000)
            
            --
            
            (150,000)Proceeds
                from shareholder loans
            
            --
            
            --
            
            30,000Payment
                of shareholder loan
            
            --
            
            (30,000)
            
            (30,000)Net
                cash provided by financing activities
            
            1,000,010
            
            166,094
            
            1,196,094Increase
                in cash & cash equivalents
            
            750,035
            
            142,171
            
            796,106Cash
                & cash equivalents--beginning of period
            
            46,081
            
            4,060
            
            --Cash
                & cash equivalents--end of period
            $
            796,116
            $
            146,231
            $
            796,106**SUPPLEMENTAL
                CASH FLOW DISCLOSURE:**Interest
                paid
            $
            3,000
            $
            --
            $
            3,000Income
                taxes paid
            $
            -
            $
            --
            $
            --**NON-CASH
                INVESTING & FINANCING TRANSACTIONS:**Options
                on common stock issued for services
            $
            423,500
            $
            --
            $
            423,500Imputed
                finance charges on issuance of debt convertible into shares of common
                stock
            
            30,000
            
            --
            
            30,000Common
                stock issued for services
            $
            --
            $
            --
            $
            363,096Common
                stock issued for expenses paid by shareholder
            $
            --
            $
            --
            $
            11,904Oil
                & gas properties acquired for payables
            $
            515,214
            $
            --
            $
            515,214





The
            accompanying notes are an integral part of these financial
            statements.
 6


**NOTE
      1--ORGANIZATION & SUMMARY OF SIGNIFCANT ACCOUNTING
      POLICIES**





**Organization**





Metalex
      Resources, Inc. (“Metalex”) was incorporated on February 4, 2004 under the laws
      of the State of Nevada for the purpose of acquiring, exploring, and developing
      mining properties. On April 18, 2006 Metalex changed its name to Rancher Energy
      Corp. (hereinafter the “Company”, “we, or “us”) and announced that the Company
      changed its business plan and focus from mining to becoming an independent
      oil
& gas exploration and production company that concentrates on applying
      secondary and tertiary recovery technology to older, historically productive
      fields, primarily in North America.





**Interim
      Reporting**





The
      accompanying unaudited financial statements of the Company have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      for interim financial information. Pursuant to the rules and regulations of
      the
      Securities & Exchange Commission (the “SEC”) they do not necessarily include
      all the information and footnotes required by accounting principles generally
      accepted in the United States for complete financial statements. In the opinion
      of management, the accompanying unaudited financial statements include all
      adjustments (consisting of normal and recurring accruals) considered necessary
      to present fairly our financial position as of June 30, 2006, the results of
      operations for the three months ended June 30, 2006 and 2005 and the period
      from
      February 4, 2004 to June 30, 2006, and cash flows for the three months ended
      June 30, 2006 and 2005 and the period from February 4, 2004 to June 30, 2006.
      The results of operations for the period ended June 30, 2006 are not necessarily
      indicative of the results for the entire fiscal year. The financial statements
      contained herein should be read in conjunction with the financial statements
      and
      notes thereto contained in the Company's Annual Report on Form 10-K for the
      year
      ended March 31, 2006.





**Accounting
      Method**





The
      Company uses the accrual basis of accounting in accordance with accounting
      principles generally accepted in the United States.





**Basic
      & Diluted Loss Per Share**





Loss
      per
      share was computed by dividing the net loss by the weighted average number
      of
      shares outstanding during the period. The weighted average number of shares
      was
      calculated by taking the number of shares outstanding and weighting them by
      the
      amount of time that they were outstanding. Basic and diluted loss per share
      were
      the same, as there were no common stock equivalents outstanding.





**Cash
      & Cash Equivalents**





For
      purposes of the Statement of Cash Flows, the Company considers all short-term
      debt securities purchased with a maturity of three months or less to be cash
      equivalents.





**Exploration
      Activities & Costs**





In
      accordance with accounting principles generally accepted in the United States,
      the Company expensed mining exploration costs as incurred. Exploration costs
      expensed during the year ended March 31, 2006 were $51,904. The Company had
      no
      exploration stage expenses for the year ended March 31, 2005.





During
      the three months ended June 30, 2006, the Company changed its business plan
      and
      focus from mineral exploration to oil & gas exploration and ceased the
      mining exploration activities.








7





**Going
      Concern**





As
      shown
      in the accompanying financial statements, the Company has no revenues, has
      incurred a net loss of $1,130,954 for the period from February 4, 2004
      (inception) through June 30, 2006, and has an accumulated deficit. These factors
      indicate that the Company may be unable to continue in existence. The financial
      statements do not include any adjustments related to the recoverability and
      classification of recorded assets, or the amounts and classification of
      liabilities that might be necessary in the event the Company cannot continue
      in
      existence. The Company’s management believes that its cash balances at June 30,
      2006 and the receipt of funds subsequent to June 30, 2006 from private financing
      agreements will generate sufficient cash for the Company to continue to operate
      based on current expense projections. The Company anticipates it will require
      over $25,000,000 to close on the acquisition of oil & gas properties
      (including the acquisition of the Big Muddy field--see Note 7 below), conduct
      exploration activities, and continue operations in the fiscal year 2007.





**Impaired
      Asset Policy**





In
      August
      2001, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets” (hereinafter “SFAS No. 144"). SFAS No. 144 replaced SFAS No.
      121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived
      Assets to Be Disposed Of”. This standard establishes a single accounting model
      for long-lived assets to be disposed of by sale, including discontinued
      operations. SFAS No. 144 requires that these long-lived assets be measured
      at
      the lower of carrying amount or fair value less cost to sell, whether reported
      in continuing operations or discontinued operations. The Company has determined
      there has been no impairment for the quarters ended June 30, 2006 and
      2005.





