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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-QSB

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

	For the quarterly period ended June 30, 2007

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

	For the transition period __________ to __________

	Commission File Number: 000-52001

Delta Oil & Gas, Inc.

(Exact name of small business issuer as specified in its charter)

Colorado	91-2102350
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

2600 144 4th Ave S.W , Calgary, Alberta T2P 3N4

(Address of principal executive offices)

866-355-3644

(Issuer’s telephone number)

_______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [ ] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 45,940,506 common shares as of July 12, 2007.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

Table of Contents

	TABLE OF CONTENTS	Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis or Plan of Operation	4
Item 3.	Controls and Procedures	13
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Submission of Matters to a Vote of Security Holders	14
Item 5.	Other Information	15
Item 6.	Exhibits	15

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our unaudited financial statements included in this Form 10-QSB are as follows:
F-1	Balance Sheet as of June 30, 2007;
F-2	Statements of Operations for the three and six months ended June 30, 2007 and 2006;
F-3	Statements of Cash Flows for the six months ended June 30, 2007 and 2006;
F-4	Notes to Financial Statements;

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-QSB. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2007 are not necessarily indicative of the results that can be expected for the full year.

Table of Contents

DELTA OIL & GAS, INC.

(A Development Stage Company)

Consolidated Balance Sheets

(Stated in U.S. Dollars)

	Unaudited June 30, 2007		Audited December 31, 2006
ASSETS

Current
Cash and cash equivalents	$	1,063,867	$	1,668,758
Accounts receivable		149,210		88,451
Prepaid expenses		1,716		1,611
		1,214,793		1,758,820

Natural Gas And Oil Properties
Proved property		879,178		812,717
Unproved property		2,082,308		1,816,007
		2,961,486		2,628,724

Other Equipment
Computer equipment		3,492		3,492
Less: accumulated depreciation		(2,966)		(2,655)
		526		837
	$	4,176,805	$	4,388,381

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES

Current
Accounts payable and accrued liabilities	$	89,329	$	39,526
Income taxes payable		4,161		-

Long Term
Asset retirement obligation		40,635		40,635
		134,125		80,161

STOCKHOLDERS' EQUITY

Share Capital
Preferred Shares, 25,000,000 shares authorized of $0.001 par value of which none have been issued
Common stock, 100,000,000 shares authorized of $0.001 par value, 45,690,506 and 45,070,406 shares issued and outstanding, respectively		45,691		45,071
Additional paid-in capital		6,083,061		5,411,761

Deficit accumulated during the development stage		(2,086,072)		(1,148,612)
		4,042,680		4,308,220
	$	4,176,805	$	4,388,381

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

F-1

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DELTA OIL & GAS, INC.

(A Development Stage Company)

Consolidated Statements of Operations

(Stated in U.S. Dollars)

Unaudited

	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,				CUMULATIVE PERIOD FROM INCEPTION JANUARY 9, 2001 TO JUNE 30,
	2007		2006		2007		2006		2007
Revenue

Natural gas and oil sales	$	260,139	$	1,226	$	407,643	$	3,414	$	1,018,773
Gain on sale of oil property		-		-		-		-		1,061,159

		260,139		1,226		407,643		3,414		2,079,932
Costs And Expenses

Natural gas and oil operating costs		47,517		924		83,261		1,685		219,311
General and administrative		291,919		37,699		911,342		209,952		2,318,534
Depreciation and depletion		194,970		161		328,949		314		834,452
Impairment of natural gas and oil properties		40,589		-		40,589		-		717,470
Dry well costs written off		-		-		-		-		118,690
Asset retirement obligations		-		-		-		-		40,635
		574,995		38,784		1,364,141		211,951		4,249,092
Net Operating (Loss)		(314,856)		(37,558)		(956,498)		(208,537)		(2,169,160)

Other Income

Forgiveness of debt		-		39,933		-		39,933		39,933
Interest income		12,460		10,925		23,199		14,889		47,316
		12,460		50,858		23,199		54,822		87,249

Income (Loss) before income taxes	$	(302,396)	$	13,300	$	(933,299)	$	(153,715)	$	(2,081,911)

Income tax		4,161		-		4,161		-		4,161

Net Income (Loss)	$	(306,557)	$	13,300	$	(937,460)	$	(153,715)	$	(2,086,072)

Basic (Loss) Per Common Share	$	(0.01)	$	0.00	$	(0.02)	$	(0.00)

Weighted Average Number Of Common Shares Outstanding		45,670,066		44,870,706		44,706,871		44,571,646

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

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DELTA OIL & GAS, INC.

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Stated in U.S. Dollars)

Unaudited

	SIX MONTHS ENDED JUNE 30,				CUMULATIVE PERIOD FROM INCEPTION JANUARY 9, 2001 TO JUNE 30,
	2007		2006		2007
Cash Flows From Operating Activities:

Net (loss) for the period	$	(937,460)	$	(153,715)	$	(2,086,072)

Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of property		-		-		(1,061,159)
Depreciation and depletion		328,949		314		834,452
Impairment of natural gas and oil properties		40,589		-		717,470
Interest accrued on note payable		-		-		-
Dry well costs written off		-		-		118,690
Stock-based compensation expense		126,120		-		692,106
Shares issued to President & CEO for servicess rendered		460,000				460,000
Shares issued to Investor Relations Services Inc for services		40,800				40,800

Changes in operating assets and liabilities:
Accounts receivable		(60,759)		(747)		(149,210)
Accounts payable and accrued liabilities		49,803		(57,565)		89,329
Income taxes payable		4,161		-		4,161
Asset retirement obligations		-		-		40,635
Promissory note payable		-		(39,397)		-
Prepaid expenses		(105)		(6,006)		(1,716)

Net Cash Generated/(Used) in Operating Activities		52,098		(257,116)		(300,514)

Cash Flows From Investing Activities:

Purchase of other equipment		-		-		(3,492)
Sale proceeds of natural gas and oil working interests		-		-		1,500,000
Investment in natural gas and oil working interests		(701,989)		(1,119,759)		(5,067,974)

Net Cash Used in Investing Activities		(701,989)		(1,119,759)		(3,571,466)

Cash Flows From Financing Activities:

Proceeds from issuance of common stock		45,000		2,167,596		4,935,847
Shares subscriptions receivable		-		16,000		-

Net Cash Provided by Financing Activities		45,000		2,183,596		4,935,847

Net Increase/(Decrease) In Cash And Cash Equivalents		(604,891)		806,721		1,063,867

Cash And Cash Equivalents At Beginning Of Period (Excess of Checks Issued Over Funds On Deposit)		1,668,758		343,004		-
Cash And Cash Equivalents At End Of Period	$	1,063,867	$	1,149,725	$	1,063,867

Non-Cash Financing Activities

500,000 shares issued to the President & CEO as part of his compensation package		460,000		-		460,000

60,000 shares issued to Investor Relations Services Inc., for services rendered.		40,800		-		40,800

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

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

1.	BASIS OF PRESENTATION

The unaudited consolidated financial statements as of June 30, 2007 included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustment (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. It is suggested that these consolidated financial statements be read in conjunction with the December 31, 2006 audited financial statements and notes thereto. The results of the operations for the six months ended June 30, 2007 are not indicative of the results that may be expected for the year.

