Summary of SUN CAL ENERGY , INC.

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

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all references to "common shares" refer to the common shares in our capital stock and the terms "we", "us", "our" and "Sun Cal" mean Sun Cal Energy, Inc. and our wholly-owned subsidiaries, Sun Cal Energy Corp., a Nevada corporation and Sun Cal Energy Canada Corp., a British Columbia corporation.

Introduction

We were incorporated under the laws of the State of Nevada on July 20, 2004 under the name Host Ventures, Inc. On November 6, 2006, we changed our name to Sun Cal Energy, Inc. through a merger with our wholly owned subsidiary, which was incorporated solely for the purpose of the merger.

We are an "exploration stage company", which means we are engaged in the search for mineral deposits (reserves) which are not in either the development or production stage. We have not generated any revenues from our operations and have achieved losses since our inception. We currently rely upon the sale of our securities to fund operations.

Our Current Business

We are in the business of oil and gas exploration. Our subsidiary, Sun Cal Energy Canada Corp. recently entered into two agreements: an agreement with TriMar Energy Partners, Inc. to acquire an 1.5% of 8/8ths overriding royalty interest in an oil and gas lease known as the Hobart Lease and an agreement with Western Energy Capital, LLC. to acquire an undivided 45% interest in certain oil and gas leases known as the Lokern Leases.

The Hobart Lease is an oil and gas lease obtained by TriMar Energy Partners, Inc., as the lessee, from the City of Hobart, as the lessor, on April 1, 2004, covering a total of 1,211.44 acres in the city of Hobart, Washita County, Oklahoma.

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In addition to the interests in the Hobart Lease and the Lokern Leases, we have also acquired a 5% working interest in the Britlind Prospect in Louisiana, a 5% Overriding Royalty Interest in the Centurion Property in Texas and a 100% working interest in the Jonah Propect in Wyoming. We also signed a letter of intent to acquire a 100% working interest in certain leases in the Cherokee and Forest City Basins of Kansas. This Letter of Intent was set to expire on October 31, 2007 but we are currently still negotiating an extension of this Letter of Intent with the counter party.

Since we are an exploration stage company, there is no assurance that commercially viable resources or reserves exist on any of our properties, and a great deal of further exploration will be required before a final evaluation as to the economic and legal feasibility for our future exploration is determined. To date, we have not discovered an economically viable resource or reserve on any of our properties, and there is no assurance that we will discover one.

Plan of Operations

The following discussion should be read in conjunction with our financial statements and the related notes included herein. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this current report, particularly in the section entitled "Risk Factors" in this quarterly report.

The Hobart Lease

The Hobart Lease is an oil and gas lease obtained by TriMar Energy Partners, Inc., as the lessee, from the City of Hobart, as the lessor, dated April 1, 2004, and as recorded on Book 983, official records, Washita County, Oklahoma, covering a total of 1,211.44 acres in the city of Hobart, Washita County, Oklahoma. We paid a total of $525,000 and 1,500,000 shares of common stock to TriMar Energy Partners, Inc. and its designates to earn the 1.5% of 8/8ths overriding royalty interest in the Hobart Lease. We are currently working with TriMar Energy Partners, Inc. on finalizing the assignment of the overriding royalty interest to our company. Under the agreement, we were also obligated to issue to TriMar Energy Partners, Inc. or its designates an additional 1,000,000 shares of our common stock upon the written proposal of a second well to be drilled on the Hobart Lease. Since such a written proposal has been submitted, we have issued the additional 1,000,000 shares of our common stock to the designates of TriMar Energy Partners, Inc.

On April 27, 2007, the operator on the Hobart Lease, Marathon Oil, spudded and began drilling a deep development gas well on our Hobart Lease interest in Washita county, Oklahoma. The well, the Sturgeon.1-11, was set to test through the Springer formation and was targeting multiple pay zones. Up to April 27, 2007, the Sturgeon 1-11 had successfully reached a depth of 17,400 feet with a total authorized depth of 20,000 feet. By May 30, 2007, well data collection and evaluation were completed on the Sturgeon 1-11 well, which was deemed commercially viable. The well reached a final depth of 19,990 feet on May 15, 2007 after slightly more than 3 months of drilling. To help evaluate the amount of pay encountered in the well, an open hole logging suite consisting of density, neutron, HRI induction, sonic, and gamma tools was run to a depth of 19,980 feet. The operator on the Hobart Lease, Marathon Oil, then ran production casing to a depth of 19,978 feet. The drilling rig was then moved off location and it is expected that completion operations will commence soon.