**Use
      of Estimates**





The
      process of preparing financial statements in conformity with accounting
      principles generally accepted in the United States requires the use of estimates
      and assumptions regarding certain types of assets, liabilities, revenues, and
      expenses. Such estimates primarily relate to unsettled transactions and events
      as of the date of the financial statements. Accordingly, upon settlement, actual
      results may differ from estimated amounts.





**Oil
      & Gas Properties**





For
      its
      oil & gas exploration and producing activities, the Company uses the full
      cost method of accounting for its oil & gas properties. Accordingly, all
      costs related to the acquisition, exploration, and development of both proved
      and unproved properties are capitalized. The Company's properties are located
      within the continental United States, which constitutes one cost center. The
      amortization of proved oil & gas properties will be calculated using the
      units-of-production method, based on proved reserves of oil & gas, when
      production commences. The costs of unproved properties will be excluded from
      amortization pending a determination of the existence of proved reserves. Such
      unproved properties will be assessed periodically for impairment. The amount
      of
      impairment, if any, will be added to the costs being amortized.





The
      Company did not have any production or reserves at June 30, 2006. Accordingly
      we
      have not recorded any depreciation, depletion, and amortization for its oil
      & gas properties.





Capitalized
      costs, less related accumulated amortization, may not exceed the sum of: (i)
      the
      present value of future net revenues from estimated production of proved oil
      & gas reserves; (ii) the cost of properties not being amortized; and (iii)
      the lower of cost or estimated fair value of unproved properties included in
      the
      costs being amortized.




Normal
      dispositions of oil &
gas
      properties will be accounted for as adjustments to capitalized costs, with
      no
      gain or loss recognized until all costs are recovered. A gain or loss is
      recognized on the sale of oil & gas properties only when significant
      reserves are involved, or when the proceeds from unproved property sales exceed
      the capitalized costs not subject to amortization at the date of
      sale.




8




**Recently
      Issued Accounting Pronouncements**





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123 (revised 2004), “Share-Based Payment”. SFAS No. 123R replaced SFAS No. 123
      and superseded APB 25. SFAS No. 123R will require compensation cost related
      to
      share-based payment transactions to be recognized in financial statements.
      As
      permitted by SFAS No. 123, the Company elected to follow the guidance of APB
      25,
      which allowed companies to use the intrinsic value method of accounting to
      value
      their share-based payment transactions with employees. Based on this method,
      the
      Company did not recognize compensation expense in its financial statements
      as
      the stock options granted had an exercise price equal to the fair market value
      of the underlying Common Stock on the date of the grant. SFAS No. 123R requires
      measurement of the cost of share-based payment transactions to employees at
      the
      fair value of the award on the grant date and recognition of expense over the
      requisite service or vesting period. SFAS No. 123R requires implementation
      using
      a modified version of prospective application, under which compensation expense
      for the unvested portion of previously granted awards and all new awards will
      be
      recognized on or after the date of adoption. SFAS No. 123R also allows companies
      to adopt SFAS No. 123R by restating previously issued financial statements,
      basing the amounts on the expense previously calculated and reported in their
      pro forma footnote disclosures required under SFAS No. 123. The provisions
      of
      SFAS No. 123R will be adopted by the Company effective April 1, 2006, using
      the
      modified prospective application method. The effect of the adoption of SFAS
      No.
      123R is expected to be significant to future financial statements as a result
      of
      applying the current fair value recognition provisions of SFAS No. 123. The
      amount of unvested stock compensation as of June 30, 2006 is $1,270,500, which
      will be recorded in future periods as earned.





In
      May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
      Corrections—a replacement of APB Opinion No. 20 and FASB Statement
      No. 3” (hereinafter “FSAS 154”). SFAS 154 requires retrospective
      application to prior periods’ financial statements for changes in accounting
      principle, unless it is impracticable to determine either the period-specific
      effects or the cumulative effect of the change. SFAS 154 also requires that
      a
      change in depreciation, amortization, or depletion method for long-lived,
      non-financial assets be accounted for as a change in accounting estimate
      affected by a change in accounting principle. SFAS 154 is effective for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005. The implementation of SFAS 154 is not expected to
      have a material impact on the Company’s financial condition or results of
      operations.





In
      February 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      155, “Accounting for Certain Hybrid Financial Instruments, and an Amendment of
      FASB Standards No. 133 and 140” (hereinafter “SFAS No. 155”). This statement
      established the accounting for certain derivatives embedded in other
      instruments. It simplifies accounting for certain hybrid financial instruments
      by permitting fair value re-measurement for any hybrid instrument that contains
      an embedded derivative that otherwise would require bifurcation under SFAS
      No.
      133, as well as eliminating a restriction on the passive derivative instruments
      that a qualify special purpose entity (“SPE”) may hold under SFAS No. 140. This
      statement allows a public entity to irrevocably elect to initially and
      subsequently measure a hybrid instrument that would require to be separated
      into
      a host contract and derivative in its entirety at fair value (with changes
      in
      fair value recognized in earnings) so long as that instrument is not designated
      as a hedging instrument pursuant to the statement. SFAS No. 140 previously
      prohibited a qualifying SPE from holding a derivative financial instrument
      that
      pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for fiscal years beginning after
      September 15, 2006, with early adoption permitted as of the beginning of an
      entity’s fiscal year. Management believes the adoption of this statement will
      have no immediate impact on the Company’s financial condition or results of
      operations.





