United
      States Securities and Exchange Commission


Washington,
      D. C. 20549





Form
      10-Q








[X]
      Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
      Act
      of 1934


For
      the
      Quarter Ended September 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.)





999-18 th Street,
      Suite 1740


Denver,
      Colorado 80202


(Address
      of Principal Executive Office)





Previous
      address:


1050
      17 th Street,
      Suite 1700


Denver,
      Colorado 80265





(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 __     Accelerated 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
      November 12, 2006, 49,104,580 shares of Rancher Energy’s common stock, $.00001
      par value, were outstanding.








Rancher
      Energy Corp.





Table
      of
      Contents





Part
      I.
      Financial Information





PageItem 1.
            Financial
                StatementsFinancial
                StatementsBalance
                Sheet, September 30 & March 31, 2006
            3Operations
                Statement, Six Months & quarters ended September 30, 2006 & 2005;
                Inceptionthrough
                September 30, 2006
            4Cash
                Flow Statement, Six Months ended September 30, 2006 &
                2005
            5Financial
                Statement Notes
            7Item
                2.
            Management's
                Discussion & Analysis of Financial Condition & Results of
                Operations
            12Item
                3.
            Quantitative
                & Qualitative Disclosures About Market Risk
            15Item
                4.
            Controls
                & Procedures
            15Part
                II. Other InformationItem
                      1.
            Legal
                Proceedings
            16Item
                1A.
            Risk
                Factors
            16Item
                2.
            Unregistered
                Sales of Equity Securities & Use of Proceeds
            20Item
                3.
            Defaults
                Upon Senior Securities
            20Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            20Item
                5.
            Other
                Information
            20Item
                6.
            Exhibits
            21Signatures
            
            23




2




Part
      I.
      Financial Information





Rancher
      Energy Corp.


(A
      Development Stage Company)


Balance
      Sheet




Sep
                  30 '06
              
              Mar
                  31 '06(Unaudited)AssetsCurrent
                  assetsCash
                  & cash equivalents
              
              $
              5,479,007
              
              $
              46,081Total
                  current assets
              
              
              5,479,007
              
              
              46,081Equipment,
                  net
              
              
              34,101
              
              
              476Oil
                  & gas property, full cost method
              
              
              3,007,919
              
              
              -Total
                  assets
              
              $
              8,521,027
              
              $
              46,557LiabilitiesCurrent
                  liabilitiesAccounts
                  payable
              
              $
              88,360
              
              $
              2,070Payable
                  for purchase of oil & gas property
              
              
              603,537
              
              
              -Total
                  current liabilities
              
              
              691,897
              
              
              2,070Stockholders'
                  EquityCommon
                  stock, 100,000,000 shares authorized, $0.00001 parvalue,
                  47,190,449 & 28,500,000 shares issued & outstandingat
                  September 30, 2006 & March 31, 2006, respectively
              
              
              472
              
              
              285Additional
                  paid-in capital
              
              
              9,726,847
              
              
              570,809Accumulated
                  deficit during development stage
              
              
              (1,898,189
              )
              
              (526,607
              )Total
                  stockholders' equity
              
              
              7,829,129
              
              
              44,487Total
                  liabilities & stockholders' equity
              
              $
              8,521,027
              
              $
              46,557






See
        accompanying notes.
  3


Rancher
      Energy Corp.


(A
      Development Stage Company)


Operations
      Statement


(unaudited)


FromFeb
                  4 '04Six
                  Months
              
              Six
                  Months
              
              Quarter
              
              Quarter
              
              (Inception)Ended
              
              Ended
              
              Ended
              
              Ended
              
              toSep
                  30 '06
              
              Sep
                  30 '05
              
              Sep
                  30 '06
              
              Sep
                  30 '05
              
              Sep
                  30 '06Revenue
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Operating
                  expenseOil
                  & Gas Operating
              
              
              -
              
              
              
              
              
              -
              
              
              
              
              
              -Mining
                  exploration expense
              
              
              -
              
              
              
              
              
              -
              
              
              
              
              
              51,904Impairment
                  of Burke Ranch property
              
              
              395,785
              
              
              
              
              
              395,785
              
              
              
              
              
              395,785G&A
              
              
              966,282
              
              
              31,913
              
              
              395,214
              
              
              10,644
              
              
              1,440,985Total
                  operating expense
              
              
              1,362,067
              
              
              31,913
              
              
              790,999
              
              
              10,644
              
              
              1,888,674Loss
                  from operations
              
              
              (1,362,067
              )
              
              (31,913
              )
              
              (790,999
              )
              
              (10,644
              )
              
              (1,888,674
              )Other
                  income (expense)Interest
                  & other income
              
              
              23,485
              
              
              
              
              
              22,120
              
              
              
              
              
              23,485Imputed
                  finance charges onconvertible
                  debt
              
              
              (30,000
              )
              
              
              
              
              -
              
              
              
              
              
              (30,000
              )Interest
                  expense
              
              
              (3,000
              )
              
              
              
              
              1,644
              
              
              
              
              
              (3,000
              )Total
                  other
              
              
              (9,515
              )
              
              -
              
              
              23,764
              
              
              -
              
              
              (9,515
              )Net
                  Loss
              
              
              (1,371,582
              )
              
              (31,913
              )
              
              (767,235
              )
              
              (10,644
              )
              
              (1,898,189
              )Basic
                  & diluted net loss per share
              
              $
              (0.04
              )
              
              nil
              
              $
              (0.02
              )
              
              nilBasic
                  & diluted weighted averageaverage
                  shares outstanding
              
              
              33,336,427
              
              
              5,000,000
              
              
              37,598,545
              
              
              7,000,000




See
      accompanying notes.






4





Rancher
      Energy Corp.


(A
      Development Stage Company)


Cash
      Flow
      Statement (Unaudited)




FromFeb
                  4 '04(Inception)Six
                  Months Ended
              
              toSep
                  30 '06
              
              Sep
                  30 '05
              
              Sep
                  30 '06Cash
                  flow (used in) operating activity:Net
                  loss
              
              $
              (1,371,582
              )
              
              (31,913
              )
              
              (1,898,189
              )Adjustments
                  to reconcile net loss tonet
                  cash used in operating activity:Impairment
                  of Burke Ranch property
              
              
              395,785
              
              
              
              
              
              395,785Abandonment
                  of office equipment
              
              
              2,284
              
              
              
              
              
              2,284Expense
                  paid by shareholder
              
              
              
              
              
              
              
              
              11,904Common
                  stock issued for services
              
              
              
              
              
              
              
              
              363,096Options
                  on Common stock issued for services
              
              
              529,375
              
              
              
              
              
              529,375Imputed
                  finance charges on issuance of debtconvertible
                  into shares of common stock
              
              
              30,000
              
              
              
              
              