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On July 11, 2007, a second permit was filed and drilling and testing of a second deep development well on our Hobart Prospect in Washita, County, Oklahoma was scheduled to begin shortly. The proposed well, Cunningham 1-2, builds on the successful drilling of the Sturgeon 1-11 well also located in the Hobart Prospect. On September 6, 2007, the second deep development gas well, Cunningham 1-2, was spudded and drilling activities begun. The target depth was the Springer Morrow, which has proved to be productive in Oklahoma and Texas. No value has been assigned, pending definitive testing.

On August 28, 2007, Range Production company filed for a third well to be drilled on our Hobart Prospect in Oklahoma. This development follows the recent application for a permit to drill and test a second deep development well, Cunningham 1-2, on its Hobart Prospect in Oklahoma. The proposed well also builds on the successful drilling of the Sturgeon 1-11 well, also located in the Hobart Prospect. Filed before the Corporation Commission of the State of Oklahoma, Range Production Company is seeking to establish a 640-acre drilling and spacing unit for a third scheduled well to be drilled in the Hobart Prospect.

On October 24, 2007, we announced that drilling on the second deep development gas well, Cunningham 1-02, reached a depth in excess of 14,000 feet. The target depth is 20,500 feet, and is being drilled by the same operator of the Sturgeon 1-11.

The Lokern Leases

The Lokern Leases are a collection of 34 oil and gas exploration leases entered into by Western Energy Capital, LLC. with various private parties between November 2005 to May 2006. The location of these leases are located in Kern County, California. We paid an aggregate of $125,000 and 1,300,000 shares of our common stock to Western Energy Capital, LLC and its designates to acquire an undivided 45% of all rights, title and interests in the Lokern Leases. Pursuant to this agreement, Western Energy Capital, LLC agrees that all leases made part of the agreement will be executed and assigned to our company in a timely manner and Western Energy Capital, LLC will issue our company a standard joint operating agreement. All leases and assignments taken by Western Energy Capital, LLC for our company shall call for Western Energy Capital, LLC to deliver a 75% Net Revenue Interest to our company.

On June 15, 2007, we acquired additional 2-D seismic data relating our Lokern Leases in California. Acquisition of the data will allow for additional geophysical correlation and interpretation of our Lokern Leases and allow our company to firm up well locations for drilling in 2007. The additional seismic data will also provide insight into the reserve estimates of the prospect. Regional 2-D seismic data is a key tool for oil and gas exploration due to its affordability and wide area of coverage compared to 3-D data. The acquisition of this data set is in line with our exploration program and initiatives, and will allow greater marketability of our prospect to large exploration and production companies.

Sun Cal Energy has the exclusive oil and gas rights for the Lokern Prospect which comprises approximately 400 acres of prime land in the oil and gas rich Kern County region of California. Our company owns a 45% Working Interest and a 75% Net Revenue Interest in the prospect. On October 18, 2007, we assigned back to a designate of Western Energy Capital, LLC a 5% overriding royalty interest net to our 45% Working Interest for a net 2.25% overriding royalty interest in the Lokern Prospect.

The Britlind Prospect Leases

On April 19, 2007, we entered into an agreement with Western Energy Capital, LLC ("Western") to acquire a partial interest in the "Britlind" Prospect and leases situated in the prolific Breton Sound area, offshore Louisiana. Western has originally entered into an agreement with BTE Energy, LLC ("BTE") whereby Western acquired a contractual interest in the Britlind Prospect from BTE, including all rights

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and privileges to approximately 9,440 acres of State of Louisiana leases, ownership interest in approximately 25 square miles of 3D seismic data, and interests in certain hardware and software in conjunction with the interpretation and display of the 3D seismic data. In April and May of 2007, we paid an aggregate of $640,000 to Western Energy Capital, LLC pursuant to the agreement for a 5% working interest in the Britlind Prospect lease interests, seismic data, hardware and software and ongoing rights to an area of mutual interest. We have also issued 400,000 shares of our common stock to a designate of Western Energy Capital, LLC. It was also acknowledged that the Britlind Prospect leases were originally acquired under the name of McGuinty Durham and Associates and assignment of leasehold out of McGuinty Durham and Associates will be made in due course. At such time Western Energy Capital will take appropriate actions to assign the interest to our company. Also pursuant to this agreement, we agreed to pay our proportionate share of all expenses, including geological, rentals and additional leases, etc. from May 11, 2007 and on.