2.	OPERATIONS

a)	Organization

Delta Oil & Gas, Inc. (“the Company”) was incorporated as a Colorado corporation on January 9, 2001.

The Company is a development stage, independent natural gas and oil company engaged in the exploration, development and acquisition of natural gas and oil properties in the United States and Canada. The Company’s entry into the natural gas and oil business began on February 8, 2001.

During the year ended December 31, 2004, the Company completed a forward stock split on the basis of 5 ½ common shares for every one previously held common share, common shares outstanding have been adjusted retroactively.

b)	Development Stage Activities

The Company is a development stage enterprise engaged in the exploration for and production of natural gas and oil in the United States and Canada.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

2.	OPERATIONS (Continued)

The Company is subject to several categories of risk associated with its development stage activities. Natural gas and oil exploration and production is a speculative business, and involves a high degree of risk. Among the factors that have a direct bearing on the Company’s prospects are uncertainties inherent estimating natural gas and oil reserves, future hydrocarbon production, and cash flows, particularly with respect to wells that have not been fully tested and with wells having limited production histories; access to additional capital; changes in the price of natural gas and oil; availability and cost of services and equipment; and the presence of competitors with greater financial resources and capacity.

c)	Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As shown in the accompanying consolidated financial statements, the Company has incurred a net loss of $2,086,072 since inception. To achieve profitable operations, the Company requires additional capital for obtaining producing oil and gas properties through either the purchase of producing wells or successful exploration activity. Management believes that sufficient funding will be available to meet its business objectives including anticipated cash needs for working capital and is currently evaluating several financing options. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of and, if successful, to commence the sale of its products under development. As a result of the foregoing, there exists substantial doubt the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

3.	SIGNIFICANT ACCOUNTING POLICIES

a)	Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiary, Delta Oil & Gas (Canada) Inc. All significant inter-company balances and transactions have been eliminated.

F-5

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

b)	Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates with regard to these financial statements include the estimate of proved natural gas and oil reserve quantities and the related present value of estimated future net cash flows there from.

c)	Natural Gas and Oil Properties

The Company accounts for its oil and gas producing activities using the full cost method of accounting as prescribed by the United States Securities and Exchange Commission (“SEC”). Accordingly, all costs associated with the acquisition of properties and exploration with the intent of finding proved oil and gas reserves contribute to the discovery of proved reserves, including the costs of abandoned properties, dry holes, geophysical costs, and annual lease rentals are capitalized. All general corporate costs are expensed as incurred. In general, sales or other dispositions of oil and gas properties are accounted for as adjustments to capitalized costs, with no gain or loss recorded. Amortization of evaluated oil and gas properties is computed on the units of production method based on all proved reserves on a country-by-country basis. Unevaluated oil and gas properties are assessed at least annually for impairment either individually or on an aggregate basis. The net capitalized costs of evaluated oil and gas properties (full cost ceiling limitation) are not to exceed their related estimated future net revenues from proved reserves discounted at 10%, and the lower of cost or estimated fair value of unproved properties, net of tax considerations. These properties are included in the amortization pool immediately upon the determination that the well is dry.

Unproved properties consist of lease acquisition costs and costs on well currently being drilled on the properties. The recorded costs of the investment in unproved properties are not amortized until proved reserves associated with the projects can be determined or until they are impaired.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

d)	Asset Retirement Obligations

The Company has adopted Statement of Financial Accounting Standards No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations”, which requires that asset retirement obligations (“ARO”) associated with the retirement of a tangible long-lived asset, including natural gas and oil properties, be recognized as liabilities in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated assets. The cost of tangible long-lived assets, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the assets. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to the expected settlement value. The fair value of the ARO is measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate.

e)	Joint Ventures

All exploration and production activities are conducted jointly with others and, accordingly, the accounts reflect only the Company’s proportionate interest in such activities.

f)	Revenue Recognition

Revenue from sales of crude oil, natural gas and refined petroleum products are recorded when deliveries have occurred and legal ownership of the commodity transfers to the customers. Title transfers for crude oil, natural gas and bulk refined products generally occur at pipeline custody points or when a tanker lifting has occurred. Revenues from the production of oil and natural gas properties in which the Company shares an undivided interest with other producers are recognized based on the actual volumes sold by the Company during the period. Gas imbalances occur when the Company’s actual sales differ from its entitlement under existing working interests. The Company records a liability for gas imbalances when it has sold more than its working interest of gas production and the estimated remaining reserves make it doubtful that the partners can recoup their share of production from the field. At June 30, 2007 and 2006, the Company had no overproduced imbalances.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

g)	Cash and Cash Equivalent

Cash consists of cash on deposit with high quality major financial institutions, and to date has not experienced losses on any of its balances. The carrying amounts approximated fair market value due to the liquidity of these deposits. For purposes of the balance sheet and statements of cash flows, the Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. At June 30, 2007 and 2006, the Company had no cash equivalents.

h)	Environmental Protection and Reclamation Costs

The operations of the Company have been, and may be in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restorations costs. Both the likelihood of new regulations and their overall effect upon the Company may vary from region to region and are not predictable.

The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures. Environmental expenditures that relate to ongoing environmental and reclamation programs will be charged against statements of operations as incurred or capitalized and amortized depending upon their future economic benefits. The Company does not currently anticipate any material capital expenditures for environmental control facilities because all property holdings are at early stages of exploration. Therefore, estimated future removal and site restoration costs are presently considered minimal.

i)	Foreign Currency Translation

United States funds are considered the Company’s functional currency. Transaction amounts denominated in foreign currencies are translated into their United States dollar equivalents at exchange rates prevailing at the transaction date. Monetary assets and liabilities are adjusted at each balance sheet date to reflect exchange rates prevailing at that date, and non-monetary assets and liabilities are translated at the historical rate of exchange. Gains and losses arising from restatement of foreign currency monetary assets and liabilities at each year-end are included in statements of operations.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

j)	Other Equipment

Computer equipment is stated at cost. Provision for depreciation on computer equipment is calculated using the straight-line method over the estimated useful life of three years.

k)	Impairment of Long-Lived Assets

In the event that facts and circumstances indicate that the costs of long-lived assets, other than oil and gas properties, may be impaired, and evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value is required. Impairment of oil and gas properties is evaluated subject to the full cost ceiling as described under Natural Oil and Gas Properties.

l)	Loss Per Share

In February 1997, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS 128”). Under SFAS 128, basic and diluted earnings per share are to be presented. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares.

m)	Income Taxes

The Company follows the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of (i) temporary differences between the tax bases of assets and liabilities, and their reported amounts in the financial statements, and (ii) operating loss and tax credit carryforwards for tax purposes. Deferred tax assets are reduced by a valuation allowance when, based upon management’s estimates, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

n)	Financial Instruments

The Company’s financial instruments consist of cash and cash equivalent, accounts receivable, accounts payable and accrued liabilities.

