**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM 10-K**




**[X]**  **ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE**  **ACT
      OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2006**







**[
      ]   TRANSITION REPORT PURSUANT TO 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 incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)**1050
                17****th****Street, Suite 1700****Denver,
                Colorado**
            
            **80265**(Address
                of principal executive offices)
            
            (Zip
                Code)




Registrant’s
      telephone number, including area code: **(303)
      629-1122**





Securities
      registered pursuant to Section 12(b) of the Act: **None**





Securities
      registered pursuant to Section 12(g) of the Act:




**Title
                of each class**Common
                Stock, par value $0.00001




Indicate
      by check mark if the registrant is a well-known seasoned issuer as defined
      in
      Rule 405 of the Securities Act. Yes  [
      ]   No **[** **X]**





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act. Yes  [
      ]   No **[** **X]**





Check
      whether the registrant (1)  filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act during the preceding 12 months
      (or for such shorter periods 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 if disclosure of delinquent filers in response to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III or this Form 10-K or any
      amendment to this Form 10-K. **[X]**


Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of
      the Act).


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 Act). Yes [ ] No
**[X]**





The
      aggregate market value of the common stock held by non-affiliates of the
      registrant, as of June 15, 2006, was approximately **$** 37,380,000
      based on the closing bid of $1.335 for the registrant’s common stock as reported
      by the OTC Bulletin Board. Shares of common stock held by each director, each
      officer named in Item 11, and each person who owns 10% or more of the
      outstanding common stock have been excluded from this calculation in that such
      persons may be deemed to be affiliates.





As
      of
      June 15, 2006 the registrant had 29,500,000 shares of common stock
      outstanding.





DOCUMENTS
      INCORPORATED BY REFERENCE—NONE


Transitional
      Disclosure Format. Yes  [
      ]   No   **[X** **]**





**FORM
      10-K**


**FOR
      THE FISCAL YEAR ENDED MARCH 31, 2006**





**INDEX**








Page**PART
                I**Item
                1
            Business
            1Item
                1A
            Risk
                Factors
            10Item
                1B
            Unresolved
                Staff Comments
            13Item
                2
            Properties
            14Item
                3
            Legal
                Proceedings
            14Item
                4
            Submission
                of Matters to a Vote of Security
                Holders
            14**PART
                II**Item
                5
            Market
                for Registrant’s Common Equity, Related Stockholder
                Matters and Issuer Purchases of Equity Securities
            15Item
                6
            Selected
                Financial Data
            17Item
                7
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            18Item
                7A
            Quantitative
                and Qualitative Disclosure About Market
                RiskItem
                8
            Financial
                Statements and Supplementary
                Data
            26Item
                9
            Changes
                in and Disagreements with Accountants on Accounting
                and Financial Disclosure
            27Item
                9A
            Controls
                and Procedures
            27Item
                9B
            Other
                Information
            27**PART
                III**Item
                10
            Directors
                and Executive Officers of the
                Registrant
            28Item
                11
            Executive
                Compensation
            30Item
                12
            Security
                Ownership of Certain Beneficial Owners and
                Management and Related Stockholder Matters
            32Item
                13
            Certain
                Relationships and Related
                Transactions
            33Item
                14
            Principal
                Accountant Fees and Services
            34Item
                15
            Exhibits
                and Financial Statement
                Schedules
            35**SIGNATURES**









i


**Forward-Looking
      Statements**





We
      have
      included in this report, statements which are intended as “forward-looking
      statements” under the Private Securities Litigation Reform Act of 1995. These
      include statements that are not simply a statement of historical fact but
      describe what we “believe”, “anticipate”, or “expect” will occur. We caution you
      not to place undue reliance on the forward-looking statements made in this
      report. Although we believe these statements are reasonable, there are many
      factors, which may affect our expectation of our operations. These factors
      include, among other things, the following:





·
            general
                economic conditions;





·
            the
                market price of, and demand for, oil and
                gas;





·
            our
                ability to service future
                indebtedness;





·
            our
                success in completing exploration and development
                activities;





·
            expansion
                and other development trends of the oil and gas
                industry;





·
            our
                accumulated deficit;





·
            acquisitions
                and other business opportunities that may be presented to and pursued
                by
                us;





·
            our
                ability to integrate our acquisitions into our company structure;
                and





·
            changes
                in laws, regulations and taxation.








ii


**PART
      I**





**Item
      1.****BUSINESS.**





**Background.**





Rancher
      Energy Corp. (the “Company”, “Rancher Energy”, “we” or “us”) was formed on
      February 4, 2004 and is incorporated in the State of Nevada. We are an
      independent energy company formed for the purpose of engaging in the
      development, production, and marketing of oil and gas in North America.





The
      Company’s current operations are focused in two basins in the Rocky Mountain
      Region of the United States--the Powder River Basin in central Wyoming and
      the Crazy Mountain Basin in central Montana. Led by an experienced management
      team, Rancher Energy is working to enhance shareholder value by identifying
      and
      developing diversified oil and gas assets across North America, particularly
      in
      the Rocky Mountains.





Rancher
      Energy's prospects in Wyoming and Montana are strategic acquisitions that will
      be developed through the application of scientific expertise, and the latest
      technology and drilling techniques, to enhance recovery and achieve the most
      effective results possible. Rancher Energy intends to specialize in using modern
      exploration and recovery techniques on older, historically productive fields
      with proven in-place oil and gas reserves. Higher oil and gas prices and
      advances in technology such as 3-D seismic data, directional drilling, and
      CO2
      injection make these assets an attractive source of potentially recoverable
      oil
      and gas reserves.





From
      its
      inception until June 2006, the Company, then known as Metalex Resources, Inc.
      “(Metalex”), was primarily engaged in the exploration for gold mineral deposits
      and reserves in British Columbia, Canada. Metalex found no commercially
      exploitable deposits or reserves of gold. On April 19, 2006, Metalex announced
      that it had changed its name to Rancher Energy and its new business direction
      as
      an oil and gas exploration and production company focusing on geologic business
      in the Rocky Mountains.





**Recent
      Events.**




***The
      Burke Ranch Field.***





On
      June
      21, 2006, the Company acquired t he
      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 25 miles north of Casper, Wyoming, in the central region of the
      state. Rancher Energy holds a 89.80% working interest (73.68% net revenue
      interest) before payout, which reverts to a 49.90% working interest (36.94%
      net
      revenue interest) after payout. The prospect was acquired through an assignment
      of an agreement with Hot Springs Resources, Ltd. (“HSR”) from an unaffiliated
      party, for $250,000 cash payable within 90 days from June 21, 2006 and a 4%
      overriding royalty interest on production attributable to the Company’s interest
      to the unaffiliated third party.





In
      addition, within one calendar year at our sole cost, risk and expense we are
      obligated to conduct or cause to be conducted a 3-D seismic survey over the
      property and we must pay for all processing, analysis, and interpretation of
      the
      3-D seismic data acquired as a result of the seismic survey. We expect the
      total
      cost of the seismic program to be approximately $320,000.





We
      must
      also select an engineering firm to perform certain engineering studies on the
      property and prepare a development plan. The scope and substance of the studies
      and plan shall be at our direction, provided that we must confer with HSR prior
      to providing or revising any instructions to the engineering firm. We are solely
      responsible for the costs incurred in the preparation of the studies and plan.
      See Other Recent Events for the selection of NITEC LLC (“NITEC”) to conduct this
      work.





HSR
      must
      cause to be conducted operations and purchases of equipment necessary to install
      a submersible pump, cable and if needed a motor in Well 9 on the property and,
      complete any tubing repairs that may be necessary in respect of Well 9-17.
      We
      are solely responsible for all costs and expenses relating to such operations,
      provided that if the costs and expenses respecting Well 9 or Well 9-17 exceed
      $50,000 then HSR is solely responsible for all costs


1
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and
      expenses exceeding $50,000, provided further however, that if, due to wellbore
      integrity problems, equipment failures or sticking of equipment or tools in
      the
      wellbore or other problems beyond the anticipation or control of the parties,
      the costs of operations respecting either or both Well 9 and Well 9-17 are
      anticipated to exceed $75,000 in the aggregate, then the parties shall determine
      whether they wish to proceed and if so they shall jointly (each as to a 50%
      share) pay for any costs in excess of $75,000. If HSR fails to complete the
      operations described above within one year, we shall have no further obligations
      with respect to these operations.





If,
      after
      the acquisition, processing, analysis and interpretation of the seismic data
      described above, we and HSR mutually agree, in good faith, based upon such
      seismic data and analysis thereof, that a well should be drilled to test the
      Tensleep Formation (the “Tensleep Well”) on the property, we must at our sole
      cost drill and log (or cause the drilling and logging of) such a well of such
      a
      depth to test the entire Tensleep Formation, and, if, after logging, a
      completion of such a well for production is justified, as determined mutually
      by
      the parties, then HSR must pay 50% of the costs of such completion and we pay
      the remaining 50%. If such well thereafter produces petroleum substances, we
      will share in the production from such well on the basis of the fractions
      described below, until the costs of such well and its completion have been
      recovered out of the production of petroleum substances from such
      well.





Prior
      to
      Cost Recoupment Fractions:




HSR:
            Amount of completion costs paid by HSR
              divided byTotal of all drilling, logging and
              competition costs paid by HSR and RancherRancher:
            Amount
              of drilling, logging and completion costs paid by Rancher divided
              byTotal
              of all drilling, logging and completion costs paid by HSR and
              Rancher




Upon
      recoupment of such drilling, logging and completion costs, we will share in
      the
      production from such well on an equal, 50-50 basis.





Finally,
      if production of petroleum substances from the property exceeds 20 barrels
      of
      oil per day (6mcf of natural gas shall equal 1 barrel of oil) for a continuous
      period of no less than 30 days, then we must each month thereafter for a period
      of 12 months pay to HSR out of our net share of the proceeds from the sale
      of
      petroleum substances produced from the property a payment of $5,000 (for an
      aggregate payment obligation of $60,000).





The
      Burke
      Ranch Field was discovered in 1953 by the Houston Oil Company, and has continued
      to be developed since its discovery. According to the Wyoming Oil and Gas
      Conservation Commission, approximately 6.5 million barrels of oil have been
      produced from the Burke Ranch Field as of September 2005.





A
      third
      party geological assessment by Merschat Minerals LLC dated September 2005,
      (the
“Merschat Assessment”) estimates that the Burke Ranch Field has approximately 13
      million barrels of oil still in place. The
      Burke
      Ranch Field production and development history is similar to many other fields
      in Wyoming where primary and secondary (waterflood) production removes roughly
      one-half of the original oil in place.





The
      Merschat Assessment estimates that potential remaining oil reserves in the
      Dakota Formation at the Burke Ranch Field total 6.5 million barrels of oil.
      This prospect
      holds strong tertiary (third stage) potential for extracting potential in-place
      resources. Additional reserve recovery methods recommended by the Merschat
      Assessment include carbon dioxide flooding—a process estimated to recover up to
      30% of remaining oil in place (approximately 2 million barrels of oil) in the
      Burke Ranch Field. Other more conventional recommended methods to recover the
      oil in place include infill drilling and horizontal drilling.





The
      location of the Burke Ranch Field has several built-in advantages, with basic
      infrastructure already in place—pipelines, power, roads, etc .
      Because
      the Burke Ranch Field is within an established producing unit, lease expirations
      are of little concern. Another benefit of this prospect is its moderate depth
      of
      approximately 6,500 feet to the Dakota pay zone. The Merschat Assessment also
      suggests that the Dakota Formation might hold potential reserves at deeper
      levels, and should be assessed further.


2
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          to Index*


The
      Company recently successfully bid for and has the right to acquire an additional
      8,183 acres contiguous and/or adjacent to its Burke Ranch Field. These leases,
      together with the Burke Ranch Field’s original 1,921 acres, will increase the
      total acreage of the Company’s Burke Ranch Field more than five times (5X) to
      10,104 acres (see “Other Recent Events”, below). The
      Company also recently entered
      into an agreement with NITEC to perform a reservoir engineering study on the
      Company's Burke Ranch Field in order to ascertain the field’s remaining
      recoverable oil (see “Other Recent Events”, below).





