You should read the following discussion and analysis in conjunction with our Company's consolidated financial statements and related notes. For the purpose of this discussion, unless the context indicates another meaning, the terms:
"Company", "we", "us" and "our" refer to Deep Well Oil & Gas, Inc. and its subsidiaries. This discussion includes forward-looking statements that reflect our current views with respect to future events and financial performance that involve risks and uncertainties. Our actual results, performance or achievements could differ materially from those anticipated in the forward-looking statements as a result of certain factors including risks discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations - "Forward-Looking Statements" below and elsewhere in this report, and under the heading "Risk Factors" and "Environmental Laws and Regulations" disclosed in this report on Form 10-K for the year ended September 30, 2007.

Our consolidated financial statements and information are reported in U.S. dollars and are prepared based upon United States generally accepted accounting principles.

General Overview

Deep Well Oil and Gas, Inc. ("Deep Well"), along with its subsidiaries, is an emerging independent junior oil and gas exploration and development company headquartered in Edmonton, Alberta, Canada. Our Company's immediate corporate focus is to develop the existing land base that it presently controls in the Peace River oil sands area in Alberta, Canada. Our principal office is located at Suite 700, 10150 - 100 Street, Edmonton, Alberta T5J 0P6, our telephone number is (780) 409-8144, and our fax number is (780) 409-8146. Deep Well Oil & Gas, Inc. is a Nevada corporation based in Alberta, Canada, and trades on the pink sheets under the symbol DWOG. We maintain a web site at www.deepwelloil.com.

Results of Operations for the Year Ended September 30, 2007

Our Company is an exploration stage company and as such does not have commercial production at any of its properties and, accordingly, it currently does not generate cash from operations. Since the inception of our current business plan, our operations have consisted primarily of various exploration and start-up activities relating to our properties, which included acquiring lease holdings by acquisitions and public offerings, seeking institutional investors, locating joint venture partners, acquiring and analyzing seismic data, engaging various firms to comply with leasehold conditions and environmental regulations as well as project management, and developing our long term business strategies. For year ended September 30, 2007, and for the comparable period, we generated no revenues from operations.

                                                             Year                     Year                September 10,
                                                            Ended                    Ended                   2003 to
                                                      September 30, 2007       September 30, 2006       September 30, 2007

Revenue                                              $                  -     $                  -     $                  -
Expenses
Administrative                                       $          1,452,958     $          1,341,713     $          4,561,287
Share Based Compensation                                          246,643                  558,882                  805,525
Net Loss from Operations                                       (1,699,601 )             (1,900,595 )             (5,366,812 )

Other Income and Expenses
Forgiveness of Loan Payable                                       287,406                        -                  287,406
Interest Income                                                    50,183                    2,492                   66,153
Interest Expense                                                  (73,652 )                (24,179 )               (207,862 )
Settlement of Debt                                                      -                        -                   24,866
Net Loss and Comprehensive Loss                      $         (1,435,664 )   $         (1,922,282 )   $         (5,196,249 )

Our net loss and comprehensive loss for the year ended September 30, 2007, was $1,435,664 compared to a net loss and comprehensive loss of $1,922,282 for the year ended September 30, 2006. This difference was due primarily to a decrease of $312,239 in share based compensation expense to the comparable period and forgiveness of a loan payable, for further information on the loan payable see Note 8 in the consolidated financial statements disclosed in this report on Form 10-K. Part of the reason for the difference in the share based compensation expense between these two comparable periods was that some of the first stock options granted under the Plan in the first quarter of 2005 were immediately vested, compensating for the time a director, employee, or consultant had been working for our Company prior to the adoption of the Plan. For further information regarding share based compensation see Note 10 in the consolidated financial statements disclosed in this report on Form 10-K.

For the year ended September 30, 2007, interest income increased by $47,691, compared to the year ended September 30, 2006, due primarily to interest from term deposit and finance charges related to outstanding accounts receivables. For the year ended September 30, 2007, interest expense increased by $49,473, compared to the year ended September 30, 2006, due primarily to accrued interest payable.

Results of Operations

Our Company successfully completed its winter drilling program and met its objectives by drilling 6 wells, 3 of which were drilled on our oil sands permit in order to provide technical data to support the required Department of Energy regulation to convert our oil sands permit into a 15-year primary lease. In addition, three wells were drilled further to the North of the above-mentioned 3 wells and the 3 horizontal wells previously drilled by our former Farmout partner. These three northern wells continued the delineation of the main reservoir trend and confirmed that the main reservoir continues north. We are evaluating the many options for production now available to us to decide the best course of action. Drilling on these 80% owned lands has opened new avenues for testing and further development of the Sawn Lake project. On the 12 sections of the jointly held lands, in which we have a 40% working interest, our Company is exploring different plans of action with Andora Energy Corporation, the operator of these 12 sections. The focus of our Company's drilling program is to define the heavy oil reservoir to establish reserves and to determine the best technology under which oil can be produced from the Sawn Lake project in order to initiate production and generate a cash flow.

