UNITED STATES SECURITIES

AND

EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 20-F

[ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE   ACT OF 1934

For the fiscal year ended ________December 31, 2008________

OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to __________

OR

[ ]  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: ______

Commission File Number: 333-137571

POWER GAS & OIL INC.

(Formerly Liberty Petroleum Inc.)

(Exact name of Registrant as specified in its charter)

Alberta, Canada

(Jurisdiction of incorporation or organization)

4620 Manilla Road S.E., Calgary, Alberta, Canada T2G 4B7

(Address of principal executive offices)

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

None

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

Common Stock, Fully Paid and Non-Assessable Common Shares Without Par Value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

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Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:  41,709,750 common shares as of December 31, 2008 and June 11, 2009.  No preferred shares issued and outstanding.

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]

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes [  ] No [X]

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days.  Yes [X]   No [  ]

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

Large accelerated filer [  ]                                                      Accelerated filer [  ]                                           Non-accelerated filer [X]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP [  ]                 International Financial Reporting Standards as issued                                   Other [ X]

by the International Accounting Standards Board [  ]

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [ X] Item 18 [  ]

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

Index to Exhibits on Page ___

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POWER OIL & GAS INC. (FORMERLY LIBERTY PETROLEUM INC.)

FORM 20-F ANNUAL REPORT 2008

TABLE OF CONTENTS

Oil and Gas Glossary		4
Introduction		5
Part I
Item 1.	Identity of Directors, Senior Management and Advisors	7
Item 2.	Offer Statistics and Expected Timetable	7
Item 3.	Key Information	7
Item 4	Information on the Company	7
Item 4A.	Unresolved Staff Comments	27
Item 5.	Operating and Financial Review and Prospects	27
Item 6.	Directors, Senior Management and Employees	33
Item 7.	Major Shareholders and Related Party Transactions	38
Item 8.	Financial Information	41
Item 9.	The Offer and Listing	43
Item 10.	Additional Information	43
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 12.	Description of Other Securities Other Than Equity Securities	48
Part II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	50
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	50
Item 15.	Controls and Procedures	50
Item 16.	Reserved	52
Part III
Item 17.	Financial Statements	54
Item 18.	Financial Statements	54
Item 19.	Exhibits	55
Financial Statements		56
Signature Page		81

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 GLOSSARY

Term	Definition
Adsorption	The accumulation of gases, liquids, or solutes on the surface of a solid or liquid.
Basin	A depressed area where sediments have accumulated during geologic time and considered to be prospective for oil and gas deposits.
Coal	A carbon-rich rock derived from plant material (peat)
Development	The phase in which a proven oil or gas field is brought into production by drilling production (development) wells.
Drilling		The using of a rig and crew for the drilling, suspension, production testing, capping, plugging and abandoning, deepening, plugging back, sidetracking, re-drilling or reconditioning of a well.
Drilling logs		Recorded observations made of rock chips cut from the formation by the drill bit, and brought to the surface with the mud, as well as rate of penetration of the drill bit through rock formations. Used by geologists to obtain formation data.
Exploration		The phase of operations which covers the search for oil or gas by carrying out detailed geological and geophysical surveys followed up where appropriate by exploratory drilling. Compare to "Development" phase.
Fracturing		The application of hydraulic pressure to the reservoir formation to create fractures through which oil or gas may move to the wellbore.
Methane		The simplest of the various hydrocarbons and is the major hydrocarbon component of natural gas, and in fact is commonly known as natural gas. It is colorless, odorless, and burns efficiently without many byproducts
Mineral Lease		A legal instrument executed by a mineral owner granting exclusive right to another to explore, drill, and produce oil and gas from a piece of land
Permeability		A measure of the ability of a rock to transmit fluid through pore spaces.
Reserves		Generally the amount of oil or gas in a particular reservoir that is available for production.
Reservoir		The underground rock formation where oil and gas has accumulated. It consists of a porous rock to hold the oil or gas, and a cap rock that prevents its escape

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INTRODUCTION

We were formed as a corporation under the federal laws of Canada pursuant to the Canada Business Corporations Act on April 25, 2005 under the name Liberty Gold Corp.  On June 23, 2006, at an annual general and special meeting of shareholders, a majority of the shareholders of the Company approved a change in business of the Company from mineral exploration to oil and gas exploration and extraction.  At the same meeting, a majority of the shareholders of the Company approved a change in name of the Company to Liberty Petroleum Inc.  On May 23, 2008 at a special meeting of shareholders, a majority of the Company’s shareholders approved a change in name of the Company to Power Oil & Gas Inc.

We are currently an oil and gas exploration stage company and anticipate acquiring, exploring, and if warranted and feasible, developing oil and gas properties.

In this Annual Report, the “Company”, “Power Oil & Gas Inc.”, “Power”, "we", "our", and "us", refer to Power Oil & Gas Inc. (unless the context otherwise requires).  Summary discussions of documents referred to in this 20-F may not be complete, and we refer you to the actual documents for more complete information.  Our principal corporate offices are located at 4620 Manilla Road S.E., Calgary, Alberta, T2G 4B7.

BUSINESS OF POWER OIL & GAS INC., (Formerly Liberty Petroleum Inc.)

Power Oil & Gas Inc., (formerly Liberty Petroleum Inc.)(the “Company") is principally a company engaged in the acquisition and exploration of oil and gas properties.  On March 15, 2006, the Company entered into an agreement giving it the exclusive right and option to acquire a 100% interest in a mineral exploration property known as the GQ Property located in the Kamloops Mining District of British Columbia, Canada.  In relation to the Company’s decision to pursue opportunities in the oil and gas industry, it terminated the GQ Property option on May 31, 2006.

On June 14, 2006, the Company entered into a Petroleum, Natural Gas and General Rights Conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd. and Torland Ltd. (together, the “Vendor”) whereby the Company acquired a 100% interest in a petroleum and natural gas (“PN&G”) lease with the government of Alberta.  The underlying lease acquired by the Company is Alberta PN&G lease 0405070015 (the “Lease”), and the property to which the Lease pertains is located in the Milk River area of Alberta. Upon signing the Agreement, the Company paid the Vendor $7,500 and paid closing costs of $938 and agreed to assume the underlying lease payments to the province of Alberta.  In addition, the Vendor is entitled to an overriding 5% royalty on all petroleum substances produced from the Milk River Property, if any.  The Vendor is entitled to a first and paramount lien upon all of the petroleum substances produced or allocated to the Property to secure the payment of any amounts due and payable to the Vendor relating to the royalty.

On July 23, 2008, the Company entered into an assignment and assumption agreement with Giant Oil & Gas Inc. et al, a company related by common directors, whereby the Company purchased a 100% right and interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a total of 1,911 hectares in the Taber, Grand Forks area of Alberta, Canada.  Upon signing the Agreement, the Company paid the Vendor $30,331and agreed to assume the underlying lease payments to the province of Alberta.

For all of its current properties, the Company has obtained the Petroleum and Natural Gas rights only.

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FINANCIAL AND OTHER INFORMATION

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“CDN$” or “$”).  The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

FORWARD-LOOKING STATEMENTS

This Annual Report includes forward-looking statements, principally in ITEM #4, “Information on the Company” and ITEM #5, “Operating and Financial Review and Prospects".  We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business.  These forward-looking statements are subject to risks, uncertainties and assumptions including, among other things, the factors discussed in this Annual Report under ITEM #3, “Key Information, Risk Factors" and factors described in documents that we may furnish from time to time to the Securities and Exchange Commission.

The words "believe", "may", "estimate", "continue", "anticipate", "intend", "expect", and similar words are intended to identify forward-looking statements.  In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this Annual Report might not occur.  Our actual results and performance could differ substantially from those anticipated in our forward-looking statements.  We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.

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PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

--- Not applicable ---

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.

--- Not applicable ---

ITEM 3.  KEY INFORMATION.

3.A. Selected Financial Data

The selected financial data of the Company for the fiscal years ended December 31, 2008, 2007 and 2006 and for the fiscal period from April 25, 2005 (inception) to December 31, 2005 were derived from the financial statements of the Company that have been audited by Smythe Ratcliffe LLP, independent Chartered Accountants, as indicated in their audit reports, which are included elsewhere in this Annual Report.  The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in this 20-F.

The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain all available funds for use in its operations and the expansion of its business.

The selected financial information disclosed below has been derived from financial statements of the Company, which have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP).  There are no material numerical differences between Canadian GAAP and US GAAP, as applicable to the Company.

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Selected Financial Information

All in Canadian $ except Common Shares issued	For Year Ended December 31, 2008	For Year Ended December 31, 2007	For Year Ended December 31, 2006	For the Period April 25, 2005 (Inception) to December 31, 2005
Operating Revenues	-	-	-	-
Interest Income	$151	$2,451	$2,673	-
Loss from Operations	$(145,640)	$(61,618)	$(34,692)	$(8,950)
Net Loss	$(145,610)	$(61,618)	$(34,692)	$(8,950)
Loss per Share – Basic and Diluted	$(0.00)	$(0.00)	$(0.00)	$(0.00)
Total Assets	$100,466	$38,676	$105,248	$130,525
Net Assets	$(49,372)	$29,215	$90,833	$125,525
Total Liabilities	$149,838	$9,461	$14,415	$5,000
Working Capital	$(91,488)	$19,881	$82,395	$125,525
Share Capital	$134,475	$134,475	$134,475	$134,475
Common Shares Issued	41,709,750	41,709,750	41,709,750	41,709,750
Dividends Declared	-	-	-	-

3.A.3. Exchange Rates

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).  The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

Set forth below are the exchange rates for the Canadian Dollar at the end of three periods ended December 31st since the Company’s inception on April 25, 2005, the average rates for the period and the range of high and low rates for the period.  The data for April 2009 and for each month during the most recent six months is also provided.

For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.  The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar.  The average rate means the average of the exchange rates on the last day of each month during the period.

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Table No. 2

U.S. Dollar/Canadian Dollar

Period	Average	High	Low	Close
April 2009	1.22	1.19	1.27	1.19
March 2009	1.26	1.22	1.31	1.26
February 2009	1.25	1.22	1.27	1.27
January 2009	1.23	1.18	1.28	1.23
December 2008	1.23	1.19	1.30	1.22
November 2008	1.22	1.15	1.30	1.24
Fiscal Year Ended December 31, 2008	1.07	0.97	1.30	1.22
Fiscal Year Ended December 31, 2007	1.07	0.91	1.19	0.98
Fiscal Year Ended December 31, 2006	1.13	1.10	1.17	1.17
Fiscal Year Ended December 31, 2005	1.21	1.15	1.27	1.17
April 2, 2004 to December 31, 2004	1.30	1.20	1.38	1.20

______________________________________________________________________________

3.B. Capitalization and Indebtedness

--- Not applicable ---

3.C. Reasons for the Offer and Use of Proceeds

--- Not applicable ---

3.D. Risk Factors

This investment has a high degree of risk.  Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus.  If any of the following risks actually occur, our business, operating results and financial condition could be harmed and the value of our stock could go down.  This means you could lose all or a part of your investment.

RISKS RELATING TO OUR COMPANY

1. We are an exploration stage company, with limited operating history in oil and gas exploration and we have focused primarily on establishing our operations, all of which raises substantial doubt as to our ability to successfully develop profitable business operations and makes an investment in our common shares very risky.

On June 23, 2006 at an annual general and special meeting of shareholders, a majority of the shareholders of the Company approved the change in the name of the Company from Liberty Gold Corp. to Liberty Petroleum Inc.  At the same meeting, a majority of the Company’s shareholders also approved the change in business of the Company from mineral exploration to oil and gas exploration.  On May 23, 2008 at a special meeting of shareholders, a majority of the Company’s shareholders approved a change in name of the Company to Power Oil & Gas Inc.  As a result we have only recently commenced oil and gas exploration operations.

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Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a business in the oil and natural gas industries. We have yet to generate any revenues from operations and have been focused on organizational, start-up, property acquisition, and fund raising activities. Since we have not generated any revenues, we will have to raise additional capital to fund our operations for the next twelve months, which we may do through loans from existing shareholders, the sale of our equity securities or strategic arrangement with a third party in order to continue our business operations.  There is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably. Our future operating results will depend on many factors, including:

• our ability to raise adequate working capital;

• success of our development and exploration;

• demand for natural gas and oil;

• the level of our competition;

• our ability to attract and maintain key management and employees; and

• our ability to efficiently explore, develop and produce sufficient quantities of marketable natural gas or oil in a highly competitive and speculative environment while maintaining quality and controlling costs.

To achieve profitable operations, we must, alone or with others, successfully execute on the factors stated above.  If we are not successful in executing any of the above stated factors, our business will not be profitable and may never even generate any revenue, which make our common shares a less attractive investment and may harm the trading of our common shares, if a market ever develops.

2. The field of oil and gas exploration is difficult to predict because of technological advancements and market factors, which factors our management may not correctly assess and it may make it difficult for investors to sell their our common shares.

Because the nature of our business is expected to change as a result of shifts in the market price of oil and natural gas, competition, and the development of new and improved technology, management forecasts are not necessarily indicative of future operations and should not be relied upon as an indication of future performance.

Our Management may incorrectly estimate projected occurrences and events within the timetable of our business plan, which would have an adverse effect on our results of operations and, consequently, make our common shares a less attractive investment and harm the future trading of our common shares trading on the OTC Bulletin Board.  Investors may find it difficult to sell their shares on the OTC Bulletin Board should a market ever develop for our shares.

3. Because we have no plan to generate revenue unless and until our exploration program is successful in finding productive wells, we will need to raise a substantial amount of additional capital in order to fund our operations for the next twelve months and in order to develop our property and acquire and develop new properties.  If the prospects for our property are not favorable or the capital markets are tight, we would not be able to raise the necessary capital and we will not be able to pursue our business plan, which would likely cause our common shares to become worthless.

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Cash on hand is insufficient to fund our anticipated operating needs of approximately $106,100 for the next twelve months. As we have no plan to generate revenue unless and until our exploration program is successful in finding productive wells, we will require substantial additional capital to fund our operations for the next twelve months and in order to participate in the development of our property, which has not had any production of oil or natural gas, as well as for the future acquisition and/or development of other properties.  Because we currently do not have any cash flow from operations we need to raise additional capital, which may be in the form of loans from current shareholders and/or from public and private equity offerings.  Our ability to access capital will depend on our success in participating in properties that are successful in exploring for and producing oil and gas at profitable prices.  It will also be dependent upon the status of the capital markets at the time such capital is sought.  Should sufficient capital not be available, the development of our business plan could be delayed and, accordingly, the implementation of our business strategy would be adversely affected. In such event it would not be likely that investors would obtain a profitable return on their investments or a return of their investments at all.

4. Even if we discover unconventional tight gas on our properties, a great deal more effort has to be put into extracting gas from a tight formation than a conventional natural gas deposit, where once drilled, the gas can usually be extracted quite readily, and easily.  Several techniques exist that allow natural gas to be extracted, including fracturing and acidizing, however, these techniques are very costly.  Accordingly, we will require substantial additional capital to fund our operations and should we fail to do so, we will not be able to pursue our business plan, which would likely cause our common shares to become worthless.

Currently, we are focused primarily on exploring our properties to determine the potential for hosting natural gas in the form of unconventional tight gas.  Unconventional tight gas is stuck in a very tight formations underground, trapped in unusually impermeable, hard rock, or in a sandstone or limestone formations that are unusually impermeable and non-porous (tight sand).  We have no revenues, and we do not have any plan to generate revenue unless and until our exploration program is successful in finding productive wells.  However, even if we discover unconventional tight gas on our properties, a great deal more effort has to be put into extracting gas from a tight formation than a conventional natural gas deposit, where once drilled, the gas can usually be extracted quite readily, and easily.  Several techniques exist that allow natural gas to be extracted, including fracturing and acidizing, however, these techniques are very costly.  Accordingly, we will require substantial additional capital to fund our operations.  Because we currently do not have any cash flow from operations, we will need to raise additional capital, which may be in the form of loans from current shareholders and/or from public and private equity offerings.  Should sufficient capital not be available, the development of our business plan could be delayed and, accordingly, the implementation of our business strategy would be adversely affected.  In such event it would not be likely that investors would obtain a profitable return on their investments or a return of their investments at all.

5. We have an irrevocable option to repurchase an aggregate of 30,000,000 common shares held by our directors, and unaffiliated stockholders have no protection against our future potential decision to repurchase such  shares pursuant to current or potentially modified contracts, even if such repurchase would essentially use all or substantially all of the company’s working capital and essentially cause the company to become insolvent.

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We have an irrevocable option to repurchase 16,000,000 common shares held by Pratt Barndollar, our Director, Chairman, President, Chief Executive Officer, Chief Operating Officer, and Secretary, and 14,000,000 common shares held by Manny Dhinsa, a member of our Board of Directors.  This repurchase option is exercisable by us if, at any time on or before April 30, 2025, the holder of such shares ceases to be a director of the Company.   For further information on such agreements, see our disclosure below under the section entitled “Material Contracts.”

The exercise price of such repurchase option is $0.01 per share, amounting in the aggregate to $160,000 for the shares held by Mr. Barndollar and $140,000 for the shares held by Mr. Dhinsa.  Unaffiliated stockholders have no protection against our future potential decision to repurchase the shares of the two directors pursuant to current or potentially modified contracts, even if such repurchase would essentially use all or substantially all of the company’s working capital and essentially cause the company to become insolvent.

6. We are heavily dependent on contracted third parties and upon Pratt Barndollar, who is our Director, Chairman, President, Chief Executive and Operating, Officer, and Secretary.  The loss of Mr. Barndollar, whose knowledge, leadership and technical expertise upon which we rely, would harm our ability to execute our business plan and continue our operations until we found a suitable replacement.