***The
      Broadview Dome Prospect.***





On
      June
      6, 2006, the Company acquired t he
      Broadview Dome Prospect, located approximately 25 miles northwest of Billings,
      Montana. This natural gas prospect involves approximately 7,600 acres. Rancher
      Energy holds a 100% working interest (80.00% net revenue interest) until payout,
      and 55.00% working interest (40.00% net revenue interest) after payout. The
      prospect was acquired through an assignment from an unaffiliated party for
      $250,000 cash payable within 90 days from June 6, 2006 and a 4% overriding
      royalty interest attributable to the Company’s interest to the unaffiliated
      third party.





Under
      a
      subsequent Exploration and Development Agreement entered into on June 15,
      2006  (the “Agreement”) with Big Snowy Resources, LP (“BSR”) the
      leaseholder of the property, we are obligated to arrange as soon as practicable
      and pay for a 3-D seismic program covering 4 square miles on the property.
      We
      estimate the total cost of the seismic program to be approximately
      $200,000.





Within
      30
      days from the 3-D seismic program completion date, we must give written notice
      to BSR of our intention to drill based on the 3-D and propose a drilling
      location (the “Test Well”). Our failure to provide a notice prior to expiration
      of the 30 day period shall be deemed an election by us to terminate the
      Agreement with no further obligations or liabilities. If we elect not to
      terminate the Agreement, we have 120 days to spud the Test Well. The Test Well
      will be drilled at our sole cost. The well must be drilled to the deepest
      horizon indicated as hydrocarbon bearing by the 3-D seismic.





Upon
      receipt by BSR of the final seismic interpretation and notice of drilling
      location, BSR will assign to us a 55.00% working interest in the spacing unit
      of
      the Test Well. Upon drilling and completion of the test well, BSR will assign
      us
      a 55.00% working interest (40.00% net revenue interest) in all lands owned
      by
      BSR in the area covered by the Agreement.





If
      the
      Test Well is commercial, we are entitled to 100% of the net revenue from the
      Test Well until payout of our costs. After payout, the revenue from the Test
      Well will be distributed in proportion to the working interest shares of BSR
      and
      us.





We
      also
      must use our commercially reasonable efforts to obtain required government
      and
      administrative regulatory approvals and other necessary consents for the
      construction and operation of a pipeline of approximately 12 miles in length,
      in
      Stillwater County, Montana (the “Pipeline”), to transport gas from the Test
      Well, and other wells producing in commercial quantities on the property in
      which we and BSR have a joint working interest (the “Joint Wells”) to a gas
      transmission line.





If
      we are
      able to secure all such required approvals and consents we are obligated within
      18 months thereafter to finance, construct, operate, and maintain the Pipeline,
      or instead of constructing the Pipeline, make mutually acceptable arrangements
      to transport all produced gas from the Joint Wells to market.





Upon
      payout of our costs in the Pipeline, we must assign 20% of our right, title
      and
      interest in the Pipeline to BSR. We have granted BSR an option to purchase
      an
      additional 25% of our Pipeline (the “Pipeline Option”). The Pipeline Option may
      be exercised incrementally by BSR where the minimum percentage of such
      increments is 1%.  If BSR exercises the Pipeline Option, it must do so
      within 18 months of the completion of construction of the Pipeline (after which
      the Pipeline Option automatically terminates).





3
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The
      Broadview Dome Prospect is close to existing regional pipelines, and is in
      an
      area of the state actively experiencing commercial gas production activity.
      The
      Yellowstone-Stillwater county line splits the prospect from north to south.
      The
      topography reflects the structure on the surface, with dipping strata in all
      directions from the top of the dome. South Comanche Creek runs from west to
      east
      separating two distinct structures, one on the north and one on the
      south.





The
      Broadview Dome Prospect is an up dip test of the Frontier Sand located on a
      small anticlinal feature, which is on the southeastern edge of the larger
      Hailstone Dome. The sharp flextures created by this structure have resulted
      in
      the formation of many northeast southwest trending normal faults. These faults
      have truncated the structure, creating the potential for Amsden, Swift, and
      Madison formation fault bounded reservoirs.





***Other
      Recent Events.***





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
      provides that Venture Capital has the option to convert all or a portion of
      the
      $500K 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 Venture Capital of its intent to convert
      all or a portion of the Loan into shares of the Company, or (ii) in the event
      the Company is offering shares or units to the general public, at the price
      such
      shares or units are being offered to the general public.





On
      June
      8, 2006, the Company entered into an agreement with NITEC to perform a reservoir
      engineering study (the “NITEC Study”) on the Company's Burke Ranch Field in
      order to ascertain the field’s remaining recoverable oil. NITEC estimates that
      it will take it three to four months to complete the NITEC Study at a cost
      of
      approximately $95,000.





On
      June
      6, 2006, at the Wyoming BLM auction, the Company successfully bid for and has
      the right to acquire an additional 8,183 acres contiguous and/or adjacent to
      its
      Burke Ranch Field (the “BLM Leases”). The BLM Leases will be acquired for a
      total cost of $143,237 or an average cost of approximately $16.00 an acre,
      excluding first annual rental payments of $12,275 and administration fees of
      $910, and the closing is expected to occur in approximately 90 days. The BLM
      Leases, together with the Burke Ranch Field’s original 1,921 acres, will
      increase the total acreage of the Company’s Burke Ranch Field more than five
      times (5X) to 10,104 acres.





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 2% interest on the principal amount on or before
      June
      30, 2006. The $150K Loan Agreement provides that Enerex has 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 is offering shares or units
      to
      the general public, at the price such shares or units are being offered to
      the
      general public.





On
      May
      15, 2006, the Company entered into an employment agreement with John Works
      (the
“Works Employment Agreement”) wherein we engaged Mr. Works as our president,
      chief executive officer, and a director. The term of the Works Employment
      Agreement is two 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
      the Company’s common stock at a price of $0.00001 per share as follows: (i)
      1,000,000 shares on the execution of the employment agreement, (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


4
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event
      the
      agreement is terminated, Mr. Works will be entitled to purchase all shares
      that
      have vested, and all unvested shares will be forfeited.





On
      May
      15, 2006, Andrei Stytsenko resigned as the Company’s principal executive officer
      but would remain with the Company both as a director and as Vice
      President--Production. Mr. Stytsenko’s resignation was not as a result of any
      disagreement with the Company but rather as the result of the change of
      direction and focus of the Company from the exploration and development of
      gold
      mineral deposits and reserves in British Columbia, Canada to an
      oil
      and gas exploration and production company with its primary operations in the
      Rocky Mountain Region of the United States.





On
      April
      11, 2006, the Company amended its Articles of Incorporation and changed its
      name
      from Metalex to Rancher Energy. On April 18, 2006 the Company’s common stock
      began trading on the OTC Bulletin Board under our new symbol
“RNCH”.





**Business
      Strategy.**





The
      Company’s objective is to develop natural oil and gas reserves, production, and
      revenues through a strategy that includes the following key
      elements:




***Pursue
      Attractive Reserve and Leasehold Acquisitions.*** To
      date,
      acquisitions have been critical in establishing our asset base. We believe
      that
      we are well positioned, given our initial success in identifying and quickly
      closing on attractive opportunities in the Powder River and the Crazy Mountain
      Basins, to effect opportunistic acquisitions that can provide upside potential,
      including long-term drilling inventories and undeveloped leasehold positions
      with attractive return characteristics. Our focus is to acquire assets that
      provide the opportunity for developmental drilling, the drilling of extensional
      step out wells, and use of state-of-the art enhanced oil recovery techniques,
      which we believe provide us with significant upside potential while not exposing
      us to the risks associated with drilling new field wildcat wells in frontier
      basins.





***Pursuit
      of Selective Complementary Acquisitions.*** We
      will
      seek to acquire long-lived producing properties with a high degree of operating
      control, or oil and gas entities that are known to be competent in the
      area,  that offer opportunities profitably to develop oil and gas
      reserves.





***Drive
      Growth Through Technology and Drilling.*** We
      plan
      to supplement our long-term reserve and production growth through the use of
      3-D
      seismic and reservoir geology experts, coupled with strategically-focused
      drilling operations.





***Maximize
      Operational Control.*** To
      date,
      we do not own any assets where we are not the operator. It is strategically
      important to our future growth and maturation as an independent exploration
      and
      production company to be able to continue to serve as operator of our properties
      when possible, as that will enable us to exert greater control over costs and
      timing in and manner of our exploration, development, and production
      activities.





***Operate
      Efficiently, Effectively, and Maximize Economies of Scale Where Practical.*** Our
      objective is to generate profitable growth and high returns for our
      stockholders, and we expect that our cost structure will benefit from economies
      of scale and our continuing cost management initiatives as we grow. As we manage
      our growth, we will actively focus on reducing lease operating expenses, general
      and administrative costs, and finding and development costs. In addition, our
      acquisition efforts will be geared toward pursuing opportunities that fit well
      within our existing operations, or in areas where the Company is establishing
      new operations, or where we believe that a base of existing production will
      produce an adequate foundation for economies of scale necessary to grow a
      business within a geography or business segment.


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**Governmental
      Regulation.**





The
      Company’s business and the oil and gas industry in general are heavily
      regulated. The availability of a ready market for oil and gas production depends
      on several factors beyond the Company’s control. These factors include
      regulation of oil and gas production, federal and state regulations governing
      environmental quality and pollution control, the amount of oil and gas available
      for sale, the availability of adequate pipeline and other transportation and
      processing facilities, and the marketing of competitive fuels. State and federal
      regulations generally are intended to prevent waste of oil and gas, protect
      rights to produce oil and gas between owners in a common reservoir, and control
      contamination of the environment. Pipelines are subject to the jurisdiction
      of
      various federal, state, and local agencies.




The
      Company believes that it is in substantial compliance with such statutes, rules,
      regulations, and governmental orders, although there can be no assurance that
      this is or will remain the case. Failure to comply with such laws and
      regulations can result in substantial penalties. The regulatory burden on the
      oil and gas industry increases our cost of doing business and affects our
      profitability. Although we believe we are in substantial compliance with all
      applicable laws and regulations, such laws and regulations are frequently
      amended or reinterpreted so we are unable to predict the future cost or impact
      of complying with such laws and regulations.




The
      following discussion of the regulation of the oil and gas industry in the United
      States and is not intended to constitute a complete discussion of the various
      statutes, rules, regulations, and environmental orders to which the Company’s
      operations may be subject.




*Regulation
      of Oil and Gas Exploration and Production.*





The
      Company’s oil and gas operations will be subject to various types of regulation
      at the federal, state, and local levels. Prior to commencing drilling activities
      for a well, the Company (or its operating subsidiaries, operating entities,
      or
      operating partners) must procure permits and/or approvals for the various stages
      of the drilling process from the applicable federal, state, and local agencies
      in the state in which the area to be drilled is located. Such permits and
      approvals include those for the drilling of wells, maintaining bonding
      requirements in order to drill or operate wells, and regulating the location
      of
      wells, the method of drilling and casing wells, the surface use and restoration
      of properties on which wells are drilled, the plugging and abandoning of wells,
      and the disposal of fluids used in connection with oil and gas operations.
      The
      Company’s operations are also subject to various conservation laws and regulations.
      These include the regulation of the size of drilling and spacing units or
      proration units, and the density of wells which may be drilled, and the
      unitization or pooling of oil and gas properties. In this regard, some states
      allow the forced pooling or integration of tracts to facilitate exploration
      while other states rely primarily or exclusively on voluntary pooling of lands
      and leases. In areas where pooling is voluntary, it may be more difficult to
      form units, and therefore, more difficult to develop a project if the operator
      owns less than 100% of the leasehold. In addition, state conservation laws
      may
      establish maximum rates of production from oil and gas wells, generally prohibit
      the venting or flaring of natural gas and impose certain requirements regarding
      the ratability of production.




The
      effect of these regulations may limit the amount of oil and gas the Company
      can
      produce from its wells and may limit the number of wells or the locations at
      which the Company can drill. The regulatory burden on the oil and gas industry
      increases the Company’s costs of doing business and, consequently, affects its
      profitability.  Inasmuch as such laws and regulations are frequently
      expanded, amended, and reinterpreted, the Company is unable to predict the
      future cost or impact of complying with such regulations.