              30,000Depreciation
              
              
              1,800
              
              
              106
              
              
              2,214Interest
                  on convertible note converted into equity
              
              
              3,453
              
              
              (1,904
              )
              
              3,453Increase
                  in accounts receivable
              
              
              
              
              
              (497
              )Increase
                  (decrease) in accts payable
              
              
              86,290
              
              
              
              
              
              86,767Increase
                  in payroll taxes payable
              
              
              -
              
              
              -
              
              
              1,593Net
                  cash used in operating activity
              
              
              (322,595
              )
              
              (34,208
              )
              
              (473,311
              )Cash
                  flow used in investing activity:Equipment
                  purchases
              
              
              (37,709
              )
              
              
              
              
              (38,599
              )Oil
                  & gas property additions
              
              
              (2,800,167
              )
              
              -
              
              
              (2,800,167
              )Net
                  cash used in investing activity
              
              
              (2,837,875
              )
              
              -
              
              
              (2,838,765
              )Cash
                  flow from financing activity:Proceeds
                  from sale of common stock & warrants
              
              
              8,093,397
              
              
              196,094
              
              
              8,289,491Proceeds
                  from issuance of convertible debt
              
              
              500,000
              
              
              (30,000
              )
              
              530,000Payments
                  on convertible debt
              
              
              
              
              
              
              
              
              -Proceeds
                  from shareholder loans
              
              
              
              
              
              
              
              
              -Payment
                  of shareholder loan
              
              
              -
              
              
              -
              
              
              (30,000
              )Net
                  cash from financing activity
              
              
              8,593,397
              
              
              166,094
              
              
              8,789,491Increase
                  in cash & cash equivalents
              
              
              5,432,926
              
              
              131,886
              
              
              5,479,007Cash
                  & cash equivalents--beginning of period
              
              
              46,081
              
              
              4,060
              
              
              -Cash
                  & cash equivalents--end of period
              
              $
              5,479,007
              
              $
              135,946
              
              $
              5,479,007




See
        accompanying notes.




5







Rancher
      Energy Corp.


(A
      Development Stage Company)


Cash
      Flow
      Statement, continued (Unaudited)




FromFeb
                  4 '04(Inception)Six
                  Months Ended
              
              toSep
                  30 '06
              
              Sep
                  30 '05
              
              Sep
                  30 '06Non-cash
                  Investing and Financing Transactions:Imputed
                  finance charges on issuance of debtconvertible
                  into shares of common stock
              
              $
              30,000
              
              $
              -
              
              $
              30,000Common
                  stock and warrants issued onconversion
                  of note and accrued interest
              
              $
              503,453
              
              $
              -
              
              $
              503,453Common
                  stock issued for services
              
              
              
              
              
              
              
              $
              363,096Common
                  stock issued for expensepaid
                  by shareholder
              
              
              
              
              
              
              
              $
              11,904Oil
                  & gas property acquired for payables
              
              $
              603,537
              
              $
              -
              
              $
              603,537





See
      accompanying notes.




6




Note
      1—Organization & Summary of Significant Accounting Policies





Organization





Rancher
      Energy Corp. (“Rancher Energy”) was incorporated in Nevada on February 4, 2004.
      Rancher Energy explores for, develops, and plans to produce oil & gas,
      concentrating on applying secondary and tertiary recovery technology to older,
      historically productive fields, primarily in North America.





Basis
      of
      Presentation





The
      accompanying unaudited financial statements include, in management’s opinion,
      all adjustments, only consisting of normal recurring adjustments, necessary
      for
      fair presentation. The financial statements should be read in conjunction with
      our financial statements included in our March 31, 2006, Form 10-K and our
      June
      30, 2006, Form 10-Q, Amendment No. 1. The accompanying financial statements
      are
      interim financial statements prepared in accordance with accounting principles
      generally accepted in the United States.





Going
      Concern





Rancher
      Energy has no revenue, has incurred a net loss of $1,898,000 for the period
      from
      February 4, 2004 (inception) through September 30, 2006, and has an accumulated
      deficit of $1,898,000. These factors indicate that we 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 we cannot
      continue in existence. We believe that our cash balances at September 30, 2006,
      and the receipt of funds subsequent to September 30, 2006 from private financing
      agreements, will generate sufficient cash receipts for us to continue to operate
      based on current expense projections. We anticipate we will require over
      $75,000,000 to close on the acquisition of oil & gas properties (including
      the Cole Creek South field, the South Glenrock B field, and the Big Muddy
      field—see Notes 3 and 7 below), conduct development activity, and continue
      operations going forward.





Oil
&
      Gas Operations





Rancher
      Energy had no production or reserves at September 30, 2006. Accordingly it
      has
      recorded no depreciation or depletion for its oil & gas
      properties.





Share-Based
      Payment





Effective
      April 1, 2006, Rancher Energy adopted Statement of Financial Accounting Standard
      123(R) *Share-Based
      Payment* (“Statement 123R”) using the modified prospective transition method. In
      addition, the Securities and Exchange Commission (the “SEC”) issued Staff
      Accounting Bulletin No. 107 *Share-Based
      Payment* in
      March, 2005, which provides supplemental application guidance on Statement
      123R
      based on the views of the SEC. Under the modified prospective transition method,
      compensation cost recognized in the six months ended September 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
      Statement 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 Statement 123R. In accordance with the modified
      prospective transition method, results for prior periods have not been restated.





The
      adoption of Statement 123R resulted in stock compensation expense for the six
      months ended September 30, 2006, of $529,000. Rancher Energy did not recognize
      a
      tax benefit from the stock compensation expense because it 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.





7


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 (i) the stock price at the valuation date, (ii) the expected
      stock price volatility, and (iii) 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 Statement 123R, Rancher Energy 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. Statement 123R
      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 Statement 123R. As a result of Rancher Energy’s net
      operating losses, the excess tax benefits that would otherwise be available
      to
      reduce income taxes payable have the effect of increasing Rancher Energy’s net
      operating loss carry forwards. Accordingly, because Rancher Energy 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 September
      30, 2006.





Stock
      Options as of the Six Months Ended September 30, 2005


For
      the
      six months ended September 30, 2005, Rancher Energy had not issued any stock
      options and there were no stock options outstanding. Therefore there is no
      pro-forma effect on the financial statements for the six months ended September
      30, 2005.