It is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments is approximate their carrying values.

o)	Comprehensive Loss

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at June 30, 2007 and 2006, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

p)	Stock-Based Compensation

The Company accounts for employee stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25 - “Accounting for Stock Issued to Employees”, and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair value of the Company’s common stock at the date of the grant over the amount an employee must pay to acquire the common stock. Non-employee stock-based compensation is accounted for using the fair value method in accordance with SFAS No. 123 - “Accounting for Stock-Based Compensation”.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

4.	NATURAL GAS AND OIL PROPERTIES

a) Proved Properties

Properties	December 31, 2006		Addition		Depletion for the Period		Write down in carrying Value		June 30, 2007
USA properties	$	454,480	$	398,117	$	(202,569)	$	(39,337)	$	610,691
Canada properties		358,237		37,571		(126,069)		(1,252)		268,487
Total	$	812,717	$	435,688	$	(328,638)	$	(40,589)	$	879,178

a)	Proved Properties - Descriptions

i)	Liberty Valance, California, USA

In February 2001, the Company acquired and 8.9% working interest in a gas well located in California at a cost of $90,000. The well commenced production in February 2001 following a redrill.

On January 1, 2007, the Company assigned all of its right, title and interest to Lario Oil & Gas. Lario Oil & Gas agreed to assume all costs and liability associated with the plugging and abandonment of the well.

ii)	Wordsworth Prospect, Saskatchewan, Canada

On April 10, 2006, the Company entered into an agreement (the “Agreement”) with Petrex Energy Ltd., for a participation and Farmout agreement where the Company will participate for 15% gross working interest before payout (BPO) and 7.5% gross working interest after pay out (APO) in a proposed four well horizontal drilling program in the Wordsworth area in Southeast Saskatchewan, Canada. As at December 31, 2006, the Company had advanced $210,606 as its share of the costs in this Agreement. Currently there is one producing well on this prospect.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

4.	NATURAL GAS AND OIL PROPERTIES (Continued)

iii)	Owl Creek Prospect, Oklahoma, USA

In June 2006, the Company entered into an agreement to accept the assignment of an undivided 20% working interest in a potential oil well known as the Powell #2 and an option to purchase a 20% interest in all future wells drilled on the land surrounding Powell#2. In addition the Company has an option to participate in any lands of mutual interest that may be acquired in the future by the Owl creek participating partners. The Company paid $22,911 in this period for capital expenditure. As of June 30, 2007, the cost to the Company for this assignment was $391,898.

In July 2006, the Company also elected to participate in Isbill #1-36, it was abandoned during the year. Its costs amounted to $80,738 was moved to the cost pool of proved properties for depletion.

In January 2007, the Company elected to participate in Isbill #2-36 well. The Company paid $187,559 for its 20% of working interest. Isbill #2-36 started production from April 2007.

iv)	Todd Creek, Alberta, Canada

In January 2005, the Company acquired a 20% working interest in 13.75 sections (8,800 acres) of land in Todd Creek, Alberta, Canada, at a cost of $597,263. One of the well 13-28-9-2W5M has production since October 2006.

v.	Palmetto Point Prospect, Mississippi, USA

On February 21, 2006, the Company entered into an agreement (the “Agreement”) with 0743608 B.C. Ltd., (“Assignor”) a British Columbia, Canada based oil and gas exploration company, in order to accept an assignment of the Assignor’s ten percent (10%) gross working and revenue interest in a ten-well drilling program (the “Drilling Program”) to be undertaken by Griffin & Griffin Exploration L.L.C., (“Griffin”) a Mississippi based exploration company. Under the terms of the Agreement, the Company paid the Assignor $425,000 as payment for the assignment of the Assignor’s 10% gross working and revenue interest in the Drilling Program. The Company also entered into a joint Operating Agreement directly with Griffin on February 24, 2006.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

4.	NATURAL GAS AND OIL PROPERTIES (Continued)

v.	Palmetto Point Prospect, Mississippi, USA (Continued)

On August 4, 2006, the Company elected to participate in additional two wells program in Mississippi owned by Griffin & Griffin Exploration and paid $70,000.

The Drilling Program on the acquired property interests was initiated by Griffin in May 2006 and was substantially completed by Griffin by December 31, 2006. The prospect area owned or controlled by Griffin on which the ten wells were drilled, is comprised of approximately 1,273 acres in Palmetto Point, Mississippi.

As of June 30, 2007, seven wells were found to be proved wells, and two wells were written off.

vi.	Mississippi II, USA

In August 2006, the Company entered into a joint venture agreement with Griffin & Griffin Exploration, LLC. to acquire an interest in a drilling program comprised of up to 50 natural gas and/or oil wells. The area in which the proposed wells are to be drilled is comprised of approximately 300,000 gross acres of land located between Southwest Mississippi and North East Louisiana. The proposed wells will be targeting the Frio and Wilcox Geological formations. The Company has agreed to pay 10% of all prospect fees, mineral leases, surface leases and drilling and completion costs to earn a net 8% share of all production zones to the base of the Frio formation and 7.5% of all production to the base of the Wilcox formation. In January 2007, the well CMR USA 39-14 was found to be proved. The cost of $35,125 was added to the proved properties cost pool. Dixon#1 was abandoned in January 2007, its costs amounted to $40,605 was moved to the proved properties cost pool for depletion. Also, Randall#1 was abandon in June 2007, its costs amounted to $26,918 was moved to the proved properties cost pool.

b) Unproved Properties

Properties	December 31, 2006		Addition		Cost added to capitalized cost		June 30, 2007
USA properties	$	497,500	$	458,972	$	(375,208)	$	581,264
Canada properties		1,318,507		182,537		-		1,501,044
Total	$	1,816,007	$	641,509	$	(375,208)	$	2,082,308

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

4.	NATURAL GAS AND OIL PROPERTIES (Continued)

b)	Unproved properties - Description (Continued)

i.	Todd Creek, Alberta, Canada

In January 2005, the Company acquired a 20% working interest in 13.75 sections (8,800 acres) of land in Todd Creek, Alberta, Canada, at a cost of $597,263. The Company paid $314,959 (CDN$352,376) on October 27, 2006 for well 13-33-8-2W5M. It was abandoned and the cost was moved to the proved properties cost pool for depletion. As at June 30, 2007, a cash call of $258,139 has been paid as share of costs for a proposed drilling program.

ii.	Hillspring, Alberta, Canada

In January 2005, the Company acquired a 10% working interest in 1 section (64 acres) of land in Hillspring, Alberta, Canada, at a cost of $414,766.

iii.	Cache Slough Prospect, California, USA

In May 2005, the Company entered into a participation agreement with Production Specialties Company (“PSC”) where the Company has been granted the right to earn a 68% working interest in a test well and a 12.50% working interest in certain lands located in Solano County, California, by paying 18.75% of the test well operations. During the year a cash call of $438,841 has been paid as share of costs for a proposed drilling program.