*Oil
      and Gas Marketing and Transportation.*





Federal
      legislation and regulatory controls have historically affected the price of
      oil
      and gas and the manner in which production is transported and marketed. Under
      the Natural Gas Act of 1938, the Federal Energy Regulatory Commission (“FERC”)
      regulates the interstate sale for resale of natural gas and the transportation
      of natural gas in interstate commerce, although facilities used in the
      production or gathering of natural gas in interstate commerce are generally
      exempted from FERC jurisdiction. Effective January 1, 1993, the Natural Gas
      Wellhead Decontrol Act deregulated natural gas prices for all “first sales” of
      natural gas, which definition will cover all sales of our own production. In
      addition, as part of the broad industry restructuring initiatives described
      below, FERC has granted to all producers such as us a “blanket certificate of
      public convenience and necessity” authorizing the sale of gas
      for


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resale
      without further FERC approvals. As a result, all natural gas that we produce
      in
      the future may now be sold at market prices, subject to the terms of any private
      contracts that may be in effect.




Natural
      gas sales prices nevertheless continue to be affected by intrastate and
      interstate gas transportation regulation, because the prices that companies
      such
      as ours receive for our production are affected by the cost of transporting
      the
      gas to the consuming market. Through a series of comprehensive rulemakings,
      beginning with Order No. 436 in 1985 and continuing through Order No. 636 in
      1992 and Order No. 637 in 2000, FERC has adopted regulatory changes that have
      significantly altered the transportation and marketing of natural gas. These
      changes were intended by FERC to foster competition by, among other things,
      transforming the role of interstate pipeline companies from wholesale marketers
      of gas to the primary role of gas transporters, and by increasing the
      transparency of pricing for pipeline services. FERC has also developed
      rules governing the relationship of the pipelines with their marketing
      affiliates, and implemented standards relating to the use of electronic data
      exchange by the pipelines to make transportation information available on a
      timely basis and to enable transactions to occur on a purely electronic
      basis.




In
      light
      of these statutory and regulatory changes, most pipelines have divested their
      gas sales functions to marketing affiliates, which operate separately from
      the
      transporter and in direct competition with all other merchants, and most
      pipelines have also implemented the large-scale divestiture of their gas
      gathering facilities to affiliated or non-affiliated companies. Interstate
      pipelines thus now generally provide unbundled, open and nondiscriminatory
      transportation and transportation-related services to producers, gas marketing
      companies, local distribution companies, industrial end users, and other
      customers seeking such services. Sellers and buyers of gas have gained direct
      access to the particular pipeline services they need, and are better able to
      conduct business with a larger number of counterparties.




*Environmental
      Regulations.*





The
      Company’s operations are subject to numerous laws and regulations governing the
      discharge of materials into the environment or otherwise relating to
      environmental protection. Public interest in the protection
      of the environment has increased dramatically in recent years. The trend of
      more
      expansive and stricter environmental legislation and regulations could continue.
      To the extent laws are enacted or other governmental action is taken that
      restricts drilling or imposes environmental protection requirements that result
      in increased costs to the oil and gas industry in general, the business and
      prospects of the Company could be adversely affected.




The
      nature of the Company’s business operations results in the generation of wastes
      that may be subject to the Federal Resource Conservation and Recovery Act
      (“RCRA”) and comparable state statutes. The U.S. Environmental Protection Agency
      (“EPA”) and various state agencies have limited the approved methods of disposal
      for certain hazardous and non-hazardous wastes. Furthermore, certain wastes
      that
      may be generated by the Company’s operations that are currently exempt from
      treatment as “hazardous wastes” may in the future be designated as “hazardous
      wastes”, and therefore be subject to more rigorous and costly operating and
      disposal requirements.




Stricter
      standards in environmental legislation may be imposed on the industry in the
      future. For instance, legislation has been proposed in Congress from time to
      time that would reclassify certain exploration and production wastes as
“hazardous wastes” and make the reclassified wastes subject to more stringent
      handling, disposal, and clean-up restrictions. If such legislation were to
      be
      enacted, it could have a significant impact on our operating costs, as well
      as
      on the oil and gas industry in general. Compliance with environmental
      requirements generally could have a materially adverse effect upon our capital
      expenditures, earnings, or competitive position.




The
      Comprehensive Environmental Response, Compensation, and Liability Act
      (“CERCLA”), also known as the “Superfund” law, imposes liability, without regard
      to fault or the legality of the original conduct, on certain classes of persons
      who are considered to be responsible for the release of a “hazardous substance”
into the environment.  These persons include the present or past owners or
      operators of the disposal site or sites where the release occurred and the
      companies that transported or arranged for the disposal of the hazardous
      substances at the site where the release occurred. Under CERCLA, such persons
      may be subject to joint and several liability for the costs of cleaning up
      the
      hazardous substances that have been released into the environment, for damages
      to natural resources, and for the costs of certain health studies. It is not
      uncommon for neighboring landowners and other third parties to


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file
      claims for personal injury and property damages allegedly caused by the release
      of hazardous substances or other pollutants into the environment. Furthermore,
      although petroleum, including natural gas and crude oil, is exempt from CERCLA,
      at least two courts have ruled that certain wastes associated with the
      production of crude oil may be classified as “hazardous substances” under CERCLA
      and thus such wastes may become subject to liability and regulation under
      CERCLA. State initiatives further to regulate the disposal of crude oil and
      gas
      wastes are also pending in certain states, and these various initiatives could
      have adverse impacts on our business.




In
      August 2005, the Energy Policy Act of 2005 was enacted (the “Energy Act”).
      The Energy Act contains certain provisions that facilitate oil and gas leasing
      and permitting on federal lands. The Energy Act also provides for certain
      incentives for oil and gas production.




The
      Company’s operations may be subject to the Clean Air Act (the “CAA”) and
      comparable state and local requirements. Amendments to the CAA were adopted
      in
      1990 and contain provisions that may result in the gradual imposition of certain
      pollution control requirements with respect to air emissions from the operations
      of the Company. The EPA and states have been developing regulations to implement
      these requirements. The Company may be required to incur certain capital
      expenditures in the next several years for air pollution control equipment
      in
      connection with maintaining or obtaining operating permits and approvals
      addressing other air emission-related issues.




The
      Federal Water Pollution Control Act (the “FWPCA” or the “Clean Water Act”) and
      resulting regulations, which are implemented through a system of permits, also
      govern the discharge of certain contaminants into waters of the United States.
      Sanctions for failure to comply strictly with the Clean Water Act are generally
      resolved by payment of fines and correction of any identified deficiencies.
      However, regulatory agencies could require the Company to cease construction
      or
      operation of certain facilities that are the source of water discharges and
      compliance could have a materially adverse effect on our capital expenditures,
      earnings, or competitive position.




Our
      operations will be subject to local, state, and federal laws and regulations
      to
      control emissions from sources of air pollution. Payment of fines and correction
      of any identified deficiencies generally resolve penalties for failure to comply
      strictly with air regulations or permits. Regulatory agencies could also require
      us to cease construction or operation of certain facilities that are air
      emission sources.





*Operating
      Hazards and Insurance.*





The
      Company’s exploration and production operations include a variety of operating
      risks, including the risk of fire, explosions, above-ground and underground
      blowouts, craterings, pipe failure, casing collapse, abnormally pressured
      formations, and environmental hazards such as oil and gas leaks, ruptures,
      and
      discharges of toxic gas, the occurrence of any of which could result in
      substantial losses to the Company due to injury and loss of life, severe damage
      to and destruction of property, natural resources and equipment, pollution
      and
      other environmental damage, clean-up responsibilities, regulatory investigation,
      penalties, and suspension of operations.




Any
      significant problems related to its facilities could adversely affect the
      Company’s ability to conduct its operations. In accordance with customary
      industry practice, the Company maintains or will attempt to obtain insurance
      against some, but not all, potential risks; however, there can be no assurance
      that such insurance will be adequate to cover any losses or exposure for
      liability. The occurrence of a significant event not fully insured against
      could
      materially adversely affect the Company’s operations and financial condition.
      The Company cannot predict whether insurance will be available at premium levels
      that justify its purchase or whether insurance will be available at
      all.






8
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**Employees.**





At
      present, the Company has two full time employees. One employee is Mr. John
      Works, our President, Chief Executive Officer and Chief Financial Officer,
      and
      the other is Mr. Andrew Casazza, our manager of finance and operations.





We
      presently do not have pension, health, annuity, insurance, profit sharing,
      or
      similar benefit plans; however, we may adopt such plans in the future. We have
      a
      stock option plan under which options have been granted to Mr. Works. See Item
      11 “Executive Compensation” below.





The
      Company’s employees are not covered by a collective bargaining agreement. The
      Company considers relations with its employees to be excellent.





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**Item
      1A.****RISK
      FACTORS.**





To
      inform
      readers of our future plans and business strategies, this report contains
      statements concerning our future performance, intentions, objectives, plans
      and
      expectations that are or may be deemed to be “forward-looking statements”. Our
      ability to do this has been fostered by the Private Securities Litigation Reform
      Act of 1995, which provides a “safe harbor” for forward-looking statements to
      encourage companies to provide prospective information so long as those
      statements are accompanied by meaningful cautionary statements identifying
      important factors that could cause actual results to differ materially from
      those discussed in the statements. Such factors affecting us include, but are
      not limited to, the following:




***We
      have incurred losses to date, we expect future losses, and we may never become
      profitable*** **.**




The
      Company has incurred losses in the past. We incurred net losses from continuing
      operations for the years ended March 31, 2006, 2005, and 2004 of $124,453,
      $27,154, and $375,000, respectively. In addition, we had an accumulated deficit
      of $526,607 at March 31, 2006. We may fail to achieve significant revenues
      or
      profitability. There can be no assurance of when, if ever, we will be profitable
      or whether we will be able to maintain profitability.





***Our
      auditors have issued a going concern opinion, hence there is substantial
      uncertainty 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.
      See
      Item 8 “Financial Statements and Supplementary Data”.





***We
      lack an operating history, have never had any revenues, have no immediate
      prospects for revenues, and have losses which we expect to continue.***





We
      were
      incorporated in February 2004 and we have not realized any revenues to date.
      We
      have no operating history upon which an evaluation of our future success or
      failure can be made. Based upon our current plans, we expect to incur operating
      losses in future periods. This will occur because there are expenses associated
      with the start-up nature of our oil and gas acquisition and development
      business. As a result, continuing to incur expenses while failing to generate
      revenue would have a material adverse effect on our financial condition and
      results of operations.




***If
      we are unable to obtain additional funding our business operations will be
      harmed.***




We
      believe that our current cash position and estimated 2007 cash from our
      operations will not be sufficient to meet our current estimated general and
      administrative, operating, and capital expenditures through the end of fiscal
      year 2007. As a result, the Company will require additional funding. We do
      not
      know if additional financing will be available when needed, or if it is
      available, if it will be available on acceptable terms. Insufficient funds
      may
      prevent us from implementing our business strategy.




***Our
      business depends on the level of activity in the oil and gas industry, which
      is
      significantly affected by volatile energy prices.***




Our
      business depends on the level of activity in oil and gas exploration,
      development, and production in markets worldwide. Oil and gas prices, market
      expectations of potential changes in these prices, and a variety of political
      and economic and weather-related factors significantly affect this level of
      activity. Oil and gas prices are extremely volatile and are affected by numerous
      factors, including:


10
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**•**
            worldwide
                demand for oil and gas;**•**
            the
                ability of OPEC to set and maintain production levels and pricing;**•**
            the
                level of production in non-OPEC countries;**•**
            the
                policies of the various governments regarding exploration and development
                of their oil and gas reserves;**•**
            local
                weather;**•**
            fluctuating
                pipeline takeaway capacity;**•**
            advances
                in exploration and development technology;**•**
            the
                political environment surrounding the production of oil and
                gas;**•**
            level
                of consumer product demand; and**•**
            the
                price and availability of alternative
                fuels.




***Our
      business involves numerous operating hazards.***




Our
      proposed operations are subject to certain hazards inherent in drilling for
      oil
      or gas, such as blowouts, reservoir damage, loss of production, loss of well
      control, punchthroughs, craterings, or fires. The occurrence of these events
      could result in the suspension of drilling operations, weather, equipment
      shortages, damage to or destruction of the equipment involved, and injury or
      death to rig personnel. Operations also may be suspended because of machinery
      breakdowns, abnormal drilling conditions, failure of subcontractors to perform
      or supply goods or services, or personnel shortages. Damage to the environment
      could also result from our operations, particularly through oil spillage or
      extensive uncontrolled fires. We may also be subject to damage claims by other
      oil and gas companies.




Although
      we intend to maintain insurance in the areas in which we operate, pollution
      and
      environmental risks generally are not fully insurable. Our insurance policies
      and contractual rights to indemnity may not adequately cover our losses, and
      we
      do not have insurance coverage or rights to indemnity for all risks. If a
      significant accident or other event occurs and is not fully covered by insurance
      or contractual indemnity, it could adversely affect our financial position
      and
      results of operations.