Stock
      Options as of the Six Months Ended September 30, 2006


The
      following table summarizes stock option activity during the six months ended
      September 30, 2006:




Outstanding
                OptionsNumber
                of
              Shares
            
            Weighted
              Average
              Exercise Price
            
            Weighted
              Average
              Remaining
              Contractual
              Term
              (in
                years)
            
            Total
              Intrinsic
              ValueOptions
                outstanding at April 1, 2006
            
            
            -
            
            $
            -Granted
            
            
            4,000,000
            
            
            0.00001Exercised
            
            
            (1,000,000
            )
            
            0.00001Canceled
                or forfeited
            
            
            -
            
            
            -Options
                outstanding at September 30, 2006
            
            
            3,000,000
            
            $
            0.00001
            
            
            2.75
            
            $
            5,399,970Options
                exercisable at September 30, 2006
            
            
            250,000
            
            $
            0.00001
            
            
            2.75
            
            $
            499,998




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 six months
      ended September 30, 2006, was approximately $529,000. Rancher Energy received
      $10 from stock options exercised during the six months ended September 30,
      2006.
      Rancher Energy did not realize any tax deductions related to the exercise of
      stock options during the six months.





Stock
      options outstanding and currently exercisable at September 30, 2006
      are:




Options
                Outstanding
            
            Options
                ExercisableRange
                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
            
            2.75
            
            $
            0.00001
            
            -
            
            $
            -




8




Total
      estimated unrecognized compensation cost from unvested stock options as of
      September 30, 2006 was approximately $1,165,000, which Rancher Energy expects
      to
      recognize over 2.75 years.




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




Six
                Months EndedSeptember
                30, 2006Volatility
            87.0%Expected
                option term
            1
                yearRisk-free
                interest rate
            5.22%Expected
                dividend yield
            0%





New
      Accounting Pronouncements





In
      September 2006 the Financial Accounting Standards Board issued Statement 157, *Fair
      Value Measurements* (“Statement
      157”). Statement 157 defines fair value, establishes a framework for measuring
      fair value in generally accepted accounting principles, and expands disclosures
      about fair value measurements. Statement 157 applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, Statement 157 does not require
      any
      new fair value measurements. However, for some entities, the application of
      Statement 157 will change current practice. Statement 157 is effective for
      financial statements issued for years beginning after November 15, 2007, and
      interim periods within those fiscal years. We believe that statement 157 will
      not have a material effect on our financial statements.





Note
      2—Loss per Share





Rancher
      Energy computes basic and diluted loss per share by dividing the net loss by
      the
      weighted average shares outstanding. Basic and diluted loss per share are the
      same amount because stock options and warrants are excluded from the calculation
      as the effect of inclusion would be anti-dilutive.





Note
      3—Property Acquisitions





On
      August
      3, 2006, Rancher Energy signed a nonbinding letter of intent with ARI Antelope
      Resources, Inc. ("ARI") 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 and the
      negotiation of a definitive purchase and sale agreement.





On
      August
      10, 2006, Rancher Energy entered into a Purchase and Sale Agreement with Wyoming
      Mineral Exploration, LLC for the purchase of approximately 8,500 acres 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 Rancher Energy 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 on CO2 which are available from a third party but not
      assured. If Rancher Energy is not able to obtain to meet its closing conditions,
      then the $2,500,000 deposit will be forfeited as liquidated damages. Rancher
      Energy engaged ERM Rocky Mountain Inc. (“ERM”) to conduct an environmental
      review in conjunction with the acquisition of the Big Muddy field which revealed
      no material environmental problems.





9





Note
      4—Burke Ranch Impairment





In
      June
      2006 Rancher Energy acquired 10,104 acres in the Burke Ranch field and adjacent
      property in Natrona County, Wyoming. Rancher Energy has had engineering studies
      performed on the property and has concluded that the potential reserves in
      the
      property do not warrant further development expenditures. Accordingly, Rancher
      Energy has recorded $395,785 of expense to fully impair the property. The owner
      of the Burke Ranch Unit claims that Rancher Energy should have conducted a
      3-D
      seismic survey and drilled a test well.  Rancher Energy does not
      believe that it has any continuing obligations.





Note
      5—Debt Converted Into Common Stock & Warrants





On
      June
      9, 2006, Rancher Energy borrowed $500,000 at 6% interest from Venture Capital
      First LLC (“Venture Capital”) for working capital, to be repaid on or before
      December 9, 2006. The agreement provided that Venture Capital had the option
      to
      convert all or a portion of the loan into common stock and warrants to purchase
      common stock, either (i) at a price per share equal to the closing price of
      Rancher Energy’s shares on the day preceding notice from Venture Capital of its
      intent to convert all or a portion of the loan into common stock, or, (ii)
      in
      the event Rancher Energy conducted an offering of common stock, or units
      consisting of stock and warrants to purchase stock, at the price of such shares
      or units in the offering.





In
      July
      2006 Venture Capital elected to convert its entire loan and accrued interest
      into common stock and warrants to purchase common stock at a price of $0.50
      per
      unit, which was the price per unit in the offering described in Note 6.
      Accordingly, on July 19, 2006, Rancher Energy 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 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—Sale of Common Stock & Warrants





From
      June
      30, 2006, through September 30, 2006, Rancher Energy sold 15,683,544
      unregistered Units for $0.50 per Unit, totaling $8,341,772 gross proceeds.
      Each
      Unit consists of one share of common stock and a warrant to purchase one
      additional share of common stock. On 7,850,000 Units Rancher Energy paid no
      underwriting discounts or commissions. On 7,833,544 Units Rancher Energy paid
      a
      5% cash commission of $195,839 and an additional commission of 391,677 shares
      of
      common stock, representing 5% of the number of Units sold. The warrants are
      exercisable for a period of two years from the date of issuance. During the
      first year of the warrant exercise period, the exercise price is U.S. $0.75
      per
      share; during the second year the exercise price is U.S. $1.00 per share. The
      warrants are redeemable by Rancher Energy for no consideration upon 30 days’
prior notice.





All
      of
      the Units were sold outside the United States in offshore transactions to
      non-U.S. persons pursuant to the exemption from registration provided by
      Regulation S adopted under the Securities Act of 1933, as amended. Each of
      these
      investors was a sophisticated investor who provided customary investment
      representations and warranties as to suitability and against resales and
      distributions of the Units. The certificates bear a standard restrictive legend
      generally used in Regulation S transactions.





In
      October 2006 Rancher Energy sold an additional 1,449,956 Units on a commission
      basis for $0.50 per Unit, totaling $724,978 gross proceeds, paying a 5% cash
      commission of $36,249 and an additional commission of 72,498 shares of common
      stock, representing 5% of the number of Units sold. These Units were issued
      on
      the same terms and conditions as the Units described in the two paragraphs
      immediately above.





10





Note
      7—Other Subsequent Events





On
      October 2, 2006, the board of directors of Rancher Energy (the “Board”) approved
      the 2006 Stock Incentive Plan (the “Plan”). The Plan provides for the grant of
      incentive stock options, nonqualified stock options, restricted stock awards,
      restricted stock units (awards of restricted stock, cash or a combination),
      and
      dividend equivalent rights (collectively, the “Awards”) to Rancher Energy’s
      officers, employees, directors, and consultants. The Board reserved 10,000,000
      shares of common stock for issuance under the Plan. The Plan will terminate
      on
      October 1, 2016.