In
      March
      2006, the FASB issued Statement of Financial Accounting Standards No. 156,
      “Accounting for Servicing of Financial Assets—an Amendment of FASB Statement
      No.140”. This statement requires an entity to recognize a servicing asset or
      servicing liability each time it undertakes an obligation to service a financial
      asset by entering into a servicing contract in any of the following situations:
      (i) a transfer of the servicer’s financial assets that meets the requirements
      for sale accounting; (ii) a transfer of the servicer’s financial assets to a
      qualifying special-purpose entity in a guaranteed mortgage securitization in
      which the




9




transferor
      retains all of the resulting securities and classifies them as either
      available-for-sale securities or trading securities in accordance with the
      FASB
      statement No. 115; or (iii) an acquisition or assumption of an obligation to
      service a financial asset that does not relate to financial assets of the
      servicer or its consolidated affiliates. The statement also requires all
      separately recognized servicing assets and servicing liabilities to be initially
      measured at fair value, if practicable, and permits an entity to choose either
      the amortization or fair value method for subsequent measurement of each class
      of servicing assets and liabilities. This statement is effective for fiscal
      years beginning after September 15, 2006, with early adoption permitted as
      of
      the beginning of an entity’s fiscal year. Management believes the adoption of
      this statement will have no immediate impact on the Company’s financial
      condition or results of operations.





In
      August
      2006, the FASB issued EITF 00-19, “Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”
(hereinafter “EITF 00-19”). This statement requires an entity to classify and
      measure freestanding contracts that are indexed to, and potentially settled
      in,
      a company’s own stock. Examples of these contracts include written put options,
      written call options (and warrants), purchased put options, purchased call
      options, forward sale contracts, and forward purchase contracts. Management
      believes the adoption of this statement will have no immediate impact on the
      Company’s financial condition or results of operations.





**Adoption
      of SFAS 123(R)**




Effective
      April 1, 2006, the Company adopted the fair value recognition provisions of
      Statement of Financial Accounting Standard 123(R) “ *Share-Based
      Payment”* (“SFAS
      123(R)”) using the modified prospective transition method. In addition, the
      Securities and Exchange Commission issued Staff Accounting Bulletin No. 107
“ *Share-Based
      Payment* ”
(“SAB
      107”) in March, 2005, which provides supplemental SFAS 123(R) application
      guidance based on the views of the SEC. Under the modified prospective
      transition method, compensation cost recognized in the quarterly period ended
      June 30, 2006 includes: (a) compensation cost for all share-based
      payments granted prior to, but not yet vested as of April 1, 2006, based on
      the grant date fair value estimated in accordance with the original provisions
      of SFAS No. 123, and (b) compensation cost for all share-based
      payments granted beginning April 1, 2006, based on the grant date fair
      value estimated in accordance with the provisions of SFAS 123(R). In accordance
      with the modified prospective transition method, results for prior periods
      have
      not been restated.




The
      adoption of SFAS 123(R) resulted in stock compensation expense for the quarterly
      period ended June 30, 2006 of $423,500 to income from operations. This expense
      reduced basic and diluted earnings per share by $0.015 for the quarter. The
      Company did not recognize a tax benefit from the stock compensation expense
      because the Company considers it is more likely than not that the related
      deferred tax assets, which have been reduced by a full valuation allowance,
      will
      not be realized.




The
      Black-Scholes option-pricing model was used to estimate the option fair values.
      The option-pricing model requires a number of assumptions, of which the most
      significant are, the stock price at the valuation date, the expected stock
      price
      volatility, and the expected option term (the amount of time from the grant
      date
      until the options are exercised or expire). Expected volatility was calculated
      based upon recent actual historical stock price movements. The stock price
      at
      the valuation date was calculated using an estimated stock price that would
      result in a combined value of the share value and warrant value approximating
      the Unit price of $0.50. It was assumed that all warrants would have a one
      year
      option term.




Prior
      to
      the adoption of SFAS 123(R), the Company presented any tax benefits of
      deductions resulting from the exercise of stock options within operating cash
      flows in the condensed consolidated statements of cash flow. SFAS 123(R)
      requires tax benefits resulting from tax deductions in excess of the
      compensation cost recognized for those options (“excess tax benefits”) to be
      classified and reported as both an operating cash outflow and a financing cash
      inflow upon adoption of SFAS 123(R). As a result of the Company’s net operating
      losses, the excess tax benefits that would otherwise be available to reduce
      income taxes payable have the effect of increasing the Company’s net operating
      loss carry forwards. Accordingly, because the Company is not able to realize
      these excess tax benefits, such benefits have not been recognized in the
      condensed statement of cash flow for the quarterly period ended June 30, 2006.




10




***Stock
      Options as of the Quarterly Period Ended June 30, 2005***




For
      the
      quarter ended June 30, 2005 the Company had not issued any stock options and
      there were no stock options outstanding. Therefore there is no pro-forma effect
      on the quarter ended June 30, 2005 financial statements.




***Stock
      Options as of the Quarterly Period Ended June 30, 2006***





The
      following table summarizes stock option activity during the quarterly period
      ended June 30, 2006:




**Outstanding
                Options****Number
                of**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Term**
              **(in
                years)**
            
            **Aggregate**
              **Intrinsic**
              **Value**Options
                outstanding at April 1, 2006
            
            
            -
            
            $
            -Granted
            
            
            4,000,000
            
            
            0.00001Exercised
            
            
            (1,000,000
            )
            
            0.00001Canceled
                or forfeited
            
            
            -
            
            
            -Options
                outstanding at June 30, 2006
            
            
            3,000,000
            
            $
            0.00001
            
            
            3
            
            $
            1,270,500Options
                exercisable at June 30, 2006
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -




The
      total
      intrinsic value, or the difference between the exercise price and the market
      price on the date of exercise, of all options exercised during the quarterly
      period ended June 30, 2006, was approximately $423,500. Cash received from
      stock
      options exercised during the quarterly period ended June 30, 2006 was $10.
      The
      Company did not realize any tax deductions related to the exercise of stock
      options during the quarter.