***Our
      current properties are located in the Rocky Mountains, making us vulnerable
      to
      risks associated with operating in one major geographic
      area.***




Our
      current activities are focused on 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 and gas produced from
      the
      wells in these basins.




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




The
      oil
      and gas industry is intensely competitive, and we compete with other companies
      that are significantly larger and have greater resources.  Many of these
      companies not only explore for and produce oil and gas, 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
      productive oil and gas properties and exploratory 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.




11
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***If
      oil and gas prices decrease, we may be required to take write-downs of the
      carrying values of our oil and gas properties.***




Generally
      accepted accounting principles require that we periodically review the carrying
      value of our oil and gas properties for possible impairment. Based on specific
      market factors and circumstances at the time of the prospective impairment
      reviews, and the continuing evaluation of development plans, production data,
      economics and other factors, we may be required to write down the carrying
      value
      of our oil and gas properties. A write-down constitutes a non-cash charge to
      earnings. We may incur impairment charges in the future, which could have
      material adverse effect on our results of operations in the periods
      taken.




***Governmental
      laws and regulations may add to our costs or limit our drilling
      activity.***




Our
      operations are affected from time to time in varying degrees by governmental
      laws and regulations. We may be required to make significant capital
      expenditures to comply with governmental laws and regulations. It is also
      possible that these laws and regulations may in the future add significantly
      to
      our operating costs or may significantly limit drilling activity.  Failure
      to comply with these laws and regulations may result in the suspension or
      termination of our operations and subject us to administrative, civil and
      criminal penalties, including assessment of natural resource
      damage.




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




Some
      of
      the information in this 10-K 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.




The
      Company believes 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 10-K, 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.




***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 price 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, of public market
                analysts;


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


·
            conditions
                generally affecting the oil and gas
                industry;


·
            the
                success of our business strategy;
                and


·
            the
                operating and stock price performance of other comparable
                companies.




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Many
      of
      these factors are beyond our control, and we cannot predict their potential
      effects on the price of our common stock.  We cannot assure that the market
      price of our common stock will not fluctuate or decline significantly in the
      future.  In addition, the stock markets in general can experience
      considerable price and volume fluctuations.





***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 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 result, 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
      1B.****UNRESOLVED
      STAFF COMMENTS.**





None.




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**Item
      2.****PROPERTIES.**




During
      the fiscal year ending March 31, 2006, the Company did not own or operate any
      oil or gas properties. As a result, we had no production data nor net wells
      drilled, and no developed or undeveloped acreage, to report in this Form 10-K.
      As described in “Part 1--Recent Events”, the Company has acquired the rights to
      one property in each of two basins in the Rocky Mountain Region of the United
      States--the Burke Ranch Field in the Powder River Basin located in central
      Wyoming, and the Broadview Dome Prospect in the Crazy Mountain Basin located
      in
      central Montana.





Our
      executive office is located in Denver, Colorado where we lease our offices
      from
      an unaffiliated third party for $950 per month. The term of such lease is on
      a
      month to month basis with no minimum term nor expiration date.







**Item
      3.****LEGAL
      PROCEEDINGS.**





We
      are
      not a party to any legal proceedings.







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





No
      matters were submitted to a vote of our security holders during the fourth
      quarter of fiscal year 2006.





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**PART
      II**





**Item
      5.****MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.**





Rancher
      Energy’s common stock is quoted on the OTC Bulletin Board under the symbol
“RNCH”.





The
      following table sets forth, on a per share basis, the high and low closing
      prices for the periods indicated:





Calendar
                quarter ended:
            
            High
            
            LowJune
                30, 2006 (through June 15)
            
            $
            1.50
            
            $
            .52March
                31, 2006
            
            $
            3.00
            
            $
            .30December
                31, 2005
            
            $
            none
            
            $
            noneSeptember
                30, 2005
            
            $
            none
            
            $
            noneJune
                30, 2005
            
            $
            none
            
            $
            none





On
      April
      22, 2005 the SEC declared effective our Form SB-2 Registration Statement, file
      number 333-116307, permitting us to offer up to 28,000,000 shares of common
      stock at $0.007 per share. There was no underwriter involved in this public
      offering.





Of
      the
      29,500,000 shares of the Company’s common stock outstanding as of June 15, 2006,
      a total of 1,500,000 shares were owned by Mr. Works and Mr. Stytsenko and may
      only be resold in compliance with Rule 144 of the Securities Act of 1933.





As
      of
      June 15, 2006, there were 20 holders of record of the Company’s common stock and
      an undetermined number of beneficial owners whose shares are held by
      CEDE & Co.





The
      Company has not paid any dividends on its common stock since inception, and
      the
      Company does not anticipate declaration or payment of any dividends at any
      time
      in the foreseeable future.





**Repurchases
      of Equity Securities.**





During
      the quarter ended March 31, 2006 the registrant did not repurchase any of its
      equity securities; however, on March 8, 2006, Andrei Stytsenko, our former
      President and a current director, donated 69,500,000 shares of our common stock
      to our treasury for no consideration.




**Recent
      Issuances of Unregistered Securities.**





During
      the fourth quarter of fiscal year 2006, there were no issuances of unregistered
      securities by the Company.





**Equity
      Compensation Plan Information.**





The
      Company does not have an equity compensation plan, however see “Executive
      Compensation” under Item 11 below for information concerning a stock option plan
      we have adopted for our Chief Executive Officer.





**Use
      of Proceeds.**





On
      April
      22, 2005, we completed our public offering and sold 28,000,000 shares of common
      stock and raised $200,000. There was no underwriter involved in our public
      offering. The proceeds from the offering were partially used during this year
      ended March 31, 2006 for general operating expenses, accounting, and consulting
      fees. The balance is available for use as set forth in the Use of Proceeds
      section of our Form SB-2 registration statement.


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The
      following amounts were paid from the proceeds of the offering through March
      31,
      2006:




Accounting
                and legal fees
            
            $
            66,604Accounts
                payable
            
            
            51,904Operating
                expenses
            
            
            44,589Total
            
            $
            163,097








**Item
      6.****SELECTED
      FINANCIAL DATA.**





Subsequent
      to March 31, 2006, we changed the direction and focus of our business from
      an
      exploratory stage mining business to the oil and gas business. We had no
      revenues from our exploratory stage mining activities and we relinquished our
      mining claims. The financial results of these activities are reflected below
      in
      Item 8 “Financial Statements and Supplementary Data” and are incorporated by
      reference in response to this Item 6.


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          to Index*


**Item
      7.****MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.**





The
      following discussion and analysis should be read in conjunction with the
      Company’s financial statements and the related notes. This discussion is
      intended to provide investors with an understanding of the Company’s past
      performance, financial condition, and prospects. The following topics will
      be
      discussed and analyzed:





·
            overview
                of our business;·
            results
                of operations and comparison of results between years;·
            outlook
                for fiscal 2007;·
            liquidity
                and capital resources;·
            subsequent
                events;·
            critical
                accounting policies and estimates; and·
            recent
                accounting pronouncements.





**Overview**





Rancher
      is an independent energy company which intends to engage in the development,
      production, and marketing of oil and 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 and gas prospects in the Rocky
      Mountain region. We plan to generate revenues by the production of oil and
      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—1) 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) and 2) a separate acreage prospect of over 7,600 gross
      acres
      (4,180 net to the Company’s 55.00% working interest) in the Broadview Dome
      Prospect in the Crazy Mountain Basin in central Montana.





At
      March
      31, 2006, the Company did not own or operate any oil or gas properties. As
      a
      result, we had no production data, net wells drilled and no developed or
      undeveloped acreage to report in this 10-K.





**Results
      of Operations During Fiscal Year 2006 Compared to Fiscal Year
      2005**





The
      Company’s net loss increased from $27,154 for the year ended March 31, 2005 to
      $124,453 for the year ended March 31, 2006. Legal and accounting fees increased
      to $47,809 from $8,795 in 2006 due to increased activity for the Company,
      including $20,000 paid to the Company’s previous securities attorney in
      conjunction with registration of the Company’s securities. In addition, the
      increase in activity resulted in increased auditing and review fees.





Mining
      exploration expenses of $50,000 were recognized in the year ended March 31,
      2006
      which related to expenditures on a mining project that the Company abandoned
      subsequent to year end.





**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 Burke Ranch 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 as required
                by
                its exploration and development agreement, which includes, at a minimum,
                completing a 3-D seismic survey on the 2,560
                acres.


·
            Finalize
                the additional agreements with third parties to provide the financing
                for
                the exploration and development
                programs.


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·
            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.





**Liquidity
      and Capital Resources.**





At
      March
      31, 2006 the Company had a working capital surplus of $44,011. Subsequent to
      year end, through two separate transactions, the Company borrowed $650,000.
      The
      first amount advanced to the Company ($150,000) will be repaid out of the
      proceeds of the second amount advanced ($500,000). Accordingly, at June 26,
      2006
      the Company has approximately $300,000 cash in the bank after $143,000 paid
      for
      leases acquired adjacent to Burke Ranch, repayment of the $150,000 note and
      overhead through June 26, 2006. Pursuant to the Burke Ranch Unit Purchase and
      Participation Agreement (Exhibit 10.3), the Company may receive up to a $71,500
      payment within 30 days if the seller of the Burke Ranch property elects to
      purchase up to 50% of the $143,000 leases purchased.





Currently
      the Company is spending approximately $50,000 per month on consultants,
      salaries, and other general and administrative expenses. In addition, the
      Company has agreed to pay $500,000 in cash within the next ninety days for
      the
      initial payments required under the two acquisition agreements and it estimates
      the initial exploration phase costs to be $750,000. The Company is currently
      negotiating with Enerex, and others, for the sale of Company Common stock units.
      The Company expects that its current cash balances, combined with the sale
      of
      Company common stock units, if completed, will meet its capital needs for fiscal
      year 2007.





The
      Company will require additional financing during fiscal year 2007 if the Company
      identifies other acquisitions that meet its investment and operational strategy
      or if the Company’s exploration program is successful, resulting in a
      development program. 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
      and 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 and Capital Expenditures.**





During
      the year ended March 31, 2006 the Company expended $124,000 in its operating
      activities, primarily to finance its unsuccessful efforts to explore for hard
      minerals and overhead costs. This amount compares to $25,000 used in operating
      activities in fiscal year 2005.





**Commitments.**





Pursuant
      to the terms of the purchase of the Burke Ranch and Broadview Dome agreements,
      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 $750,000 to
      meet
      its minimum 3-D seismic and rework obligations under such agreements.





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





At
      March
      31, 2006 the Company has a net operating loss carry forward for U.S. income
      tax
      purposes of $163,500. 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. The allowance recorded was $55,500 and
      $13,500 for fiscal years 2006 and 2005, respectively.


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**Subsequent
      Events.**





***The
      Burke Ranch Field.***





Subsequent
      to March 31, 2006, on June 21, 2006, the Company acquired t he
      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 central
      region of the state. Rancher will acquire up to a 89.82% working interest before
      payout, which reverts to a 49.90% working 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 Burke Ranch and the purchase of certain equipment
      and completion of repairs on wells currently existing on the property within
      30
      days of closing.





The
      Company recently successfully bid for and has the right to acquire an additional
      8,183 acres contiguous and/or adjacent to its Burke Ranch Field. These leases,
      together with the Burke Ranch Field’s original 1,921 acres, will increase the
      total acreage of the Company’s Burke Ranch Field more than five times (5X) to
      10,104 acres (see “Other Recent Events”, below).





The
      Company also recently entered
      into an agreement with 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 (see “Other Subsequent Events”, below).





***The
      Broadview Dome Prospect.***





On
      June
      21, 2006, the Company acquired t he
      Broadview Dome Prospect, located approximately 25 miles northwest of Billings,
      Montana, in the Crazy Mountain Basin. This natural gas prospect involves
      approximately 7,600 acres. Rancher Energy holds a 100.00% working interest
      until
      payout, and 55.00% working interest after payout.





The
      terms
      of the agreement to acquire Broadview Dome include the completion of a 3-D
      seismic survey on the acreage as soon as possible.





***Other
      Subsequent Events.***





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,
      (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.