We are dependent on the continued contributions of Pratt Barndollar, whose knowledge and leadership would be difficult to replace.  Our success is also heavily dependent on our ability to retain and attract experienced engineers, geoscientists and other technical and professional staff.  We do not currently have any consulting agreements in place with either Mr. Barndollar or third parties under which we can ensure that we will have sufficient expertise to undertake our planned exploration program.  We do not maintain any key person insurance on Mr. Barndollar.   If we were to lose his services, our ability to execute our business plan would be harmed and we may be forced to cease operations until such time as we could hire a suitable replacement for Mr. Barndollar.

7. Volatility of oil and gas prices and markets, over which we have no control, could make it difficult for us to achieve profitability and investors are likely to lose their investment in our common shares.

Our ability to achieve profitability is substantially dependent on prevailing prices for natural gas and oil.  The amounts of, and price obtainable for, any oil and gas production that we achieve will be affected by market factors beyond our control.  If these factors are not favorable over time to our financial interests, it is likely that owners of our common shares will lose their investments. Such factors include:

• worldwide or regional demand for energy, which is affected by economic conditions;

• the domestic and foreign supply of natural gas and oil;

• weather conditions;

• domestic and foreign governmental regulations;

• political conditions in natural gas and oil producing regions;

• the ability of members of the Organization of Petroleum Exporting Countries to agree upon and maintain oil prices and production levels; and

• the price and availability of other fuels.

8. Drilling wells is speculative, often involving significant costs that are difficult to project and may be more than our estimates, unsuccessful drilling of wells or successful drilling of wells that are, nonetheless, unprofitable, any one of which is likely to reduce the profitability of our business and negatively affect our results of operations.

12

Developing and exploring for natural gas and oil involves a high degree of operational and financial risk, which precludes definitive statements as to the time required and costs involved in reaching certain objectives.  The budgeted costs of drilling, completing and operating wells are often exceeded and can increase significantly when drilling costs rise due to a tightening in the supply of various types of oilfield equipment and related services.  Drilling may be unsuccessful for many reasons, including title problems, weather, cost overruns, equipment shortages and mechanical difficulties.  Moreover, the successful drilling of a natural gas or oil well does not ensure a profit on investment.  Exploratory wells bear a much greater risk of loss than development wells.  A variety of factors, both geological and market-related, can cause a well to become uneconomical or only marginally economic and the results of our operations will be negatively affected as well.

9. The natural gas and oil business involves numerous uncertainties and operating risks that can prevent us from realizing profits and can cause substantial losses.

Our development, exploitation and exploration activities may be unsuccessful for many reasons, including weather, cost overruns, equipment shortages and mechanical difficulties. Moreover, the successful drilling of a natural gas and oil well does not ensure a profit on investment.  A variety of factors, both geological and market-related, can cause a well to become uneconomical or only marginally economical.

The natural gas and oil business involves a variety of operating risks, including:

• fires;

• explosions;

• blow-outs and surface cratering;

• uncontrollable flows of oil, natural gas, and formation water;

• natural disasters, such as hurricanes and other adverse weather conditions;

• pipe, cement, or pipeline failures;

• casing collapses;

• embedded oil field drilling and service tools;

• abnormally pressured formations; and

• environmental hazards, such as natural gas leaks, oil spills, pipeline ruptures and discharges of toxic gases.

If we experience any of these problems, it could affect well bores, gathering systems and processing facilities, which could adversely affect our ability to conduct operations. We could also incur substantial losses as a result of:

• injury or loss of life;

• severe damage to and destruction of property, natural resources and equipment;

• pollution and other environmental damage;

• clean-up responsibilities;

• regulatory investigation and penalties;

• suspension of our operations; and

• repairs to resume operations.

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10. If we commence drilling, we do not currently have any contracts with equipment providers, we may face the unavailability or high cost of drilling rigs, equipment, supplies, personnel and other services which could adversely affect our ability to execute on a timely basis our development, exploitation and exploration plans within our budget and, as a result, negatively impact our financial condition and results of operations.

If we commence drilling, shortages or an increase in cost of drilling rigs, equipment, supplies or personnel could delay or interrupt our operations, which could negatively impact our financial condition and results of operations.  Drilling activity in the geographic areas in which we conduct drilling activities may increase, which would lead to increases in associated costs, including those related to drilling rigs, equipment, supplies and personnel and the services and products of other vendors to the industry.  Increased drilling activity in these areas may also decrease the availability of rigs.  We do not currently have any contracts with providers of drilling rigs and, consequently we may not be able to obtain drilling rigs when we need them.  Therefore, our drilling and other costs may increase further and necessary equipment and services may not be available to us at economical prices.

11. We are subject to complex laws and regulations, including environmental regulations, which can significantly increase our costs and possibly force our operations to cease.

If we commence drilling and experience any leakage of crude oil and/or gas from the subsurface portions of a well, our gathering system could cause degradation of fresh groundwater resources, as well as surface damage, potentially resulting in suspension of operation of a well, fines and penalties from governmental agencies, expenditures for remediation of the affected resource, and liabilities to third parties for property damages and personal injuries.  In addition, any sale of residual crude oil collected as part of the drilling and recovery process could impose liability on us if the entity to which the oil was transferred fails to manage the material in accordance with applicable environmental health and safety laws.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labor, and other risks are involved. We may become subject to liability for pollution or hazards against which it cannot adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Development, production and sale of natural gas and oil in Canada are subject to extensive laws and regulations, including environmental laws and regulations.  We may be required to make large expenditures to comply with environmental and other governmental regulations.  Matters subject to regulation include:

• location and density of wells;

• the handling of drilling fluids and obtaining discharge permits for drilling operations;

• accounting for and payment of royalties on production from state, federal and Indian lands;

• bonds for ownership, development and production of natural gas and oil properties;

• transportation of natural gas and oil by pipelines;

• operation of wells and reports concerning operations; and

• taxation.

14

Under these laws and regulations, we could be liable for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages.  Failure to comply with these laws and regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties.  Moreover, these laws and regulations could change in ways that substantially increase our costs.  Accordingly, any of these liabilities, penalties, suspensions, terminations or regulatory changes could materially adversely affect our financial condition and results of operations enough to possibly force us to cease our business operations.

12. The potential profitability of oil and gas ventures depends upon various factors beyond the control of our company, which may materially affect our financial performance.

The potential profitability of oil and gas properties is dependent upon many factors beyond our control.  For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project.  These changes and events may materially affect our financial performance.

13. Our auditors’ opinion in our December 31, 2008 financial statements includes an explanatory paragraph in respect of there being substantial doubt about our ability to continue as a going concern.   We will need to raise additional capital in order to fund our operations for the next twelve months, and if we fail to raise such capital investors may lose some or all of their investment in our common shares.

We have incurred net losses of $250,900 from April 25, 2005 (inception) to December 31, 2008.  Our financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.  We anticipate generating losses for at least the next 12 months.  Therefore, there is substantial doubt about our ability to continue operations in the future as a going concern.  We will need to obtain additional funds in order to fund our operations for the next twelve months.  Our plans to deal with this cash requirement include loans from existing shareholders, raising additional capital from the public or private sale of equity or entering into a strategic arrangement with a third party.  If we cannot continue as a viable entity, our shareholders may lose some or all of their investment in our company.

14. If we do not maintain the property lease payments on our properties, we will lose our interests in the properties as well as losing all monies incurred in connection with the properties.

We have leased property in Alberta, Canada that we have acquired through a Petroleum, Natural Gas and General Rights Conveyance with Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd., and Torland Ltd, and an Assignment and Assumption agreement with Giant Oil & Gas Inc.  The properties require lease payments to the Alberta provincial government.  See Section 4.D entitled ‘Property, Plant and Equipment’ of this 20-F for a more detailed description of the property obligations.  If we do not continue to make the annual lease payments, we will lose our ability to explore and develop the property and we will not retain any kind of interest in the property.

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15. We may not be able to compete with current and potential exploration companies, some of whom have greater resources and experience than we do in locating and commercializing oil and natural gas reserves and, as a result, we may fail in our ability to maintain or expand our business.

The natural gas and oil market is intensely competitive, highly fragmented and subject to rapid change.  We may be unable to compete successfully with our existing competitors or with any new competitors.  We compete with many exploration companies which have significantly greater personnel, financial, managerial, and technical resources than we do.  This competition from other companies with greater resources and reputations may result in our failure to maintain or expand our business.

16. We expect losses to continue in the next 12 months because we have no oil or gas reserves and, consequently, no revenue to offset losses.

Based upon the fact that we currently do not have any oil or gas reserves, we expect to incur operating losses in next 12 months.  The operating losses will occur because there are expenses associated with the acquisition of, and exploration of natural gas and oil properties which do not have any income-producing reserves.  Failure to generate revenues may cause us to go out of business.  We will require additional funds to achieve our current business strategy and our inability to obtain additional financing will interfere with our ability to expand our current business operations.

17. Since our directors work for other natural resource exploration companies, their other activities for those other companies may involve a conflict of interest with regard to their time, could slow down our operations or negatively affect our profitability.

Our officers and directors are not required to work exclusively for us and do not devote all of their time to our operations.  In fact, our directors work for other natural resource exploration companies.  Therefore, it is possible that a conflict of interest with regard to their time may arise based on their employment by such other companies.  Their other activities may prevent them from devoting full-time to our operations which could slow our operations and may reduce our financial results because of the slow down in operations.  It is expected that each of our directors will devote approximately 1 hour per week to our operations on an ongoing basis, and when required will devote whole days and even multiple days at a stretch when property visits are required or when extensive analysis of information is needed.

18.       Our principal shareholders, officers and directors own a controlling interest in our voting stock and investors will not have any voice in our management, which could result in decisions adverse to our general shareholders.

Our officers and directors, in the aggregate, beneficially own approximately or have the right to vote approximately 71.9% of our outstanding common stock. As a result, these stockholders, acting together, will have the ability to control substantially all matters submitted to our stockholders for approval including:

· election  of  our  board  of  directors;

· removal  of  any  of  our  directors;

· amendment  of  our  Articles of Incorporation  or  bylaws;  and

· adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.

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As a result of their ownership and positions, our directors and executive officers collectively are able to influence all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions.  In addition, it is possible for our directors and executive officers to modify their share purchase agreements such that they could force the repurchase of their shares and remain on the board.  Also, sales of significant amounts of shares held by our directors and executive officers, or the prospect of these sales, could affect the market price of our common stock if the marketplace does not orderly adjust to the increase in shares in the market and the value of your investment in the Company may decrease.  Management's stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

19. We have no employees and our only officer works one day per week on our business and our directors work only one hour per week on our business.  Consequently, we may not be able to monitor our operations and respond to matters when they arise in a prompt or timely fashion.  Until we have additional capital or generate revenue, we will have to rely on consultants and service providers, which will increase our expenses and increase our losses.

We do not have any employees, our only officer works on our business one day per week and our directors each spends one hour a week on our business.  With practically no personnel, we have a limited ability to monitor our operations, such as the progress of oil and gas exploration, and to respond to inquiries from third parties, such as regulatory authorities or potential business partners.  Though we may rely on third party service providers, such as accountants and lawyers, to address some of our matters, until we raise additional capital or generate revenue, we will have to rely on consultants and third party service providers to monitor our operations, which will increase our expenses and have a negative effect on our results of operations.

RISKS RELATING TO OUR COMMON SHARES

20.           We may, in the future, issue additional common shares, which would reduce investors’ percent of ownership and may dilute our share value.

Our Articles of Incorporation authorize the issuance of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.  The future issuance of our unlimited authorized common shares may result in substantial dilution in the percentage of our common shares held by our then existing shareholders. We may value any common shares issued in the future on an arbitrary basis.  The issuance of common shares for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common shares.

21.           Our common shares are subject to the "Penny Stock" Rules of the SEC and we have no established market for our securities, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than USD $5.00 per share or with an exercise price of less than USD $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, the rules require:

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· that a broker or dealer approve a person’s account for transactions in penny stocks; and

· the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

· obtain financial information and investment experience objectives of the person; and

· make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

· sets forth the basis on which the broker or dealer made the suitability determination; and

· that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules.  This may make it more difficult for investors to dispose of our common shares and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent

price information for the penny stock held in the account and information on the limited market in penny stocks.

22.           We have registered 34,650,000 common shares underlying our warrants that may be available for future sale.  The sale of these shares may depress the market price of our common shares and shareholders could suffer a loss on their investment.

As of June 11, 2009, we had warrants outstanding to purchase an aggregate of 34,650,000 common shares.  We have registered the 34,650,000 common shares underlying the warrants and all of these warrants will be freely tradable under U.S. federal law upon their respective vesting dates of May 26, 2009 with respect to the 11,550,000 Class A warrants, November 26, 2009 with respect to the 11,550,000 Class B warrants, and May 26, 2010 with respect to the 11,550,000 Class C warrants. If such warrants are exercised in full and converted to common shares, our shareholders may experience a decline in the price of our common shares as such common shares are sold into the open market.  If such decline in the price of our common shares were to materialize, shareholders could suffer a loss on their investment.

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23.           There is no current trading market for our securities and if a trading market does not develop, purchasers of our securities may have difficulty selling their shares.

Our shares only began trading on the OTC Bulletin Board in January 2008 under the symbol LTYPF.  In June 2008 the symbol was changed to PWOIF to reflect the name change from Liberty Petroleum Inc. to Power Oil & Gas Inc.  There is currently no established public trading market for our securities and an active trading market in our securities may not develop or, if developed, may not be sustained.  If for any reason a public trading market does not otherwise develop, purchasers of the shares may have difficulty selling their common shares should they desire to do so.

24.           State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus.

Secondary trading in common shares sold in this offering will not be possible in any state until the common shares are qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state.  If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common shares in any particular state, the common shares could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common shares, the liquidity for the common shares could be significantly impacted thus causing you to realize a loss on your investment.

25.           We are a “foreign private issuer”, and you may not have access to the information you could obtain about us if we were not a “foreign private issuer”.

We are considered a "foreign private issuer" under the Securities Act of 1933, as amended. As an issuer incorporated in Canada, we will be required to prepare our annual and interim financial statements in accordance with Canadian generally accepted accounting principles. For purpose of our annual disclosure obligations in the United States, we will annually file in the United States financial statements prepared in accordance with Canadian GAAP together with reconciliation to US GAAP.  In addition, as a foreign private issuer we will not have to file quarterly reports with the SEC nor will our directors, officers and 10% stockholders be subject to Section 16(b) of the Exchange Act. As a foreign private issuer we will not be subject to the proxy rules of Section 14 of the Exchange Act. Furthermore, Regulation FD does not apply to non-U.S. companies and will not apply to us. Accordingly, you may not be able to obtain information about us as you could obtain if we were not a “foreign private issuer”.

26.           Because we do not intend to pay any cash dividends on our common shares, our stockholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common shares in the foreseeable future.  Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.

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27.           We may become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax consequences to U.S. investors.

If we are a “passive foreign investment company” or “PFIC” as defined in Section 1297 of the Code, U.S. Holders will be subject to U.S. federal income taxation under one of two alternative tax regimes at the election of each such U.S. Holder. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and either (i) 75% or more of its gross income for the taxable year is “passive income”, which generally includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if we elect, adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more.  Whether we are a PFIC in any year and the tax consequences relating to PFIC status will depend on the composition of our income and assets, including cash. U.S. Holders should be aware, however, that if we become a PFIC, we may not be able or willing to satisfy record-keeping requirements that would enable U.S. Holders to make an election to treat us as a “qualified electing fund” for purposes of one of the two alternative tax regimes applicable to a PFIC, which would result in adverse tax consequences to our shareholders who are U.S. citizens.

28.           Because we are formed under the Canadian Business Corporations Act in Canada and all of our assets, officers, and directors are located outside the United States, it may be difficult for an investor to enforce within the United States any judgments obtained against us or any of our officers and directors.

All of our assets are located outside of the United States and we do not currently maintain a permanent place of business within the United States. In addition, all of our officers and directors are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for an investor to effect service of process or enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. In addition, there is uncertainty as to whether the courts of Canada would recognize or enforce judgments of United States courts obtained against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.  There is even uncertainty as to whether the Canadian courts would have jurisdiction to hear original actions brought in Canada against us or our directors and officers predicated upon the securities laws of the United States or any state thereof.

ITEM 4.  INFORMATION ON THE COMPANY

4.A. History and Development of the Company

Power Oil & Gas Inc. (formerly Liberty Petroleum Inc.) (the “Company”)is principally a company engaged in the acquisition and exploration of oil and gas properties.  On March 15, 2006, the Company entered into an agreement giving it the exclusive right and option to acquire a 100% interest in a mineral exploration property known as the GQ Property located in the Kamloops Mining District of British Columbia, Canada.  In relation to the Company’s decision to pursue opportunities in the oil and gas industry, it terminated the GQ Property option on May 31, 2006.

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On June 14, 2006, the Company entered into a Petroleum, Natural Gas and General Rights Conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd. and Torland Ltd. (together, the “Vendor”) whereby the Company acquired a 100% interest in a petroleum and natural gas (“PN&G”) lease with the government of Alberta.  The underlying lease acquired by the Company is Alberta PN&G lease 0405070015 (the “Lease”), and the property to which the Lease pertains is located in the Milk River area of Alberta. Upon signing the Agreement, the Company paid the Vendor $7,500 and paid closing costs of $938 and agreed to assume the underlying lease payments to the province of Alberta.  In addition, the Vendor is entitled to an overriding 5% royalty on all petroleum substances produced from the Milk River Property, if any.  The Vendor is entitled to a first and paramount lien upon all of the petroleum substances produced or allocated to the Property to secure the payment of any amounts due and payable to the Vendor relating to the royalty.