Stock
      options outstanding at June 30, 2006, which vest at a rate of 250,000 shares
      per
      completed quarter of service by the Company’s president (see Note 2), are as
      follows:




**Options
                Outstanding**
            
            **Options
                Exercisable****Range
                of exercise prices**
            
            **Number
                of**
              **Options**
              **Outstanding**
            
            **Weighted Average**
              **Remaining**
              **Contractual
                Life**
              **(in
                years)**
            
            **Weighted Average**
              **Exercise
                price**
            
            **Number
                of**
              **Options**
              **Exercisable**
            
            **Weighted Average**
              **Exercise
                Price**$0.00001
            
            
            3,000,000
            
            
            3
            
            $
            0.00001
            
            
            -
            
            
            
            
            $
            -




Total
      estimated unrecognized compensation cost from unvested stock options as of
      June
      30, 2006 was approximately $1,270,500, which is expected to be recognized over
      a
      weighted average period of approximately 3 years.




The
      fair
      value was estimated as of the grant date using the Black-Scholes option pricing
      model with the following assumptions:




**Three Months Ended**
              **June
                30, 2006**Volatility
            
            
            87.0
            %Expected
                option term
            
            
            1
                yearRisk-free
                interest rate
            
            
            5.22
            %Expected
                dividend yield
            
            
            0
            %





11





**NOTE
      2--ISSUANCE OF OPTIONS TO PURCHASE COMMON STOCK & EMPLOYMENT
      CONTRACT**





On
      May
      15, 2006, the Company entered into an employment contract with John Works
      wherein we engaged Mr. Works as our president, chief executive officer, and
      a
      director. The term of the agreement is two (2) years beginning May 15, 2006.
      We
      will pay Mr. Works $12,500 per month, reimburse Mr. Works for out-of-pocket
      expenses incurred by him up to $10,000 per month, an automobile allowance of
      $400 per month, and a parking allowance of $150 per month. Further, we will
      pay
      Mr. Works a minimum of $950 per month to maintain an office in Denver, Colorado.
      In addition to the foregoing, we have granted Mr. Works an option to acquire
      restricted shares of our common stock at a price of $0.00001 per share as
      follows: (i) 1,000,000 shares on the execution of the employment agreement,
      which was exercised on May 15, 2006, (ii) 1,000,000 shares from June 1, 2006
      to
      May 31, 2007 at the rate of 250,000 shares per completed quarter of service,
      (iii) 1,000,000 shares from June 1, 2007 to May 31, 2008 at the rate of 250,000
      shares per completed quarter of service, and (iv) 1,000,000 shares from June
      1,
      2008 to May 31, 2009 at the rate of 250,000 shares per completed quarter of
      service. In the event the agreement is terminated, Mr. Works will be entitled
      to
      purchase all shares that have vested, and all unvested shares will be forfeited.





SFAS
      No.
      123R requires measurement of the cost of share-based payment transactions to
      employees at the fair value of the award on the grant date and recognition
      of
      expense over the requisite service or vesting period. A valuation specialist
      was
      engaged by the Company to assist management in determining the fair value of
      all
      the options granted to Mr. Works as of May 15, 2006. Based on the valuation
      specialist’s consultations with management, the Company has determined such
      value to be $0.4235 per underlying share, or a total of $1,694,000. As a result,
      the Company has included as a non-cash expense item $423,500 in stock based
      compensation for the three months ended June 30, 2006. The remaining fair value
      of the options, or $1,270,500, will be expensed ratably as the options vest
      over
      the next three years.





**NOTE
      3--BURKE RANCH ACQUISITION**





On
      June
      21, 2006, the Company acquired the Burke Ranch Field, an oil prospect consisting
      of approximately 1,921 acres in the Powder River Basin in Natrona County,
      Wyoming. The prospect is located approximately twenty-five (25) miles north
      of
      Casper, Wyoming, in the east-central region of the state. The Company acquired
      up to an 89.82% interest before payout, which reverts to a 49.90% interest
      after
      payout.





The
      terms
      of the agreement include the Company paying $250,000 within ninety days of
      the
      agreement date, completing a 3-D seismic survey on the acreage within one year
      of signing, selecting an engineering firm to perform engineering studies and
      to
      prepare a development plan for the Burke Ranch Field, and the purchase of
      certain equipment and completion of repairs on wells currently existing on
      the
      property within 30 days of closing.





During
      June 2006 the Company acquired an additional 8,183 acres contiguous and/or
      adjacent to its Burke Ranch Field for a net cost of $102,892. These leases,
      together with the Burke Ranch Field’s original 1,921 acres, have increased the
      total acreage of the Company’s Burke Ranch Field to 10,104 acres.





The
      Company also recently entered
      into an agreement with NITEC LLC (“NITEC”) to perform reservoir engineering
      studies on the Company's Burke Ranch Field, as required by the agreement, in
      order to ascertain the field’s remaining recoverable oil.





**NOTE
      4--BROADVIEW DOME ACQUISITION**





On
      June
      21, 2006, the Company acquired, for a purchase price of $250,000, the Broadview
      Dome Prospect, located approximately twenty-five (25) miles northwest of
      Billings, Montana, in the Crazy Mountain Basin. This natural gas prospect
      involves approximately 7,600 acres. Rancher Energy holds a 100.0% working
      interest until payout, and 55.0% working interest after payout.





12




The
      terms
      of the agreement include the Company paying $250,000 within ninety days of
      the
      agreement date and the completion of a 3-D seismic survey on the acreage as
      soon
      as possible.