On
      May
      15, 2006, the Company announced that Andrei Stytsenko resigned as the Company’s
      principal executive officer but would remain with the Company both as a board
      member and as Vice President--Production. Mr. Stytsenko’s resignation was not as
      a result of any disagreement with the Company but rather as the result of the
      change of direction and focus of the Company from the exploration and
      development of gold mineral deposits and reserves in British Columbia, Canada
      to its
      new
      business direction as an oil and gas exploration and production company focusing
      primarily on the Rocky Mountain Region of the United States.





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


19
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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
      provides that Enerex has 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 Loan into shares of the Company, or (ii) in the event the Company is
      offering shares or units to the general public, at the price such shares or
      units are being offered to the general public.





On
      June
      6, 2006, at the Wyoming BLM auction, the Company successfully bid for and has
      the right to acquire an additional 8,183 acres contiguous and/or adjacent to
      its
      Burke Ranch Field (the “BLM Leases”). The BLM Leases will be acquired for a
      total cost of $143,237 or an average cost of approximately $16.00 an acre,
      excluding first annual rental payments of $12,275 and administration fees of
      $910, and the closing is expected to occur in approximately 90 days. The BLM
      Leases, together with the Burke Ranch Field’s original 1,921 acres, will
      increase the total acreage of the Company’s Burke Ranch Field more than five
      times (5X) to 10,104 acres.




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
      provides that Venture Capital has the option to convert all or a portion of
      the
      $500K 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 Venture Capital of its intent to convert
      all or a portion of the Loan into shares of the Company, or (ii) in the event
      the Company is offering shares or units to the general public, at the price
      such
      shares or units are being offered to the general public.





**Critical
      Accounting Policies and 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 our estimates, including those related
      to
      oil and gas reserves, bad debts, oil and 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 and gas exploration and producing activities, the Company will use the
      full
      cost method of accounting for its oil and gas properties. Accordingly, all
      costs
      related to the acquisition, exploration and development of both proved and
      unproved properties will be capitalized. The Company's properties are expected
      to be located within the continental United States, which will constitute one
      cost center. The amortization of proved oil and gas properties will be
      calculated using the units-of-production method, based on proved reserves of
      oil
      and 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: (1)
      the
      present value of future net revenues from estimated production of proved oil
      and
      gas reserves; (2) the cost of properties not being amortized; and (3) the lower
      of cost or estimated fair value of unproved properties included in the costs
      being amortized.


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**Reserve
      Estimates.**





Estimates
      of oil and 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 and 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 and 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 and 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
      and
      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 and gas properties and/or
      the rate of depletion of the oil and gas properties.





**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.





**Recently
      Issued Accounting Standards and Pronouncements**




In
      March
      2006, the Financial Accounting Standards Board 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: a transfer of the servicer’s financial assets
      that meets the requirements for sale accounting; a transfer of the servicer’s
      financial assets to a qualifying special - purpose entity in a guaranteed
      mortgage securitization in which the 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 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
      February 2006, the Financial Accounting Standards Board 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 special-purpose
      entity 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.


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Management
      believes the adoption of this statement will have no immediate impact on the
      Company’s financial condition or results of operations.





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 (“Statement 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 our condensed consolidated results of operations, financial position or
      cash
      flows.





In
      December 2004, the FASB issued SFAS No. 153 “Exchanges of Non-monetary
      Assets—an amendment of APB Opinion No. 29”. This Statement amended APB
      Opinion No. 29 to eliminate the exception for non-monetary exchanges of
      similar productive assets and replaces it with a general exception for exchanges
      of non-monetary assets that do not have commercial substance. A non-monetary
      exchange has commercial substance if the future cash flows of the entity are
      expected to change significantly as a result of the exchange. The Company
      believes the impact of this new standard will not have a material impact upon
      the Company’s financial position, results of operations or cash flows. SFAS 153
      is effective for all reporting periods beginning after June 15,
      2005.




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 January 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 March 31, 2006 is $00,000,
      which will be recorded in future periods as earned.




In
      February 2005, the staff of the SEC sent a letter to oil and gas
      registrants regarding situations that require additional financial statement
      disclosures, pending final resolution of accounting treatment. The following
      are
      items related to registrants using the successful efforts method of accounting:





•
            
            Companies
                may enter concurrent commodity buy/sale arrangements, or transactions
                in
                contemplation of other transactions, often to assure that the commodity
                is
                available at a specific location. Pending resolution of accounting
                questions with the Emerging Issues Task Force, the staff of the SEC
                has
                requested additional disclosures for any such material arrangements,
                including separate disclosure on the face of the income statement
                of any
                related proceeds and costs reported on a gross basis. These disclosures
                are not applicable, since the Company has not entered any transactions
                of
                this nature.•
            
            Statement
                of Financial Accounting Standards No. 19, Financial Accounting and
                Reporting by Oil and Gas Producing Companies, specifies that drilling
                costs for completed exploratory wells should be expensed if the related
                reserves cannot be classified as proved within one (1) year unless
                certain
                criteria are met. In April 2005, the FASB issued FASB Staff Position
                19-1, Accounting for Suspended Well Costs. FSP 19-1 provides guidance
                for
                evaluating whether sufficient progress is being made to determine
                whether
                reserves can be classified as proved. FSP 19-1 is effective for all
                reporting periods beginning after April 4, 2005,




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however,
                  early application is permitted. Pending adoption of FSP 19-1, the
                  staff of
                  the SEC has requested additional disclosures be included in registrants’
                  financial statements regarding their accounting policy for capitalization
                  of exploratory drilling costs, as well as disclosure of capitalized
                  exploratory drilling cost amounts included in the financial statements.




**Item
      7A.****QUANTITATIVE
      AND 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.


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**Item
      8.****FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA.**


















**Financial
      Statements**


**and**


**Report
      of Independent Registered Public Accounting Firm**


**March
      31, 2006, 2005, and 2004**







**RANCHER
      ENERGY CORP.**








**Table
      of Contents**





**See
                pages attached to this report**Report
                of Independent Registered Public Accounting Firm
            
            
            F-1Consolidated
              Financial Statements
            
            
            F-2Consolidated
                Balance Sheets
            
            
            F-3Consolidated
                Statements of Operations and Comprehensive Loss
            
            
            F-4Consolidated
                Statements of Changes in Stockholders' (Deficit) Equity
            
            
            F-5Consolidated
                Statements of Cash Flows
            
            
            F-6Notes
                to Consolidated Financial Statements
            
            
            F-7





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To
          the
          Board of Directors
 Rancher
          Energy Corp.
 (fka
          Metalex Resources, Inc.)
 Spokane,
          Washington
 
 
 
 **REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
          FIRM**
 
 
 We
          have
          audited the accompanying balance sheets of Rancher Energy Corp. (fka Metalex
          Resources, Inc. and a Nevada corporation and an exploration stage company)
          as of
          March 31, 2006 and 2005, and the related statements of operations, stockholder’s
          deficit and cash flows for the periods then ended and for the period from
          February 4, 2004 (inception) through March 31, 2006. These financial statements
          are the responsibility of the Company’s management. Our responsibility is to
          express an opinion on these financial statements based on our
          audit.
 
 We
          conducted our audit in accordance with auditing standards of the Public
          Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. An audit includes examining,
          on a
          test basis, evidence supporting the amounts and disclosures in the financial
          statements. An audit also includes assessing the accounting principles
          used and
          significant estimates made by management, as well as evaluating the overall
          financial statement presentation. We believe that our audit provides a
          reasonable basis for our opinion.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the financial position of Rancher Energy Corp. as of
          March
          31, 2006 and 2005, and the results of its operations, stockholder’s deficit and
          cash flows for the periods then ended and for the period from February
          4, 2004
          (inception) through March 31, 2006 in conformity with accounting principles
          generally accepted in the United States of America.
 
 The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As discussed in Note 2 to the financial
          statements, the Company’s operating losses raise substantial doubt about its
          ability to continue as a going concern. Management’s plans regarding those
          matters also are described in Note 2. The financial statements do not include
          any adjustments that might result from the outcome of this
          uncertainty.
 
 
 /s/
Williams
&
Webster,
          P.S.
 Williams
          & Webster, P.S.
 *Certified
          Public Accountants*
 Spokane,
          Washington
 June
          19,
          2006
 
 *Return
            to Index*
 **RANCHER
                  ENERGY CORP.**
                **(FKA
                  METALEX RESOURCES, INC.****(AN
                  EXPLORATION STAGE COMPANY)****BALANCE
                  SHEETS**March
                  31,2006
              
              2005**ASSETS**CURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              46,081
              
              $
              4,060Total
                  Current Assets
              
              
              46,081
              
              
              4,060EQUIPMENT,
                  net
              
              
              384
              
              
              511OTHER
                  ASSETSSoftware,
                  net
              
              
              261
              
              
              178TOTAL
                  ASSETS
              
              $
              46,557
              
              $
              4,749**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY (DEFICIT)**CURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              477
              
              $
              795Payroll
                  taxes payable
              
              
              1,593
              
              
              108Advances
                  from officers
              
              
              -
              
              
              30,000Total
                  Current Liabilities
              
              
              2,070
              
              
              31,903COMMITMENTS
                  AND CONTINGENCIES
              
              
              -
              
              
              -STOCKHOLDERS’
                  EQUITY (DEFICIT)Common
                  stock, 100,000,000 shares authorized, $0.00001par
                  value, 28,500,0000 and 70,000,000 shares issued and
                  outstanding
              
              
              285
              
              
              700Additional
                  paid-in capital
              
              
              570,809
              
              
              374,300Accumulated
                  deficit during exploration stage
              
              
              (526,607
              )
              
              (402,154
              )TOTAL
                  STOCKHOLDERS’ EQUITY (DEFICIT)
              
              
              44,487
              
              
              (27,154
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
              
              $
              46,557
              
              $
              4,749
 
 
 
  The
            accompanying notes are an integral part of these financial
            statements.
 F-
            2
 *Return
            to Index*
  
 **RANCHER
                  ENERGY CORP.**
                **(FKA
                  METALEX RESOURCES, INC.)****(AN
                  EXPLORATION STAGE COMPANY)****STATEMENTS
                  OF
                  OPERATIONS**FromFebruary
                  4, 2004Years
                  Ended
              
              (Inception)
                  toMarch
                  31,
              
              March
                  31,2006
              
              2005
              
              2006REVENUE
              
              $
              -
              
              $
              -
              
              $
              -OPERATING
                  EXPENSESLegal
                  and accounting fees
              
              
              47,809
              
              
              8,795
              
              
              66,604Mining
                  exploration expense
              
              
              50,000
              
              
              -
              
              
              51,904Consulting
                  fees
              
              
              -
              
              
              -
              
              
              363,096Depreciation
              
              
              213
              
              
              201
              
              
              414Other
                  general and administrative expenses
              
              
              26,431
              
              
              18,158
              
              
              44,589TOTAL
                  EXPENSES
              
              
              124,453
              
              
              27,154
              
              
              526,607LOSS
                  FROM OPERATIONS
              
              
              (124,453
              )
              
              (27,154
              )
              
              (526,607
              )INCOME
                  TAXES
              
              
              -
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              (124,453
              )
              $
              (27,154
              )
              $
              (526,607
              )BASIC
                  AND DILUTEDNET
                  LOSS PER SHARE
              
              $
              nil
              
              $
              nilWEIGHTED
                  AVERAGE SHARESOUTSTANDING
                  USED IN BASIC ANDDILUTED
                  PER SHARE CALCULATION
              
              
              32,819,623
              
              
              70,000,000
 
  The
            accompanying notes are an integral part of these financial
            statements.
 F-
            3
 *Return
            to Index*
  
 **RANCHER
                    ENERGY CORP.**
                  **(FKA
                    METALEX RESOURCES, INC.)****(AN
                    EXPLORATION STAGE COMPANY)****STATEMENT
                    OF STOCKHOLDERS'
                    DEFICIT**Common
                    StockShares
                
                Amount
                
                Additional
                  Paid-in
                  Capital
                
                Accumulated
                  Deficit
                
                Total
                  Stockholders'
                  Equity
                    (Deficit)Stock
                    issued for repayment of expensesand
                    consulting services
                
                
                70,000,000
                
                $
                700
                
                $
                374,300
                
                $
                -
                
                $
                375,000Net
                    loss for the year ended, March 31, 2004
                
                
                -
                
                
                -
                
                
                -
                
                
                (375,000
                )
                
                (375,000
                )Balance,
                    March 31, 2004
                
                
                70,000,000
                
                
                700
                
                
                374,300
                
                
                (375,000
                )
                