On July 23, 2008, the Company entered into an Assignment and Assumption agreement with Giant Oil & Gas Inc. et al, a company related by a common director, whereby the Company purchased a 100% right and interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a total of 1,911 hectares in the Taber, Grand Forks area of Alberta, Canada.  Upon signing the Agreement, the Company paid the Vendor $30,331 and agreed to assume the underlying lease payments to the province of Alberta

Our office is located at 4620 Manilla Road, S.E., Calgary, Alberta, Canada, T2G 4B7.  Our telephone number is 604-608-3830.  Our internet address is www.poweroilinc.com.

We are a company in the early stages of engaging in the exploration and development of oil and gas properties.

No commercially viable natural gas deposit may exist on our properties.  Our plan of operations is to carry out geological analysis of these properties in order to ascertain whether it possesses deposits of natural gas.  We can provide no assurance to investors that our property contains a commercially viable natural gas deposit until appropriate exploratory work is done and an evaluation based on that work concludes further work programs are justified.  At this time, we definitely have no known reserves on our property.

For the period from April 25 2005 (inception) to December 31, 2008, we did not generate any revenue.

4.B. Business Overview

Historical Corporate Development

Power Oil & Gas Inc. (formerly Liberty Petroleum Inc.)(the “Company") is principally a company engaged in the acquisition and exploration of oil and gas properties.  On March 15, 2006, the Company entered into an agreement giving it the exclusive right and option to acquire a 100% interest in a mineral exploration property known as the GQ Property located in the Kamloops Mining District of British Columbia, Canada.  In relation to the Company’s decision to pursue opportunities in the oil and gas industry, it terminated the GQ Property option on May 31, 2006.

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We are a company in the early stages of engaging in the exploration and development of oil and gas properties.  To accomplish our objective, our strategy is to acquire exploration prospects. On June 14, 2006, the Company entered into a Petroleum, Natural Gas and General Conveyance Agreement with Stone Petroleums Ltd. et al whereby the Company acquired a 100% interest in a petroleum and natural gas lease in the Milk River area of Alberta, Canada.  The rights associated with the lease relate to petroleum and natural gas.  On July 23, 2008, the Company entered into an assignment and assumption agreement with Giant Oil & Gas Inc. et al whereby the Company purchased a 100% right and interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a total of 1,911 hectares in the Taber, Grand Forks area of Ablerta, Canada.  Upon signing the Agreement, the Company agreed to assume the underlying lease payments to the province of Alberta.  The Company’s specific goal is to explore the properties for potential unconventional tight gas sands.

However, extensive analysis of these properties will be required before we can make an evaluation as to the economic feasibility of developing or finding valuable natural gas on these grounds. In addition, there is no assurance that we will be able to make the payments required by the lease agreement for the property.  There is no assurance that the property will ever generate any revenue.

We have limited finances and require additional funding in order to accomplish our exploration, development and acquisition objectives. There is no assurance that we will have revenues in the future or that we will be able to secure other funding necessary for our future growth and expansion.  There is also no assurance that our oil and natural gas exploration activities will produce commercially viable reserves.  Our efforts to extract oil and gas may be unprofitable.

We may seek relationships with other mineral exploration and development companies that will allow us to exploit idle and/or undeveloped resources.

MATERIAL EFFECTS OF GOVERNMENT REGULATIONS

Development, production and sale of natural gas and oil in Canada are subject to extensive laws and regulations, including environmental laws and regulations.  The oil and gas leases currently leased by the Company are owned by the Province of Alberta and are managed by the Department of Energy.  We may be required to make large expenditures to comply with environmental and other governmental regulations.  Matters subject to regulation include:

• location and density of wells;

• the handling of drilling fluids and obtaining discharge permits for drilling operations;

• accounting for and payment of royalties on production from state, federal and Indian lands;

• bonds for ownership, development and production of natural gas and oil properties;

• transportation of natural gas and oil by pipelines;

• operation of wells and reports concerning operations; and

• taxation.

Under these laws and regulations, we could be liable for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages.  Failure to comply with these laws and regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties.  Moreover, these laws and regulations could change in ways that substantially increase our costs.  Accordingly, any of these liabilities, penalties, suspensions, terminations or regulatory changes could materially adversely affect our financial condition and results of operations enough to possibly force us to cease our business operations.

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ANTICIPATED CHANGES TO FACILITIES AND EMPLOYEES

Management of the Company anticipates no changes to either facilities or employees in the near future.

SEASONALITY, DEPENDENCY UPON PATENTS, LICENSES, CONTRACTS, PROCESSES, SOURCES AND AVAILIBILTY OF RAW MATERIALS

Certain of the Company’s properties may be in remote locations and subject to significant temperature variations and changes in working conditions.  It may not be possible to actively explore the Company’s property in Alberta throughout the year because seasonal changes in the weather.  If exploration is pursued at the wrong time of year, the Company may incur additional costs to address issues relating to the weather.

If we commence drilling, shortages or an increase in cost of drilling rigs, equipment, supplies or personnel could delay or interrupt our operations, which could impact our financial condition and results of operations.  Drilling activity in the geographic areas in which we conduct drilling activities may increase, which would lead to increases in associated costs, including those related to drilling rigs, equipment, supplies and personnel and the services and products of other vendors to the industry. Increased drilling activity in these areas may also decrease the availability of rigs.  We do not have any contracts with providers of drilling rigs and, consequently we may not be able to obtain drilling rigs when we need them.  Therefore, our drilling and other costs may increase further and necessary equipment and services may not be available to us at economical prices.

COMPETITION

The oil and gas exploration industry is intensely competitive, highly fragmented and subject to rapid change.  We may be unable to compete successfully with our existing competitors or with any new competitors.  We compete with many exploration companies that have significantly greater personnel, financial, managerial, and technical resources than we do.  This competition from other companies with greater resources and reputations may result in our failure to maintain or expand our business.

4.C. Organizational Structure

The Company is not part of a group and has no subsidiaries.

4.D. Property, Plant And Equipment

CORPORATE OFFICES

We do not own any real property.  We currently lease our corporate headquarters at 4620 Manilla Road S.E., Calgary, Alberta T2G 4B7.    We do not have any policies regarding investments in real estate, securities or other forms of property.

A detailed description of the Company’s exploration properties with additional information for the properties of major significance to the Company is outlined below.

PETROLEUM AND NATURAL GAS LEASES

The Company has an interest in 11 petroleum and natural gas (“PN&G”) leases in Alberta, Canada.

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Unconventional Tight Gas Sands Background

Canada has large deposits of natural gas in rock formations that are especially difficult and expensive to produce. The gas in these difficult-to-produce formations is often referred to as “unconventional”. Most commonly, the formations are low permeability, or “tight” sandstones and limestones, coal seams, organic shales, or interbedded combinations of these formations.

Unconventional gas is found in virtually all Canadian sedimentary basins with the gas resource estimated at over 60 trillion cubic metres. Over the last several decades, new technologies have allowed it to be commercially developed. Between 20 to 30% of Canada's current natural gas production is unconventional. In the United States, unconventional gas accounts for over 40% of gas production.

Tight sandstones and limestones are Canada's most important unconventional gas resource in terms of production. A recent study, funded in part by the Canadian government, indicates that between 85 and 113 million cubic metres per day of Canada's gas production is from tight gas formations. Historically, it has not been the practice in Canada to distinguish between conventional and unconventional gas production from sandstones and limestones. Over the last decade or so, the contribution of tight zones to production has been increasingly recognized and targeted for development.

Significant tight gas production occurs in shallow gas plays in Alberta, and the deep basin of Alberta.  Over the years there has been significant success in accessing natural gas locked in these tight gas reservoirs primarily through the application of horizontal drilling technology.  As conventional sandstones and limestones continue to decline in production, these tight formations will become increasingly important as industry currently shows a high level of interest in this play.

Acquisition of Interests

On June 14, 2006, the Company entered into a Petroleum, Natural Gas and General Rights Conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd., and Torland Ltd. (together the “Vendor”) whereby the Company acquired a 100% interest in a Petroleum and Natural Gas (“PN&G”) lease with the government of the Province of Alberta.  The underlying lease acquired by the Company is Alberta PN&G lease 0405070015, and the property to which the lease pertains is located in the Milk River area of Alberta, as further described below. Upon signing of the Agreement the Company paid the Vendor $7,500 and paid closing costs of $938 and agreed to assume the underlying lease payments to the Province of Alberta.  In addition, the Vendor is entitled to an overriding 5% royalty on all petroleum substances produced from the Milk River Property, if any.  The Vendor is entitled to a first and paramount lien upon all of the petroleum substances produced or allocated to the property to secure the payment of any amounts due and payable to the Vendor relating to the royalty.

On July 23, 2008, the Company entered into an assignment and assumption agreement with Giant Oil & Gas Inc. et al whereby the Company purchased a 100% right and interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a total of 1,911 hectares in the Taber, Grand Forks area of Alberta, Canada.  Upon signing the Agreement, the Company paid the Vendor $30,331.48 and agreed to assume the underlying lease payments to the province of Alberta

Location

All of the Company’s leases are located in the Province of Alberta with a focus on the Taber/Grand Forks area.

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The Taber/Grand Forks group of leases covers more than 2,100 hectares or 5,300 acres in southern Alberta.  The area is known to have significant potential and a demonstrated history of production.  

Property Lease Information

The Company’s properties are comprised of 11 leases with the government of the province of Alberta, Canada.  The leases are for an initial term of five years with a commencement date equal to the date of acquisition.  The leases are renewable if certain conditions are met.  All leases require the payment of the first year’s minimum annual lease payments at the time of acquisition.  In general, minimum annual lease payments are $3.50 per hectare.

Lease Number	Hectares	Lease Commencement Date	Annual Lease Payments
0405070015 0407020077 0407030073	256 128 256	July 14, 2005 February 8, 2007 March 8, 2007	$896 $448 $896
0407030650 0407040015 0407040018 0407040020 0407050502 0407080296 0407080298 0407080302 Totals	256 250.912 192 128 256 124.32 128 192 2167.232	March 22, 2007 April 5, 2007 April 5, 2007 April 5, 2007 May 31, 2007 August 23, 2007 August 23, 2007 August 23, 2007	$896 $878.19 $672 $448 $896 $435.12 $448 $672 $7,585.31

Regional Geology

Alberta contains vast amounts of coal distributed throughout the southern Plains, Foothills, and Mountains.  Originally deposited in relatively flat-lying peat swamps, organic matter (peat) was buried by sediments derived from uplift (mountain building), in the west and gradually changed into coal with increasing heat and pressure of burial.  Over time, the coals were uplifted and partially eroded away, resulting in the present distribution of coal across the Plains.  Coal-bearing strata dip gently westward toward the Mountains where coals are folded and abruptly turn toward the surface to be exposed in the Foothills.

Coal typically occurs within a coal zone as discrete seams and/or packages with several thin and thick seams interbedded with non-coaly rock layers or beds.  A coal zone may be traceable over a large geographic area.  Coal zones are found in strata ranging in age from Late Jurassic (approximately 145 millions years old) to Tertiary (approximately 65 million years old).

The oldest and deepest coals of the Alberta Plains belong to the Lower Cretaceous Mannville Group coals.  The Mannville coals are widely distributed across the Alberta Plains, are thick, continuous and contain some of the highest gas contents of any coals in the Alberta Plains.  Typically six or more seams with cumulative coal thickness ranging from 2 to 14 meters occur over a stratigraphic interval of 40 to 100 meters.  The thickest coals extend from southeast Grande Prairie in a widening wedge between Edmonton and Calgary to the Coronation area with coals occurring at depths ranging from about 800 meters to 2800 meters.

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Upper Cretaceous through Tertiary-aged coal also occurs across the Plains with older coals being overlain by progressively younger rocks and coals.  Three coal zones are recognized within the Upper Cretaceous Belly River Group:  the McKay Coal Zone, near the base of the Belly River Group; the Taber Coal Zone, located in the middle; and the Lethbridge Coal Zone, at the top of the Belly River Group.  Compared to the Mannville coals, the overall thin coals and restricted lateral continuity of the Belly River Group coal seams have resulted in limited exploration efforts in these coals.

The rank of coal in Alberta ranges from very low (lignite) to high (anthracite).  Coal near the surface in the Plains is generally of sub-bituminous rank with lignite occurring in the north and northeast part of the Plains, and high volatile bituminous C in the northwest and southwest areas of the Plains.  Coal rank increases with burial depth.  In the Plains, coal rank increases towards the west as seams dip and become progressively deeper toward the mountains.  With increasing depth also comes increasing overburden pressure, which may restrict permeability.

To date, Horseshoe Canyon coals with relatively low gas contents, but with favourable fracturing are being successfully exploited for unconventional production in the south-central plains.  Mannville coals are showing potentially favourable amounts of fracturing and high gas contents in some locations are undergoing evaluation in the north central to central plains.

Property Geology

The Company’s Properties have not undergone any drilling.  Drill log information from wells drilled on adjacent properties is publicly available. Based on a review of these drill logs, there is an indication that Belly River and Mannville coals may be present.

Previous Work

The Properties are very early stage properties and have not had any drilling performed on it.  The Properties are located in an area that is known to host Belly River and Mannville coals.

Planned Work by the Company for 2009

The Province of Alberta maintains a significant publicly-available database of drilling information from all wells drilled under leases issued by the provincial government.  Companies who drill on government land in Alberta are required to submit their drill results to the province.  Therefore, previous drilling undertaken on land adjacent to the Company’s holding, or drilling on the Company’s land by companies exploring for other resources (oil sands for example) are required to submit their drill log data to the Alberta government.  As a result, there is a large database of drill results available to the public.  The Company intends to undertake a comprehensive review of this drill log data from surrounding properties in order to gain a better understanding of the exploration potential of the properties.  The Company does not currently have agreements in place with qualified geologists who can undertake this review.  Currently, the Company is attempting to engage consultants to perform the reviews.

The review of the data will include preparing detailed geological maps using existing drill log data with the aim of identifying potential drill targets and to obtain a better understanding of potential strategies for acquiring new land holdings.  The Company will not undertake any drilling in 2009, as the review of available information will take between twelve to eighteen months to complete commencing  January 2009.  Therefore, the Company is not expecting to undertake any drilling until at least 2010.

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ITEM 4A.  UNRESOLVED STAFF COMMENTS

--- Not applicable ---

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion for the fiscal year ended December 31, 2008, 2007, 2006 and for the period from April 25, 2005 (inception) to December 31, 2005 should be read in conjunction with the financial statements of the Company and the notes thereto.

Certain statements contained in the foregoing MD&A and elsewhere in this 20-F constitute forward-looking statements.  Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the financial statements were made, and readers are advised to consider such forward-looking statements in light of the risks set forth in section 3.D. above.

OVERALL PERFORMANCE

The following table sets forth the audited statement of operations data for Power Oil & Gas Inc. (formerly Liberty Petroleum Inc.) for the fiscal years indicated:

	Power Oil & Gas Inc. (formerly Liberty Petroleum Inc.)
	Periods Ended December 31
	2008			2007			2006
Operating revenue	$	-		$	-		$	-
Interest income	$	151		$	2,451		$	2,673
Expenses	$	145,391		$	64,069		$	37,365
Loss from operations	$	(145,640	)	$	(61,618	)	$	(34,692	)
Net loss	$	(145,640	)	$	(61,618	)	$	(34,692	)
Net loss per share:
Basic and diluted	$	0.00		$	0.00		$	0.00
Weighted average number of  common shares outstanding		41,709,750			41,709,750			41,709,750

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Results of Operations of Fiscal 2008 vs. Fiscal 2007

We are a natural resource exploration company in the exploration stage with an objective of acquiring, exploring, and, if warranted and feasible, developing oil and gas properties.  Oil and natural gas exploration and development requires significant capital and our assets and resources are limited. Therefore, we participate in the oil and gas industry through the optioning of oil and gas exploration and development projects.

Revenue - Cost of Revenue

We did not earn any revenues during the years ended December 31, 2008 or 2007.  We do not anticipate earning revenues until such time as we have entered into commercial production of our oil and gas properties. We can provide no assurance that we will discover commercially exploitable levels of oil or gas on our properties, or if such resources are discovered, that we will enter into commercial production of our oil and gas properties.

General and Administrative Expenses

For the year ended December 31, 2008 we had a net loss of $145,640 of the like consisting of: (a) $5,948 in listing and filing fees related to the preparation of the Company’s 20-F and the Company’s name change; (b) $36,250 in professional fees related to the preparation of our financial statements (c) $5,210 in office expenses; (d) $1,650 for transfer agent costs (e) $15,000 in Directors’ fees, (f) $60,573 in stock based compensation, (g) $20,760 in loss on foreign exchange derivative, and (h) $151 in interest income.

For the year ended December 31, 2007 we had a net loss of $61,618 consisting of: (a) $21,404 in listing and filing fees related to the preparation of the Company’s 20-F and the updating of the F-1 registration statement; (b) $15,700 in professional fees related to the preparation of our financial statements (c) $7,966 in office expenses; (d) $4,000 in rent; (e) $1,499 for transfer agent costs (f) $13,500 for Directors’ fees, and (g) $2,451 in interest income.