Following these payments, the Company will be responsible for 12.5% of all additional expenditures for drilling and production on the property and be entitled to receive 8.5% of all revenue generate by the property, which is 12.5% of this California company’s 68% interest.

On November 16, 2006, the Company assigned all of its interest in exchange for a cash amount of $1,500,000.

F-14

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

4.	NATURAL GAS AND OIL PROPERTIES (Continued)

Unproved Properties - Description (Continued)

iv.	Strachan Prospect, Alberta, Canada

In September 2005, the Company entered into a participation and farmout agreement with Odin Capital Inc. (“Odin”) where the Company will participate for 4% share of the costs of drilling a test well in certain lands located in the Leduc formation, Alberta, Canada. In exchange for the participation costs, the Company will earn interests in certain petroleum and natural gas wells ranging from 1.289% to 4.0%. As at June 30, 2007, the Company has advanced $347,431 as its share of the costs in the Leduc formation property.

v.	Palmetto Point Prospect, Mississippi, USA

On February 21, 2006, the Company entered into an agreement (the “Agreement”) with 0743608 B.C. Ltd., (“Assignor”) a British Columbia based oil and gas exploration company, in order to accept an assignment of the Assignor’s ten percent (10%) gross working and revenue interest in a ten-well drilling program (the “Drilling Program”) to be undertaken by Griffin & Griffin Exploration L.L.C., (“Griffin”) a Mississippi based exploration company. Under the terms of the Agreement, the Company paid the Assignor $425,000 as payment for the assignment of the Assignor’s 10% gross working and revenue interest in the Drilling Program. The Company also entered into a joint Operating Agreement directly with Griffin on February 24, 2006.

On August 4, 2006, the Company elected to participate in additional two wells program in Mississippi owned by Griffin & Griffin Exploration and paid $70,000.

As of June 30, 2007, seven wells were found to be proved wells, and two wells were written off.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

4.	NATURAL GAS AND OIL PROPERTIES (Continued)

Unproved Properties (Continued)

vi.	Mississippi II, USA

In August, 2006, the Company entered into a joint venture agreement with Griffin & Griffin Exploration, LLC. to acquire an interest in a drilling program comprised of up to 50 natural gas and/or oil wells. The area in which the proposed wells are to be drilled is comprised of approximately 300,000 gross acres of land located between Southwest Mississippi and North East Louisiana. The proposed wells will be targeting the Frio and Wilcox Geological formations. The Company has agreed to pay 10% of all prospect fees, mineral leases, surface leases and drilling and completion costs to earn a net 8% share of all production zones to the base of the Frio formation and 7.5% of all production to the base of the Wilcox formation. In January 2007, the well CMR USA 39-14 was found to be proved. The cost of $35,125 was added to the proved properties cost pool. Also, Dixon#1 was abandoned in January 2007, its costs amounted to $40,605 was moved to the proved properties cost pool for depletion. Randall#1 was abandon in June 2007, its costs amounted to $26,918 was moved to the proved properties cost pool. Finally two further wells, TEC#1 and Buffalo River are awaiting testing.

vii.	Owl Creek Prospect, Oklahoma, USA

In April 2007, the Company entered into the 2006-3 Drilling Program for a buy-in cost of $113,700 which will provide 12.5% Before Casing Point (“BCP”) working interest and After Casing Point (“ACP”) working interest of 10%.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

5.	NATURAL GAS AND OIL EXPLORATION RISK

a)	Exploration Risk

The Company’s future financial condition and results of operations will depend upon prices received for its natural gas and oil production and the cost of finding acquiring, developing and producing reserves. Substantially all of its production is sold under various terms and arrangements at prevailing market prices. Prices for natural gas and oil are subject to fluctuations in response to changes in supply, market uncertainty and a variety of other factors beyond its control. Other factors that have a direct bearing on the Company’s prospects are uncertainties inherent in estimating natural gas and oil reserves and future hydrocarbon production and cash flows, particularly with respect to wells that have not been fully tested and with wells having limited production histories; access to additional capital; changes in the price of natural gas and oil; availability and cost of services and equipment; and the presence of competitors with greater financial resources and capacity.

b)	Distribution Risk

The Company is dependent on the operator to market any oil production from its wells and any subsequent production which may be received from other wells which may be successfully drilled on the Prospect. It relies on the operator’s ability and expertise in the industry to successfully market the same. Prices at which the operator sells gas/oil both in intrastate and interstate commerce, will be subject to the availability of pipe lines, demand and other factors beyond the control of the operator. The Company and the operator believe any oil produced can be readily sold to a number of buyers.

c)	Credit Risk

A substantial portion of the Corporation’s accounts receivable is with joint venture partners in the oil and gas industry and is subject to normal industry credit risks.

d)	Foreign Operations Risk

The Company is exposed to foreign currency fluctuations, political risks, price controls and varying forms of fiscal regimes or changes thereto which may impair its ability to conduct profitable operations as it operates internationally and holds foreign denominated cash and other assets.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

6.	ASSET RETIREMENT OBLIGATIONS

The Company determined that the net effect of the ARO calculation to the Company’s income statement for the year ended December 31, 2006 is $40,635, (2005: $0). The ARO is calculated using the 5% value of proved properties as at December 31, 2006. The Company has not increased its ARO during this period, since the amount accrued to date is sufficient.

7.	SHARE CAPITAL

Common Stock

On January 11, 2006, the Company issued 75,000 common shares for exercise of stock options at $0.80 per share.

On January 24, 2006, the Company issued 230,000 common shares for exercise of stock options at $0.80 per share.

On January 25, 2006, the Company issued 12,500 common shares for exercise of stock options at $1.00 per share.

On April 25, 2006, the Company issued 727,271 common shares pursuant to a private placement at $2.75 per share.

On January 23, 2007, the Company issued 60,000 common shares for exercise of stock options at $0.75 per share.

On March 1, 2007, the Company issued 500,000 common shares to its President & CEO as part of his compensation package. The price of the share as of March 1, 2007 was $0.92.

On May 1, 2007, the Company issued 60,000 common shares to Investor Relations Services, Inc. as part of the investor relation services and consulting agreement. The price of the share as of May 1, 2007 was $0.68.

Preferred Stock

The Company did not issue any preferred stock during the quarter ended June 30, 2007 (December 31, 2006 - $Nil).

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

7.	SHARE CAPITAL (continued)

ii.