                -Net
                    loss for the year ended March 31, 2005
                
                
                -
                
                
                -
                
                
                -
                
                
                (27,154
                )
                
                (27,154
                )Balance,
                    March 31, 2005
                
                
                70,000,000
                
                
                700
                
                
                374,300
                
                
                (402,154
                )
                
                (27,154
                )Common
                    stock issued for cash at $0.07 pershare
                    net of offering costs of $3,906
                
                
                28,000,000
                
                
                280
                
                
                195,814
                
                
                -
                
                
                196,094Shares
                    returned from founding stockholder in reorganization
                
                
                (69,500,000
                )
                
                (695
                )
                
                695
                
                
                -
                
                
                -Net
                    loss for the year ended, March 31, 2006
                
                
                -
                
                
                -
                
                
                
                
                
                (124,453
                )
                
                (124,453
                )Balance,
                    March 31, 2006
                
                
                28,500,000
                
                $
                285
                
                $
                570,809
                
                $
                (526,607
                )
                $
                44,487
 
  The
            accompanying notes are an integral part of these financial
            statements.
 F-
            4
 *Return
            to Index*
  
 **RANCHER
                  ENERGY CORP.**
                **(FKA
                  METALEX RESOURCES, INC.)****(AN
                  EXPLORATION STAGE COMPANY)****STATEMENTS
                  OF CASH FLOWS**FromFebruary
                  4,2004Years
                  Ended
              
              (Inception)
                  toMarch
                  31,
              
              March
                  31,2006
              
              2005
              
              2006**CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (124,453
              )
              $
              (27,154
              )
              $
              (526,607
              )Adjustments
                  to reconcile net loss to net cash used byoperating
                  activities:Expenses
                  paid by shareholder
              
              
              -
              
              
              -
              
              
              11,904Common
                  stock issued for services
              
              
              -
              
              
              -
              
              
              363,096Depreciation
              
              
              213
              
              
              201
              
              
              414Increase
                  (decrease) in accounts payable
              
              
              (318
              )
              
              795
              
              
              477Increase
                  in payroll taxes payable
              
              
              465
              
              
              1,108
              
              
              1,593Net
                  cash used by operating activities
              
              
              (124,073
              )
              
              (25,050
              )
              
              (149,123
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Purchase
                  of equipment
              
              
              -
              
              
              (890
              )
              
              (890
              )Net
                  cash used by investing activities
              
              
              -
              
              
              (890
              )
              
              (890
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from sale of common stock
              
              
              196,094
              
              
              -
              
              
              196,094Proceeds
                  from shareholder loan
              
              
              -
              
              
              30,000
              
              
              30,000Payment
                  of shareholder loan
              
              
              (30,000
              )
              
              -
              
              
              (30,000
              )Net
                  cash used by financing activities
              
              
              166,094
              
              
              30,000
              
              
              196,094**INCREASE
                  IN CASH AND CASH EQUIVALENTS:**Change
                  in cash
              
              
              42,021
              
              
              4,060
              
              
              46,081Beginning
                  of period
              
              
              4,060
              
              
              -
              
              
              -End
                  of period
              
              $
              46,081
              
              $
              4,060
              
              $
              46,081**SUPPLEMENTAL
                  CASH FLOW DISCLOSURE:**Interest
                  paid
              
              $
              -
              
              $
              -
              
              $
              -Income
                  taxes paid
              
              $
              -
              
              $
              -
              
              $
              -**NON-CASH
                  INVESTING AND FINANCING TRANSACTIONS:**Common
                  stock issued for services
              
              $
              -
              
              $
              -
              
              $
              363,096Common
                  stock issued for expenses paid by shareholder
              
              $
              -
              
              $
              -
              
              $
              11,904
 
 
 
 
  The
              accompanying notes are an integral part of these financial
              statements.
 F-
              5
 *Return
            to Index*
  **RANCHER
                  ENERGY CORP.**
                **(FKA
                  METALEX RESOURCES, INC.)****(AN
                  EXPLORATION STAGE COMPANY)****NOTES
                  TO FINANCIAL
                  STATEMENTS**
   **NOTE
        1 - ORGANIZATION AND DESCRIPTION OF BUSINESS**
 
 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”) and announced that the Company changed its
        business plan and focus from mining to becoming an independent oil and gas
        exploration and production company that concentrates on applying secondary
        and
        tertiary recovery technology to older, historically productive fields primarily
        in North America. See Note 7 regarding additional events that occurred
        subsequent to year end.
 
 The
        Company's fiscal year end is March 31.
 
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 This
        summary of significant accounting policies of the Company is presented to
        assist
        in understanding the financial statements. The financial statements and notes
        are representations of the Company's management which is responsible for
        their
        integrity and objectivity. These accounting policies conform to accounting
        principles generally accepted in the United States of America, and have been
        consistently applied in the preparation of the financial
        statements.
 
 Accounting
        Method
 The
        Company uses the accrual basis of accounting in accordance with accounting
        principles generally accepted in the United States of America.
 
 Basic
        and 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
        and 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.
 
 Compensated
        Absences
 Currently,
        the Company has two employees, but presently does not offer compensated
        absences. The Company may change its policy to recognize the costs of
        compensated absences in the future.
 
 Derivative
        Instruments
 The
        Financial Accounting Standards Board issued Statement of Financial Accounting
        Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
        Activities", as amended by SFAS No. 137, "Accounting for Derivative Instruments
        and Hedging Activities--Deferral of the Effective Date of FASB No. 133",
        and
        SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
        Hedging
        Activities" and SFAS No. 149, “Amendment of Statement 133 on Derivative and
        Hedging Activities”, which is effective for the Company at inception. These
        statements establish accounting and reporting standards for derivative
        instruments, including certain derivative instruments embedded in other
        contracts, and for hedging activities. They require that an entity recognize
        all
        derivatives as either assets or liabilities in the consolidated balance sheet
        and measure those instruments at fair value.
 
  F-
            6
 *Return
            to Index*
 **RANCHER
                  ENERGY CORP.**
                **(FKA
                  METALEX RESOURCES, INC.)****(AN
                  EXPLORATION STAGE COMPANY)****NOTES
                  TO FINANCIAL
                  STATEMENTS**
  If
          certain conditions are met, a derivative may be specifically designated
          as a
          hedge, the objective of which is to match the timing of gain or loss recognition
          on the hedging derivative with the recognition of (i) the changes in the
          fair
          value of the hedged asset or liability that are attributable to the hedged
          risk
          or (ii) the earnings effect of the hedged forecasted transaction. For a
          derivative not designated as a hedging instrument, the gain or loss is
          recognized in income in the period of change.
 At
        March
        31, 2006 and 2005, the Company had not engaged in any transactions that would
        be
        considered derivative instruments or hedging activities.
 
 Exploration
        Stage Activities and Costs
 The
        Company was in the exploration stage at March 31, 2006 and had not yet realized
        any revenues from its planned operations. In accordance with accounting
        principles generally accepted in the United States of America, the Company
        expensed mining exploration costs as incurred. Exploration costs expensed
        during
        the years ended March 31, 2006 was $50,000. The Company had no exploration
        stage
        expenses for the year ended March 31, 2005.
 
 Subsequent
        to the date of financials, the Company changed its business plan and focus
        from
        mineral exploration to oil and gas exploration and ceased the above exploration
        activities.
 
 Fair
        Value of Financial Instruments
 The
        carrying amounts for cash and payables approximate their fair
        value.
 
 Foreign
        Currency Valuation
 Assets
        and liabilities of the Company's foreign operations are translated into U.S.
        dollars at year-end exchange rates, and revenue and expenses are translated
        at
        the average exchange rates during the period. The net effect of exchange
        differences arising from currency translation will be disclosed as a separate
        component of stockholders' equity. Realized gains and losses from foreign
        currency transactions are reflected in the results of operations.
 
 Going
        Concern
 As
        shown
        in the accompanying financial statements, the Company has no revenues, has
        incurred a net loss of $526,607 for the period from February 4, 2004 (inception)
        through March 31, 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 receipt of funds
        subsequent to March 31, 2006 from a private financing agreement will generate
        sufficient cash for the Company to continue to operate based on current expense
        projections. The Company anticipates it will require over $1,500,000 to close
        on
        the acquisition of oil and gas properties, 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. This statement is effective
        beginning for fiscal years after December 15, 2001, with earlier application
        encouraged. The Company has adopted this statement and it has had no immediate
        impact on the financial statements at March 31, 2006 and 2005.
 
 F-
            7
 *Return
            to Index*
  **RANCHER
                    ENERGY CORP.**
                  **(FKA
                    METALEX RESOURCES, INC.)****(AN
                    EXPLORATION STAGE COMPANY)****NOTES
                    TO FINANCIAL
                    STATEMENTS**
 Use
          of
          Estimates
 The
          process of preparing financial statements in conformity with accounting
          principles generally accepted in the United States of America 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.
 
 Provision
          for Taxes
 Income
          taxes are provided based upon the liability method of accounting pursuant
          to
          Statement of Financial Accounting Standards, FAS No. 109, "Accounting for
          Income
          Taxes" (hereafter “SFAS No. 109”). Under this approach, deferred income taxes
          are recorded to reflect the tax consequences on future years of differences
          between the tax basis of assets and liabilities and their financial reporting
          amounts at each year end. A valuation allowance is recorded against deferred
          tax
          assets if management does not believe the Company has met the "more likely
          than
          not" standard imposed by SFAS No. 109 to allow recognition of such an
          asset.
  The
        significant components of the deferred tax assets at March 31, 2006 and 2005
        were as follows:
 
 2006
              
              2005Net
                  operating loss carryforward:
              
              $
              163,500
              
              $
              39,700Deferred
                  tax asset
              
              
              55,500
              
              
              13,500Deferred
                  tax asset valuation allowance
              
              $
              (55,500
              )
              $
              (13,500
              )Net
                  deferred tax asset
              
              $
              --
              
              $
              --
 
 At
        March
        31, 2006, the Company has net operating loss carryforwards of approximately
        $163,500, which expire in the years 2024 and 2025. The Company recognized
        $363,096 of losses from the issuance of common stock for services in 2004,
        which
        were not deductible for tax purposes and are not included in the calculation
        of
        the deferred tax assets.
 
 At
        March
        31, 2006, the Company had net deferred tax assets of approximately $55,500
        principally arising from net operating loss carryforwards for income tax
        purposes. As management of the Company cannot determine that it is more likely
        than not that the Company will realize the benefit of the net deferred tax
        asset, a valuation allowance equal to the net deferred tax asset has been
        established at March 31, 2006. The change in valuation allowance from March
        31,
        2005 to March 31, 2006 was $42,000.
 
 Oil
        and Gas Properties
 For
        its
        oil and gas exploration and producing activities, the Company will use the
        full
        cost method of accounting. Accordingly, all costs related to the acquisition,
        exploration and development of both proved and unproved properties will be
        capitalized. The Company's properties are expected to be located within the
        continental United States, which will constitute one cost center. The
        amortization of proved oil and gas properties will be calculated using the
        units-of-production method, based on proved reserves of oil and 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.
 
  F-
            8
 *Return
            to Index*
  **RANCHER
                    ENERGY CORP.**
                  **(FKA
                    METALEX RESOURCES, INC.)****(AN
                    EXPLORATION STAGE COMPANY)****NOTES
                    TO FINANCIAL
                    STATEMENTS**
  Capitalized
          costs, less related accumulated amortization, may not exceed the sum of:
          (1) the
          present value of future net revenues from estimated production of proved
          oil and
          gas reserves; (2) the cost of properties not being amortized; and (3) the
          lower
          of cost or estimated fair value of unproved properties included in the
          costs
          being amortized.
  Normal
          dispositions of oil and 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 and 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.
 Recently
        Issued Accounting Pronouncements
 In
        March
        2006, the Financial Accounting Standards Board 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: a transfer of the servicer’s financial assets
        that meets the requirements for sale accounting; a transfer of the servicer’s
        financial assets to a qualifying special - purpose entity in a guaranteed
        mortgage securitization in which the 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 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
        February 2006, the Financial Accounting Standards Board 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 special-purpose
        entity 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
        May
        2005, the Financial Accounting Standards Board issued Statement of Financial
        Accounting Standards No. 154, “Accounting Changes and Error Corrections”
(hereinafter “SFAS No. 154”) which replaces Accounting Principles Board Opinion
        No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in
        Interim Financial Statements— An Amendment of APB Opinion No. 28”. SFAS No. 154
        provides guidance on accounting for and reporting changes in accounting
        principle and error corrections. SFAS No. 154 requires that changes in
        accounting principle be applied retrospectively to prior period financial
        statements and is effective for fiscal years beginning after December 15,
        2005.
        Management does not expect SFAS No. 154 to have a material impact on the
        company’s financial position, results of operations, or cash flows.
 
  F-
            9
 *Return
            to Index*
  **RANCHER
                    ENERGY CORP.**
                  **(FKA
                    METALEX RESOURCES, INC.)****(AN
                    EXPLORATION STAGE COMPANY)****NOTES
                    TO FINANCIAL
                    STATEMENTS**
  **NOTE
          3 - MINING CLAIMS**
 
 In
          February 2004, the Company, through its former president, acquired for
          $1,904
          ($2,500 CDN), 100% of the rights, title and interest in four mining claims
          in
          the Yalakom River Valley in British Columbia, Canada. The claims were recorded
          in Mr. Stytsenko’s name. Title to the claims was expected to be conveyed to a
          wholly owned subsidiary corporation of the Company if mineralized material
          was
          discovered. The wholly owned subsidiary corporation would not be incorporated
          unless mineralized material was discovered.
 
 With
          the
          subsequent change in its business plan and focus (see Notes 1 and 7), the
          Company will not continue with any exploration of this property and has
          chosen
          to abandon it entirely.
 
 **NOTE
        4 - COMMON STOCK**
 
 The
        Company is authorized to issue 100,000,000 shares of $0.00001 par value common
        stock. All shares have equal voting rights, are non-assessable and have one
        vote
        per share. Voting rights are not cumulative and, therefore, the holders of
        more
        than 50% of the common stock could, if they choose to do so, elect all of
        the
        directors of the Company.
 
 On
        February 5, 2004, a total of 70,000,000 shares of restricted common stock
        were
        issued to the Company’s president. There was no public offering of any
        securities. The aforementioned shares were issued in payment of legal fees
        of
        $10,000, consulting fees of $363,096, and $1,904 for purchase of mining claims.
        These shares were issued pursuant to exemption from registration contained
        in
        Section 4 (2) of the Securities Act of 1933.
 
 During
        the three months ended June 30, 2005 the Company issued 28,000,000 shares
        of
        common stock for cash in the amount of approximately $0.007 per share, or
        $200,000 before offering costs of $3,906.
 
 During
        the year ended March 31, 2006, the Company approved a 13-for-1 stock dividend
        which is being treated as a 14-for-1 forward stock split for accounting
        purposes. All share amounts in the financial statements have been restated
        to
        reflect this split.
 
 In
        March
        2006, in anticipation of certain management changes and reorganization of
        the
        Company’s activities, the Company’s president and majority shareholder returned
        69,500,000 shares of his common stock and retained 500,000 shares of common
        stock. The restructuring of the capital structure of the Company was in
        anticipation of a change to the Company’s direction and business focus. There
        was no established secondary market for the Company’s common stock and the
        cancellation only had the effect of reducing the shares issued for the
        president’s initial investment of $375,000 in 2004.
 
 
 **NOTE
        5 - RELATED PARTY TRANSACTIONS**
 
 The
        Company occupied office space provided by its executive administrator at
        no
        charge through the end of March 2006. The value of this space is not considered
        materially significant for financial reporting purposes. Additionally, the
        Company’s former president has advanced funds to the Company to pay $11,904 of
        initial legal fees and mining claims. The funds advanced were repaid as part
        of
        the original stock issuance transaction. See Note 4.
 
  F-
            10
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            to Index*
  **RANCHER
                    ENERGY CORP.**
                  **(FKA
                    METALEX RESOURCES, INC.)****(AN
                    EXPLORATION STAGE COMPANY)****NOTES
                    TO FINANCIAL
                    STATEMENTS**
 During
        the year ended March 31, 2005, an officer advanced money to the Company in
        the
        amount of $30,208 to pay accounting fees and to provide operating capital.
        During the year ended March 31, 2006, the Company repaid to the officer $32,112,
        which included an overpayment of $1,904 for the costs of the initial staking
        fees at the mining site that had already been repaid to the officer. (See
        Note
        4.) The Company discovered this oversight and the Company officer repaid
        the
        overpayment during the year ended March 31, 2006.
 
 
 **NOTE
        6 - COMMITMENTS AND CONTINGENCIES**
 
 Mining
        and Oil and Gas Industries
 Through
        the end of fiscal 2006, the Company was engaged in the exploration and
        development of mineral properties. At present, there are no feasibility studies
        establishing proven and probable reserves.
 
 Although
        the minerals exploration and mining industries are inherently speculative
        and
        subject to complex environmental regulations, the Company was unaware of
        any
        pending litigation or of any specific past or prospective matters which could
        impact its mining claims at March 31, 2006 or 2005.
 
 Subsequent
        to the date of the financials, the Company changed its focus from mineral
        exploration to oil and gas exploration and production. At this time the Company
        is unaware of any pending litigation or of any specific past or prospective
        matters which could impair the value of its oil and gas properties acquired
        subsequent to March 31, 2006.
   **NOTE
        7.  SUBSEQUENT EVENTS**
 
 Change
        of Direction and Focus
 On
        May
        15, 2006, the Company announced that Andrei Stytsenko resigned as the Company’s
        principal executive officer but would remain with the Company both as a board
        member and as vice president of production. Mr. Stytsenko’s resignation was not
        as a result of any disagreement with the Company but rather as the result
        of the
        change of direction and focus of the Company from the exploration and
        development of gold mineral deposits and reserves in British Columbia, Canada
        to
        its new business direction as an oil and gas exploration and production company
        focusing primarily on the Rocky Mountain Region of the United States.
 
 On
        May
        15, 2006, the Company entered into an employment contract with its new president
        and chief executive officer. and agreed to pay the executive a minimum of
        $950
        per month to maintain an office in Denver, Colorado. In addition, the Company
        granted the executive an option to acquire restricted shares of its common
        stock
        at a price of $0.00001 per share as follows: (i) 1,000,000 shares on the
        execution of the employment agreement, (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, the executive will be
        entitled to purchase all shares that have vested, and all unvested shares
        will
        be forfeited.
 
 Property
        Acquisitions
 
 *The
        Burke Ranch Field*
 Subsequent
        to March 31, 2006, 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 central region of
        the
        state. The Company will acquire up to an 89.82% interest before payout, which
        reverts to a 49.90% interest after payout.
 
  F-
            11
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            to Index*
  **RANCHER
                    ENERGY CORP.**
                  **(FKA
                    METALEX RESOURCES, INC.)****(AN
                    EXPLORATION STAGE COMPANY)****NOTES
                    TO FINANCIAL
                    STATEMENTS**
 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.
 
 The
        Company also recently entered into an agreement with NITEC LLC 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.
 
 *The
        Broadview Dome Prospect*
 On
        June
        21, 2006, the Company acquired the Broadview Dome Prospect, located
        approximately 25 miles northwest of Billings, Montana, in the Crazy Mountain
        Basin. This natural gas prospect involves approximately 7,600 acres. Rancher
        Energy holds a 100.00% working interest until payout, and 55.00% working
        interest after payout.
 
 Other
        Subsequent Events
 On
        June
        6, 2006, the Company entered into a 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 provides that Enerex has 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 NASDAQ on the day preceding notice from Enerex of its intent
        to
        convert all or a portion of the loan into shares of the Company, or (ii)
        in the
        event the Company is offering shares or units to the general public, at the
        price such shares or units are being offered to the general public.
 
 On
        June
        6, 2006, at the Wyoming BLM auction, the Company successfully bid for and
        has
        the right to acquire an additional 8,183 acres contiguous and/or adjacent
        to its
        Burke Ranch Field (the “BLM Leases”). The BLM Leases will be acquired for a
        total cost of $143,237 or an average cost of approximately $16.00 an acre,
        excluding first annual
        rental payments of $12,275 and administration fees of $910, and the closing
        is
        expected to occur in approximately 90 days. The BLM Leases, together with
        the
        Burke Ranch Field’s original 1,921 acres, will increase the total acreage of the
        Company’s Burke Ranch Field more than five times (5X) to 10,104 acres.
 
 On
        June
        9, 2006, the Company entered into a loan agreement with Venture Capital First
        LLC (“Venture Capital”) to borrow from Venture Capital the principal amount of
        U.S. $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 provides that Venture Capital
        has the option to convert all or a portion of the $500K 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 NASDAQ on the day preceding notice
        from Venture Capital of its intent to convert all or a portion of the loan
        into
        shares of the Company, or (ii) in the event the Company is offering shares
        or
        units to the general public, at the price such shares or units are being
        offered
        to the general public.
 
  F-
              12
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            to Index*





**Item
      9.****CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**





None.








**Item
      9A.****CONTROLS
      AND
      PROCEDURES.**




***Disclosure
      Controls and Procedures.***




Our
      management, as required by Rule 13a-15(b) and Rule 15d-15(e) of the Securities
      Exchange Act of 1934, 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 Securities Exchange Act of 1934. As of March
      31,
      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 Securities Exchange Act of 1934 as of the year ending March
      31,
      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 March 31, 2006 were
      effective in ensuring information required to be disclosed in this Annual Report
      on Form 10-K 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.







**Item
      9B.****OTHER
      INFORMATION.**





None.




25
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**PART
      III**





**Item
      10.****DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT.**





**Directors
      and Executive Officers.**





Directors,
      executive officers, and significant employees of the Company, and their
      respective ages and positions with the Company, are as follows:





Name
            
            Age
            
            PositionJohn
                Works
            
            51
            
            President,
                Chief Executive Officer, Chief Financial Officer and a
                directorAndrei
                Stytsenko
            
            40
            
            Vice
                President—Production and a director





**JOHN
      WORKS** brings
      over 23 years of experience in the global oil and gas industry as a corporate
      executive, investment banker, and lawyer focusing on originating, structuring,
      financing, and implementing domestic and international oil and gas projects.





Before
      joining Rancher Energy, Mr. Works was the founder and Managing Director of
      Emerging Markets Finance International, LLC (EMFI) of Denver, Colorado where
      the
      firm is positioned as a leading emerging markets international financial advisor
      and arranger, with oil and gas projects as its core area of expertise. In 2005
      Mr. Works served as President and Chief Operating Officer of American
      International Depository and Trust, a specialized financial institution
      providing foreign clients with traditional depository banking and trust services
      as well as privacy and protection features typically provided by offshore
      financial institutions and private banks. In 2001 Mr. Works served as Senior
      Vice President and Head of International Producer Finance at Shell Capital,
      The
      Shell Group’s venture capital affiliate, in Houston, Texas. Prior to Shell
      Capital, from 1999-2001 Mr. Works was President and CEO of The Rompetrol
      Group in Bucharest, Romania, Romania's largest privately-owned oil and gas
      company. From 1997-1999 Mr. Works was Senior Vice President and Deputy Head
      of
      Project Finance Advisory at the ABN Amro bank in Amsterdam, the Netherlands,
      where he originated and executed international oil and gas project advisory
      and
      finance transactions involving the bank and capital markets, multilateral and
      export credit agencies, and mergers and acquisitions. From 1996-1997 Mr. Works
      was Vice President, Emerging Markets, Former Soviet Union, at J.P. Morgan's
      investment banking unit in London, England where he was responsible for client
      relationships and transaction execution for oil and gas projects in Russia
      and
      Central Asia. From 1990-1996 Mr. Works was Vice President and Legal Relationship
      Manager in J.P. Morgan’s New York office for the bank’s business units involved
      in U.S. and global project advisory and mergers and acquisitions assignments
      where he assisted in analyzing, structuring, drafting, negotiating, and closing
      U.S. and international mergers and acquisitions, divestitures, restructurings,
      and recapitalizations.





Mr.
      Works
      began his career in 1982 as a corporate finance attorney with several Wall
      Street firms including Shearman and Sterling and Cahill Gordon and Reindel
      in
      New York. Mr. Works was educated at the University of Denver College Of Law
      (J.D. 1982), the Institut d'Etudes Politiques de Paris (Certificat d'Etudes
      Politiques 1978), the Université de Paris-IV (Sorbonne) (Certificat de Langue
      Française 1977), and the University of Kansas (B.A. 1977). Mr. Works is a U.S.
      national and is fluent in English and French. He currently resides in Denver,
      Colorado.