The increase in the loss in 2008 compared to 2007 is primarily related to the fact that in 2008 the Company incurred an expense for stock based compensation of $60,573 versus $Nil for 2007 and a loss on foreign exchange derivative of $20,760 versus $Nil for 2007.   We did not have any rent charges in 2008 versus $4,000 in 2007.  In 2008 listing and filing fees decreased to $5,948 compared to $21,404 in 2007.

Results of Operations of Fiscal 2007 vs. Fiscal 2006

We are a natural resource exploration company in the exploration stage with an objective of acquiring, exploring, and, if warranted and feasible, developing oil and gas properties.  Oil and natural gas exploration and development requires significant capital and our assets and resources are limited. Therefore, we participate in the oil and gas industry through the optioning of oil and gas exploration and development projects.

Revenue - Cost of Revenue

We did not earn any revenues during the years ended December 31, 2007 or 2006.  We do not anticipate earning revenues until such time as we have entered into commercial production of our oil and gas property. We can provide no assurance that we will discover commercially exploitable levels of oil or gas on our property, or if such resources are discovered, that we will enter into commercial production of our oil and gas property.

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General and Administrative Expenses

For the year ended December 31, 2007 we had a net loss of $61,618 consisting of: (a) $21,404 in listing and filing fees related to the preparation of the Company’s 20-F and the updating of the F-1 registration statement; (b) $15,700 in professional fees related to the preparation of our financial statements (c) $7,966 in office expenses; (d) $4,000 in rent; (e) $1,499 in transfer agent costs (f) $13,500 in Directors’ fees, and (g) $2,451 in interest income.

For the year ended December 31, 2006 we had a net loss of $34,692 consisting of: (a) $18,733 in listing and filing fees related to the preparation of the Company’s F-1 registration statement; (b) $7,500 in professional fees related to the preparation of our financial statements (c) $3,000 relating to the write-off of the Company’s option payment on its former gold exploration property; (d) $1,470 in office expenses; (e) $4,077 in rent; (f) $585 in transfer agent costs (g) $2,000 in Directors’ fees, and (h) $2,673 in interest income.

The increase in the loss in 2007 compared to 2006 is primarily related to the fact the in 2007 the Company incurred more expenses relating to being a publicly reporting issuer.  In 2007 we added two members to our Board of Directors, and filed a 20-F report for the first time.  In 2006, we completed the filing of our F-1 registration statement and entered into and subsequently terminated an option on a mineral exploration property in British Columbia.

5.B.  Liquidity and Capital Resources

Liquidity

We are an oil and gas exploration company with an objective of acquiring, exploring, and if warranted and feasible, developing oil and gas properties. We have members on our board of directors who have extensive experience in the oil and gas industry. However, exploration activities of properties without any proven reserves require a considerable amount of time and money, and the subsequent return on investment for our shareholders would be very long term indeed.  Should we make a finding of natural gas on our properties, we would consider our alternatives to such finding, including the possibility of selling any findings to a major oil and gas company. By selling its findings to another oil and gas company, it would provide an immediate return to our shareholders without the long time frame and cost of putting an oil or gas operation into operation ourselves, and it would also provide future capital for the company to continue operations.

Since our incorporation we have financed our operations almost exclusively through the sale of our common shares to investors.  As we are an oil and gas exploration and development company with no producing resource properties, we do not generate operating income or cash flow from our business operations.  Until a significant discovery is found, our working capital requirements will be dependent upon the amount of our exploration budget for any given year.  We expect to continue to finance operations through the sale of equity.  However, there is no guarantee that we will be successful in arranging financing on acceptable terms.

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On October 14, 2008 and November 6, 2008 the Company entered into two bridge loan agreements with two separate investors for $57,672.50 and $59,472.50 respectively.  The loans carry an interest rate of the Bank of Canada Rate +1% per annum, and may be converted to common stock of Power Oil & Gas at the discretion of the Borrower or Lender at a conversion rate based on fair market value of the Company’s common shares, which will be determined by the Borrower and the Lender on the date of conversion.  The funds will be used for operating capital purposes and the acquisition of exploration properties.  The 2008, 2007,  and 2006 operations were funded through two private placements and the two bridge loan agreements. Such proceeds are not sufficient to enable us to continue our planned operations.

During 2008, we used $55,548 for operating activities, a decrease of $9,979 over 2007.  The decrease in 2008 from 2007 was primarily due to an increase in the 2008 net loss ($131,360) compared to the net loss in 2007 ($61,618).     In 2008 there was an increase of accounts payable and accrued liabilities of $1,602 while in 2007 there was a decrease of $4,954.

In 2008 there was an inflow from bridge loans payable of $117,145 while 2007 was nil.

Investing in 2008 related to $20,000 invested in short term investments and cash used for the acquisition of oil and gas interests  and annual property payments totaling $32,782.  In 2007, we invested $70,673 in short-term investments and used cash to make our annual property payment of $896.

During 2007, we used $65,527 for operating activities, an increase of $38,510 over 2006.  The increase in 2007 from 2006 was primarily due to an increase in the 2007 net loss ($61,618) compared to the net loss in 2006 ($34,692).  In addition, in 2007 there was an outflow from accounts payable and accrued liabilities of $4,954 while in 2006 there was an inflow of $9,415.  There were no financing activities in either 2007 or 2006 while investing in 2007 related to the $70,673 received upon the maturity of investments and cash used to make our annual property payment of $896.  In 2006, we invested $90,673 in short-term investments and $8,438 for the acquisition of our Milk River Property.

During 2006, we used $27,017 for operating activities, an increase of $22,216 over 2005.  The increase in 2006 over 2005 was primarily due to an increase in the 2006 net loss ($34,692) compared to the net loss in 2005 ($8,950).  No financing activities occurred in 2006.  In 2005 we received $134,475 from the proceeds of two private placements and shares issued to our founders.    In 2006, we invested $90,673 in short-term investments and $8,438 for the acquisition of our Milk River Property.  No investing activities were undertaken in 2005.

We had cash and short-term investments of $56,611 as of December 31, 2008. We anticipate that we will incur through the end of our next fiscal year:

· $57,600 in connection with work expenditures, lease payments and the initial geological analysis of the oil and gas leases;

· $49,100 for operating expenses, including working capital and general, administrative and professional legal and accounting expenses associated with our being a reporting issuer under the Securities Exchange Act of 1934.

· There are two loans payable due before the end of the next fiscal year of in the amount of $117,145.  This amount has not been included in the operating expenses due to terms of conversion.

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At December 31, 2008 we had working capital of ($91,488). Therefore, current cash on hand is not sufficient for the next twelve months as proposed in our plan of operations.  We shall require additional funding and we anticipate that such funding will be in the form of equity financing from the sale of our common shares.  However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common shares to fund additional phases of the exploration program, should we decide to proceed.  We believe that debt financing will not be an alternative for funding any further phases in our exploration program.  The risky nature of this enterprise and lack of tangible assets places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable mine can be demonstrated.  We do not have any arrangements in place for any future equity financing.

Critical accounting estimates

The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period.  Actual results could differ from these estimates and would impact future results of operations and cash flows.

The Company follows the full cost method for accounting for its oil and natural gas property interests as prescribed by the Canadian Institute of Chartered Accountants, (“CICA”) Accounting Guideline 16 - Oil and Gas Accounting – Full Cost.  Under this method all costs related to the acquisition of, the exploration for, and the development of oil and natural gas reserves are capitalized on a country-by-country basis.  These capitalized costs are depleted or depreciated on a unit-of-production basis on the estimated proved reserves.  Certain costs associated with the acquisition and exploration of unproven properties are excluded from depletion and depreciation until it is determined whether proved reserves are attributable to the properties. Where the Company has entered into option agreements for the acquisition of an interest in oil and gas properties that provide for periodic payments, amounts unpaid are not recorded as a liability since they are paid entirely at the Company’s option.  Estimates of undiscounted future cash flows that we use for conducting impairment tests are subject to significant judgment decisions based on assumptions of highly uncertain future factors such as, crude oil and natural gas prices, production quantities, estimates of recoverable reserves, and production and transportation costs. Given the significant assumptions required and the strong possibility that actual future factors will differ, we consider the impairment test to be a critical accounting procedure.

5.C. Research and Development, Patents and Licenses etc.

 --- Not applicable ---

5.D. Trends.

--- No Disclosure Necessary ---

5.E. Off-Balance Sheet Arrangements.

We do not have any off balance sheet arrangements as of December 31, 2008 and December 31, 2007 or of the date of this report.

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5.F. Contractual Obligations.

We have the following contractual obligations as expressed in CDN dollars at December 31, 2008:

Contractual Obligations	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than five years
Annual Lease Payments:
Property Leases	$	20,964	$	7585	$	13,379	$	0	$	0
Capital (Finance) Lease Obligations		0		0		0		0		0
Operating Lease Obligations		0		0		0		0		0
Purchase Obligations		0		0		0		0		0
Other Long-Term Liabilities Reflected on the Company’s Balance Sheet Under the GAAP of the primary financial statements		0		0		0		0		0
Total	$	20,964	$	7585	$	13,379	$	0	$	0

On June 14, 2006, the Company entered into a Petroleum, Natural Gas and General Rights Conveyance with Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd., and Torland Ltd. (collectively the “Vendor”) whereby the Company acquired a 100% interest in a petroleum and natural gas lease with the government of the Province of Alberta.  Upon signing of the agreement, the Company paid the Vendor $8,438 (including closing costs) and agreed to assume the underlying lease payments to the Province of Alberta of the greater of $3.50 per hectare or $50 per year.  The Lease expires on July 14, 2010 but can be renewed.

On July 23, 2008, the Company entered into an assignment and assumption agreement with Giant Oil & Gas Inc. et al whereby the Company purchased a 100% right and interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a total of 1,911 hectares in the Taber, Grand Forks area of Ablerta, Canada.  Upon signing the Agreement, the Company paid the Vendor $30,331.48 and agreed to assume the underlying lease payments to the province of Alberta of $3.50 per hectare.  These leases all expire in 2012 but can be renewed.

At December 31, 2008 and 2007, the Company had trade payables, accrued liabilities, and bridge loan payables of $128,208 and $9,461 respectively.  All of these obligations are unsecured and due in less than one year.

Recent Accounting Pronouncements Applicable to the U.S.

SFAS 157

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of FAS 157 are effective fiscal years beginning after November 15, 2007.

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SFAS 159

In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115” (“SFAS No. 159”) which permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for fiscal periods beginning after November 15, 2007.

SFAS 141(R)

In December 2007, the FASB issued SFAS 141(R) “Business Combinations” and SFAS 160 “Non-controlling Interests in Financial Statements”, which are both effective for fiscal years beginning after December 15, 2008. SFAS 141(R), which will replace FAS 141, is applicable to business combinations consummated after the effective date of December 15, 2008.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES

6.A. Directors and Senior Management

Directors and Senior Management

June 11, 2009

______________________________________________________________________________

The following table sets forth certain information regarding the members of our board of directors and our executive officers:

Name	Age	Positions and Offices Held
Pratt Barndollar	50	Director, Chairman, President, Chief Executive Officer, Chief Operating Officer, and Secretary
Manny Dhinsa	37	Director
Rob Sandhu	33	Director
Keith Diakiw	36	Director

Our directors hold office until the next annual meeting of our shareholders or until their successors are duly elected and qualified.  None of our directors have any family relationships with any of our other directors or executive officers.  Set forth below is a summary description of the principal occupation and business experience of each of our directors and executive officers for at least the last five years.

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PRATT BARNDOLLAR, age 50, is an experienced geophysicist who has served as senior geoscience manager and interpreter for large and small oil companies during the span of his career.  He has broad US and international experience in prospect evaluation, operations and planning and currently holds the position of Manager, Exploration Planning at Talisman Energy Inc. Between 2006 and 2008 he was Vice President, Exploration of Napa Energy Ltd.  Mr. Barndollar served as Chief Geophysicist and Exploration Portfolio Manager for Devon Energy between 2002 and 2005, Senior Geophysicist for Samson Canada between 2000 and 2002, Chief Geophysicist for Apache Canada between 1997 and 2000, and Senior Explorer and Project Leader for Phillips Petroleum between 1982 and 1997.  Mr. Barndollar earned two Bachelor of Science degrees from Kansas State University, in Geophysics and Civil Engineering.  His professional affiliations include the Association of Professional Engineers, Geologists, and Geophysicists of Alberta; Texas Board of Professional Geoscientists; American Association of Petroleum Geologists; Canadian Society of Petroleum Geologists; and the Canadian Society of Exploration Geophysicists.

Manny Dhinsa, age 37, is an accomplished petroleum specialist who has been working in the Alberta oil patch for more than a decade. His clients have included world-class oil and gas companies such as Encana, Nexen, Devon and CNRL. He has been involved in advanced exploration programs throughout Alberta, Saskatchewan and northeast British Columbia, including heavy oil exploration in the Lloydminster area (CNRL) and Encana's natural gas resource in the Greater Sierra play.  Mr. Dhinsa graduated from the University of Alberta with a Bachelor of Science degree in geology.

Rob Sandhu has served on our Board of Directors since May 15, 2007.  Since October 2007 he has also served as the President, CEO, and Director of Giant Oil & Gas Inc., a publicly traded oil and gas exploration company. He is an oil and natural gas drilling specialist who has been working as a professional petroleum driller since 1999. During the preceding five years Mr. Sandhu has worked for the Halliburton Group as a directional driller and as a drilling operator for Phoenix Technology Income Trust. From 2000 to 2004 he was a field supervisor for Precision Drilling Technical Services Group.  He has field drilling experience throughout Alberta. Mr. Sandhu has technical training from the Southern Alberta Institute of Technology in Calgary.

Keith Diakiw, age 36, has served on our Board of Directors since May 15, 2007.  He is a professional geologist who has field experience in Canada and Brazil.  Mr. Diakiw is currently working as a Production Geologist for Canadian Natural Resources Ltd. in Fort McMurray, Alberta, Canada.  From 2005 to 2006 he was employed by Wellsite Masters Ltd. as a Well Site Geologist for an oil sands drilling program.  From 2003 to 2004, he worked as a Field Engineer for Schlumberger D&M in Brazil on offshore platforms, while in 2003, he was employed by EnCana Corporation as a Contract Geologist and successfully completed his NW Alberta shallow gas play project.  Prior to 2003, Mr. Diakiw was attending the University of Alberta where he successfully earned a Bachelor of Science

Involvement in Certain Legal Proceedings

We are not aware of any material legal proceedings that have occurred within the past five years concerning any director, director nominee, or control person which involved a criminal conviction, a pending criminal proceeding, a pending or concluded administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding of securities or commodities law violations.

There are no family relationships between any two or more Directors or Senior Management.

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There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.

6.B. Compensation

Cash Compensation

Except as described herein, none of our officers or directors have received or earned any compensation or bonus for services rendered in the fiscal years ended December 31, 2008 or 2007.   Commencing September 2006, Mr. Nott, and Commencing May 15, 2007, Mr. Sandhu and Mr. Diakiw, each has received $500 per month to serve as a Director of the Company.  Mr. Nott received remuneration from January to June 2008 as he resigned in June 2008.   During the fiscal year ended December 31, 2008, total Directors’ Fees were $15,000 (2007 - $13,500).  The monthly fees owing to Mr. Sandhu have been temporarily suspended as of January 2009 in order to conserve operating expenses.  Mr. Diakiw will receive monthly fees for the first quarter of 2009 and then will be suspended in order to conserve operating capital.

We do not maintain key-man life insurance for any of our executive officers or directors.

At the Company’s Annual General Meeting held June 28, 2007, a majority of the Company’s shareholders approved the Company’s 2007 stock option plan.  The stock option plans provides for the granting of up to a maximum of 5,000,000 common stock options.  To date, a total of 600,000 options have been granted under the plan, whereas 200,000 have an exercise price of $.50 USD per option, 200,000 have an exercise price of $1.00 USD per option, and 200,000 have an exercise price of 1.50 USD per option.

Outstanding Equity Awards as at December 31, 2008

Name	No.  of Options Granted	Exer-cise Price per Option		Grant Date	Expiration Date	Mkt. Value of Securities Underlying Options on Date of Grant	Number of Securities Underlying Unexercised Options, Exercisable	Number of Securities Under-lying Un-exercised Options, Un-exercisable	Grant Date Fair Value of Stock Options(1)
Pratt Barndollar(2)	200,000	$.51	06/30/08		06/30/18	$.51	-	200,000	$99,000
Pratt Barndollar(2)	200,000	$1.02	06/30/08		06/30/18	$.51	-	200,000	$97,800
Pratt Barndollar(2)	200,000	$1.53	06/30/08		06/30/18	$.51	-	200,000	$97,000
Manny Dhinsa	-	-	-		-	-	-	-	-
Rob Sandhu Keith Diakiw	- -	- -	- -		- -	- -	- -	- -	- -

(1) The figures in this column represent the grant date fair value of stock option grants as determined using the Black-Scholes model. For more information regarding the assumptions used to value stock option grants, please refer to note 5(b) of the Company’s audited financial statements for the fiscal year ended December 31, 2008 filed with this Form 20-F.

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(2) Mr. Barndollar was granted 600,000 options on June 30, 2008.  The options vest in equal installments of 200,000 every twelve months commencing June 30, 2009 and ending June 30, 2011.

Change of Control Remuneration.

The Company had no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of the Company in Fiscal 2008 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.

6.C. Board Practices

6.C.1. Terms of Office.

Refer to ITEM 6.A.1.

6.C.2. Directors’ Service Contracts.