Stock Options

Compensation expense related to stock options granted is recorded at their fair value as calculated by the Black-Scholes option pricing model. Options exercised of $126,120 was recorded during the six month ended June 30, 2007 (December 31, 2006 - $195,719) related to options granted during the year ended December 31, 2006 but vested during the six months ended June 30, 2007. The changes in stock options are as follows:

	NUMBER	WEIGHTED AVERAGE EXERCISE PRICE
Balance outstanding, December 31, 2006	300,000	$ 0.75
Granted	300,000	0.75
Exercised	(60,000)	(0.75)
Balance outstanding, June 30, 2007	540,000	$ 0.75

The weighted average assumptions used in calculating the fair value of stock options granted during the six month period ended June 30, 2007 and June 30, 2006, using the Black-Scholes option pricing model are as follows:

	June 30, 2007	June 30, 2006
Rick-free interest rate	3.77%	3.77%
Expected life of the option	3 years	1 year
Expected volatility	146.36%	288.99%
Expected dividend yield	-	-

The following table summarized information about the stock options outstanding at June 30, 2007:

OPTIONS OUTSTANDING			OPTIONS EXERCISABLE
EXERCISE PRICE	NUMBER OF SHARES	REMAINING CONTRACTUAL LIFE (YEARS)	NUMBER OF SHARES
$ 0.75	240,000	1.72	224,000
$ 0.75	300,000	2.59	150,000

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

7.	SHARE CAPITAL (continued)

iii.

Common Stock Share Purchase Warrants

As at June 30, 2007, share purchase warrants outstanding for the purchase of common shares as follows:

WARRANTS OUTSTANDING
EXERCISE PRICE	NUMBER OF SHARES	EXPIRY DATE
$ 1.50	2,483,985	February 1, 2010
$ 3.00	727,271	April 30, 2009

8.	RELATED PARTIES

During the period ended June 30, 2007, the Company paid $ nil (June 30, 2006 - $15,197) for management fees and $52,868 for consulting fees (June 30, 2006 - $nil) to directors of the Company. Amounts paid to related parties are based on exchange amounts agreed upon by those related parties.

On March 1, 2007, we issued to Douglas Bolen 500,000 shares of our common stock in consideration for services rendered pursuant to the a consulting agreement with Last Mountain Management, Inc. (“LMM”). Douglas Bolen, our Chief Executive Officer, is the sole shareholder, officer, and director of LMM. These shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. The price of the share as of March 1, 2007 was $0.92. Total cost of $460,000 was included in the general and administration expense.

9.	COMMITMENT AND CONTRACTURAL OBLIGATIONS

A lease agreement for the Vancouver, Canada office commenced June 1, 2007 and terminated on May 31, 2008. The lease agreement provides a fixed rental fee of $1,365 per month plus additional charges for services supplied by the landlord or incurred on behalf of the client in the previous month.

On March 1, 2005, the Company also rented an office in Calgary, Canada on a month to month basis for $243 per month.

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DELTA OIL & GAS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Stated in U.S. Dollars)

10.

SUBSEQUENT EVENT

On July 8, 2007, we cancelled all of the options previously granted to its Chief Financial Officer and, in consideration for the cancellation of these options and in compensation for Chief Financial Officer’s services rendered to the Company to date, we granted him 250,000 shares of common stock in the Company, all of which are considered by the Company’s Board of Directors to be fully paid and non assessable upon issuance.

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Item 2. Management’s Discussion and Analysis or Plan of Operation

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

We were incorporated under the laws of the State of Colorado on January 9, 2001 under the name Delta Oil & Gas, Inc. We are engaged in the exploration, development, acquisition and operation of oil and gas properties. Because oil and gas exploration and development requires significant capital and our assets and resources are limited, we participate in the oil and gas industry through the purchase of small interests in either producing wells or oil and gas exploration and development projects.

Business of Issuer

We are an exploration company focused on developing North American oil and natural gas reserves. Our current focus is on the exploration of our land portfolio comprised of working interests in highly prospective acreage in Palmetto Point, Mississippi; Southern Saskatchewan, Canada; the Southern Alberta Foothills area in Canada; and Garvin and McClain counties in Oklahoma.

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Liberty Valance Well

On February 7, 2001, we acquired an 8.9% working interest in a production gas well called the Liberty Valance RD1 Gas Unit (“Liberty Valance” or the “well”). The well was located in the Rancho Capay Gas Field in Glenn County, California. We acquired this well for $90,000.

Based upon a reserve report, reserves in the Liberty Valance Well were estimated at 1,032 (MCF) on December 31, 2006 translating in an estimate of $123 for the standardized measure of discounted cash flows remaining from reserves as of December 31, 2006. The operator of the well markets each non−operator's share of gas production from the well and deducts all royalty burdens and operating expenses prior to the distribution of revenues. The Liberty Valance well generated revenue of $2,870 during the year ended December 31, 2006. On January 1, 2007, we sold our remaining interest in the Liberty Valance Well for forgiveness of abandonment costs associated with the well.

Todd Creek Prospect and Hillspring Prospect

On November 26, 2004, through our wholly-owned Canadian subsidiary, Delta Oil & Gas (Canada), Inc., we entered into two agreements (the "Agreements") with Win Energy Corporation, ("Win"), an Alberta based Oil & Gas Exploration Company, in order to acquire an interest in lands and leases owned by Win. On or about January 25, 2005, we paid Win the full purchase price set forth in the Agreements and acquired a working interest in two prospective properties known as Todd Creek and Hillspring. Both properties are located approximately 90 miles south of Calgary, Alberta in the Southern Alberta Foothills belt.

Todd Creek Prospect

On January 25, 2005, we acquired a 20% working interest in 13.75 sections of land (8800 acres) in Todd Creek for the purchase price of $597,263. We also have an option to acquire an additional 15% interest in 7 additional sections of land (4,480 acres). This option terminated on December 31, 2006.

Included in the acquisition is a test well that has been drilled and cased. Under the terms of this agreement, Win shall assume all costs of drilling and completing or abandoning the test well up to gross costs of $1,330,000. Thereafter, we will assume responsibility for 20% of all costs, risks, and expenses relating to the test well. As of June 30, 2007, we paid cash call of $258,139 as our share of costs for the proposed drilling program.

During the second quarter of 2005, a well located in Todd Creek property was drilled to a specifically targeted depth. This well is located in 13-28-9-2W5 in Alberta, Canada and we will refer to this well as the “13-28 well.” The 13-28 well was evaluated and tested. The operator encountered gas reservoirs and concluded that this well is a potential gas well. This well was tied into a newly constructed gas processing plant and production commenced in September 2006. The revenue received from this well was $19,172 for the six months ended June 30, 2007. The revenue received from this well for the three months ended June 30, 2007 was $7,177.

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In January 2007, we completed the drilling of a second well in the Todd Creek Prospect located in 13-33-8-2 in Alberta, Canada and we will refer to this well as the “13-33 well.” Independent reserves reports we commissioned indicate that no economic hydrocarbons are present and therefore we have transferred the well costs to proved reserves and subsequently depleted the cost in accordance with our accounting policy.