We are currently in the process of evaluating various enhanced recovery technologies for a test well project, which is subject to regulatory approval, public consultations, Board of Directors approval, financing, successful reservoir evaluation and modeling, and other risks associated with the oil sands industry.

Deep Well through its subsidiaries Northern Alberta Oil Ltd. which we refer to as "Northern", and Deep Well Oil & Gas (Alberta) Ltd. currently have a 100% working interest in 15 sections of petroleum and natural gas licenses ("P&NG") in the Peace River area of Alberta, Canada, an 80% working interest in 56 contiguous sections of oil sands development leases, and a 40% working interest in an additional 12 contiguous sections of oil sands development leases in the Peace River oil sands area of Alberta, Canada. Our P&NG licenses and oil sands development leases cover 52,505 gross acres (21,248 gross hectares).

On April 2, 2008, our Company participated in a public offering of Crown Petroleum and Natural Gas Rights held by the Alberta Department of Energy, in which we successfully bid on 1 P&NG license covering 3,796 gross acres (1,536 gross hectares) for a total of 6 sections in the Ochre area. Our Company acquired an undivided 100% working interest in these 6 sections located in the Peace River oil sands area approximately fourteen miles west of our Sawn Lake properties.

On December 4, 2008, as operator, we successfully spudded the first well of six wells to be drilled in our 2008/2009 winter drilling program. This well is located at 12-14-092-13W5 in North Central Alberta and was drilled to a vertical depth of 680 meters. The well was logged, cased, and completed for bluesky heavy oil production, with perforated intervals from 644.5m to 649.5m. This well is currently being tested.

On December 15, 2008, as operator, we successfully spudded the second well of our six well 2008/2009 winter drilling program. This well is located at 9-16-092-13W5 in North Central Alberta and was drilled to a vertical depth of 680 meters. The well was logged, cased, and completed for bluesky heavy oil production, with perforated intervals from 638.5m to 643.5m. This well is currently being tested.

On January 8, 2009, as operator, we successfully spudded the third well of our six well 2008/2009 winter drilling program. This well is located at 10-33-091-13W5 in North Central Alberta and was drilled to a vertical depth of 708 meters. This well determined the southern edge of the Bluesky reservoir of our Sawn Lake Project.

On January 16, 2009, as operator, we successfully spudded the fourth well of our six well 2008/2009 winter drilling program. This well is located at 7-5-092-13W5 in North Central Alberta and was drilled to a vertical depth of 718 meters. The well was logged and cased for bluesky heavy oil production, and is pending further evaluation.

On January 25, 2009, as operator, we successfully spudded the fifth well of our six well 2008/2009 winter drilling program. This well is located at 8-4-092-13W5 in North Central Alberta and was drilled to a vertical depth of 725 meters. The well was logged and cased for bluesky heavy oil production, and is pending further evaluation.

On February 2, 2009, as operator, we successfully spudded the sixth well of our six well 2008/2009 winter drilling program. This well is located at 6-22-092-13W5 in North Central Alberta and was drilled to a vertical depth of 660 meters. The well was logged and cased for bluesky heavy oil production, and is pending further evaluation.

In conjunction with our recent drilling program, our Company acquired existing road infrastructure on our properties as follows: effective December 1, 2008, we acquired 6 P&NG properties of which 2 were expected to immediately expire, covering 11,387 gross acres (gross 4,608 hectares) from Paramount Resources Ltd. ("Paramount"). Included in this land acquisition, Paramount transferred 7 mineral surface leases (proposed well sites or "MSLs") and 4 licenses of occupation, totalling 12 km of roads (access roads or "LOCs"). Along with this acquisition we acquired 2 wells. Of the 2 wells, one was drilled to a vertical depth of 737 meters on our existing oil sands lease and subsequent to the drilling and logging operations; this well was cased for bluesky heavy oil production. Perforated intervals were from 681.5m to 684.5m and 684.5m to 685.0m. This well's status is still drilled and cased for future bitumen production. The estimated cost to drill this well would have been approximately $1.4 million dollars in drilling and completion costs, which does not include the costs associated to construct the existing access roads that we have acquired from Paramount. Paramount used these access roads, which our Company now owns, to access their properties to drill their wells and prepare some of their MSLs for future drilling.

Effective February 1, 2009, we also acquired from Penn West Petroleum Ltd. an LOC that totalled 8.7 km of an existing road.

On May 5, 2009, our Company was informed by the Alberta Department of Energy that they had approved our application to convert 5 sections of our oil sands permit to a 15-year primary lease. By drilling on these lands, where the permits were set to expire, we have preserved title to 5 sections and now have a primary lease, which is valid for an additional 15 years.