With the exceptions of Pratt Barndollar, Rob Sandhu, and Keith Diakiw, there are no Director Service contracts.  Pursuant to an agreement dated June 2008 between the Company and Mr. Barndollar, commencing June 2008, Mr. Barndollar is to serve as the President, CEO, and  Director of the Company.  Pursuant to respective agreements dated May 15, 2007 between the Company and Mr. Sandhu and Mr. Diakiw, commencing May 15, 2007, Mr. Sandhu and Mr. Diakiw each began receiving $500 per month to serve as a Director of the Company.

The monthly fees owing to Mr. Sandhu have been suspended as of January 1, 2009 in order to conserve cash flow.  The monthly fees owing to Mr. Diakiw have been suspended as of April 1, 2009 in order to conserve cash flow.  The respective service contracts will terminate upon the respective Director ceasing to serve as a Director of the Company.

6.C.3. Board of Director Committees.

The Audit Committee oversees the accounting and financial reporting processes of the Company and all audits and external reviews of the financial statements of the Company on behalf of the Board, and has general responsibility for oversight of internal controls, accounting and auditing activities of the Company. Until September 2008, the Company’s Audit Committee consists of the following three directors, all of who are financially literate and knowledgeable about the Company’s affairs: Paul Uppal, Duncan Budge and Michael Nott. Mr. Duncan Budge is the audit committee’s financial expert member as a qualified accountant with over 25 years experience in business.As of September 2008 the Board of Directors is empowered to appoint a new audit committee for the Corporation.

The Committee reviews, on a continuous basis, any reports prepared by the Company's external auditors relating to the Company's accounting policies and procedures, as well as internal control procedures and systems. The Committee is also responsible for examining all financial information, including annual financial statements, prepared for securities commissions and similar regulatory bodies prior to filing or delivery of the same. The Audit Committee also oversees the annual audit process, the Company's internal accounting controls, any complaints and concerns regarding accounting, internal controls or auditing matters and the resolution of issues identified by the Company's external auditors. The Audit Committee recommends to the Board the firm of independent auditors to be nominated for appointment by the shareholders and the compensation of the auditors. The Audit Committee meets on an as needed basis.

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6.D. Employees

We have no employees at this time. We utilize outside contractors where possible, and rely on the industry expertise of management and our Board of Directors. These contractors will be responsible for surveying, geology, engineering, exploration, and excavation. The geologists will evaluate the information derived from the exploration and excavation and the engineers will

advise us on the economic feasibility of removing the mineralized material. We presently employ no member of our management team.  We do not foresee any significant changes in the number of employees or consultants we will have over the next twelve months, unless the growth of our business demands it.

6.E. Share Ownership

The following table lists, as of June 11, 2009 Directors and Senior Management who beneficially own the Company's voting securities, consisting solely of common shares and the amount of the Company's voting securities owned by the Directors and Senior Management as a group.

Shareholdings of Directors and Senior Management

______________________________________________________________________________

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the "SEC") and generally includes voting or investment power with respect to securities.  In accordance with SEC rules, shares of common shares issuable upon the exercise of options or warrants which are currently exercisable or which become exercisable within 60 days following the date of the information in this table are deemed to be beneficially owned by, and outstanding with respect to, the holder of such option or warrant.  Except as indicated by footnote, and subject to community property laws where applicable, to our knowledge, each person listed is believed to have sole voting and investment power with respect to all shares of common shares owned by such person.

Name of Beneficial Owner	Number of Shares of common shares Beneficially Owned *	Percent of common shares Beneficially Owned
Pratt Barndollar	16,000,000(1)	38.4%
Manny Dhinsa	14,000,000(1)	33.6%
Keith Diakiw Rob Sandhu	- -	- -
All directors and executive officers as a group  (four persons)	30,000,000	72.0%

*                        Based on 41,709,750 shares outstanding as of June 11, 2009.

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(1) The shares owned by Messrs. Barndollar and Dhinsa are subject to our option to purchase all or any portion of these shares are a purchase price of CDN $0.01 per share.  We are not obligated to repurchase the shares at any time or for any reason (such as termination of employment, resignation from the Board or as officer, a change of control of the Company or failure to reach performance goals).  Our repurchase right will continue with respect to and for so long as any of the 30 million shares issued to Messrs. Barndollar and Dhinsa are held by them (or any of their affiliates or family members), and will survive the resignation as an officer or director of the Company by Mr. Barndollar and/or Mr. Dhinsa.  We may exercise our right of repurchase as to some or all of the shares held (directly or indirectly) by theses Directors by delivering a notice of such exercise to Mr. Barndollar and/or Mr. Dhinsa not less than ten business days prior to the closing of such repurchase.  Messrs. Barndollar and Dhinsa agree that they shall not, directly or indirectly, sell, exchange, pledge, hypothecate, transfer, gift, grant an irrevocable proxy with respect to, devise, assign or in any other way dispose of, encumber or grant a security interest in, any of the shares or any interest therein.  Messrs. Barndollar and Dhinsa also agree and acknowledge that said restriction is in addition to all applicable securities laws and regulation.

Our major shareholders do not have voting rights that differ from the other holders of shares of our common shares.

Stock Options

On June 28, 2007, the stockholders of the Company approved the Company’s 2007 stock option plan whereby the Company may grant options to its directors, consultants and employees for up to 5,000,000 shares of common stock.  The exercise price of each option equals the market price of the Company’s stock on the date of grant.  Options vest over a three-year period, unless otherwise specified by the Board of Directors.  All options have a ten year term. 600,000 options have been granted to date.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A. Major Shareholders.

7.A.1.a. Holdings By Major Shareholders.

The Company has two shareholders who own more than 5% of the issued shares.  As at June 11, 2009 Pratt Barndollar and Manny Dhinsa own an aggregate 30,000,000 shares, or 72.0% of the common shares.

7.A.1.b. Significant Changes in Major Shareholders’ Holdings.

On September 10, 2008, one of our founding Directors, Mr. Paul Uppal, resigned as a Director, and, pursuant to a share assignment agreement dated September 10, 2008, gifted his 16,000,000 common shares to Pratt Barndollar, our new President, CEO and Director.  Pursuant to the share assignment agreement, the common shares gifted to Mr. Barndollar are subject to the same terms and conditions as were in our agreement with Mr. Uppal, including the repurchase option held by us with respect to Mr. Uppals’s shares.

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On September 10, 2008, Mr. Duncan Budge, resigned as our Director, and, pursuant to a share assignment agreement dated September 10, 2008, gifted his 14,000,000 common shares to Manny Dhinsa, our Director.  Pursuant to the share assignment agreement, the common shares gifted to Mr. Dhinsa are subject to the same terms and conditions as were in our agreement with Mr. Budge, including the repurchase option held by us with respect to Mr. Budge’s shares.

On August 17, 2006, one of founding Directors, Mr. Greg Crowe, resigned as our director, and, pursuant to a share purchase agreement dated August 17, 2006, he sold his 14,000,000 common shares at a price of $0.0001 to Duncan Budge, who is our director.  Pursuant to the share purchase agreement, the common shares purchased by Mr. Budge are subject to the same terms and conditions as were in our agreement with Mr. Crowe, including the repurchase option held by us with respect to Mr. Crowe’s shares.   For further information on such agreements, see our disclosure under the sub-section entitled “Material Contracts.”

7.A.1.c. Different Voting Rights.

The Company’s major shareholders do not have different voting rights.

7.A.2. Canadian Share Ownership.

On June 11, 2009 the Company’s shareholders’ list showed At 41,709,750 common shares outstanding which were held by approximately 47 stockholders of record.  Of the shares issued and outstanding 34,739,750 are held by shareholders with Canadian addresses.

The Company’s shares began trading in January 2008 under the stock symbol LTYPF on the OTC Bulletin Board.  In June 2008 the symbol was changed to PWOIF to reflect the name change from Liberty Petroleum Inc. to Power Oil & Gas Inc.

7.A.4. Change of Control of Company Arrangements.

There are no arrangements, known to the Company, the operation of which may at a subsequent date result in a change in control of the Company.

7.B. Related Party Transactions

In May 2004, pursuant to an agreement, we issued 16,000,000 common shares to Paul Uppal, one of our officers, directors and founder.   On September 10, 2008 Mr. Uppal, resigned as our director, and, pursuant to a share assignment agreement dated September 10, 2008, he gifted his 16,000,000 common shares to Mr. Pratt Barndollar, who is our President, CEO and Director.  Pursuant to the share assignment agreement, the common shares given to Mr. Barndollar are subject to the same terms and conditions as were in our agreement with Mr. Uppal, including the repurchase option held by us with respect to Mr. Uppal’s shares. Such shares are restricted and the certificates representing such shares contain a restrictive legend.

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In May 2004, we also issued 14,000,000 common shares to one of our directors and founder, Greg Crowe.  On August 17, 2006 Mr. Crowe, resigned as our director, and, pursuant to a share purchase agreement dated August 17, 2006, he sold his 14,000,000 common shares at a price of $0.0001 to Mr. Duncan Budge, who is our director.  Pursuant to the share purchase agreement, the common shares purchased by Mr. Budge are subject to the same terms and conditions as were in our agreement with Mr. Crowe, including the repurchase option held by us with respect to Mr. Crowe’s shares.   On September 10, 2008, Mr. Duncan Budge, resigned as our Director, and, pursuant to a share assignment agreement dated September 10, 2008, gifted his 14,000,000 common shares to Manny Dhinsa, our Director.  Pursuant to the share assignment agreement, the common shares gifted to Mr. Dhinsa are subject to the same terms and conditions as were in our agreement with Mr. Budge, including the repurchase option held by us with respect to Mr. Budge’s shares.

The common shares issued to Mr. Barndollar and Mr. Dhinsa are subject to our right, exercisable at any time, to purchase any or all of these shares from Mr. Barndollar and Mr. Dhinsa at a purchase price of CDN$0.01 per share.  We have this right until we, in our sole discretion, decide to terminate the agreement.  The exercise price of such repurchase option is $0.01 per share, amounting in the aggregate to $160,000 for the shares held by Mr. Barndollar and $140,000 for the shares held by Mr. Dhinsa. Unaffiliated stockholders have no protection against our future potential decision to repurchase the shares of the two directors pursuant to current or potentially modified contracts, even if such repurchase would essentially use all or substantially all of the company’s working capital and essentially cause the company to become insolvent.

Shareholder Loans

There are no loans to shareholders.

Amounts Owing to Senior Management/Directors

At December 31, 2008 and 2007 no amounts were owed to senior management or directors.  There have been no transactions since inception, or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more than 5% of the outstanding common shares, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest.  Management believes the transactions referenced above were on terms at least as favorable to the Company as the Company could have obtained from unaffiliated parties.

7.C. Interests of Experts and Counsel

--- Not applicable ---

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ITEM 8.  FINANCIAL INFORMATION

8.A.  Statements and Other Financial Information

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, as discussed in footnotes to the financial statements.

The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report.  The audit report of Smythe Ratcliffe LLP is included herein immediately preceding the financial statements.

Audited Financial Statements:

Fiscal periods ended December 31, 2008, 2007, 2006, and 2005.

8.A.7. Legal/Arbitration Proceedings

The directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.

The directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

8.A.8. Policy on Dividend Distributions

The Company has never declared or paid a dividend to its shareholders.  The Company does not have any policy on dividend distributions.

8.B. Significant Changes

On March 15, 2006, the Company entered into an agreement giving it the exclusive right and option to acquire a 100% interest in a mineral exploration property known as the GQ Property located in the Kamloops Mining District of British Columbia, Canada.  In relation to the Company’s decision to pursue opportunities in the oil and gas industry, it terminated the GQ Property option on May 31, 2006.

On June 14, 2006, the Company entered into a petroleum, natural gas and general rights conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd. and Torland Ltd. (together, the “Vendor”) whereby the Company acquired a 100% interest in a petroleum and natural gas (“PN&G”) lease with the government of Alberta.  The underlying lease acquired by the Company is Alberta PN&G lease 0405070015 (the “Lease”), and the property to which the Lease pertains is located in the Milk River area of Alberta. Upon signing the Agreement, the Company paid the Vendor $7,500 and paid closing costs of $938 and agreed to assume the underlying lease payments to the province of Alberta.  In addition, the Vendor is entitled to an overriding 5% royalty on all petroleum substances produced from the Milk River Property, if any.  The Vendor is entitled to a first and paramount lien upon all of the petroleum substances produced or allocated to the Property to secure the payment of any amounts due and payable to the Vendor relating to the royalty.

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On June 23, 2006, at an annual general and special meeting of shareholders, a majority of the shareholders of the Company approved a change in business of the Company from mineral exploration to oil and gas exploration and extraction.  At the same meeting, a majority of the shareholders of the Company approved a change in name of the Company to Liberty Petroleum Inc.

On August 14, 2006, Mr. Duncan Budge was appointed to the Board of Directors.

On August 17, 2006 Mr. Crowe, resigned as our director, and, pursuant to a share purchase agreement dated August 17, 2006, he sold his 14,000,000 common shares at a price of $0.0001 to Mr. Duncan Budge, who is our director.  Pursuant to the share purchase agreement, the common shares purchased by Mr. Budge are subject to the same terms and conditions as were in our agreement with Mr. Crowe, including the repurchase option held by us with respect to Mr. Crowe’s shares.

On August 21, 2006 Mr. Michael Nott was appointed to the Board of Directors.

On May 15, 2007 Mr. Rob Sandhu and Mr. Keith Diakiw were appointed to the Board of Directors.

On June 28, 2007 at an annual general meeting of shareholders, a majority of the shareholders of the Company approved the Company’s 2007 Stock Option Plan.

On June 28, 2007 Mr. Paul Uppal was appointed President, Secretary, and Treasurer.

On May 23, 2008 at a special meeting of the shareholders, a majority of the shareholders of the Company approved a change in name of the Company to Power Oil & Gas Inc.

On June 1, 2008, Mr. Pratt Barndollar was appointed CEO, CFO President, Secretary, Treasurer and Director.

On July 23, 2008, the Company entered into an assignment and assumption agreement with Giant Oil & Gas Inc. et al whereby the Company purchased a 100% right and interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a total of 1,911 hectares in the Taber, Grand Forks area of Ablerta, Canada.  Upon signing the Agreement, the Company paid the Vendor $30,331.48 and agreed to assume the underlying lease payments to the province of Alberta.

On September 10, 2008 Manny Dhinsa was appointed to the Board of Directors.

On September 10, 2008, one of our founding Directors, Mr. Paul Uppal, resigned as a Director, and, pursuant to a share assignment agreement dated September 10, 2008, gifted his 16,000,000 common shares to Pratt Barndollar, our new President, CEO and Director.  Pursuant to the share assignment agreement, the common shares gifted to Mr. Barndollar are subject to the same terms and conditions as were in our agreement with Mr. Uppal, including the repurchase option held by us with respect to Mr. Uppals’s shares.

On September 10, 2008, Mr. Duncan Budge, resigned as our Director, and, pursuant to a share assignment agreement dated September 10, 2008, gifted his 14,000,000 common shares to Manny Dhinsa, our Director.  Pursuant to the share assignement agreement, the common shares gifted to Mr. Dhinsa are subject to the same terms and conditions as were in our agreement with Mr. Budge, including the repurchase option held by us with respect to Mr. Budge’s shares.

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On October 14, 2008 and November 6, 2008 the Company entered into two bridge loan agreements with two separate investors for $57,672.50 and $59,472.50 respectively.  The loans carry an interest rate of the Bank of Canada Rate +1, and may be converted to common stock of Power Oil & Gas.

ITEM 9.  THE OFFER AND LISTING

9.C. Markets

Admission to Quotation on the OTC Bulletin Board

Our shares began trading in January 2008 under the stock symbol LTYPF on the OTC Bulletin Board. In June 2008 the symbol was changed to PWOIF to reflect the name change from Liberty Petroleum Inc. to Power Oil & Gas Inc.  There is currently no established public trading market for our securities.  As a result, a market may never develop or if developed may not be maintained.  As a result an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our securities. The OTC Bulletin Board differs from national and regional stock exchanges in that it:

(1) is not situated in a single location but operates through communication of bids, offers and confirmations between broker-dealers, and

(2) securities admitted to quotation are offered by one or more Broker-dealers rather than the  "specialist" common to stock exchanges.

To qualify for quotation on the OTC Bulletin Board, an equity security must have at least one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor the company listing.

The following description of our capital stock is a summary and is qualified in its entirety by the provisions of our Articles of Incorporation, which were previously filed as an exhibit to the Company’s registration statement on Form F-1 filed with the Commission on September 25, 2006.

ITEM 10.  ADDITIONAL INFORMATION

10.A. Share Capital

--- Not applicable ---

10.B.  Memorandum and Articles of Association

The Company’s Articles of Incorporation were filed with the Director under the Canada Business Corporations Act on April 25, 2005. The Company, having a primary place of business in the Province of British Columbia, was also issued a Certificate of Registration as an extraprovincial company under the Business Corporations Act, British Columbia on May 6, 2005.  In addition, the Company also was issued a Certificate of Registration as an extraprovincial company in Alberta on July 17, 2006.  On June 28, 2006 the Company filed its Articles of Amendment changing its name to Liberty Petroleum Inc. and changing its purpose to “oil and natural gas exploration”.  On May 23, 2008 the Company filed its Articles of Amendment changing its name to Power Oil & Gas Inc.  In September 2008 the Company deregistered as an extraprovincial Company in British Columbia.