Hillspring Prospect

On January 25, 2005, we acquired a 10% working interest in one section of land (640 acres) in Hillspring for the purchase price of $414,766. It is now anticipated that a test well will be drilled on our property interest in 2007.

Our acquisition of an interest in Hillspring Prospect included an option to acquire an additional 10% working interest in 1.25 sections in the immediate area for the sum of $207,833 (US dollars). This option expired on July 1, 2005, but was later extended to December 29, 2006, and we decided not to extend this option further.

Strachan Prospect

On September 23, 2005, we entered into a Farmout Agreement (“Agreement”) with Odin Capital Inc. (“Odin”), a Calgary, Alberta corporation. A former member of our board of directors, Mr. Philipchuk, maintains a 50% ownership interest in Odin. Odin has the right to acquire an oil and gas leasehold interests in certain lands located in Section 9, Township 38, Range 9, West of the 5^th Meridian, Alberta, Canada (“Section 9”) upon incurring expenditures for drilling and testing on the property. In exchange for us paying 4.0000% of all costs associated with drilling, testing, and completing the test well on the property which we refer to as the Leduc formation test well, we will have earned:

a)	in the Spacing Unit for the Earning Well:
i)	a 2.000% interest in the petroleum and natural gas below the base of the Mannville excluding natural gas in the Leduc formation; and
ii)	a 4.000% interest in the natural gas in the Leduc formation before payout subject to payment of the Overriding Royalty which is convertible upon payout at royalty owners option to 50% of our Interest; and
b)	a 1.600% interest in the rights below the base of the Shunda formation in Section 10, Township 38, Range 9W5M.
c)	a 1.289% interest in the rights below the base of the Shunda formation in Section 15 and 16, Township 38, Range 9W5M, down to the base of the deepest formation penetrated.

On October 6, 2005, drilling commenced Leduc formation test well. Under the terms of the Agreement, we advanced 110% of the anticipated costs prior to drilling. The total costs advanced by us prior to drilling were $347,431. The well was drilled to the targeted depth of 13,650 feet.

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Based on results indicating the presence of a potential gas well, the operator inserted casing into the total depth of the well and will perform a full testing program. We are awaiting information from the operator as to when the full testing program will be completed. If the additional testing returns positive results, this well will be tied a nearby pipeline to accommodate the natural gas production.

Palmetto Point Prospect - 12 Wells

On February 21, 2006, we entered into an agreement (the “Agreement”) with 0743608 B.C. Ltd., (“Assignor”) a British Columbia based oil and gas exploration company, in order to accept an assignment of the Assignor’s ten percent (10%) gross working and revenue interest in a ten-well drilling program (the “Drilling Program”) to be undertaken by Griffin & Griffin Exploration L.L.C., (“Griffin”) a Mississippi based exploration company. Under the terms of the Agreement, we paid the Assignor $425,000 as payment for the assignment of the Assignor’s 10% gross working and revenue interest in the Drilling Program. We also entered into a Joint Operating Agreement directly with Griffin on February 24, 2006.

The Initial Drilling Program on ten (10) wells on the acquired property interest has been completed by Griffin. The prospect area owned or controlled by Griffin on which the initial ten wells was drilled, is comprised of approximately 1,273 acres in Palmetto Point, Mississippi. To date, ten wells have been drilled, 7 of which are producing, 3 of which are expected to produce but are currently waiting to be tied into the pipeline. and 2 of which were not commercially viable and were plugged and abandoned. We elected to participate in an additional two well program which has also been completed. With respect to the two additional wells at this same location, it appears that these well contains reserves suitable for commercial production. These wells are waiting to be tied into a nearby pipeline. Total revenue received from these wells for the year ended December 31, 2006 was $17,485. Total revenue received from these wells for the six months ended June 30, 2007 was $29,585. The revenue received from these wells for the three months ended June 30, 2007 was $22,323

Palmetto Point Prospect - 50 wells

During the fiscal quarter ended September 30, 2006, we entered into a joint venture agreement to acquire an interest in a drilling program comprising of up to 50 natural gas and/or oil wells. The area in which the proposed wells are to be drilled in approximately 300,000 gross acres location between Southwest Mississippi and Northeastern Louisiana. Drilling commenced in the first week of September 2006. The site of the first 20 proposed wells are located within range to tie into existing pipeline infrastructure should the wells be suitable for commercial production. The drilling program is being conducted by Griffin in its capacity as operator. We have agreed to pay 10% of all prospect fees, mineral leases, surface leases, and drilling and completion costs to earn a net 8% share of all production zones to the base of a geological formation referred to as the Frio formation and 7.5% of all production to the base of a geological formation referred to as the Wilcox formation. The cost during the quarter ending September 30, 2006 amounted to $100,000. During the fourth quarter of fiscal 2006, we made additional payments of $300,000 to be employed in the further development of prospects on lands in Mississippi and Louisiana in accordance with the terms of the operating agreement.

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We have drilled seven wells of which two have been abandoned (Dixon #1 and Randall #1). Of the successful 5 wells, Redbug #1 (CMR USA) and Faust #1 (TEC#1) are producing and Buffalo River #1, Redbug #2 and Buffalo River #2 are awaiting connection to the nearby pipeline for production. Total revenue received from these wells for the six months ended June 30, 2007 was $6,677. The revenue received from these wells for the three months ended June 30, 2007 was $2,885

Wordsworth Prospect

On April 10, 2006, we entered into a farmout, option and participation letter agreement (“FOP Agreement”) where we acquired a 15% working interest in certain leasehold interests located in southeast Saskatchewan, Canada referred to as the Wordsworth area for the purchase price of $152,724. We are responsible for our proportionate share of the costs associated with drilling, testing, and completing the first test well on the property. In exchange for us paying our proportionate share of the costs associated with drilling, testing, and completing the first test well on the property, we earned a 15% working interest before payout and a 7.5% working interest after payout on the Wordsworth prospect. Payout refers to the return of our initial investment in the property. In addition, we also acquired an option to participate and acquire a working interest in a vertical test well drilled to 1200 meters to test the Mississippian (Alida) formation in LSD 13 of section 24, township 7, range 3 W2.

During June 2006, the first well was drilled to a horizontal depth of 2033 meters in the Wordsworth prospect. The initial drilling of this well and subsequent testing revealed that this well contains oil reserves suitable for commercial production. In June 2006, this initial well was producing as a flowing oil well. Revenue generated from this well for the year ended December 31, 2006 was $223,613. Revenue generated from this well for the six months ended June 30, 2007 was $74,944. The revenue received from these wells for the three months ended June 30, 2007 was $27,201

The second horizontal well was drilled in May 2007. Initial logs indicated hydrocarbon showings in an oil bearing zone estimated to be approximately 770 feet in the horizontal section. However, due to the high water content in fluid removed from this well, the operator determined that it was not commercially productive and will be abandoned.