The
      Board
      or a committee appointed by the Board will fix terms of each Award as it may
      deem necessary or desirable.





On
      October 2, 2006, under the Plan, Rancher Energy granted options to purchase
      up
      to a total of 825,000 shares of common stock to one officer and one employee
      at
      an exercise price of $1.75, which was determined to be Fair Market Value based
      upon Rancher Energy’s closing market price on October 2, 2006.  On October
      16, 2006, under the Plan, Rancher Energy granted options to purchase up to
      a
      total of 1,500,000 shares of common stock to an officer at an exercise price
      of
      $2.10, which was determined to be Fair Market Value based upon Rancher Energy’s
      closing market price on October 16, 2006. The Board will submit the Plan to
      Rancher Energy’s shareholders for approval at the next shareholders meeting, and
      the issuance of any incentive stock options granted under the Plan are subject
      to the approval of the Plan by shareholders.





In
      October 2006 Rancher Energy entered into an agreement to acquire a 100% working
      interest (79.31% net revenue interest) in the Cole Creek South Field consisting
      of approximately 2,080 acres in Wyoming's Powder River Basin. Rancher Energy
      paid a deposit of 7.5% of the purchase price of $11,000,000, and the remainder
      of the purchase price is required to be paid at closing (anticipated on or
      before December 15, 2006). Closing is contingent upon obtaining financing to
      consummate this transaction, and title and environmental due diligence. Rancher
      Energy engaged ERM to conduct an environmental review in conjunction with the
      acquisition of the Cole Creek field which revealed no material environmental
      problems.





The
      Cole
      Creek South Field is located in Converse County, approximately 6 miles northwest
      of the town of Glenrock, Wyoming, in the east-central region of the state.
      The
      field was discovered in 1948 by the Phillips Petroleum Company, and according
      to
      the Wyoming Oil & Gas Conservation Commission, has approximately 54 million
      barrels of original oil in place ("OOIP"). Current gross production from the
      Cole Creek South Field is approximately 80 barrels of oil per day ("BOPD")
      of
      primarily 35 degree sweet crude.





Also
      in
      October 2006 Rancher Energy entered into an agreement to acquire a 93.73%
      working interest (74.08% net revenue interest) in the South Glenrock B Field
      consisting of approximately 7,070 acres in Wyoming's Powder River Basin. Rancher
      Energy paid a deposit of 7.5% of the purchase price of $37,000,000; the
      remainder of the purchase price is required to be paid at closing (anticipated
      on or before December 15, 2006). Closing is contingent upon obtaining financing
      to consummate this transaction, and title and environmental due diligence.
      Rancher Energy engaged ERM to conduct an environmental review in conjunction
      with the acquisition of the South Glenrock B field which revealed no material
      environmental problems.





The
      South
      Glenrock B Field is located in Converse County, immediately outside the town
      of
      Glenrock, Wyoming, in the east-central region of the state. The field was
      discovered in 1950 by Conoco, and has approximately 200 million barrels of
      OOIP
      that can be imputed from publicly available information. Bisected by Interstate
      25, the field produces from the Dakota and muddy sandstone reservoirs that
      are
      draped over a structural nose with 1600 feet of relief. Production is maintained
      by secondary recovery efforts that were initiated in 1961.





11


Current
      gross production from the South Glenrock B Field is approximately 210 BOPD
      of
      primarily 35 degree sweet crude.





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 revenue, 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.





Operations
      Update





Rancher
      Energy is an independent energy company which explores for oil & gas in
      North America and plans to develop, produce, and market such oil & gas.
      Prior to April, 2006, Rancher Energy, then known as Metalex Resources, Inc.
      (“Metalex”), was engaged in the exploration 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 to Rancher
      Energy Corp. Since April 2006 Rancher Energy has engaged a new chief executive
      officer and is actively pursuing oil & gas prospects in the Rocky Mountain
      region. We plan to generate revenue by the production of oil & gas from
      property which we have under contract, independently or with other
      parties.





During
      June 2006 we entered into agreements to acquire interests in two prospects—(i)
      10,104 acres in or adjacent to the Burke Ranch field in the Powder River Basin
      in central Wyoming, and (ii) a prospect of approximately 7,600 gross acres
      (4,180 net acres) in the Broadview Dome Prospect in the Crazy Mountain Basin
      in
      central Montana. We have evaluated the Burke Ranch prospect and have concluded
      that it does not warrant further development expenditure. Accordingly, we
      recorded a $395,785 charge to fully impair our investment in this
      prospect.





In
      August
      2006 Rancher Energy signed a letter of intent for the purchase of approximately
      1,200 acres in the East Teapot Dome Field. Rancher Energy is awaiting title
      due
      diligence to move forward on the acquisition; title work is expected to be
      completed by end of November 2006. In August 2006 Rancher Energy signed a
      purchase and sale agreement for approximately 8,500 acres in the Big Muddy
      Field, paying a $2,500,000 deposit with the balance of $22,500,000 of the
      purchase price due on closing. Both properties are in the Powder River Basin
      in
      central Wyoming.





In
      October 2006 Rancher Energy entered into an agreement to acquire a 100% working
      interest (79.31% net revenue interest) in the Cole Creek South Field consisting
      of approximately 2,080 acres in Wyoming's Powder River Basin. Rancher Energy
      paid a deposit of 7.5% of the purchase price of $11,000,000, and the remainder
      of the purchase price is required to be paid at closing (anticipated on or
      before December 15, 2006). Closing is contingent upon obtaining financing to
      consummate this transaction, and title and environmental due diligence. Rancher
      Energy engaged ERM to conduct an environmental review in conjunction with the
      acquisition of the Cole Creek field which revealed no material environmental
      problems.





12


The
      Cole
      Creek South Field is located in Converse County, approximately 6 miles northwest
      of the town of Glenrock, Wyoming, in the east-central region of the state.
      The
      field was discovered in 1948 by the Phillips Petroleum Company, and according
      to
      the Wyoming Oil & Gas Conservation Commission, has approximately 54 million
      barrels of OOIP. Current gross production from the Cole Creek South Field is
      approximately 80 BOPD of primarily 35 degree sweet crude.





Also
      in
      October 2006, Rancher Energy entered into an agreement to acquire a 93.73%
      working interest (74.08% net revenue interest) in the South Glenrock B Field
      consisting of approximately 7,070 acres in Wyoming's Powder River Basin. Rancher
      Energy paid a deposit of 7.5% of the purchase price of $37,000,000; the
      remainder of the purchase price is required to be paid at closing (anticipated
      on or before December 15, 2006). Closing is contingent upon obtaining financing
      to consummate this transaction, and title and environmental due diligence.
      Rancher Energy engaged ERM to conduct an environmental review in conjunction
      with the acquisition of the South Glenrock B field which revealed no material
      environmental problems.