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The directors of the Company are empowered under the Articles of Incorporation and By-Laws, and in accordance with the Canada Business Corporations Act, to (1) borrow money upon the credit of the Company; (2) issue, reissue, sell or pledge the debt obligations of the Company; (3) give a guarantee on behalf of the Company to secure performance of an obligation of any person; and (4) charge, mortgage, hypothecate, pledge or otherwise create a security interest in all or any of the currently owned or subsequently acquired property and assets of the Company, including, without limitation, real and personal property, movable and immovable property, tangible and intangible assets, book debts, right, powers, franchises and undertakings, to secure any obligation of the Company.  The Company’s Articles of Incorporation and By-Laws do not place any restrictions on the voting powers of interested directors.  With respect to the directors of the Company, in accordance with section 3 of the By-Laws of the Company and the Canada Business Corporations Act , as long as an interested director has complied with the applicable provisions of the Canada Business Corporations Act, any director shall not be disqualified by his office from contracting with the Company, nor shall any contract or arrangement entered into by or on behalf of the Company with any director or in which any director is in any way interested be liable to be voided, nor shall any director so contracting or interested be liable to account to the Company for any profit realized from such contract or arrangement by reason of that director or officer holding that office or of the fiduciary relationship thereby established provided that such officer or director shall have complied with the provisions of the Canada Business Corporations Act

The holders of the Company’s Common shares are entitled to receive notice of, and attend and vote at all, meetings of shareholders.   Currently, there are no specific rights, preferences and restrictions attaching to each of the Company’s Preferred shares.  The Company may issue Preferred shares in one or more series and, pursuant to Schedule A to the Company’s Articles of Incorporation, the directors may, by majority resolution, alter the Articles of Incorporation to create, define and attach rights and restrictions to the shares of each series.

Pursuant to section 6 of the Company’s By-Laws, the quorum at meetings of the Company’s shareholders shall be constituted by the presence of two shareholders entitled to vote at any such meeting holding or representing by proxy not less than one-twentieth of the shares entitled to be voted at such meeting.

There are no limitations on the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities of the Company imposed by foreign law or by the Articles of Incorporation or any other constituent document of the Company.

10.C. Material Contracts

Since inception (April 25, 2005), the Company has entered into the material contracts listed below:

1. Property Option Agreement giving the Company the exclusive right and option to acquire a 100% interest in a mineral exploration property known as the GQ Property located in the Kamloops Mining District of British Columbia.  The Company could have exercised its option by making cash payments totaling $103,000 and incurring net expenditures on the property of at least $110,000 by March 15, 2010.  The Company paid the initial $3,000 deposit as required under the agreement but did not commence exploration.  In relation to the Company’s decision to pursue opportunities in the oil and gas industry, it terminated the GQ Property option on May 31, 2006.

44

2. We have an agreement with Pratt Barndollar, our Director, Chairman, President, Chief Executive Officer, Chief Operating Officer, and Secretary, which allows us at any time to send a notice to Mr. Barndollar that we are purchasing all or any portion of his 16,000,000 shares. The irrevocable option which he granted us is exercisable at any time at an exercise price of CDN $0.01 per share.  We have the same option right with respect to 14,000,000 shares owned by Mr. Manny Dhinsa, a director. Under these agreements, if we elect to exercise our option to purchase their shares, we shall pay the applicable purchase price thereof no later than 10 business days after the delivery of a notice.

3. On June 14, 2006 the Company acquired a 100% interest in an Alberta oil sands lease (the “Milk River Property”).  The rights to the Milk River Property were acquired for $8,438 (including closing costs) which was paid upon signing.  The rights that were acquired relate to the petroleum and natural gas rights only.  The Milk River Property covers 256 hectares of land in the Milk River area of Alberta, which is approximately 77 kilometers south of Medicine Hat in the Plains region of Alberta.  The lease, which expires in July 2010, gives the Company the right to explore the Milk River Property covered by the lease.  Power’s acquisition of the lease includes an overriding 5% royalty agreement with the vendor.  The royalty is to be paid on a well-to-well basis and is payable on all petroleum substances produced by any well on the Milk River Property.  The Milk River Property is subject to an annual lease payment payable to the government of Alberta in the amount of $896 until expiry on July 14, 2010.

4.    On March 25, 2008, by way of letter agreements with each individual warrant holder, the Company and each respective warrant holder have agreed to extend the Warrant Commencement Date has been extended from May 26, 2008 to May 26, 2009 with respect to the Class A Warrants, to November 26, 2009 with respect to the Class B Warrants, and to May 26, 2010 with respect to the Class C Warrants.  All other terms of the Warrant agreements remain unchanged.

4.    On July 23, 2008, the Company entered into an assignment and assumption agreement with Giant Oil   & Gas Inc. et al whereby the Company purchased a 100% right and interest in 10 Alberta Crown Petroleum and Natural Gas Lease Agreements for a total of 1,911 hectares in the Taber, Grand Forks area of Alberta, Canada.  Upon signing the Agreement, the Company paid the Vendor $30,331.48 and agreed to assume the underlying lease payments to the province of Alberta.  The leases give the Company the right to explore the properties and are subject to annual lease payments payable to the government of Alberta in the amount of $6,689.31until expiry in 2012.

10.D. Exchange Controls

There are no government laws, decrees or regulations in Canada, which restrict the export or import of capital or, subject to the following sentence, which affect the remittance of dividends or other payments to nonresident holders of our common shares. However, any such remittance to a resident of the United States is generally subject to non-resident tax pursuant to Article X of the 1980 Canada-United States Income Tax Convention. See “Material Income Tax Considerations” above for additional discussion on tax matters.

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There are currently no limitations of general application imposed by Canadian federal or provincial laws on the rights of non-residents of Canada to hold or vote our common shares. There are also no such limitations imposed by the articles of incorporation with respect to our common shares. There are, however, certain requirements on the acquisition of control of our securities by non-residents of Canada. The Investment Canada Act requires notification to and, in certain cases, advance review and approval by, the Government of Canada, of the acquisition by a “non-Canadian” of “control” of a “Canadian business”, all as defined in the Investment Canada Act. Generally speaking, in order for an acquisition to be subject to advance review and approval, the asset value of the Canadian business being acquired must meet or exceed certain monetary thresholds.

10.E. Taxation

Canadian Federal Income Tax Considerations

The following is a brief summary of some of the principal Canadian federal income tax consequences to a holder of common shares of the Company (a "U.S. Holder") who deals at arm's length with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act (Canada) (the "Act") and the Canada – United States Income Tax Convention (the "Treaty"), is at all relevant times resident in the United States, is not and is not deemed to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules, which are not discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere.

Under the Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 15% withholding tax on dividends paid or credited or deemed by the Act to have been paid or credited on such shares. The withholding tax rate is 5% where the U.S. Holder is a corporation that beneficially owns at least 10% of the voting shares of the Company and the dividends may be exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and charities.

In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the Company unless (i) at any time in the five-year period immediately preceding the disposition, 25% or more of the shares of any class or series of the capital stock of the Company was owned by (or was under option of or subject to an interest of) the U.S. holder, persons with whom the  U.S. holder did not deal at arm's length, or the U.S holder, together with such persons and (ii) the value of the common shares of the Company at the time of the disposition derives principally from real property (as defined in the Treaty) situated in Canada. For this purpose, the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral deposits and other natural resources situated in Canada, rights to amounts computed by reference to the amount or value of production from such resources, certain other rights in respect of natural resources situated in Canada and shares of a corporation the value of whose shares is derived principally from real property situated in Canada.

A U.S. Holder who is subject to Canadian income tax in respect of a capital gain realized on a disposition of a common share must include one-half of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada.  The Holder may, subject to certain limitations, deduct one-half of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect of taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.

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United States Taxation

For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain or loss on the sale of the Company's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares.  The gain or loss will be a capital gain or capital loss if the Company's common shares are a capital asset in U.S. Taxpayer's hands.

For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Company's common shares.  A U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability.  A domestic corporation that owns at least 10% of the voting shares should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company's common shares.

Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255.  In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return.  Other filing requirements may apply, and United States Investors should consult their own tax advisors concerning these requirements.

The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company.  A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year.  The Company believes that it may be a passive foreign investment company for the taxable year ended December 31, 2008.  Individual investors should consult with there own tax advisors regarding the tax implications in their own situation.

10.F. Dividends and Paying Agents

--- Not applicable ---

10.G. Statement by Experts

--- Not applicable ---

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ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY EXCHANGE RATE SENSITIVITY

The Company's operating expenses and liabilities are primarily incurred in Canadian dollars.

To the extent the Company engages in transactions in US dollars, the results of the Company’s operations are subject to currency transaction risk and currency translation risk. The operating results and financial position of the Company are reported in Canadian dollars in the Company’s financial statements. The fluctuation of the US dollar in relation to the Canadian dollar will consequently have an impact upon the operations of the Company and may also affect the value of the Company’s assets and the amount of shareholders’ equity.

The Company’s functional currency is the Canadian dollar and its expenses are predominantly incurred in Canadian dollars. The Company incurs a relatively small portion of its expenses in U.S. dollars.

The Company is exposed to foreign currency risk with respect to its foreign exchange derivative. The foreign exchange derivative arises from the Company having issued stock options during 2008 with an exercise price stated in a currency other than the Canadian dollar. For the year ended December 31, 2008, the Company incurred a mark-to-market unrealized loss on the foreign exchange derivative of $20,760. As the stock options exercise price is stated in the US dollar, a fluctuation of $0.01 in the difference between the futures price and the current exchange rate for the US dollar to Canadian dollar exchange rate could result in a $6,000 fluctuation in earnings.

INTEREST RATE SENSITIVITY

The Company currently has no significant long-term or short-term debt requiring interest payments. Thus, the Company has not entered into any agreement or purchased any instrument to hedge against possible interest rate risks at this time.

The Company's interest earning investments are primarily short-term, or can be held to maturity, and thus, any reductions in carrying values due to future interest rate declines are believed to be immaterial. However, as the Company has a significant cash or near-cash position, which is invested in such instruments, reductions in interest rates will reduce the interest income from these investments.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A. Debt Securities

The Company has no debt outstanding.

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12.B. Warrants and Rights

We have warrants outstanding to purchase an aggregate of 34,650,000 common shares. Of these warrants, 11,550,000 are exercisable at $0.25 per share, which are exercisable beginning May 26, 2009 and expire May 26, 2010; 11,550,000 are exercisable at $0.50 per share, which are exercisable beginning November 26, 2009 and expire May 26, 2011; and 11,550,000 are exercisable at $1.00 per share, which are exercisable beginning May 26, 2010 and expire May 26, 2012. The warrants are non-transferable and provide for a cashless exercise option.

We have the right, in our sole and absolute discretion, to (i) accelerate the exercise date of the warrants to a date which is prior to the date the warrants can be exercised and /or (ii) reduce the exercise price. If we exercise our right to do so, we shall provide notice thereof to the warrant holder.

12.C. Other Securities

--- Not applicable ---

12.D. American Depository Shares

--- Not applicable ---

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PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There have been no defaults, dividend arrearages or delinquencies.

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY

          HOLDERS AND USE OF PROCEEDS

There have been no modifications to securities of any class of the Company.

ITEM 15.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s management carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2008, being the date of the Company’s most recently completed fiscal year end. This evaluation was carried out under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, Mr. Pratt Barndollar.  Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective.

Internal Controls over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision of the Company’s Principal Executive Officer, the Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). The Company’s controls include policies and procedures that:

¨ pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

¨ provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP; and

¨ provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the annual financial statements or interim financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Management conducted an evaluation of the design and operation of the Company’s internal control over financial reporting as of December 31, 2008, based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2008 due to the following material weakness:

· Our company’s administration is composed of a small number of administrative individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties.  Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible.

Limitations of Controls and Procedures

The Company’s management, including the Principal Executive Officer and Principal Financial Officer, believe that any disclosure controls and procedures or internal controls over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. 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, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or 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 unauthorized override of the control. The design of any systems 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. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

Attestation Report of Registered Public Accounting Firm

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

Changes in Internal Controls over Financial Reporting

During the most recently completed fiscal year ended December 31, 2008, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

51

ITEM 16.  RESERVED

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT

Until September 2008 the Company’s Audit Committee consists of three directors, all of who are financially literate and knowledgeable about the Company’s affairs.  Mr. Duncan Budge was the audit committee’s financial expert member as a qualified accountant with over 25 years experience in business. In addition to serving on the Board of Power Oil & Gas Inc. (formerly Liberty Petroleum Inc.), he also has served on the Board and was the Audit Committee Chair of Patriot Gold Corp., Strata Oil & Gas Inc., and Giant Oil & Gas Inc.As of September 2008 the Board of Directors is empowered to appoint a new audit committee for the Corporation.

ITEM 16B.  CODE OF ETHICS

The Company has not adopted a formal code of ethics that applies to the Company's principal executive officer, principal financial officer, principal accounting officer or controller, persons performing similar functions and other officers of the Company.

Item 16C. PRINCIPAL ACCOUNTIING FEES AND SERVICES

The audit committee is directly responsible for the appointment, compensation and oversight of auditors; the audit committee has in place procedures for receiving complaints and concerns about accounting and auditing matters; and has the authority and the funding to engage independent counsel and other outside advisors.

The Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant pre-approvals required by this policy/procedure.  The decisions of any Audit Committee member to whom authority is delegated to pre-approve a service shall be presented to the full Audit Committee at its next scheduled meeting.

Fees, including reimbursements for expenses, for professional services rendered by Smythe Ratcliffe LLP in 2008 and 2007, the Company’s auditors.

Fiscal Year ended December 31, 2008 and 2007	Fiscal Year		Fiscal Year
Principal Accountant Fees and Services	2008		2007
Audit Fees	$	17,500	$	11,700
Audit Related Fees	$	1,500	$Nil
Tax Fees	$	1,000	$Nil
All Other Fees	$Nil		$	4,400
Total	$	20,000	$	11,700

Audit related fees relate to services provided to review the Company’s annual financial statements and related disclosures.

52

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

--- Not applicable ---

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

There have been no purchases of the Company's common shares by the Company or

affiliated purchasers during the period covered by this report.

53

PART III

ITEM 17.  FINANCIAL STATEMENTS

The Company's financial statements are stated in Canadian dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.

The financial statements as required under ITEM 17 are attached hereto and found immediately following the text of this Annual Report.  The audit report of Smythe Ratcliffe LLP, is included herein immediately preceding the audited financial statements.

ITEM 18.  FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to ITEM 17.

54

ITEM 19.  EXHIBITS

Exhibit Numbers	Description of Document
1.1(1)	Articles  of  Incorporation  of  the  Company
1.2(1)	Articles of Amendment
1.3(1)	By-Laws  of  the  Company
2.1(1)	Specimen  Common  Stock  Certificate
2.2(1)	Form of Subscription Agreement
2.3(1)	Form of Class A Warrant
2.4(1)	Form of Class B Warrant
2.5(1)	Form of Class C Warrant
2.6(1)	Agreement between the Company and Paul Uppal dated April 30, 2005
2.7(1)	Agreement between the Company and Greg Crowe dated April 30, 2005
2.8(1)	Agreement among Greg Crowe, Duncan Budge, and the Company dated August 17, 2006
4.1(1)	Property Option Agreement between Warner Gruenwald and the Company dated March 15, 2006
4.2(1)	Petroleum, Natural Gas and General Rights Conveyance Agreement dated June 14, 2006, among the Company, Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd., and Torland Ltd.
4.3(1)	Royalty Agreement dated June 14, 2006, among the Company, Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd., and Torland Ltd.
*12.1	Certification of Principal Executive and Financial Officer
*13.1	Section 1350 Certification

(1) Previously filed as an exhibit to the Company’s registration statement on Form F-1 filed with the Commission on September 25, 2006.

* Filed herewith.

55

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Financial Statements

December 31, 2008 and 2007

(Expressed in Canadian Dollars)

Index	Page
Report of Independent Registered Public Accounting Firm	57
Financial Statements
Balance Sheets	58
Statements of Operations	59
Statements of Shareholders’ Deficiency	60
Statements of Cash Flows	61
Notes to Financial Statements	62 - 80

56

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDERS OF POWER OIL & GAS INC

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

We have audited the balance sheets of Power Oil & Gas Inc. (Formerly Liberty Petroleum Inc.) (An Exploration Stage Company) as at December 31, 2008 and 2007, and the statements of operations, shareholders’ deficit and cash flows for the years ended December 31, 2008, 2007 and 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 audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance 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.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2008 and 2007 and the results of its operations and its cash flows for the years ended December 31, 2008, 2007 and 2006 in accordance with Canadian generally accepted accounting principles.

“Smythe Ratcliffe LLP” (signed)

Chartered Accountants

Vancouver, Canada

June 23, 2009

COMMENTS BY AUDITORS FOR US READERS ON CANADA – UNITED STATES REPORTING DIFFERENCES

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by matters such as that described in note 1 to the financial statements.  Our report to the shareholders dated June 23, 2009 is expressed in accordance with Canadian reporting standards, which do not permit a reference to such an uncertainty in the auditors’ report when the uncertainty is adequately disclosed in the financial statements.

“Smythe Ratcliffe LLP” (signed)

Chartered Accountants

Vancouver, Canada

[Missing Graphic Reference]

June 23, 2009

57

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Balance Sheets

December 31

(Expressed in Canadian Dollars)

	2008			2007
Assets
Current
Cash	$	56,611		$	7,796
Short-term investment		-			20,000
Goods and services tax receivable		729			536
Prepaid expenses		1,010			1,010
		58,350			29,342
Oil and Gas Property Interests (note 4)		42,116			9,334
	$	100,466		$	38,676
Liabilities and Shareholders’ Equity (Deficiency)
Current Liabilities
Accounts payable and accrued liabilities	$	18,413			9,461
Foreign exchange derivative (note 5)		14,280			-
Bridge loan payable (note 6)		117,145			-
		149,838			9,461
Shareholders’ Equity (Deficiency)
Capital Stock
Authorized
Unlimited common shares without par value
Unlimited preferred shares without par value
Issued and outstanding
41,709,750 common shares (notes 8 and 9)		134,475			134,475
Contributed surplus		67,053			-
Deficit accumulated during the exploration stage		(250,900	)		(105,260	)
		(49,372	)		29,215
	$	100,466		$	38,676

Nature of Operations and Going Concern (note 1)

Approved on behalf of the Board:

“Pratt Barndollar “

__________________________________

Pratt Barndollar, President

“Manny Dhinsa “

__________________________________

Manny Dhinsa, Director

See notes to financial statements.