Overriding Royalty Interest in Ceturion Property

On October 1, 2007, we acquired a 5% Overriding Royalty Interest in the Centurion Property from King Royalty Corporation pursuant to an offering of royalty interests by King Royalty Corporation. The Centurion Property combines more than 17,000 acres of producing oil and gas assets across Texas, Oklahoma, Alabama, Louisiana and Mississippi. There are 153 producing wells on the asset with more than 50 additional proven/undeveloped drilling sites. Current production is comprised of 90% natural gas and 10% oil. As an interest holder we are entitled to share in revenues generated from oil and/or gas production from wells located on the Centurion Property. Approximately 90 days after the operators of the wells on the properties sell oil and gas production to local purchasers, we are entitled to receive payment of revenues generated by those wells attributable to our interest. However, we have no control over when we receive our payment of revenues, as each operator has its own internal policies and procedures regarding the transfer of ownership. As an interest holder we have no responsibility for operating expenses incurred in connection with the operation of wells on the properties. Lastly, we do not have responsibility for liabilities to third parties resulting from operations on the properties, which is the responsibility of the operators of the properties and the owners of working interests.

The Jonah Prospects

On August 15, 2007, we entered into an agreement with Desert Mining, Inc. to acquire a 100% working interest in 6,000 acres of leases in the Jonah Field region of Wyoming. This is the fourth core exploration and development region for our company. Our Jonah Prospects are identified as South Jonah, which consists of 2,477.68 acres and West Jonah, consisting of 3,546.89 acres. We completed our acquisition on September 5, 2007 by paying to Desert Mining, Inc. an aggregate of $821,799.

With current well spacing regulations, we believe we can drill up to 37 wells on this acreage. With technology developed in the Jonah and Pinedale fields, current completion techniques estimate gas in place between 1.0 and 3.0 BCF per well. As such, our management believes that South Jonah and West Jonah could provide between 37 BCF and 111 BCF of potential recoverable reserves.

The Jonah Field and the Pinedale Anticline are acknowledged as the premier gas fields in the Rocky Mountains. These fields are located in Wyoming's Greater Green River Basin. According to the Wyoming State Geological Survey, the Greater Green River Basin contains approximately 26 TCF of natural gas which is the largest reserve in the State. The Jonah Field is estimated to contain 7 to 10 TCF of Natural Gas, which currently produces from more than 500 wells.

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Other Interest

On October 24, 2007, we signed a letter of intent to acquire a 100% working interest in certain leases in the Cherokee and Forest City Basins of Kansas. This Letter of Intent was set to expire on October 31, 2007 but we are currently still negotiating an extension of this Letter of Intent with the counter party.

Cash Requirements

We have no revenues and have experienced losses since inception. Our plan of operations for the next 12 months involves the exploration of oil and gas properties under the two agreements held by Sun Cal Energy Corp. as well as our interests in three other oil and gas exploration properties.

As provided under the agreement with Western Energy Capital, LLC on the Lokern Leases, we will be a joint working interest owner together with Western Energy Capital, LLC for the Lokern Leases, and will be required to pay our proportionate share of all land, title, lease bonuses and drilling costs. In addition to the exploration activities on the oil and gas properties under the two agreements held by Sun Cal Energy Corp., we will be required to pay our proportionate share of all land, title, lease bonuses and drilling costs for other properties in which we hold a working interest such as the Britlind Prospect Leases and the Jonah Prospects. Furthermore, we will continue to seek opportunities to acquire other oil and gas properties of merit.

Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We anticipate that we will expend approximately $360,000 in the next 12 months for our operating expenses. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration of our oil and gas properties in the future, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide no assurance that we will generate any revenues or ever achieve profitability.