**NOTE
      5--DEBT CONVERTIBLE INTO COMMON STOCK**





On
      June
      6, 2006, the Company entered into a loan agreement (the “$150K Loan Agreement”)
      with Enerex Capital Corp. (“Enerex”) to borrow from Enerex Capital the principal
      amount of $150,000 (the “$150K Loan”) for the Company’s working capital purposes
      to be repaid in full plus two percent (2%) interest on the principal amount
      on
      or before June 30, 2006. The $150K Loan Agreement provided that Enerex had
      the
      option to convert all or a portion of the $150K Loan into shares of common
      stock
      of the Company, either (i) at a price per share equal to the closing price
      of
      the Company’s shares on the OTC Bulletin Board on the day preceding notice from
      Enerex of its intent to convert all or a portion of the $150K Loan into shares
      of the Company, or (ii) in the event the Company conducted an offering of shares
      of common stock or units, consisting of stock and warrants to purchase common
      stock, at the price of such shares or units in the offering. Enerex elected
      not
      to convert its loan into shares of common stock of the Company. Accordingly
      on
      June 29, 2006 the Company paid Enerex $153,000 in full, which included $3,000
      in
      interest.





On
      June
      9, 2006, the Company entered into a loan agreement (the “$500K Loan Agreement”)
      with Venture Capital First LLC (“Venture Capital”) to borrow from Venture
      Capital the principal amount of $500,000 (the “$500K Loan”) for the Company’s
      working capital purposes to be repaid in full plus six percent (6%) interest
      on
      the principal amount on or before December 9, 2006. The $500K Loan Agreement
      provided that Venture Capital had the option to convert all or a portion of
      the
      $500K Loan into shares of common stock of the Company and warrants to purchase
      shares of common stock of the Company, either (i) at a price per share equal
      to
      the closing price of the Company’s shares on the OTC Bulletin Board on the day
      preceding notice from Venture Capital of its intent to convert all or a portion
      of the $500K Loan into shares of common stock of the Company, or, (ii) in the
      event the Company conducted an offering of shares of common stock or units,
      consisting of stock and warrants to purchase stock, at the price of such shares
      or units in the offering.





The
      Company has recorded the fair value of the debt ($470,000) separately from
      the
      fair value of the imbedded derivative arising from the conversion feature
      ($30,000). The fair value of the debt was determined by determining the fair
      value of the debt assuming it did not include the conversion feature. Because
      the debt was convertible into units consisting of common stock and warrants
      during June, the Company recorded the entire fair value of the conversion
      feature as imputed finance charges for the three months ended June 30, 2006.





Subsequent
      to June 30, 2006 Venture Capital elected to convert its entire $500K Loan and
      accrued interest into common stock of the Company and warrants to purchase
      common stock at a price of $0.50 per unit, which was the price per unit in
      the
      offering.





Accordingly,
      on July 19, 2006 the Company issued 1,006,905 shares to Venture Capital. In
      addition, as part of the conversion, Venture Capital has received warrants
      to
      purchase up to 1,006,905 shares of common stock of the Company for a period
      of
      two years at an exercise price of $0.75 per share for the first year and $1.00
      per share for the second year.





**NOTE
      6--ISSUANCE OF COMMON STOCK**





On
      June
      30, 2006 the Company sold to Centrum Bank AG 1,000,000 Units for a total
      consideration of $500,000 or $0.50 per Unit. Each Unit consisted of one share
      of
      common stock and one redeemable stock purchase warrant (“Warrant”). Each Warrant
      is exercisable for a period of two years at an exercise price of $0.75 per
      share
      for the first year and $1.00 for the second year.





13





**NOTE
      7--SUBSEQUENT EVENTS**





On
      July
      17, 2006, the Company entered into an agreement with Quantum Geophysical, Inc.
      to conduct a 3-D seismic survey for the Burke Ranch field.





On
      August
      3, 2006 the Company signed a nonbinding letter of intent (“LOI”) with ARI
      Antelope Resources, Inc (“ARI”). Pursuant to the terms of the LOI, the Company
      intends to purchase ARI’s 100% working interest (80% net revenue interest) in
      approximately 1,200 acres located on the East Teapot Dome field in the Powder
      River Basin, northeast of Casper, Wyoming. The purchase is contingent on several
      items including the completion of due diligence by the Company and the
      negotiation of a definitive purchase & sale agreement.





As
      of
      August 10, 2006 the Company sold an additional 1,850,000 Units for a total
      consideration of $925,000. Each Unit consists of one share of common stock
      and
      one redeemable stock purchase warrant (“Warrant”). Each Warrant is exercisable
      for a period of two years at an exercise price of $0.75 per share for the first
      year and $1.00 per share for the second year.





On
      August
      10, 2006 the Company entered into a Purchase & Sale Agreement (the “PSA”)
      with Wyoming Mineral Exploration, LLC (“WME”) for the purchase of WME’s
      approximate 8,500 acre land position in the Big Muddy Field in the Powder River
      Basin east of Casper, Wyoming. The total purchase price will be $25,000,000
      with
      a deposit of $2,500,000 paid on August 18, 2006 and the remainder to be paid
      at
      closing on or before November 30, 2006. Closing is contingent upon several
      factors including the Company establishing that it will have an adequate,
      predictable, and commercially reasonable supply of water for its operations,
      and
      title and environmental due diligence. While the Big Muddy Field was discovered
      in 1916, future profitable operations are dependent of the application of
      tertiary recovery techniques requiring significant amounts of CO2 which are
      available from a third party but not assured. If the Company is not able to
      obtain financing or able to obtain CO2 supplies for commercial terms, then
      the
      $2,500,000 deposit will be forfeited as liquidated damages.





On
      August
      17, 2006, the Company entered into an agreement with ERM Rocky Mountain Inc.
      to
      conduct an environmental review in conjunction with the acquisition of the
      Big
      Muddy field.