Liquidity and Capital Resources

As of September 30, 2007, our Company's total assets were $9,855,076, compared to $4,528,124 as of September 30, 2006, and our total liabilities as of September 30, 2007, were $318,406 compared with $972,283 as of September 30, 2006. The increase in our total assets was due primarily to our Company successfully raising funds through private offerings of our common stock. The decrease in our total liabilities was due to accounts payable.

Our working capital (current liabilities subtracted from current assets) is as follows.

                             As of                    As of
                       September 30, 2007      September 30, 2006
Current Assets        $          5,497,687     $           170,973
Current Liabilities                318,406                 684,877
Working Capital       $          5,179,281     $          (513,904 )

As of September 30, 2007, our Company had a working capital of $5,179,281 compared to our working capital deficit of $513,904 as of September 30, 2006. Our working capital increase was due primarily to the increase in cash associated with our Company successfully raising funds through two separate private offerings of our common stock. Currently we have no long-term debt and our estimated working capital surplus, as of July 31, 2009, is estimated to be $1.4 million.

Our cash and cash equivalents for the year ending September 30, 2007, was 5,244,162, compared to $50,324 for the comparable year ending September 30, 2006. Our Company successfully raised sufficient funds to conduct our operations during the fiscal years 2005, 2006, 2007, and 2008. From the period October 1, 2005 to July 31, 2009, we financed our business operations through a loan, fees derived from the farmout of some of our lands, private offerings of our common stock, and the exercise of certain warrants, realizing gross proceeds of approximately $19.6 million. In these offerings, we sold units comprised of common stock and warrants to purchase additional common stock, and as a result of these offerings, we currently have an aggregate of 42,818,138 warrants outstanding with exercise prices ranging from $0.40 to $1.20. If all of these warrants are exercised we may realize aggregate proceeds of approximately $30.9 million. However, the warrant holders have complete discretion as to when or if the warrants are exercised before they expire and we cannot guarantee that the warrant holders will exercise any of the warrants.

On October 31, 2008, our Company successfully raised another $5,000,000 from one investor through a private placement offering as filed on Form 8-K dated November 7, 2008. With this private placement, we have the funds anticipated to complete our near term business plan.

For our long term operations we anticipate that, among other options, we will raise funds during the next twenty-four months through private placements of our common stock under exemptions from the registration requirements provided by Canadian, United States, and state and provincial securities laws. The purchasers and manner of issuance will be determined according to our financial needs and the available exemptions. We also note that if we issue more shares of our common stock, our stockholders may experience dilution in the percentage of their ownership of common stock. We may not be able to raise sufficient funding from stock sales for long-term operations and if so, we may be forced to delay our business plans until adequate funding is obtained. We believe debt financing will not be an alternative for funding in the exploration stage of our Company due to the risky nature of this business. However, at this time, because we are not generating any revenues, our external sources of liquidity are the sale of our capital stock, and once our Company achieves the production it expects then we may consider the alternative of debt financings.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Forward-Looking Statements

This report on Form 10-K, including all referenced exhibits, contains "forward-looking statements" within the meaning of the United States federal securities laws. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words "may", "believe", "intend", "will", "anticipate", "expect", "estimate", "project", "future", "plan", "strategy", or "continue", and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters, identify forward-looking statements. The forward-looking statements in this report on Form 10-K include, among others, statements with respect to:

· our current business strategy;

· our future financial position and projected costs;

· our projected sources and uses of cash;

· our plan for future development and operations;

· our drilling and testing plans;

· our proposed enhanced oil recovery test well project;

· the sufficiency of our working capital in order to execute our business plan;

· resource estimates;

· the timing and sources of our future funding.

Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which may cause the actual results to differ materially from the anticipated future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forward in the forward-looking statements include, but are not limited to:

· changes in general business or economic conditions;

· changes in legislation or regulation that affect our business;

· our ability to obtain necessary regulatory approvals and permits;

· opposition to our regulatory requests by various third parties;

· actions of aboriginals, environmental activists and other industrial disturbances;

· the costs of environmental reclamation of our lands;

· availability of labor or materials or increases in their costs;

· the availability of sufficient capital to finance our business plans on terms satisfactory to us;

· adverse weather conditions and natural disasters;

· risks associated with increased insurance costs or unavailability of adequate coverage;

· volatility of oil and natural gas prices;

· competition;

· changes in labor, equipment and capital costs;

· future acquisitions or strategic partnerships;

· the risks and costs inherent in litigation;

· imprecision in estimates of reserves, resources and recoverable quantities of oil and natural gas;

· product supply and demand;

· fluctuations in currency and interest rates;

· the additional risks and uncertainties, many of which are beyond our control, referred to elsewhere in this Form 10-K and in our other SEC filings.

The preceding bullets outline some of the risks and uncertainties that may affect our forward-looking statements. For a full description of risks and uncertainties, see the sections elsewhere in this Form 10-K entitled "Risk Factors" and "Environmental Laws and Regulations". Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-KSB, 10-Q, 10-QSB, 8-K and any other SEC filing should be consulted.