The operator has indicated that based on the success to date, it expects to drill one additional well every quarter for the next year.

Owl Creek Prospect

On June 1, 2006, we entered into an Assignment Agreement with Brinx Resources, Ltd., (“Brinx”) a Nevada Oil & Gas Exploration Company, in order to acquire a working interest in lands and leases owned by Brinx. The purchase price of $300,000 for the assignment and options to acquire future interests has been paid in full. We paid a further $68,987 for our proportion of costs associated with the completion of the first well. The lands are located in Garvin & McClain Counties, Oklahoma and we refer to the lands as the “Owl Creek Prospect.”

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Pursuant to the terms of the Assignment Agreement, we acquired a 20% working interest in an oil well drilled at the Owl Creek Prospect and we refer to the “Powell #2.” The Powell #2 was drilled to total depth of 5,617 feet on May 18, 2006 and underwent testing. Based upon the positive result of the testing on the Powell #2 well, this well was completed and commercial production has commenced. Under the terms of the Assignment Agreement, we are responsible for our proportionate share of the costs of completion and tie-in for production of the Powell #2 well. Initially after the well was completed, the Powell #2 well began flowing natural oil and gas under its own pressure without the assistance of a pump. The flow rates of the Powell #2 well have fluctuated significantly. Revenue generated from this well for the year ended December 31, 2006 was $265,062. Revenue generated from this well for the six months ended June 30, 2007 was $237,408. The revenue received from these wells for the three months ended June 30, 2007 was $160,805

Based upon the positive results of the Powell #2 well, an additional well we refer to as the “Isbill #1-36” was drilled and reached its targeted depth in September 2006. However, test results showed that the well will not be commercially viable, therefore the well was abandoned and all costs were transferred to proved reserves and subsequently depleted in accordance with the our accounting policy.

We were also granted an option to earn a 20% working interest in any future wells to be drilled on the 1,120 acres of land in Garvin & McClain Counties, USA which make up the Owl Creek Prospect. Lastly, we received an option to earn a 20% working interest in any future wells to be drilled on any land of mutual interest acquired by the Owl Creek participants in and around the same area. The working interest in future wells is earned by paying 20% of the costs of drilling and completing each additional well.

In January 2007, we commenced drilling of another well we will refer to as the “Isbill#2-36” well. Our 20% working interest in the Isbill#2-36 well cost $157,437. The Isbill#2-36 well was drilled to approximately 5,900 feet and encountered two potential pay zones and is a direct offset well to the Powell #2 which is currently producing. The revenue received from this well for the three months ended June 30, 2007 was $39,808.

2006-3 Drilling Program - 5 Wells

On April 17, 2007, we entered into an agreement with Ranken Energy Corporation to participate in a five well drilling program at Garvin and Murray Counties, Oklahoma (the “2006-3 drilling Program”) The leases secured and/or lands to be pooled for this drilling program total approximately 820 net acres. We have agreed to take a 10% working interest in this program. To date, we have paid the sum of $113,700 and anticipate that our total costs to successfully complete this drilling program will be approximately $618,330. Drilling is expected to commence during summer 2007.

Results of Operations for the three and six months ended June 30, 2007 and 2006

For the three months ended June 30, 2007, our revenues generated from natural gas and oil sales

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increased to $260,139 from revenue of $1,226 for the three months ended June 30, 2006. For the six months ended June 30, 2007, our revenues generated from natural gas and oil sales increased to $407,643 from revenue of $3,414 for the six months ended June 30, 2006. Prior to the three months ended June 30, 2006, our Liberty Valance well was our only producing property. The increase in revenue is attributable to royalties received from the Wordsworth and Owl Creek prospects commencing in the third quarter of 2006 and royalties received from the Company’s Mississippi prospects.

We incurred costs and expenses in the amount of $574,995 for the three months ended June 30, 2007, compared to costs and expenses of $38,784 for the same reporting period in the prior year. We incurred costs and expenses in the amount of $1,364,141 for the six months ended June 30, 2007, compared to costs and expenses of $211,951 for the same reporting period in the prior year. The increase in expenses was caused by an increase in general and administrative expenses as a result of stock based compensation paid to our executive officers. We reported depreciation and depletion expenses of $194,970 during the three months ended June 30, 2007. Our costs and expenses for the three months ended June 30, 2006 consisted of general and administrative expenses of $291,919, natural gas and oil operating costs of $47,517, depreciation and depletion of $194,970, and impairment of natural gas and oil properties in the amount of $40,589.

We reported other income of $12,460 for the three months ended June 30, 2007 and other income of $50,858 for the three months ended June 30, 2006. We reported other income of $23,199 for the six months ended June 30, 2007 and other income of $54,822 for the six months ended June 30, 2006. Other income during the three and six months ended June 30, 2007 and 2006 consisted solely of interest income and forgiveness of debt.

Net loss for the three months ended June 30, 2007 was $306,557, compared to a net loss of $13,300 for the three months ended June 30, 2006. Net loss for the six months ended June 30, 2007 was $937,460, compared to a net loss of $153,715 for the six months ended June 30, 2006.

There are material events and uncertainties which could cause our reported financial information to not to be indicative of future operating results or financial condition. Our inability to successfully identify, execute or effectively integrate future acquisitions may negatively affect our results of operations. The success of any acquisition depends on a number of factors beyond our control, including the ability to estimate accurately the recoverable volumes of reserves, rates of future production and future net revenues attainable from the reserves and to assess possible environmental liabilities. Drilling for oil and natural gas may also involve unprofitable efforts, not only from dry wells but also from wells that are productive but do not produce sufficient net reserves to return a profit after deducting operating and other costs. In addition, wells that are profitable may not achieve our targeted rate of return. Our ability to achieve our target results are also dependent upon the current and future market prices for crude oil and natural gas, costs associated with producing oil and natural gas and our ability to add reserves at an acceptable cost. We do not operate the properties in which we have an interest and we have limited ability to exercise influence over operations for these properties or their associated costs. Our dependence on the operator and other working interest owners for these projects and our limited ability to influence operations and associated costs could materially adversely affect the realization of our returns on capital in drilling or acquisition activities and our targeted production growth rate. As a result, our historical results should not be indicative of future operations.

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Liquidity and Capital Resources

As of June 30, 2007, we had total current assets of $1,214,793 and total current liabilities in the amount of $93,490. As a result, we had working capital of $1,121,303 as of June 30, 2007.

The revenue we currently generate from natural gas and oil sales does exceed our cash operating expenses. We will require additional funds to expand our acquisition, exploration and production of natural oil and gas properties. Our management anticipates that current cash on hand is sufficient to fund our continued operations at the current level for the next twelve months. Additional capital will be required to effectively expand our operations and implement our overall business strategy. It is uncertain whether we will be able to obtain financing when sought. If we are unable to obtain additional financing, the full implementation of our ability to expand our operations will be impaired.