**Item
      2. Management's Discussion & Analysis of Financial Condition & Results
      of Operations**





**FORWARD-LOOKING
      STATEMENTS**





*With
      the exception of historical matters, the matters discussed herein are
      forward-looking statements that involve risks and uncertainties Forward-looking
      statements include, but are not limited to, statements concerning anticipated
      trends in revenues, and may include words or phrases such as “will likely
      result”, “are expected to”, “will continue”, “is anticipated”, “estimate”,
“projected”, “intends to”, or similar expressions, which are intended to
      identify “forward-looking statements” within the meaning of the Private
      Securities Litigation Reform Act of 1995. Our actual results could differ
      materially from the results discussed in such forward-looking statements. There
      is absolutely no assurance that we will achieve the results expressed or implied
      in forward-looking statements. Factors that could cause or contribute to such
      differences include, but are not limited to, market prices for oil & gas,
      economic and competitive conditions, regulatory changes, estimates of proved
      reserves, potential failure to achieve production from development projects,
      capital expenditures and other uncertainties, our ability successfully to
      implement our strategy to acquire additional oil & gas properties, and our
      ability successfully to manage and operate our newly acquired oil &gas
      properties or any properties subsequently acquired by us, as well as those
      factors discussed below.*





14




**Overview**





Rancher
      Energy Corp. is an independent energy company which is engaging in the
      exploration for and related development, production, and marketing of oil &
gas in North America. Prior to April 18, 2006 the Company, then known as Metalex
      Resources, Inc. (“Metalex”), was primarily engaged in the exploration and
      development of a gold prospect in British Columbia, Canada. Metalex found no
      commercially exploitable deposits or reserves of gold. During April 2006 the
      shareholders voted to change the name of the Company to Rancher Energy Corp.
      Since April 2006 the Company has named a new president and is actively pursuing
      oil & gas prospects in the Rocky Mountain region. We plan to generate
      revenues by the production of oil & gas from properties which we have under
      contract, independently or with other parties. During June 2006 we entered
      into
      agreements to acquire interests in two different prospects—(i) up to a 89.82%
      working interest in the Burke Ranch Field in the Powder River Basin in central
      Wyoming on 1,921 gross acres (1,713 net to the Company), (ii) an additional
      8,183 gross acres contiguous and/or adjacent to our Burke Ranch Field (5,572
      net
      acres) from the U.S. Bureau of Land Management, and (iii) a separate acreage
      prospect of approximately 7,600 gross acres (4,180 net acres) in the Broadview
      Dome Prospect in the Crazy Mountain Basin in central Montana. In July 2006
      the
      Company signed a letter of intent for the purchase of approximately 1,200 acres
      in the East Teapot Dome Field and in August 2006 the Company signed a purchase
      and sale agreement for approximately 8,500 acres in the Big Muddy Field, both
      in
      the Powder River Basin in central Wyoming.





**Outlook
      for Fiscal 2007**





The
      following summarizes the goals and objectives for the Company for the year
      ending March 31, 2007:




·
            Begin
                its exploration and development program on the Burke Ranch field
                as
                required by the Participation Agreement, which includes completing
                a 3-D
                seismic survey on approximately 4,480 acres, selecting an engineering
                firm
                to perform engineering studies on the property and prepare a development
                plan, and performing remedial work on two wells currently in
                production.


·
            Begin
                its exploration and development plan on the Broadview Dome prospect
                as
                required by its exploration and development agreement, which includes,
                at
                a minimum, completing a 3-D seismic survey on the 2,560
                acres.


·
            Obtain
                financing for and close on the Teapot Dome prospect and Big Muddy
                field
                acquisitions.


·
            Prepare
                and finalize a registration statement to register securities that
                may be
                issued.


·
            Build
                up the operating capabilities of the
                Company.


·
            Pursue
                additional asset and project opportunities that are accretive to
                shareholder value.




**Results
      of Operations for the Three Months Ended June 30, 2006**





The
      Company had a net loss for the three months ended June 30, 2006 of $604,347
      compared to a net loss of $21,269 for the same period in 2005. A total of
      $423,500 of the loss is a non-cash item for the issuance of options to purchase
      common stock to our president and chief executive officer on May 15, 2006 as
      part of his employment agreement with the Company and $30,000 is a non-cash
      imputed finance charge recorded on issuance of debt convertible into Common
      shares. Also as discussed, during the first quarter of 2006 the Company has
      decided to engage full time in the exploration for and development of oil &
gas in North America. To that end, we have hired two full time employees, in
      Denver Colorado, whose payroll and benefits approximate $26,000 per month.
      During 2005 the Company’s sole employee was a part time bookkeeper at a cost of
      $1,000 per month. Consulting fees of $38,000 for the three months ended June
      30,
      2006 are for public relations and other consultants which have been engaged
      to
      assist the Company in relations with its shareholders and in complying with
      the
      disclosure requirements of the U.S. Securities & Exchange Commission.





15





**Liquidity
      & Capital Resources.**





At
      June
      30, 2006 the Company had working capital of $264,377. As of August 15, 2006
      the
      Company has sold an additional 7,850,000 Units for a total consideration of
      $3,925,000. Each Unit consists of one share of common stock and one redeemable
      stock purchase warrant (“Warrant”). Each warrant is exercisable for a period of
      two years at an exercise price of $0.75 per share for the first year and $1.00
      per share for the second year.





On
      August
      15, 2006 the Company paid $2,500,000 as a deposit for its acquisition of the
      Big
      Muddy Field-- see “Subsequent Events”, above. After such payment the Company had
      a cash balance of $2,325,754.





The
      Company estimates that its ongoing general and administrative expenses to be
      approximately $55,000 per month. In addition, the Company has agreed to pay
      $500,000 in cash by September 20, 2006 for the initial payments required under
      the two acquisition agreements for the Burke Ranch field and the Broadview
      Dome
      prospect, and it estimates the initial exploration phase costs to be $750,000
      at
      the Burke Ranch field and $287,000 at the Broadview Dome prospect to be expended
      over the next six months. The Company expects that its current cash balances,
      combined with the sale of Company common stock units, if completed, will meet
      these capital needs for fiscal year 2007.