The
      South
      Glenrock B Field is located in Converse County, immediately outside the town
      of
      Glenrock, Wyoming, in the east-central region of the state. The field was
      discovered in 1950 by Conoco, and has approximately 200 million barrels of
      OOIP
      that can be imputed from publicly available information. Bisected by Interstate
      25, the field produces from the Dakota and muddy sandstone reservoirs that
      are
      draped over a structural nose with 1600 feet of relief. Production is maintained
      by secondary recovery efforts that were initiated in 1961.





Current
      gross production from the South Glenrock B Field is approximately 210 BOPD
      of
      primarily 35 degree sweet crude.





Property
      Reviews





Rancher
      Energy has entered into agreements with ERM to conduct environmental reviews
      of
      the East Teapot Dome Field and the Big Muddy Field, both located in the Powder
      River Basin, Wyoming. Rancher Energy entered into the agreement with ERM on
      August 15, 2006 to conduct an environmental review at the East Teapot Dome
      Field, and ERM reported on September 3, 2007 its assessment to Rancher Energy
      that there were no material environmental problems. Rancher Energy entered
      into
      the agreement with ERM on August 17, 2006 to conduct an environmental review
      at
      the Big Muddy Field, and ERM reported on October 4, 2006 its assessment to
      Rancher Energy that there were no material environmental problems.





The
      Big
      Muddy Field currently is producing approximately 30 BOPD.





Regarding
      the Company's Broadview Dome Prospect, located in the Crazy Horse Basin of
      Montana, management signed an agreement with Tesla Exploration Ltd on September
      29, 2006 to shoot approximately 4.5 square miles of 3-D seismic. The seismic
      shoot is expected to begin in late November 2006 and is estimated to take
      approximately one week to complete. Interpretation of the seismic data will
      be
      undertaken by Dow Geophysical and is expected to be completed by January 2007.





Outlook
      for the Coming Year





The
      following summarizes Rancher Energy’s goals and objectives for the next twelve
      months:





·
            Obtain
                financing for and close on the South Glenrock B , Cole Creek South,
                and
                Big Muddy field acquisitions.




13




·
            Obtain
                adequate CO2 supply and build infrastructure for the South Glenrock
                B,
                Cole Creek South, and Big Muddy
                fields.





·
            Begin
                exploration and development 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.





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





·
            Build
                up Rancher Energy’s operating
                capabilities.





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





Results
      of Operations





For
      the
      six months ended September 30, 2006, Rancher Energy had a $1,372,000 net loss,
      compared to a $32,000 net loss for the same 2005 period. We reported that
      $529,000 of the loss in the 2006 period is a non-cash item for the vesting
      of
      stock options to our chief executive officer; and $30,000 is a non-cash imputed
      finance charge recorded on issuance of debt which was converted into common
      stock. In 2006 Rancher Energy decided to engage full time in the exploration
      for
      and development of oil & gas in North America. To that end, we have hired
      five full time employees whose payroll and benefits are now $56,000 per month.
      During 2005 Rancher Energy’s sole employee was a part time bookkeeper at a cost
      of $1,000 per month.





In
      June
      2006 Rancher Energy acquired 10,104 acres in the Burke Ranch field and adjacent
      property in Natrona County, Wyoming. Rancher Energy has had engineering studies
      performed on the property and has concluded that the potential reserves in
      the
      property do not warrant further development expenditures. Accordingly, Rancher
      Energy has recorded $396,000 of expense to fully impair the
      property.





Rancher
      Energy incurred consulting fees of $82,000 for the 2006 period which were for
      public relations and other consultants which have been engaged to assist Rancher
      Energy in relations with its shareholders and in complying with the disclosure
      requirements of the SEC. In the period, Rancher Energy also incurred (i) $54,000
      for contract accountants and the auditing; (ii) a $10,000 recruiting retainer
      in
      the search for a CFO; and (iii) $11,000 in fees for stock and stock option
      evaluations from various firms.





For
      the
      quarter ended September 30, 2006, Rancher Energy had a $768,000 net loss,
      compared to an $11,000 net loss for the same 2005 quarter. Each of the above
      explanations for the six month periods are comparable for the quarters, except
      that the stock option expense for the 2006 quarter was $106,000, and no finance
      charge was imputed in the quarter.





Liquidity
      & Capital Resources





At
      September 30, 2006 Rancher Energy had working capital of $1,177,000. In a
      private placement Rancher Energy has sold between June 30 and October 2006
      18,133,500 Units at a price of $0.50 per share with gross proceeds of
      $9,066,750. 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.





In
      August
      2006 Rancher Energy paid $2,500,000 as a deposit for its acquisition of the
      Big
      Muddy Field. As of September 30, 2006, Rancher Energy has committed $500,000
      in
      assignment acquisition fees, $250,000 for the Burke Ranch Field and
      $250 **,** 000
      for
      the Broadview Dome prospect. Rancher Energy estimates the initial exploration
      phase cost of $287,000 at the Broadview Dome prospect to be incurred over the
      next six months.




14




Rancher
      Energy estimates that its ongoing general and administrative expense will be
      approximately $155,000 per month. Rancher Energy has property contracts with
      payable balances totaling $66,900,000. Additional funds will be necessary for
      CO2 supply, infrastructure development, and operations on these properties
      and
      for a development program for the Broadview Dome prospect if Rancher Energy’s
      exploration program is successful. Such
      additional financing may be in the form of debt or equity or a combination
      of
      both. Historically, Rancher Energy’s primary source of liquidity has been cash
      provided by equity offerings, and debt convertible into equity from its capital
      providers. If its exploration and acquisition programs are successful Rancher
      Energy will be required to obtain additional financing which may be debt or
      equity or a combination of both.





Cash
      Flow
& Capital Expenditures





In
      the
      six months ended September 2006, Rancher Energy spent $323,000 in its operating
      activity as Rancher Energy builds up its Denver staff. This amount compares
      to
      $34,000 used in operating activity in the same 2005 period.





In
      the
      six months ended September 2006 Rancher Energy spent $2,838,000 on property
      and
      equipment acquisitions. Rancher Energy made no acquisitions in the same 2005
      period.





Commitments





Rancher
      Energy has property purchase commitments of $34,225,000 on the South Glenrock
      B
      Field prospect, $10,175,000 on the Cole Creek South Field prospect and
      $22,500,000 on the Big Muddy Field prospect, all subject to obtaining financing,
      and title and environmental due diligence.





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. We currently do not trade in petroleum, natural gas, or other
      commodities.





Item
      4.  Controls
      & Procedures




Disclosure
      Controls & Procedures.