26
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**ANDREI
      STYTSENKO** was **** until
      r ecently
      the President and a Director of the mineral exploration company Metalex
      Resources, Mr. Stytsenko previously was secretary and member of the board of
      directors of Aberdene Mines Limited. From 1985 to 1996, Mr. Stytsenko was the
      managing supervisor for Ivano Frankovski Drilling Company, located in North
      Russia. Mr. Stytsenko’s responsibilities included exploratory oil and gas
      drilling at depths in excess of up to 10,000 feet. From 1997 until 1998, Mr.
      Stytsenko was field supervisor for Booker Gold Exploration where his
      responsibilities included core loding, assaying, and mapping. Mr. Stytsenko
      earned a certificate of Overhaul Well Drilling Operations from the Nadvirnyansk
      Industrial Training Center in April 1993. In addition, Mr. Stytsenko obtained
      a
      Certificate of Contemporary Training for Production and Exploration Drilling
      Operator. Further, Mr. Stytsenko completed a 5 year program, which by North
      American Standards, is the equivalent to a Masters degree, receiving a diploma
      in Mining/Drilling Engineering from the Ivano-Frankovski State Technical Oil
      and
      Gas University in Russia, specializing in Oil and Gas Well Drilling in June
      1996.




All
      directors serve as directors for a term of one year or until his successor
      is
      elected and qualified. All officers hold office until the first meeting of
      the
      board of directors after the annual meeting of stockholders next following
      his
      election or until his successor is elected and qualified. A director or officer
      may also resign at any time.





**Committees
      of the Board of Directors.**





At
      present, the Company does not have an independent audit committee of its Board
      of Directors. It is anticipated that independent board members will be appointed
      and that an audit committee will be formed during the current fiscal year.





**Code
      of Ethics.**





The
      Company has adopted a Code of Ethics and Business Conduct (the “Code of Ethics”)
      that applies to all of the officers, directors, and employees of the Company.
      The Code of Ethics will, in the near future, be posted on our website
      ( www.rancherenergy.com ).
      We
      will disclose on our website any future waivers of, or amendments to, our Code
      of Ethics.





**Compliance
      with Section 16(a) of the Exchange Act.**





Section
      16(a) of the Securities Exchange Act of 1934 requires that the Company’s
      directors and certain of its officers to file reports of ownership and changes
      of ownership of the Company’s common stock with the SEC and NASDAQ. Based solely
      on copies of such reports provided to the Company, the Company believes that
      all
      directors and officers filed on a timely basis all such reports required of
      them
      with respect to stock ownership and changes in ownership during fiscal year
      2006.





27
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**Item
      11.****EXECUTIVE
      COMPENSATION.**





The
      following table sets forth information concerning the compensation received
      by
      Mr. Works and Mr. Stytsenko:





**Summary
      Compensation Table**





Annual
                Compensation
            Long
                Term CompensationAwards
            PayoutsName
                and Principal Position
            Fiscal
                Year
            Salary
              ($)
            Bonus
              ($)
            Other
              Annual
              Compen-
              sation
                ($)
            Restricted
              Stock
              awards
            Securities
              Underlying
              Options
              SARs
              (#)
            LTIP
              Payouts
              ($)
            All
                Other
              CompensationJohn
                Works, CEO
            2006
            0
            0
            0
            0
            0
            0
            0Andrei
                Stytsenko, Vice President
            2006
              2005
              2004
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0





**Options/SARs
      Grants During Last Fiscal Year.**





There
      were no options granted to the Company’s named executive officers during the
      fiscal year ended March 31, 2006, however see “Employment Contract”
below.





**Aggregated
      Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value.**





Number
                ofShares
            
            
            
            Securities
            
            Value
                ofAcquired
            
            
            
            Underlying
            
            UnexercisedOn
            
            Value
            
            Unexercised
            
            In-the-moneyName
            
            Exercise
            
            Realized
            
            Options
            
            OptionsJohn
                Works
            
            
            0
            
            
            0
            
            
            0(1)
            
            $
            0Andrei
                Stytsenko
            
            
            0
            
            
            0
            
            
            0
            
            $
            0


__________________





(1)  See
      “Employment Contract” below





**Employee
      Pension, Profit Sharing, or Other Retirement Plans.**





None.





**Compensation
      of Directors.**





The
      Company does not yet pay its directors any compensation for serving on the
      Company’s board of directors.


28
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**Employment
      Contract.**





Subsequent
      to March 31, 2006, on May 15, 2006, the Company entered into an employment
      agreement (the “Works Employment Agreement”) with John Works wherein we engaged
      Mr. Works as our president, chief executive officer, and a director. The term
      of
      the Works Employment Agreement is two 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 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 Works Employment Agreement, (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 Works Employment Agreement is
      terminated, Mr. Works will be entitled to purchase all shares that have vested,
      and all unvested shares will be forfeited.







29
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**Item
      12.****SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS.**




The
      following table sets forth, as of June 20, 2006, the number of and percent
      of
      the Company’s common stock beneficially owned by persons or groups known by us
      to own beneficially five percent or more of the Company’s common stock:





Name
                and Address of Beneficial Owner
            
            Amount
                and Nature of Beneficial Ownership
            
            Percent
                of ClassJohn
                Works, President and Chief Executive Officer
            
            1,000,000
                (direct)
            
            3.4%3445
                South Columbine CircleEnglewood,
                Colorado 80113Andrei
                Stytsenko
            
            500,000
                (direct)
            
            1.7%203-17711
                64thAvenueEdmonton,
                AlbertaCanada
                T5T 2J9Horatio
                Valdes
            
            1,750,000
                (1)
            
            5.9%Calle
                1RA Edificio Villa Gabriella Apt. 6-BPanama
                City, Republic of Panama


___________________





(1)  The
      Company has not received copies of Schedules 13-D or 13G filed by any person
      indicating ownership of more than 5% of the Company’s securities. Based solely
      on a June 20, 2006 stockholders' list, no holder other than Mr. Valdes is shown
      as owning of record more than 5% of the Company’s securities, other than the
      nominee CEDE & Co.





The
      following table sets forth, as of June 20, 2006, the number of and percent
      of
      the Company’s common stock beneficially owned by (a) all directors and nominees,
      naming them, (b) the named executive officers, and (c) the Company’s directors
      and executive officers as a group, without naming them:





Name
                and Address of Beneficial Owner
            
            Amount
                and Nature of Beneficial Ownership
            
            Percent
                of ClassJohn
                Works
            
            1,000,000
                (direct)
            
            3.4%3445
                South Columbine CircleEnglewood,
                Colorado 80113Andrei
                Stytsenko
            
            500,000
                (direct)
            
            1.7%203-17711
                64thAvenueEdmonton,
                AlbertaCanada
                T5T 2J9All
                executive officers anddirectors
                as a group (2 persons)
            
            1,500,000
            
            5.1%






30
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**Item
      13.****CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS.**




**Transactions
      Involving Mr. Works.**





Subsequent
      to March 31, 2006, on May 15, 2006, the Company entered into an employment
      agreement with John Works (the “Works Employment Agreement”) wherein we engaged
      Mr. Works as our president, chief executive officer, and a director. The term
      of
      the Works Employment Agreement is two 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 Works Employment
      Agreement, (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 Works
      Employment Agreement is terminated, Mr. Works will be entitled to purchase
      all
      shares that have vested, and all unvested shares will be forfeited.





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




**Audit
      and Non-Audit Fees.**




Aggregate
      fees for professional services rendered for the Company by Williams and Webster,
      P.S. as of or for the two fiscal years ended March 31, 2006 and 2005,
      respectively, are set forth below:




**Fiscal
                Year**
              **2006**
            
            **Fiscal
                Year**
              **2005**Audit
                Fees
            
            $
            12,205
            
            $
            5,295Audit-Related
                Fees
            
            -
            
            -Tax
                Fees
            
            -
            
            -T
            
            $
            12,205
            
            $
            5,295




***Audit
      Fees--*** Aggregate
      fees for professional services rendered by Williams and Webster, P.S. in
      connection with its audit of the Company’s consolidated financial statements for
      the fiscal years 2006 and 2005 and the quarterly reviews of the Company’s
      financial statements included in Forms 10-Q.




***Audit-Related
      Fees--*** These
      were primarily related to SEC filings.




***Tax
      Fees--*** These
      were related to tax compliance and related tax services.




**Policy
      on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
      of
      Independent Auditors.**




At
      present the Company has no audit committee and the fees and nature of the
      services of its registered independent public accountant are approved by the
      Company’s board of directors.


31
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**Item
      15.****EXHIBITS
      AND FINANCIAL STATEMENT
      SCHEDULES**




(a)  **Financial
      Statements and Financial Statement Schedules.**





(1)  Financial
      Statements are set forth in Item 8 of this report.





(2)  No
      Financial Statement Schedules are included herein because such schedules are
      not
      applicable, are not required, or because the required financial information
      is
      included in the Financial Statements or notes thereon.





(b)  **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 and Development Agreement dated June 15,
                2006
                between Big Snowy Resources and Rancher Energy Corp.(2)10.3
            Burke
                Ranch Unit Purchase and Participation Agreement dated February 6,
                2006
                between Hot Springs Resources LTD. and PIN Petroleum Partners
                LTD.(2)




10.4a
            $500K
                Loan Agreement dated June 9, 2006 between Rancher Energy and Venture
                Capital(3)10.4b
            $150K
                Loan Agreement dated June 6, 2006 between Rancher Energy Corp. and
                Enerex
                Capital.(2)10.5
            Work
                  Study Contract with NITEC LLC dated June 7, 2006 between Rancher
                  Energy
                  Corp. and NITEC LLC.(2)10.6
            PIN
              Resources Assignment dated June 21, 2006 of an agreement between PIN
              Resources and Hot Springs Resources, Ltd. dated February 6,
              2006.(2)10.8
            PIN
              Resources Assignment dated June 6, 2006 of rights under an Exploration
              and
              Development Agreement dated June 15, 2006 with Big Snowy Resources,
              Inc.(2)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.(2)32
            Certification
                by Chief Executive Officer and Chief Financial Officer pursuant to
                18 U.S.
                C. Section 1350.(2)


__________________





(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)  Filed
      herewith.


32
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          to Index*


(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 filed by the registrant on July 8,
      2005.





(c)  **No
      financial statements have been excluded pursuant to Rule
      14a-3(b).**


33
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**RANCHER
      ENERGY CORP.**





**SIGNATURES**





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





**RANCHER
              ENERGY CORP.**Date: June
              28, 2006
            By:
            /s/ 
              John WorksJohn
                Works, President, Principal Executive Officer, Secretary, Treasurer,
                Principal FinancialOfficer,
                andPrincipal
                Accounting Officer


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





Date: June
              28, 2006
            By:
            /s/ 
              John WorksJohn
                Works, President, Principal Executive Officer, Secretary, Treasurer,
                Principal FinancialOfficer,
                and Principal Accounting
                Officer


Date: June
              28, 2006
            By:
            /s/ 
              Andrei StytsenkoAndrei
                Stytsenko, a director


34
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          to Index*




**EXHIBIT
      INDEX**





**Exhibit
                  No.**
              **Description**3.1
              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 and Development Agreement dated June
                  15, 2006
                  between Big Snowy Resources and Rancher Energy Corp.(2)10.3
              Burke
                  Ranch Unit Purchase and Participation Agreement dated February
                  6, 2006
                  between Hot Springs Resources LTD. and PIN Petroleum Partners
                  LTD.(2)
  10.4a
              $500K
                  Loan Agreement dated June 9, 2006 between Rancher Energy and Venture
                  Capital(3)10.4b
              $150K
                  Loan Agreement dated June 6, 2006 between Rancher Energy Corp.
                  and Enerex
                  Capital.(2)10.5
              Work
                    Study Contract with NITEC LLC dated June 7, 2006 between Rancher
                    Energy
                    Corp. and NITEC LLC.(2)10.6
              PIN
                Resources Assignment dated June 21, 2006 of an agreement between
                PIN
                Resources and Hot Springs Resources, Ltd. dated February 6,
                2006.(2)10.8
              PIN
                Resources Assignment dated June 6, 2006 of rights under an Exploration
                and
                Development Agreement dated June 15, 2006 with Big Snowy Resources,
                Inc.(2)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.(2)32
              Certification
                  by Chief Executive Officer and Chief Financial Officer pursuant
                  to 18 U.S.
                  C. Section 1350.(2)
 __________________
 (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)  Filed
      herewith.





(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-K filed by the registrant on July 8,
      2005.








E-
            1
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          to Index*