However,
      the Company will require additional financing in order to close its Big Muddy
      acquisition, to begin tertiary operations on the Big Muddy field, and for a
      development program for the Burke Ranch field and the Broadview Dome prospect
      if
      the Company’s exploration program is successful, resulting in a development
      program. However, such success cannot be assured. Such additional financing
      may
      be in the form of debt or equity or a combination of both (see “Sources and Uses
      of Funds”, below).





**Sources
      & Uses of Funds.**





Historically,
      the Company’s primary source of liquidity has been cash provided by equity
      offerings, and or debt convertible into equity from its existing capital
      providers. As discussed above, the Company plans to issue common share units
      during fiscal 2007. If its exploration program and/or acquisition programs
      are
      successful the Company will be required to obtain additional financing which
      may
      be debt or equity or a combination of both.





**Cash
      Flows & Capital Expenditures.**





During
      the three months ended June 30, 2006 the Company expended $132,464 in its
      operating activities as the Company builds up its Denver staff as a Rocky
      Mountain operator. This amount compares to $23,923 used in operating activities
      in fiscal year 2005.





**Commitments.**





Pursuant
      to the terms of the purchase of the Burke Ranch field and the Broadview Dome
      prospect, the Company will be required to pay, by September 20, 2006, $250,000
      for each property for a total consideration of $500,000.





In
      addition, the Company estimates that it will cost an additional $1,037,000
      to
      meet its minimum 3-D seismic and rework obligations under such agreements.





**Income
      Taxes, Net Operating Losses, & Tax Credits.**





At
      June
      30, 2006 the Company has a net operating loss carry forward for U.S. income
      tax
      purposes of approximately $300,000. The Company has established a valuation
      allowance for deferred taxes that reduces its net deferred tax assets, as
      management currently believes that these losses will not be utilized in the
      near
      term.





16





**Critical
      Accounting Policies & Estimates.**





The
      discussion and analysis of the Company’s financial condition and results of
      operations were based upon the consolidated financial statements, which have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States. The preparation of these financial statements requires the
      Company to make estimates and judgments that affect the reported amounts of
      assets, liabilities, revenues, and expenses. Significant accounting policies
      are
      described in Note 2 to the financial statements. In response to SEC Release
      No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical
      Accounting Policies”, the Company has identified certain of these policies as
      being of particular importance to the portrayal of the financial position and
      results of operations and which require the application of significant judgment
      by management. The Company analyzes its estimates, including those related
      to
      oil & gas reserves, bad debts, oil & gas properties, marketable
      securities, income taxes, derivatives, and contingencies, and bases those
      estimates on historical experience and various other assumptions that management
      believes are reasonable under the circumstances. Actual results may differ
      from
      these estimates under different assumptions or conditions. The Company believes
      the following critical accounting policies affect the more significant judgments
      and estimates used in the preparation of the financial statements.





**Full
      Cost Method of Accounting.**





For
      its
      oil & gas exploration and producing activities, the Company uses the full
      cost method of accounting for its oil & gas properties. Accordingly, all
      costs related to the acquisition, exploration, and development of both proved
      and unproved properties are capitalized. The Company's properties are located
      within the continental United States, which constitutes one cost center. The
      amortization of proved oil & gas properties will be calculated using the
      units-of-production method, based on proved reserves of oil & gas. The costs
      of unproved properties will be excluded from amortization pending a
      determination of the existence of proved reserves. Such unproved properties
      will
      be assessed periodically for impairment. The amount of impairment, if any,
      will
      be added to the costs being amortized.





Capitalized
      costs, less related accumulated amortization, may not exceed the sum of: (i)
      the
      present value of future net revenues from estimated production of proved oil
      & gas reserves; (ii) the cost of properties not being amortized; and (iii)
      the lower of cost or estimated fair value of unproved properties included in
      the
      costs being amortized.





**Reserve
      Estimates.**





Estimates
      of oil & gas reserves, by necessity, are projections based on geologic and
      engineering data, and there are uncertainties inherent in the interpretation
      of
      such data as well as the projection of future rates of production and the timing
      of development expenditures. Reserve engineering is a subjective process of
      estimating underground accumulations of oil & gas that are difficult to
      measure. The accuracy of any reserve estimate is a function of the quality
      of
      available data, engineering and geological interpretation, and judgment.
      Estimates of economically recoverable oil & gas reserves and future net cash
      flows necessarily depend upon a number of variable factors and assumptions,
      such
      as historical production from the area compared with production from other
      producing areas, the assumed effects of regulations by governmental agencies,
      and assumptions governing future oil & gas prices, future operating costs,
      severance taxes, development costs, and workover gas costs, all of which may
      in
      fact vary considerably from actual results. The future drilling costs associated
      with reserves assigned to proved undeveloped locations may ultimately increase
      to an extent that these reserves may be later determined to be uneconomic.
      For
      these reasons, estimates of the economically recoverable quantities of oil
&
gas attributable to any particular group of properties, classifications of
      such
      reserves based on risk of recovery, and estimates of the future net cash flows
      expected therefrom may vary substantially. Any significant variance in the
      assumptions could materially affect the estimated quantity and value of the
      reserves, which could affect the carrying value of oil & gas properties
      and/or the rate of depletion of the oil & gas properties.





17




**Stock
      Based Compensation.**





Other
      than the stock option plan described above under “Other Subsequent Events”, the
      Company has not yet adopted a Long-Term Incentive plan under which the Company
      would issue performance share units convertible into common shares of the
      Company subject to vesting on the basis of the achievement of specified
      performance targets.