Rancher
      Energy’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
      Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of
      September 30, 2006, Rancher Energy performed an evaluation under the supervision
      and with the participation of our management, including the Chief Executive
      Officer and Chief Financial Officer, of the effectiveness of our design and
      operation of our disclosure controls and procedures pursuant to Rule 13a-15
      under the Exchange Act as of September 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
      September 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.


15


Part
      II.
      Other Information





Item
      1.
      Legal Proceedings





None.





Item
      1.A  Risk
      Factors





Our
      business involves a high degree of risk. Investing in our securities involves
      risk, including the risk that you may receive little or no return on your
      investment or even that you may lose part or all of your investment. Therefore,
      before investing in any of our securities, you should carefully consider each
      of
      the following risk factors and all of the other information provided in this
      report. The risks described below are those we currently believe may materially
      affect us. Additional risks not currently known to us or that we consider
      immaterial also may affect adversely our Company.




**Risks
      related to our industry, business and strategy**




***The
      acquisitions of the three Powder River Basin properties may not be
      consu*** ***mmated**and we may not be able to develop the properties as we anticipate.***




The
      acquisition of each of the three Powder River Basin properties is subject to
      customary closing conditions and other uncertainties, including our ability
      to
      obtain sufficient funds to finance the acquisitions. The transactions may not
      ultimately be consummated. In addition, our plans to develop the properties
      are
      dependent on obtaining CO2 and constructing a CO2 pipeline. We are in
      negotiations with a potential seller with respect to the acquisition of CO2,
      but
      have not yet entered into a definitive agreement. If a definitive agreement
      is
      reached, we must arrange for the construction of a CO2 pipeline on acceptable
      terms and build related infrastructure. The achievement of these objectives
      is
      subject to numerous uncertainties, and we may not be able to achieve these
      objectives on the schedule we anticipate or at all.




***If
      we are unable to obtain additional funding our business plans will not be
      achie*** **vable.**




Our
      current cash position will not be sufficient to fund the acquisition of any
      of
      the three major properties that we have agreed to acquire, the construction
      of
      the CO2 pipeline, or the development of these properties, if acquired. As a
      result, the Company will require substantial additional funding. We will likely
      pursue various financing alternatives including the issuance of common stock,
      warrants or other equity securities, convertible debt and/or other debt
      securities. Such additional equity or convertible debt financing may be dilutive
      to existing stockholders, and debt financing may contain terms which restrict
      our future business activities and expenditures. We do not know if additional
      financing will be available at all, when needed or on acceptable terms.
      Insufficient funds will prevent us from implementing our business strategy.




***We
      have a limited operating history in the oil business, and we cannot predict
      our
      future operations with any certainty.***




We
      were
      organized in 2004 to explore a gold prospect and changed our business focus
      to
      oil development using CO2 injection technology in 2006. We currently have no
      oil
      producing properties and no reserves, and we have no experience in oil
      development or production. Our future financial results depend primarily on
      (1)
      our ability to finance and complete our three major property acquisitions in
      the
      Powder River Basin and the infrastructure required to develop the properties;
      (2) our ability to secure an adequate supply of CO2; (3) the success of our
      CO2
      injection program; and (4) the market price for oil. We cannot predict that
      our
      future operations will be profitable. In addition, our operating results may
      vary significantly during any financial period.




***Oil
      prices are volatile and a decline in oil prices can significantly affect our
      financial results and impede our growth.***




Our
      revenues, profitability and liquidity are substantially dependent upon prices
      for oil, which can be extremely volatile and even relatively modest drops in
      prices can significantly affect our financial results and impede our growth.
      Prices for oil may fluctuate widely in response to relatively minor changes
      in
      the supply of and demand for oil, market uncertainty and a wide variety of
      additional factors that are beyond our control, such as the domestic and foreign
      supply of oil; the price of foreign imports; the ability of members of the
      Organization of Petroleum Exporting Countries to agree to and maintain oil
      price
      and production controls; technological advances affecting energy consumption;
      domestic and foreign governmental regulations; and the variations between
      product prices at sales points and applicable index prices.




16


**We
      have incurred losses from operations in the past and expect to do so in the
      f****uture.**




We
      incurred net losses of $27,154 and $124,453 for the fiscal years ended March
      31,
      2005 and 2006, respectively. Our acquisition and development of prospects will
      require substantial additional capital expenditures in the future. The
      uncertainty and factors described throughout this section may impede our ability
      to economically acquire, develop, and exploit oil reserves. As a result, we
      may
      not be able to achieve or sustain profitability or positive cash flows from
      operating activities in the future.




**Our
      auditors have issued a going concern opinion; hence there is substantial
      unce****rtainty
      that we will continue operations.**




Our
      auditors have issued a going concern opinion. This means that there is
      substantial doubt that we can continue as an ongoing business for the next
      twelve months. The financial statements do not include any adjustments that
      might result from the uncertainty about our ability to continue in business.
      As
      such we may have to cease operations and our shares could become worthless.




**We
      could be adversely impacted by changes in****the oil market.**




The
      marketability of our oil production will depend in part upon the availability,
      proximity and capacity of pipelines, surface and processing facilities. Federal
      and state regulation of oil production and transportation, general economic
      conditions, changes in supply and changes in demand all could adversely affect
      our ability to produce and market oil. If market factors were to change
      dramatically, the financial impact could be substantial because we would incur
      expenses without receiving revenues from the sale of production. The
      availability of markets is beyond our control.




**We
      may be unable to develop r****eserves.**




Our
      ability to develop future revenues will depend on whether we can successfully
      implement our planned CO2 injection program. We have no experience using the
      CO2
      technology, the properties we plan to acquire have not had CO2 injected in
      the
      past, and recovery factors cannot be estimated with precision. Our planned
      projects may not result in significant reserves or in the production levels
      we
      anticipate .




***We
      are dependent on our management team
      and the loss of any of these individuals would harm our
      business.***




Our
      success is dependent, in large part, on the
      continued services of John Works, our Chief Executive Officer, John Dobitz,
      our
      Senior Vice President, Engineering, and Andrew Casazza, our Chief Operating
      Officer.  There is no guarantee that any of the members of our management
      team will remain employed by us. While we have employment agreements with them,
      their continued service cannot be assured. The loss of our senior executives
      could harm our business.




***Oil
      operations are inherently risky.***




The
      nature of the oil business involves a variety of risks, including the risks
      of
      operating hazards such as fires, explosions, cratering, blow-outs, encountering
      formations with abnormal pressure, pipeline ruptures and spill and releases
      of
      toxic gas and other environmental hazards and pollution. The occurrence of
      any
      of these risks could result in losses. The occurrence of any one of these
      significant events, if it is not fully insured against, could have a material
      adverse effect on our financial position and results of operations.