58

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Statements of Operations

Years Ended December 31

(Expressed in Canadian Dollars)

	2008			2007			2006
Expenses
Stock-based compensation (note 8(c))	$	60,573		$	-		$	-
Professional fees		36,250			15,700			7,500
Loss on foreign exchange derivative (notes 3(e) and 5)		20,760			-			-
Directors’ fees		15,000			13,500			2,000
Listing and filing fees		5,948			21,404			18,733
Office and sundry		5,210			7,966			1,470
Transfer agent fees		1,650			1,499			585
Rent		-			4,000			4,077
Total Expenses		145,391			64,069			34,365
Other
Interest income		(151	)		(2,451	)		(2,673	)
Foreign exchange loss		400			-			-
		(145,640	)		(61,618	)		(31,692	)
Write-off of mineral property option payment (note 7)		-			-			(3,000	)
Net Loss and Comprehensive Loss for Year	$	(145,640	)	$	(61,618	)	$	(34,692	)
Basic and Diluted Loss Per Share	$	-		$	-		$	-
Weighted Average Number of Common Shares Outstanding		41,709,750			41,709,750			41,709,750

See notes to financial statements.

59

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Statements of Shareholders’ Deficiency

Years Ended December 31

(Expressed in Canadian Dollars)

	Number of Common Shares		Capital Stock		Contributed Surplus		Deficit Accumulated During the Exploration Stage			Total
Balance, December 31, 2005		41,709,750	$	134,475	$	-	$	(8,950	)	$	125,525
Net loss for year		-		-		-		(34,692	)		(34,692	)
Balance, December 31, 2006		41,709,750		134,475		-		(43,642	)		90,833
Net loss for year		-		-		-		(61,618	)		(61,618	)
Balance, December 31, 2007		41,709,750		134,475		-		(105,260	)		29,215
Stock based compensation		-		-		67,053		-			67,053
Net loss for year		-		-		-		(145,640	)		(145,640	)
Balance, December 31, 2008		41,709,750	$	134,475	$	67,053	$	(250,900	)	$	(49,372	)

See notes to financial statements.

60

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Statements of Cash Flows

Years Ended December 31

(Expressed in Canadian Dollars)

	2008			2007			2006
Operating Activities
Net loss for the year	$	(145,640	)	$	(61,618	)	$	(34,692	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation		60,573			-			-
Loss on foreign exchange derivative		20,760			-			-
Receivables		(193	)		143			(463	)
Prepaid expenses		-			902			(1,277	)
Accounts payable and accrued liabilities		8,952			(4,954	)		9,415
Cash Used in Operating Activities		(55,548	)		(65,527	)		(27,017	)
Investing Activities
Proceeds from (investment in) short-term investments		20,000			70,673			(90,673	)
Expenditures on oil and gas property interests		(32,782	)		(896	)		(8,438	)
Cash Provided by (Used in) Investing Activities		(12,782	)		69,777			(99,111	)
Financing Activity
Bridge loan payable		117,145			-			-
Cash Provided by Financing Activity		117,145			-			-
Inflow (Outflow) of Cash		48,815			4,250			(126,128	)
Cash, Beginning of Year		7,796			3,546			129,674
Cash, End of Year	$	56,611		$	7,796		$	3,546
Supplementary Information
Interest paid	$	-		$	-		$	-
Income taxes paid	$	-		$	-		$	-

See notes to financial statements.

61

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

1. NATURE OF OPERATIONS AND GOING-CONCERN

Power Oil & Gas Inc. (formerly Liberty Petroleum Inc.) (the “Company”) was incorporated under the Canada Business Corporations Act on April 25, 2005.  On June 23, 2006, at an annual general and special meeting of shareholders, a majority of the shareholders of the Company approved a change in business of the Company from mineral exploration to oil and gas exploration and extraction.  At the same meeting, a majority of the shareholders of the Company approved a change in name of the Company to Power Oil & Gas Inc.

The Company has been in the exploration stage since its formation and has only recently commenced its planned operations (oil and gas property exploration).  The Company is primarily engaged in the acquisition and exploration of oil and gas property interests in North America.

At December 31, 2008, the Company had working capital deficiency of $91,488 (2007 – working capital of $19,881) and an accumulated deficit of $250,900 (2007 - $105,260).  The Company will require additional financing or outside participation to undertake further acquisitions and exploration and subsequent development of future oil and gas property interests.  The Company will require additional equity financing to meet its administrative overhead costs, and to continue exploration work on its oil and gas interests in 2009.

The Company’s financial statements have been prepared assuming the going-concern concept. The application of the going-concern concept is dependent upon the Company’s ability to generate future profitable operations and receive continued financial support from its creditors and shareholders or raise additional equity financing. The current financial equity market conditions and the challenging funding environment make it difficult to raise funds by placement of common shares. There is no assurance that the Company will be successful with any financing ventures. Management is actively engaged in the review and due diligence on new projects, is seeking to raise the necessary capital to meet its funding requirements and has undertaken available cost cutting measures. There can be no assurance that management’s plan will be successful. Therefore a significant uncertainty exists in relation to the Company’s ability to continue as a going concern.

If the going-concern assumption were not appropriate for these financial statements then adjustments would be necessary in the carrying values of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments would be material.

The business of oil and gas exploration involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable operations. The Company has no sources of revenue, and has significant cash requirements to meet its administrative overhead and maintain its oil and gas interests. The recoverability of amounts shown for resource properties is dependent on several factors. These include the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development of these properties, and future profitable production or proceeds from disposition of oil and gas interests.

62

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). The functional and reporting currency of the Company is the Canadian dollar.  Canadian GAAP differs in certain respects from accounting principles generally accepted in the United States (see note 11). The significant accounting policies are summarized as follows:

(a) Use of estimates

The preparation of financial statements in conformity with Canadian GAAP 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 for the reporting period.  Significant areas requiring the use of estimates include the carrying value of oil and gas property interests, valuation of accrued liabilities, variables used in the calculation of stock-based compensation and the determination of the valuation allowance for future income tax assets.  Management believes the estimates are reasonable; however, actual results could differ from these estimates and could impact future results of operations and cash flows.

(b) Financial instruments

The Company classifies its financial instruments into one of these five categories: held-for-trading, held-to-maturity, loans and receivables, available-for-sale financial assets or other financial liabilities. All financial instruments are measured in the balance sheet at fair value, except for loans and receivables, held-to-maturity investments and other financial liabilities, which are measured at amortized cost. Subsequent measurement and changes in fair value will depend on their initial classification as follows: held-for-trading financial assets are measured at fair value and changes in fair value are recognized in net income; available-for-sale financial instruments are measured at fair value with changes in fair value recorded in other comprehensive income until the investment is no longer recognized or impaired, at which time the amounts would be recorded in net income.

Transaction costs that are directly attributable to the acquisition or issuance of financial instruments that are classified as other than held-for-trading, which are expensed as incurred, are included in the initial carrying value of such instruments.

(c) Comprehensive income

Comprehensive income is the overall change in the net assets of the Company for a period, other than changes attributable to transactions with shareholders. It is made up of net income and other comprehensive income. Other comprehensive income includes gains or losses, which generally accepted accounting principles requires to be recognized in a period but excluded from net income for that period. The Company has no items of other comprehensive income in any period presented. Therefore, net loss as presented in the Company’s statements of operations and deficit equals comprehensive loss.

63

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(c) Oil and gas property interests

The Company follows the full cost method of accounting for petroleum and natural gas interests whereby all costs of exploration for and development of petroleum and natural gas reserves are capitalized.  These costs include leasehold acquisition costs, geological and geophysical expenses, drilling costs of successful as well as unsuccessful wells and overhead charges related directly to exploration and development activities.

If the interests are sold, the proceeds of the interests will be applied against capitalized costs unless such sale significantly impacts the rate of depletion.

Costs associated with unproven reserves are reviewed by management to determine whether they have become impaired. The ceiling test is calculated by comparing the carrying value of oil and gas interest to the sum of undiscounted cash flows expected to result from future production of proved reserves and carrying value of unproved properties, net of any impairments. Estimates of future net revenues are based on expected future commodity prices and costs rather than those existing at the measurement date. It is possible that changes could occur that would adversely affect management’s estimates resulting in further write-downs of the carrying value of the interest. If impairment occurs, the carrying value of the related interest will be reduced to reflect the estimated net realizable value.

The amounts shown for petroleum and natural gas interests represent costs incurred to date less depletion and impairment if any, and do not necessarily reflect present or future values.

(d) Future income taxes

The Company follows the asset and liability method of accounting for future income taxes.  Under this method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and losses carried forward.  Future tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on future tax assets and liabilities of a change in tax rates is recognized in operations in the period in which the change is enacted or substantially enacted.  The amount of future income tax assets is limited to the amount of the benefit that is more likely than not to be realized.

64

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

2.           SIGNIFICANT ACCOUNTING POLICIES (Continued)

(e) Stock-based compensation

The Company accounts for stock-based compensation using a fair value based method with respect to all stock-based payments measured and recognized, to directors, employees and non-employees.  For directors and employees, the fair value of the option is measured at the date of grant.  For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete, the date the performance commitment is reached, or the date at which the equity instruments are granted if they are fully vested and non-forfeitable.  For directors, employees and non-employees, the fair value of the options is accrued and charged either to operations or mineral property interests, with the offset credit to contributed surplus, over the vesting period.  If and when the stock options are exercised, the applicable amounts from contributed surplus are transferred to capital stock.

(f) Loss per share

Basic loss per share is calculated using the weighted average number of common shares outstanding during the year.  The Company uses the treasury stock method for calculating diluted loss per share.  Under this method the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments.  It assumes that the proceeds would be used to purchase common shares at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive. Shares held in escrow, other than where their release is subject to the passage of time, have not been included in the calculation of the weighted average number of common shares outstanding.

(g) Asset retirement obligations (“ARO”)

The Company recognizes an estimate of the liability associated with an ARO in the financial statements at the time the liability is incurred.  The estimated fair value of the ARO is recorded as a long-term liability, with a corresponding increase in the carrying amount of the related asset. The liability amount is increased each reporting period due to the passage of time and the amount of accretion is charged to earnings in the period.  The ARO can also increase or decrease due to changes in the estimates of timing of cash flows or changes in the original estimated undiscounted cost.  Actual costs incurred upon settlement of the ARO are charged against the ARO to the extent of the liability recorded.  At present, the Company has no material AROs to record in the financial statements.

65

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

2.           SIGNIFICANT ACCOUNTING POLICIES (Continued)

(g) Foreign currency transactions

Amounts held or transacted in foreign currency are translated into Canadian dollars as follows:

(i) Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date;

(ii) Non-monetary items at the historical exchange rate; and

(iii) Expenses, at the exchange rate on the date of the transaction.

Gains and losses arising from translation are included in the current period’s loss.

(h) Changes in accounting policies

On January 1, 2008, the Company adopted the following provisions of the Canadian Institute of Chartered Accountants’ (“CICA”) Handbook.  There was no material impact on the Company’s financial condition or operating results as a result of the adoption of these new standards:

(i) Financial Instruments

Section 3862, “Financial Instruments – Disclosures”, and Section 3863, “Financial Instruments – Presentation”, replace Section 3861, revising its disclosure requirements and carrying forward its presentation requirements. These new sections place increased emphasis on disclosure about the nature of and risks arising from financial instruments and how the entity manages those risks. Section 3862 specifies disclosures that enable readers to evaluate: (i) the significance of financial instruments for the entity’s financial position and performance; and (ii) the nature and extent of risks arising from financial instruments to which the entity is exposed and how the entity manages those risks.

(ii) Capital Disclosures

Section 1535, “Capital Disclosures”, establishes standards for disclosing information about an entity’s capital and how it is managed (see Note 13).  Under this standard, the Company is required to disclose the following:

· qualitative information about its objectives, policies and procedures for managing capital;

· summary quantitative data about what it manages as capital;

· whether during the period it complied with any externally imposed capital requirement to which it is subject; and

· when the Company has not complied with such externally imposed capital requirements, the consequences of such non-compliance.

66

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(h) Changes in accounting policies (continued)

(iii) Going Concern

Section 1400, “General Standards of Financial Statement Presentation”, was amended to include requirements for management to assess and disclose an entity’s ability to continue as a going concern (see note 1).

(i) Future accounting changes

(i) Goodwill and Intangible Assets

In February 2008, the CICA issued Section 3064, “Goodwill and Intangible Assets”, replacing Section 3062, “Goodwill and Other Intangible Assets”, and Section 3450, “Research and Development Costs”. This section establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. The new section is effective for the Company on January 1, 2009. The Company is in the process of assessing the impact of this new section on its financial statements.

(ii) International Financial Reporting Standards ("IFRS")

In 2006, the Canadian Accounting Standards Board ("AcSB") published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period.  In February 2008 the AcSB announced that January 1, 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canada's own GAAP. The effective date for the Company is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The effective date will require the restatement for comparative purposes of amounts reported by the Company for the year ended December 31, 2010. While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact of the transition to IFRS cannot be reasonably estimated at this time.

67

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

3. FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, short-term investment, accounts payable and accrued liabilities, foreign exchange derivative, and bridge loan payable.  The Company has designated its cash and short-term investment, and foreign exchange derivative as held-for-trading, receivables as loans and receivables, and accounts payable and accrued liabilities and bridge loan payable as other liabilities.

(a) Fair value

The carrying values of cash, short-term investment, and accounts payable and accrued liabilities approximate their fair values because of the short-term maturity of these financial instruments. The fair value of the foreign exchange derivative is estimated using current market measures for foreign exchange rates. The carrying value of the bridge loan payable is equal to its fair value as the loan interest rate is equal to the market interest rate.

(b) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in obtaining funds to meet commitments. The Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. At December 31, 2008, the Company had accounts payable other than accrued liabilities of $63 (2007 - $2,461), which were due within 30 days, and loans payable of $117,145 (2007 - $Nil), which are due within one year. The Company does not have sufficient cash and cash equivalents as at December 31, 2008 to meet short-term business requirements such as overhead costs and oil and gas lease payments. Management is currently planning on equity, third-party and related party financing to manage its liquidity and settlement of liabilities. The Company will be required to raise additional debt or equity to meet its obligations for 2010. There is no assurance that management’s strategy will be successful.

(c) Interest rate risk

The Company is not exposed to interest rate risk due to the short-term nature of its monetary assets and liabilities.

(d) Other price risk

Other price risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from interest rate risk or foreign exchange risk. The Company is not exposed to significant other price risk.

(e) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to minimal credit risk with respect to its cash and short-term investment as these financial instruments are held at a major Canadian financial institution.

68

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

3. FINANCIAL INSTRUMENTS (Continued)

(f) Foreign currency risk

Foreign currency risk refers to the risk that the value of financial instruments or cash flows associated with the instruments will fluctuate due to changes in the foreign exchange rates. The Company considers the Canadian dollar to be its functional currency and translates the results of foreign operations into Canadian currency using approximately the average exchange rate for the year. The exchange rate may vary from time to time. The Company is exposed to foreign currency risk with respect to its foreign exchange derivative. The foreign exchange derivative arises from the Company having issued stock options during 2008 with an exercise price stated in a currency other than the Canadian dollar. For the year ended December 31, 2008, the Company incurred a mark-to-market unrealized loss on the foreign exchange derivative of $20,760. As the stock options exercise price is stated in the US dollar, a fluctuation of $0.01 in the difference between the futures price and the current exchange rate for the US dollar to Canadian dollar exchange rate could result in a $6,000 fluctuation in earnings.

4. OIL AND GAS PROPERTY INTERESTS

The cumulative costs of the Company’s unproven oil and gas interests are as follows:

	2008		2007
Balance, beginning of the year	$	9,334	$	8,438
Lease and acquisition costs		32,782		896
Balance, end of the year	$	42,116	$	9,334

On June 14, 2006, the Company entered into a petroleum, natural gas and general rights conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd. and Torland Ltd. (together, the “Vendor”) whereby the Company acquired a 100% interest in a petroleum and natural gas (“P&NG”) lease with the government of Alberta.  The underlying lease acquired by the Company is Alberta P&NG lease 0405070015 (the “Lease”), and the property to which the Lease pertains is located in the Milk River area of Alberta (the “Property”). Upon signing the Agreement, the Company paid the Vendor $7,500, paid closing costs of $938 and agreed to assume the underlying lease payments to the province of Alberta.  In addition, the Vendor is entitled to an overriding 5% royalty on all petroleum substances produced from the Property, if any.  The Vendor is entitled to a first and paramount lien upon all of the petroleum substances produced or allocated to the Property to secure the payment of any amounts due and payable to the Vendor relating to the royalty.  In 2008, total lease payments were $2,451 (2007 - $896).

On July 23, 2008, the Company entered into an assumption agreement with Giant Oil & Gas Inc., a company related by common directors, whereby the Company acquired all of the rights and obligations of ten Alberta Crown Petroleum and Natural Gas Lease Agreements for the total amount of $30,331, which was equal to the carrying value of the ten leases.