**Item
      3. QUANTITATIVE & QUALITATIVE DISCLOSURE ABOUT MARKET
      RISK.**





We
      currently do not invest in derivative financial instruments, interest rate
      swaps, or other similar investments to alter interest rate exposure or for
      any
      other purpose.





**Item
      4.**  **CONTROLS
      & PROCEDURES.**




***Disclosure
      Controls & Procedures.***




Our
      management, as required by Rule 13a-15(b) and Rule 15d-15(e) of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”), the Company’s management,
      including the Chief Executive Officer and Chief Financial Officer, is
      responsible for establishing and maintaining effective disclosure controls
      and
      procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange
      Act.
      As of June 30, 2006, an evaluation was performed under the supervision and
      with
      the participation of our management, including the Chief Executive Officer
      and Chief Financial Officer, evaluated the effectiveness of our design and
      operation of the Company’s disclosure controls and procedures pursuant to Rule
      13a-15 under the Exchange Act as of the three months ended June 30, 2006. In
      designing and evaluating the disclosure controls and procedures, management
      recognized that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable assurance of achieving the desired control
      objectives. Based on that evaluation, our Chief Executive Officer and Chief
      Financial Officer concluded that, as of the end of such period, our disclosure
      controls and procedures are effective to provide reasonable assurance that
      information we are required to disclose in reports that we file or submit under
      the Exchange Act as of June 30, 2006 were effective in ensuring information
      required to be disclosed in this Quarterly Report on Form 10-Q was recorded,
      processed, summarized, and reported on a timely basis, and reported within
      the
      time periods specified in the SEC’s rules and forms, and that such information
      was accumulated and communicated to our management, including our Chief
      Executive Officer and Chief Financial Officer, to allow timely decisions
      regarding required disclosure.


18


**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS.**





None.





**ITEM
      1A. RISK FACTORS.**





As
      of
      June 30, 2006 there were no material changes from the risk factors set forth
      in
      Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended
      March 31, 2006. However, the Company faces additional risks associated with
      the
      acquisition of the Big Muddy field described in Note 7 of Part I
      above.





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





Each
      sale
      of unregistered securities made by the Company during the quarter ended June
      30,
      2006 and through the date of this Quarterly Report on Form 10-Q were duly
      reported on Form 8-K. The Company made no repurchases of its common stock during
      the quarter ended June 30, 2006.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES.**





None.





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





None.





**ITEM
      5. OTHER INFORMATION.**





See
      “EXPLANATORY NOTE” preceding “Item 1, Financial Statements” above.





**ITEM
      6. EXHIBITS.**







Exhibit
                No.
            Description3.1
            Articles
                of Incorporation of Rancher Energy Corp.(1)3.2
            Bylaws
                of Rancher Energy.(1)4.1
            Specimen
                Stock Certificate.(1)10.1
            Employment
                Agreement dated June 1, 2006 between Rancher Energy Corp. and John
                Works.(2)10.2
            Broadview
                Dome Prospect Exploration & Development Agreement dated June 15, 2006
                between Big Snowy Resources and Rancher Energy Corp.(2)10.3
            Burke
                Ranch Unit Purchase & Participation Agreement dated February 6, 2006
                between Hot Springs Resources, Ltd. and Pin Petroleum Partners,
                Ltd.(2)10.4a
            $500K
                Loan Agreement dated June 1, 2006 between Rancher Energy Corp. and
                Venture
                Capital First LLC.(3)10.4b
            $150K
                Loan Agreement dated June 1, 2006 between Rancher Energy Corp. and
                Enerex
                Capital Corp.(2)




19




10.5
            Work
                Study Contract with NITEC LLC dated June 7, 2006 between Rancher
                Energy
                Corp. and NITEC LLC.(2)10.6
            PIN
                Petroleum Partners, Ltd. Assignment dated June 21, 2006 of an agreement
                between PIN Petroleum Partners, Ltd. and Hot Springs Resources, Ltd.
                dated
                February 6, 2006.(2)10.8
            PIN
                Petroleum Partners, Ltd. Assignment dated June 6, 2006 of rights
                under an
                Exploration & Development Agreement dated June 15, 2006 with Big Snowy
                Resources, Inc.(2)10.9
            Purchase
                & Sale Agreement dated August 10, 2006 between Rancher Energy Corp.
                and Wyoming Mineral Exploration, LLC relating to the Big Muddy
                prospect.(5)14.1
            Code
                of Ethics and Business Conduct.(4)31
            Certification
                by Chief Executive Officer and Chief Financial Officer pursuant to
                Sarbanes-Oxley Section 302.(5)32
            Certification
                by Chief Executive Officer and Chief Financial Officer pursuant to
                18 U.S.
                C. Section 1350.(5)


__________________





(1)
            Included
                as an exhibit to Registration Statement No. 333-116307 on Form SB-2
                filed
                by the registrant on June 7, 2005 and incorporated herein by
                reference.





(2)
            Included
                as an exhibit to the registrant’s Form 10-K for the fiscal year ended
                March 31, 2006 filed on June 30, 2006 and incorporated herein by
                reference.





(3)
            Included
                as Exhibit 10.7 to Form 8-K filed by the registrant on June 9, 2006
                and
                incorporated herein by reference.





(4)
            Included
                as Exhibit 14.1 to Form 10-KSB for the fiscal year ended March 31,
                2005
                filed by the registrant on July 8, 2005 and incorporated herein by
                reference.





(5)
            Filed
                herewith.







20





**RANCHER
      ENERGY CORP.**





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, as amended, the registrant caused this report to be signed on its behalf
      by the undersigned, thereunto duly authorized.





Dated:
                August 28, 2006
            RANCHER
                ENERGY CORP.By:
            /s/ John WorksJohn
                Works, President, Principal Executive Officer,Secretary,
                Treasurer, Principal Financial Officer,and
                Principal Accounting Officer















21