**We
      are subject to extensive go****vernment
      regulations.**




Our
      business is affected by numerous federal, state and local laws and regulations,
      including energy, environmental, conservation, tax and other laws and
      regulations relating to the oil industry. These include, but are not limited
      to:




·
            the
                prevention of waste,


·
            the
                discharge of materials into the environment,


·
            the
                conservation of oil,


·
            pollution,


·
            permits
                for drilling operations,


·
            drilling
                bonds,


·
            reports
                concerning operations, the spacing of wells, and the unitization
                and
                pooling of properties.




17


Failure
      to comply with any laws and regulations may result in the assessment of
      administrative, civil and criminal penalties, the imposition of injunctive
      relief or both. Moreover, changes in any of these laws and regulations could
      have a material adverse effect on our business. In view of the many
      uncertainties with respect to current and future laws and regulations, including
      their applicability to us, we cannot predict the overall effect of such laws
      and
      regulations on our future operations.




***Government
      regulation and environmental risks could increase our
      costs.***




Many
      jurisdictions have at various times imposed limitations on the production of
      oil
      by restricting the rate of flow for oil wells below their actual capacity to
      produce. Our operations will be subject to stringent laws and regulations
      relating to environmental problems. These laws and regulations may require
      the acquisition of a permit before drilling commences, restrict the types,
      quantities and concentration of materials that can be released into the
      environment in connection with drilling and production activities, limit or
      prohibit drilling activities in protected areas, and impose substantial
      liabilities for pollution resulting from our operations. Changes in
      environmental laws and regulations occur frequently, and changes could result
      in
      substantially increased costs. Because
      current regulations covering our operations are subject to change at any time,
      we may incur significant costs for compliance in the future.




**The
      properties we plan to acquire are located in the Powder River Basin in the
      Rocky
      Mountains, ma****king
      us vulnerable to risks associated with operating in one major geographic
      area.**




Our
      proposed activities are focused on the Powder River Basin in the Rocky Mountain
      region of the United States, which means our properties are geographically
      concentrated in that area. As a result, we may in the future be
      disproportionately exposed to the impact of delays or interruptions of
      production from these wells caused by significant governmental regulation,
      transportation capacity constraints, curtailment of production, or interruption
      of transportation of oil produced from the wells in this basin.




***Competition
      in the oil & gas industry is intense, which may adversely affect our ability
      to succeed.***




The
      oil
& gas industry is intensely competitive, and we compete with companies that
      are significantly larger and have greater resources. Many of these companies
      not
      only explore for and produce oil, but also carry on refining operations and
      market petroleum and other products on a regional, national, or worldwide basis.
      These companies may be able to pay more for oil properties and prospects or
      define, evaluate, bid for, and purchase a greater number of properties and
      prospects than our financial or human resources permit. Our larger competitors
      may be able to absorb the burden of present and future federal, state, local,
      and other laws and regulations more easily than we can, which would adversely
      affect our competitive position. Our ability to acquire additional properties
      and to discover reserves in the future will be dependent upon our ability to
      evaluate and select suitable properties and to consummate transactions in a
      highly competitive environment.




**Oil
      prices may be impacted a****dversely
      by new taxes.**




The
      federal, state and local governments in which we operate impose taxes on the
      oil
      products we plan to sell. In the past, there has been a significant amount
      of
      discussion by legislators and presidential administrations concerning a variety
      of energy tax proposals. In addition, many states have raised state taxes on
      energy sources and additional increases may occur. We cannot predict whether
      any
      of these measures would have an adverse impact on oil prices.




**Shortages
      of equipment, supplies and personnel could delay or otherwise adversely affect
      our cost of oper****ations
      or our ability to operate according to our business
      plans.**




We
      may
      experience shortages of field equipment and qualified personnel, which may
      cause
      delays in our ability to continue to drill, complete, test, and connect wells
      to
      processing facilities. These costs have sharply increased in various areas.
      The
      demand for and wage rates of qualified crews generally rise in response to
      the
      increased number of active rigs in service and could increase sharply in the
      event of a shortage. Shortages of field equipment or qualified personnel could
      delay, restrict or curtail our exploration and development operations, which
      may
      materially adversely affect our business, financial condition and results of
      operations.




***Shortages
      of transportation services and processing facilities may result in our receiving
      a discount in the price we receive for oil sales or may adversely affect our
      ability to sell our oil.***




We
      may
      experience limited access to transportation lines, trucks or rail cars in order
      to transport our oil to processing facilities. We may also experience limited
      access to processing facilities. If either or both of these situations arise,
      we
      may not be able to sell our oil at prevailing market prices or we may be
      completely unable to sell our oil, which would may materially adversely affect
      our business, financial condition and results of operations.




18


**Risks
      Related to our Common Stock**




**Our
      common stock is illiquid, so investors may have difficulty selling any
      signif****icant
      number of shares of our stock.**




Our
      common stock is traded on the Over-the-Counter Bulletin Board (“OTC-BB”) The
      average daily trading volume of our common stock on the OTC-BB was approximately
      211,000 shares per day over the three month period prior to the date of this
      report. If limited trading in our stock continues, the price of our common
      stock
      may be negatively affected and it may be difficult for investors to sell their
      shares in the public market at any given time.





Our
      capital raising activities will likely involve the issuance of common stock
      and
      securities exercisable for or convertible into common stock, which would dilute
      the ownership of our existing stockholders and could result in a decline in
      the
      trading price of our common stock. We will need to obtain substantial additional
      financing, in large part, through sales of our securities, including common
      stock, warrants and convertible debt securities, in order to fund our planned
      property acquisitions and development program. The issuance of such securities
      will result in the dilution of existing investors. Furthermore, we may enter
      into financing transactions at prices that represent a substantial discount
      to
      the market prices of our common stock. These transactions may have a negative
      impact on the trading price of our common stock.




**Sales
      of a substantial number of shares in the future may result in significant
      downward pressure on the price of our common stock and could affect the ability
      of our stockholders to realize the current tra****ding
      price of our common stock.**




If
      our
      stockholders and new investors sell significant amounts of our stock, our stock
      price could drop. Even a perception by the market that the stockholders will
      sell in large amounts could place significant downward pressure on our stock
      price.




***Our
      stock price and trading volume may be volatile, which could result in losses
      for
      our stockholders.***




The
      equity trading markets may experience periods of volatility, which could result
      in highly variable and unpredictable pricing of equity securities. The market
      of
      our common stock could change in ways that may or may not be related to our
      business, our industry or our operating performance and financial condition.
      In
      addition, the trading volume in our common stock may fluctuate and cause
      significant price variations to occur. Some of the factors that could negatively
      affect our share price or result in fluctuations in the price or trading volume
      of our common stock include:




·
            Actual
                or anticipated quarterly variations in our operating
                results;


·
            Changes
                in expectations as to our future financial performance or changes
                in
                financial estimates, if any;


·
            Announcements
                relating to our business or the business of our
                competitors;


·
            Conditions
                generally affecting the oil and natural gas
                industry;


·
            The
                success of our operating strategy;
                and


·
            The
                operating and stock performance of other comparable
                companies.





Many
      of
      these factors are beyond our control, and we cannot predict their potential
      effects on the price of our common stock. If the market price of our common
      stock declines significantly, you may be unable to resell your shares of common
      stock at or above the price you acquired those shares. We cannot assure you
      that
      the market price of our common stock will not fluctuate or decline
      significantly.




**There
      are risks associated with fo****rward-looking
      statements made by us and actual results may differ.**




Some
      of the information in this report contains forward-looking statements that
      involve substantial risks and uncertainties. These statements can be identified
      by the use of forward-looking words such as “may”, “will”, “expect”,
“anticipate”, “believe”, “estimate”, and “continue”, or similar words.
      Statements that contain these words should be read carefully because
      they:




·
            discuss
                our future expectations,


·
            contain
                projections of our future results of operations or of our financial
                condition, and


·
            state
                other “forward-looking”
information.





19


We
      believe it is important to communicate our expectations. However, there may
      be
      events in the future that we are not able to accurately predict and/or over
      which we have no control. The risk factors listed in this section, other risk
      factors about which we may not be aware, as well as any cautionary language
      in
      this report, provide examples of risks, uncertainties, and events that may
      cause
      our actual results to differ materially from the expectations we describe in
      our
      forward-looking statements. The occurrence of the events described in these
      risk
      factors could have an adverse effect on our business, results of operations,
      and
      financial condition.




***NASD
      sales practice requirements limit a stockholders' ability to buy and sell our
      stock.***




The
      National Association of Securities Dealers, Inc. (“NASD”) has adopted rules that
      require that in recommending an investment to a customer, a broker-dealer must
      have reasonable grounds for believing that the investment is suitable for that
      customer. Prior to recommending speculative low priced securities to their
      non-institutional customers, broker-dealers must make reasonable efforts to
      obtain information about the customer’s financial status, tax status, investment
      objectives, and other information. Under interpretations of these rules, the
      NASD believes that there is a high probability that speculative low priced
      securities will not be suitable for at least some customers. The NASD
      requirements make it more difficult for broker-dealers to recommend that their
      customers buy our common stock, which has the effect of reducing the level
      of
      trading activity and liquidity of our common stock. Further, many brokers charge
      higher transactional fees for penny stock transactions. As a result, fewer
      broker-dealers are willing to make a market in our common stock, reducing a
      stockholders' ability to resell shares of our common stock.




**We
      do not expect to pay dividends in the foreseeable future. As a
      r****esult,
      holders of our common stock must rely on stock appreciation for any return
      on
      their investment.**




We
      do not
      anticipate paying cash dividends on our common stock in the foreseeable future.
      Any payment of cash dividends will also depend on our financial condition,
      results of operations, capital requirements, and other factors and will be
      at
      the discretion of our board of directors. Accordingly, holders of our common
      stock will have to rely on capital appreciation, if any, to earn a return on
      their investment in our common stock. Furthermore, we may in the future become
      subject to contractual restrictions on, or prohibitions against, the payment
      of
      dividends, by our finance providers or otherwise.





Item
      2.
      Unregistered Sales of Equity Securities and Use of Proceeds





Each
      sale
      of unregistered securities made by Rancher Energy during the quarter ended
      September 30, 2006 and through the date of this Quarterly Report on Form 10-Q
      was reported on Form 8-K. Rancher Energy made no repurchases of its common
      stock
      during the quarter ended September 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.





20





Item
      6.
      Exhibits





Exhibit
                No.
            Description3.1
            Articles
                of Incorporation of Rancher Energy (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 and John
                Works.(2)10.2
            Broadview
                Dome Prospect Exploration & Development Agreement dated June 15, 2006
                between Big Snowy Resources and Rancher Energy.(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 and Venture
                Capital First LLC.(3)10.4b
            $150K
                Loan Agreement dated June 1, 2006 between Rancher Energy and Enerex
                Capital Corp.(2)10.5
            Work
                Study Contract with NITEC LLC dated June 7, 2006 between Rancher
                Energy
                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 and
                Wyoming Mineral Exploration, LLC relating to the Big Muddy field.(5)10.10
            Purchase
                & Sale Agreement dated October 11, 2006 between Rancher Energy and
                Nielsen & Associates relating to the South Glenrock B field and the
                Cole Creek South field.(6)10.11
            Employment
                Agreement dated October 2, 2006 between Rancher Energy and John Dobitz.
                (6)10.12
            Rancher
                Energy 2006 Stock Incentive Plan approved by the Board dated October
                2,
                2006. (6)10.13
            Lease
                agreement dated November 3, 2006 between Ranch Energy and Denver
                Place
                Associates Limited Partnership. (7)10.14
            Employment
                Agreement dated October 23, 2006 between Rancher Energy and Andrew
                Casazza. (8)10.15
            Finder’s
                Fee Agreement dated August 25, 2006 between Rancher Energy and Falcon
                Capital. (8)14.1
            Code
                of Ethics & Business
                Conduct.(4)




21




31
            Certification
                by Chief Executive Officer & Chief Financial Officer pursuant to
                Sarbanes-Oxley Section 302.(9)32
            Certification
                by Chief Executive Officer & Chief Financial Officer pursuant to 18
                U.S. C. Section 1350.(9)


__________________




(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 year ended March 31,
                2006 filed on June 30, 2006 and incorporated herein by
                reference.(3)
            Included
                as an exhibit to Form 8-K filed by the registrant on June 9, 2006
                and
                incorporated herein by reference.(4)
            Included
                as an exhibit to Form 10-KSB for the year ended March 31, 2005 filed
                by the registrant on July 8, 2005 and incorporated herein by
                reference.(5)
            Included
                as an exhibit to the registrant’s Form 10-Q/A for the quarter
                ended June 30, 2006 filed on August 28, 2006 and incorporated herein
                by reference.(6)
            Included
                as an exhibit to a Form 8-K filed by the registrant on October 6,
                2006 and
                incorporated herein by reference.(7)
            Included
                as an exhibit to Form 8-K filed by the registrant on November 9,
                2006 and
                incorporated herein by reference.(8)
            Included
                as an exhibit to Form 8-K filed by the registrant on November 14,
                2006 and
                incorporated herein by reference.(9)
            Filed
                herewith.





22


Rancher
      Energy Corp.





Signatures





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





Dated:  
                November 14, 2006
            RANCHER
                ENERGY CORP.By:
            /s/
              John
              WorksJohn
                Works, President, Principal Executive Officer,Secretary,
                Treasurer, Principal Financial Officer,and
                Principal Accounting Officer








23