Operating activities generated $52,098 in cash for the six months ended June 30, 2007. Our royalties received were the primary component of our positive operating cash flow. Investing activities during the six months ended June 30, 2007 consisted of $701,989 for the investment in natural gas and oil properties. Cash flows provided by financing activities during the six months ended June 30, 2007 consisted of $45,000 related to the issuance of common stock.

The underlying drivers that resulted in material changes and the specific inflows and outflows of cash for the six months ended June 30, 2007 are as follows:

·	Property acquisition costs,

·	Financing from the issuance of common stock, and

·	Royalties received from the Company’s oil and gas prospects

Off Balance Sheet Arrangements

As of June 30, 2007, there were no off balance sheet arrangements.

Going Concern

As shown in the accompanying financial statements, we have incurred a net loss of $2,086,072 since inception. To achieve profitable operations, we require additional capital for obtaining producing oil and gas properties through either the purchase of producing wells or successful exploration activity. Our management believes that sufficient funding will be available to meet our business objectives including anticipated cash needs for working capital and is currently evaluating several financing options. However, there can be no assurance that we will be able to obtain sufficient funds to continue the development of and, if successful, to commence the sale of our products under development. As a result of the foregoing, there exists substantial doubt about our ability to continue as a going concern.

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Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that the following accounting policies fit this definition.

Joint Ventures

All exploration and production activities are conducted jointly with others and, accordingly, the accounts reflect only our proportionate interest in such activities.

Natural Gas and Oil Properties

We account for our oil and gas producing activities using the full cost method of accounting as prescribed by the United States Securities and Exchange Commission (“SEC”). Accordingly, all costs associated with the acquisition of properties and exploration with the intent of finding proved oil and gas reserves contribute to the discovery of proved reserves, including the costs of abandoned properties, dry holes, geophysical costs, and annual lease rentals are capitalized. All general corporate costs are expensed as incurred. In general, sales or other dispositions of oil and gas properties are accounted for as adjustments to capitalized costs, with no gain or loss recorded. Amortization of evaluated oil and gas properties is computed on the units of production method based on all proved reserves on a country-by-country basis. Unevaluated oil and gas properties are assessed at least annually for impairment either individually or on an aggregate basis. The net capitalized costs of evaluated oil and gas properties (full cost ceiling limitation) are not to exceed their related estimated future net revenues from proved reserves discounted at 10%, and the lower of cost or estimated fair value of unproved properties, net of tax considerations. These properties are included in the amortization pool immediately upon the determination that the well is dry.

Revenue Recognition

Revenue from sales of crude oil, natural gas and refined petroleum products are recorded when deliveries have occurred and legal ownership of the commodity transfers to the customers. Title transfers for crude oil, natural gas and bulk refined products generally occur at pipeline custody points or when a tanker lifting has occurred. Revenues from the production of oil and natural gas properties in which we share an undivided interest with other producers are recognized based on the actual volumes sold by us during the period. Gas imbalances occur when our actual sales differ from its entitlement under existing working interests. We record a liability for gas imbalances when we have sold more than our working interest of gas production and the estimated remaining reserves make it doubtful that the partners can recoup their share of production from the field. At June 30, 2007 and 2006, we had no overproduced imbalances.

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Item 3. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2007. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Mr. Douglas Bolen and our Chief Financial Officer, Mr. Kulwant Sandher. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2007, our disclosure controls and procedures are effective. There have been no changes in our internal controls over financial reporting during the quarter ended June 30, 2007.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

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

The information set forth below relates to our issuances of securities without registration under the Securities Act during the reporting period which were not previously included in a Current Report on Form 8-K.

On January 18, 2007, we appointed Kulwant Sandher to serve as our Chief Financial Officer and Principal Financial Officer. In connection with his appointment, we granted Mr. Sandher options to purchase 300,000 shares of our common stock at the exercise price of $0.75 per share with an expiration date of January 17, 2010. 75,000 of these options vested upon execution of a stock option agreement on January 18, 2007, 75,000 became vested and exercisable on June 30, 2007, 75,000 were to become vested and exercisable on September 30, 2007, and the remaining 75,000 were to become vested and exercisable on December 31, 2007.

On July 8, 2007, we cancelled all of the options previously granted to Mr. Sandher and, in consideration for the cancellation of these options and in compensation for Mr. Sandher’s services rendered to the Company to date, we granted him 250,000 shares of common stock in the Company, all of which are considered by our Board of Directors to be fully paid and non assessable upon issuance.

On March 1, 2007, we issued to Douglas Bolen 500,000 shares of our common stock in consideration for services rendered pursuant to the a consulting agreement with Last Mountain Management, Inc. (“LMM”). Douglas Bolen, our Chief Executive Officer, is the sole shareholder, officer, and director of LMM. These shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. We did not engage in any general solicitation or advertising.

Item 3. Defaults upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended June 30, 2007.

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Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number	Description
3.1	Articles of Incorporation, as amended ¹
3.2	By-laws, as amended ¹
10.1	Agreement to Acquire Interest in Todd Creek ²
10.2	Agreement to Acquire Interest in Hillspring ²
10.3	Amendment to Todd Creek and Hillspring Agreements ²
10.4	Farmout Agreement relating to Cache Slough Prospect ³
10.5	Farmout Agreement with Odin Capital Inc. relating to Leduc formation test well ⁴
10.6	Drilling Program Agreement between Griffin & Griffin Exploration L.L.C. and 0743608 B.C. Ltd. ⁵
10.7	Assignment Agreement between Delta Oil & Gas, Inc. and 0743608 B.C. Ltd ⁵
10.8	Assignment Agreement of Interests in Cache Slough Prospect ⁷
10.9	Assignment and Assumption Agreement for Owl Creek Prospect ⁸
10.10	Consulting Agreement with Last Mountain Management, Inc. ⁹
14.1	Code of Ethics ⁶
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

¹Incorporated by reference to Registration Statement on Form SB-2 filed on February 13, 2002

²Incorporated by reference to current report on Form 8-K filed on February 15, 2005

³Incorporated by reference to current report on Form 8-K filed on September 29, 2005

⁴Incorporated by reference to current report on Form 8-K filed on May 26, 2005

⁵Incorporated by reference to current report on Form 8-K filed on February 27, 2006

⁶Incorporated by reference to annual report on Form 10-KSB for the year ended December 31, 2004

⁷Incorporated by reference to quarterly report on Form 10-QSB for the period ended September 30, 2006 filed on November 20, 2006

⁸Incorporated by reference to current report on Form 8-K filed on June 2, 2006

⁹Incorporated by reference to Amended Registration Statement on Form 10-SB filed on February 27, 2007

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Delta Oil & Gas, Inc.

Date:	August 14, 2007

	By: /s/ Douglas Bolen Douglas Bolen Title: Chief Executive Officer and Director