69

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

4. OIL AND GAS PROPERTY INTERESTS (Continued)

As at December 31, 2008, the Company has 11 leases requiring total annual lease payments of $7,585 through to 2012.

5. FOREIGN EXCHANGE DERIVATIVE

On June 30, 2008, the Company issued stock options to the Company’s President with an exercise price stated in US dollars, which resulted in the following:

	2008
Foreign exchange derivative, June 30, 2008	$	6,480
Mark-to-market loss on foreign exchange derivative		(20,760	)
Foreign exchange derivative, December 31, 2008	$	(14,280	)

On June 30, 2008, the initial recognition of the foreign exchange derivative resulted in a recovery of stock-based compensation of $6,480 (note 8(c)).

6. BRIDGE LOAN PAYABLE

On November 6, 2008 the Company entered into a $117,145 bridge loan agreement with two unrelated parties.  The loan bears interest at the Bank of Canada Prime Rate (December 31, 2008 - 3.50%) plus 1% per annum.  Loan principal and accrued interest in the amount of $57,672 is due on October 14, 2009 and $59,473 is due on November 6, 2009. The loan is unsecured and may be converted to common shares of the Company in 2009 at the discretion of the Borrower or Lender at a conversion rate based on the quoted market value of the Company’s common shares, which will be determined by the Borrower and the Lender on the date of conversion.

7. MINERAL PROPERTY OPTION PAYMENT

On March 15, 2006, the Company entered into an agreement giving it the exclusive right and option to acquire a 100% interest in a mineral exploration property known as the GQ Property located in the Kamloops Mining District of British Columbia.  The Company could have exercised its option by making cash payments totalling $103,000 and incurring net expenditures on the property of at least $110,000 by March 15, 2010.  The Company paid the initial $3,000 deposit as required under the agreement but did not commence exploration.  In relation to the Company’s decision to pursue opportunities in the oil and gas industry, it terminated the GQ Property option on May 31, 2006.  The $3,000 property option payment for the GQ Property has been expensed in the statement operations during the year ended December 31, 2006.

70

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

8. CAPITAL STOCK

(a) Common shares

During the years ended December 31, 2008, 2007 and 2006, the Company did not enter into any common share transactions.

(b) Stock options

On June 28, 2007, the stockholders of the Company approved the Company’s 2007 stock option plan whereby the Company may grant options to its directors, consultants and employees for up to 5,000,000 shares of common stock.  The exercise price of each option equals the market price of the Company’s stock on the date of grant.  Options vest over a three-year period, unless otherwise specified by the Board of Directors.  All options have a ten year term.

In 2008, 600,000 stock options were granted to a director and officer of the Company, which vest over a four year period.

The following table sets forth a summary of options granted and exercised:

	Number of Options		Weighted Average Exercise Price
Balance, December 31, 2007		-	$	-
Options granted		600,000	$	US 1.00
Options exercised		-	$	-
Balance, December 31, 2008		600,000	$	US 1.00

The following table summarizes information concerning outstanding and exercisable common stock options under the 2007 Plan at December 31, 2008:

Exercise Price	Options Outstanding	Expiry date	Number of Options Currently Exercisable
US $ 0.50	200,000	June 30, 2018	100,000
US $ 1.00	200,000	June 30, 2018	Nil
US $ 1.50	200,000	June 30, 2018	Nil
	600,000		100,000

At December 31, 2008, the intrinsic value of the Company’s stock options was $80,000.

71

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

8. CAPITAL STOCK (Continued)

(c) Stock-based compensation

For the year ended December 31, 2008, the Company has recognized $67,053 (2007 - $Nil; 2006 - $Nil) in stock-based compensation, which was offset by $6,480 (2007- $Nil) for the fair value of the foreign exchange derivative.  There is $143,247 in unrecognized stock-based compensation, which will be recognized in future periods as the options vest. The fair value of each option granted was estimated as at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions and resulting fair value:

	2008	2007	2006
Risk-free interest rate	3.74%	N/A	N/A
Dividend yield	Nil	N/A	N/A
Expected volatility	68.29%	N/A	N/A
Expected average option term (years)	10	N/A	N/A
Weighted average fair value	$0.35	N/A	N/A

Expected volatilities are based on industry comparables using available data and other factors due to the fact that the Company’s stock has only limited trading history.  When applicable, the Company will use historical data to estimate option exercise, forfeiture, and employee termination within the valuation model.  For non-employees, the expected term of the options approximates their contractual lives.

(d) Share purchase warrants

As at December 31, 2008, 2007 and 2006, the following share purchase warrants were outstanding and are exercisable after May 26, 2009:

	Expiry Date	Exercise Price	Number of Warrants
Class A	May 26, 2010	$ 0.25	11,550,000
Class B	May 26, 2011	$ 0.50	11,550,000
Class C	May 26, 2012	$ 1.00	11,550,000
			34,650,000

The weighted average exercise price of the warrants is $0.58.

72

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

8. CAPITAL STOCK (Continued)

(d) Share purchase warrants (continued)

During 2008, the vesting dates of the share purchase warrants were extended. Originally, all of the warrants were to have become exercisable on May 26, 2008.  On March 25, 2008, by way of letter agreements with each individual warrant holder, the Company and each respective warrant holder have agreed to extend the vesting of the Company’s Class A, Class B and Class C warrants. As a result of the agreements between the Company and the respective warrant holders, the warrant vesting date has been extended to May 26, 2009 with respect to the Class A Warrants, to November 26, 2009 with respect to the Class B Warrants, and to May 26, 2010 with respect to the Class C Warrants.  All other terms of the Warrant agreements remain unchanged.

9.           SHARE REPURCHASE OPTION

The Company holds an irrevocable right to repurchase all or a portion of the 30,000,000 shares owned by two of its Directors for a price of $0.01 per share.  The right can be exercised by the Company at any time and at its sole discretion.  The Company is not obligated to repurchase the shares at any time or for any reason (such as termination of employment, a change of control of the Company or failure to reach performance goals).  The repurchase right held by the Company will continue with respect to and for so long as any of the 30,000,000 shares issued to these directors are held by them (or any of their affiliates or family members), and will survive any such director’s resignation as an officer or director of the Company.  The Company may exercise its right of repurchase some or all of the shares held, directly or indirectly, by these directors by delivering a notice of such exercise to such director(s) not less than seven calendar days prior to the closing of such repurchase.  The directors agree that they shall not, directly or indirectly, sell, exchange, pledge, hypothecate, transfer, gift, grant an irrevocable proxy with respect to, devise, assign or in any other way dispose of, encumber or grant a security interest in any of the shares or any interest therein. The directors also agree and acknowledge that said restriction is in addition to all applicable securities laws and regulations.

73

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

10. INCOME TAXES

The reconciliation of income tax provision computed at Canadian statutory rates of 31% (2007 – 34.12%; 2006 – 34.12%) to the reported income tax provision is as follows:

	2008			2007			2006
Income tax benefit	$	45,148		$	21,024		$	11,143
Stock-based compensation		(18,778	)		-			-
Unrealized loss on foreign exchange derivative		(6,434	)		-			-
		19,936			21,024			11,143
Change in future income taxes resulting from enacted tax rate reduction		(8,479	)		(17,740	)		-
Change in valuation allowance		(11,457	)		(3,284	)		(11,143	)
Income tax provision	$	-		$	-		$	-

The significant components of future income tax assets are as follows:

	2008			2007
Non-capital losses	$	169,998		$	105,691
Temporary difference		(431	)		(431	)
		169,567			105,260
Income tax rate		26	%		31	%
Income tax asset		44,087			32,630
Valuation allowance		(44,087	)		(32,630	)
	$	-		$	-

The valuation allowance reflects the Company’s estimate that the tax assets more likely than not will not be realized.

The Company has accumulated non-capital losses for income tax purposes of $169,998.  The losses expire in the following years:

2015	$	8,950
2026		35,123
2027		61,618
2028		64,307
	$	169,998

74

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

11. RELATED PARTY TRANSACTIONS

During the year ended December 31, 2008, directors’ fees in aggregate of $15,000 (2007 - $13,500; 2006 - $2,000) were paid to the directors of the Company.  These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount agreed to by the related parties, except as noted in note 4.

12. DIFFERENCES BETWEEN CANADIAN AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND PRACTICES

(a) Recent US accounting pronouncements

(i) In December 2008 the Securities & Exchange Commission (“SEC”) unanimously approved amendments to revise its oil and gas reserves estimation and disclosure requirements. The amendments, among other things, allows the use of new technologies to determine proved reserves; permits the optional disclosure of probable and possible reserves; modifies the prices used to estimate reserves for SEC disclosure purposes to a 12-month average instead of a period end price; and requires that if a third party is primarily responsible for  preparing or auditing reserve estimates, the Company make disclosures relating to the independence and qualifications of the third party, including filing as an exhibit any report received from the third party. The revised rules are effective January 1, 2010. The new requirements do not have an impact on the Company’s 2008 financial statements.

(ii) In November 2008, the Financial Accounting Standards Board (“FASB”) voted on the effective date and other amendments of proposed FASB Staff Position FAS 140-e and FIN 46(R)-e, Disclosures  about  Transfers  of  Financial  Assets and Interests in Variable  Interest  Entities (FSP FAS 140-e and FIN 46R-e). FSP FAS 140-e and FIN 46R-e would amend SFAS No.  140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities   as amended (SFAS 140) and FASB Interpretation No. 46 (revised   December   2003),   Consolidation   of  Variable  Interest Entities  (FIN  46R)  to  require  enhanced  disclosures  by public entities about transfers of financial assets and interests in variable interest  entities, and provide users of the financial statements with greater  transparency about a transferors continuing involvement with transferred  financial  assets  and  an enterprises involvement with variable  interest entities. The disclosures required by FSP FAS 140-e and  FIN  46R-e  will  be effective for reporting periods (interim and annual) ending after December 15, 2008. The Company has concluded this amended standard will have no effect on its financial statements.

75

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

12. DIFFERENCES BETWEEN CANADIAN AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND PRACTICES (Continued)

(a) Recent US accounting pronouncements (continued)

(iii) In September  2008, the FASB issued two separate but related exposure drafts:  (1)  Proposed  Statement  of  Financial Accounting Standards, Accounting  for  Transfers of Financial Assets  an amendment of FASB Statement No. 140, and (2) Proposed Statement of Financial Accounting  Standards,  Amendments  to  FASB Interpretation No. 46(R) (together, the  proposed  Statements). The proposed Statements would remove the concept of a qualifying special-purpose entity (QSPE) from SFAS 140 and the exceptions from applying FIN 46R to QSPEs. The proposed Statements would be effective as of the beginning of a reporting entity’s fiscal year that begins after November 15, 2009. The Company has concluded these proposed standards will have no effect on its financial statements.

(iv) In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, Determining   Whether  Instruments  Granted  in  Share-Based  Payment Transactions  Are  Participating  Securities  (FSP EITF 03-6-1) FSP EITF  03-6-1 establishes that unvested share-based payment awards that contain  non-forfeitable  rights  to dividends or dividend equivalents (whether  paid  or  unpaid) are participating securities as defined in Emerging  Issues  Task  Force  (EITF) Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128, and should  be  included in the computation of earnings per share pursuant to  the  two-class  method  as  described  in  Statement  of Financial Accounting Standards No. 128, Earnings per Share. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period earnings per share data presented shall be adjusted retrospectively to conform to the provisions of FSP EITF 03-6-1. Early application is not permitted. The Company has concluded this standard will have no effect on its financial statements.

(v) In May 2008, the FASB issued Statement of Financial Accounting Standards No.162, the Hierarchy of Generally Accepted Accounting Principles (SFAS 162).  SFAS  162  identifies  a  consistent framework,  or  hierarchy,  for  selecting accounting principles to be used   in   preparing  financial  statements  that  are  presented  in conformity  with  U.S. generally accepted accounting principles for nongovernmental  entities. SFAS 162 is effective 60 days following the SECs  approval  of  the  Public  Company Accounting  Oversight Board amendments  to  AU  Section  411,  The  Meaning  of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company has concluded this standard will have no effect on its financial statements.

76

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

12. DIFFERENCES BETWEEN CANADIAN AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND PRACTICES (CONTINUED)

(a) Recent US accounting pronouncements (Continued)

(vi) In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”), which replaces SFAS 141. SFAS 141(R) requires assets and liabilities acquired in a business combination, contingent consideration, and certain acquired contingencies to be measured at their fair values as of the date of acquisition. SFAS 141(R) also requires that acquisition-related costs and restructuring costs be recognized separately from the business combination.  SFAS 141(R) is effective for fiscal years beginning after December 15, 2008 and will be effective for business combinations entered into after January 1, 2009.  The Company will assess the impact of SFAS 141(R) on future acquisitions.

(vii) In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”).  SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value. This statement expands the use of fair value measurement and applies to companies that elect the fair value option. The fair value option established by this statement permits all entities to choose to measure eligible items at fair value at specified election dates. This statement was effective for the Company January 1, 2008. SFAS 159 did not have a significant impact on the Company’s financial statements.

(viii) In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”).  SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; however, for some entities the application of this statement will change current practice. SFAS 157 was effective for the Company January 1, 2008.  The adoption of SFAS 157 had no significant impact on the Company’s financial statements.

77

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

12. DIFFERENCES BETWEEN CANADIAN AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND PRACTICES (CONTINUED)

(b) Reconciliation to US GAAP

	2008		2007
Total Assets for Canadian GAAP and US GAAP	$	100,466	$	38,676

	2008			2007
Total Liabilities for Canadian GAAP	$	149,838		$	9,461
Adjustment for foreign exchange derivative		(14,280	)		-
Total Liabilities for US GAAP	$	135,558		$	9,461
Total Equity (Deficit) for Canadian GAAP	$	(49,372	)	$	29,215
Adjustment for loss on foreign exchange derivative		14,280			-
Total Equity (Deficit) for US GAAP		(35,092	)		29,215
Total Liabilities and Equity for US GAAP	$	100,466		$	38,676

	2008			2007			2006
Net Loss for Canadian GAAP	$	(145,640	)	$	(61,618	)	$	(34,692	)
Adjustment for loss on foreign exchange derivative		14,280			-			-
Net Income (Loss) for US GAAP	$	(131,360	)	$	(61,618	)	$	(34,692	)

78

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

12. DIFFERENCES BETWEEN CANADIAN AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND PRACTICES (CONTINUED)

(c) Reconciliation to US GAAP

	2008		2007
Shareholders’ Equity
Total Capital Stock and Contributed Surplus / Additional Paid-in Capital for Canadian GAAP and US GAAP and US GAAP	$	201,528	$	134,475

Total Deficit for Canadian GAAP	$	(250,900	)	$	(105,260	)
Adjustment for loss on foreign exchange derivative		14,280			-
Total Deficit for US GAAP	$	(236,620	)	$	(105,260	)
Total Liabilities and Equity for US GAAP	$	(35,092	)	$	29,215

Under Canadian GAAP, stock-based compensation is credited to contributed surplus and transferred to capital stock once the option is exercised. Under US GAAP, stock-based compensation is credited directly to additional paid-in capital and transferred to capital stock once the option is exercised.

Under Canadian GAAP, a stock option with an exercise price stated in a currency other than the functional currency results in a foreign exchange derivative, which is recognized as a foreign exchange asset or liability and remeasured every reporting date. Any changes in the fair value of the foreign exchange derivative are recorded as a gain or loss on foreign exchange through operations. Under US GAAP, if an option's exercise price is denominated in a currency in which the shares of the Company are traded, the stock options are not considered indexed to the foreign exchange rate. Therefore, no foreign exchange derivative exists under US GAAP.

79

POWER OIL & GAS INC.

(Formerly Liberty Petroleum Inc.)

(An Exploration Stage Company)

Notes to Financial Statements

Years Ended December 31, 2008, 2007 and 2006

(Expressed in Canadian Dollars)

13. CAPITAL MANAGEMENT

The Company considers its capital to be its shareholders’ equity.  The Company’s objectives when managing its capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development of its oil and gas property interests and to maintain a flexible capital structure, which optimizes the costs of capital at an acceptable risk.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets.  To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets, or adjust the amount of cash and term deposits.

In order to facilitate the management of its capital requirements, the Company prepares expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions.

In order to maximize ongoing development efforts, the Company does not pay out dividends.  The Company’s investment policy is to invest its short-term excess cash in highly liquid short-term interest-bearing investments, selected with regard to the expected timing of expenditures from continuing operations. There were no changes in the Company’s approach to capital management during the year ended December 31, 2008. The Company is not subject to externally imposed capital requirements.

80

Signature Page

Pursuant to the requirements of Section 12g of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant:

Power Oil & Gas Inc. (formerly Liberty Petroleum Inc.), SEC File No. 333-137571

Dated: June 11, 2009                                                                            By: /s/ Pratt Barndollar

                                                                                                              Name: Pratt Barndollar

                                                                                                             Title: Director, Chairman, President,

                                                                                                             Chief Executive Officer, Chief Financial Officer, and Secretary

Dated: June 11, 2009                                                                            By: /s/ Manny Dhinsa

                                                                                                              Name: Manny Dhinsa

                                                                                                              Title: Director

Dated: June 11, 2009                                                                            By: /s/ Keith Diakiw

                                                                                                              Name: Keith Diakiw

                                                                                                              Title: Director

Dated: June 11, 2009                                                                            By: /s/ Rob Sandhu

                                                                                                              Name: Rob Sandhu

                                                                                                              Title: Director

81