We will also need more funds if the costs of the exploration of our oil and gas properties are greater than we have anticipated. We will also require additional financing to sustain our business operations if we are not successful in earning revenues. We currently do not have any arrangements for further financing and we may not be able to obtain financing on commercially reasonable terms or terms that are acceptable to us when it is required.

We recorded a net operating loss of $480,342 for the three months ended September 30, 2007 and have an accumulated deficit of $1,184,375 since inception. As at September 30, 2007 we had cash of $988,766, and for the next 12 months, management anticipates that the minimum cash requirements to fund our proposed exploration program and our continued operations will be $408,000.

Results of Operations

First Quarter and Three Month Summary

We have not earned any revenues from our incorporation on July 20, 2004 to September 30, 2007. We incurred operating expenses in the amount of $480,342 for the three month period ended September 30, 2007, compared to $12,771 for the three month period ended September 30, 2006. This increase was due to the change of our business from a relatively inactive mineral exploration company to an oil and gas exploration company actively acquiring interests in various parts of the United States since March 2007. The principal component for the increase of our operating expenses for the three months ended September 30, 2007 compared to the three months ended September 30, 2006 was increase in general and administrative expenses relating to the acquisition of various interests in oil and gas exploration properties.

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We incurred operating expenses of $1,183,794 for the period from our inception on July 20, 2004 to September 30, 2007.

We have not attained profitable operations and are dependent upon obtaining financing to pursue exploration activities.

Revenue

During the next 12 month period, we anticipate that we may generate revenue from the overriding interests we owned in some of our properties. However, we do not anticipate that that the revenues generated, if any, would be sufficient for us to attain profitable operations. Accordingly, we will be required to obtain additional financing in order to continue our plan of operations. We believe that debt financing will not be an alternative for funding additional phases of exploration as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or through shareholder or related party loans. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our exploration programs. In the absence of such financing, we will not be able to continue exploration of our properties and our business plan will fail. Even if we are successful in obtaining equity financing to fund our exploration program, there is no assurance that we will obtain the funding necessary to pursue any advanced exploration of our properties. If we do not continue to obtain additional financing, we will be forced to abandon our properties and our plan of operations

Liquidity and Financial Condition

At September 30, 2007, we had working capital of $767,909. At September 30, 2007, our total current assets were $991,566 which consisted of cash, cash held in trust and prepaid expenses. At September 30, 2007, our total current liabilities were $223,657.

Future Financings

We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any of additional sales of our equity securities or arrange for debt or other financing to fund our exploration and development activities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain.

Our significant accounting policies are disclosed in Note 2 to the unaudited financial statements included in this Quarterly Report on Form 10-QSB.

RISK FACTORS

Shares of our common stock are speculative, especially since we are in the exploration-stage of our new business. We operate in a volatile sector of business that involves numerous risks and uncertainties. The risks and uncertainties described below are not the only ones we face. Other risks and uncertainties, including those that we do not currently consider material, may impair our business. If any of the risks discussed below actually occur, our business, financial condition, operating results or cash flows could be materially adversely affected. This could cause the trading price of our securities to decline, and you may lose all or part of your investment. Prospective investors should consider carefully the risk factors set out below.

Risks Related To Our Business

As our properties are in the exploration stage there can be no assurance that we will establish commercial discoveries on our properties.

Exploration for economic reserves of oil and gas is subject to a number of risk factors. While the rewards to an investor can be substantial if an economically viable discovery is made, few of the properties that are explored are ultimately developed into producing oil and/or gas wells. Our properties are in the exploration stage only and are without proven reserves of oil and gas. There can be no assurance that we will establish commercial discoveries on any of our properties.

The potential profitability of oil and gas ventures depends upon factors beyond the control of our company

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 world-wide 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.

Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gas which may be acquired or discovered will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market

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fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. The extent of these factors cannot be accurately predicted but the combination of these factors may result in our company not receiving an adequate return on invested capital.

Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring interests in oil and gas properties.

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there is a high degree of competition for desirable oil and gas properties for drilling operations and necessary drilling equipment, as well as for access to funds. There can be no assurance that the necessary funds can be raised or that any projected work will be completed.

The marketability of natural resources will be affected by numerous factors beyond our control which may result in us not receiving an adequate return on invested capital to be profitable or viable.

The marketability of natural resources which may be acquired or discovered by us will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental . . .