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 or 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 our Annual Report on Form 10-K for the fiscal year ended September 30, 2007, filed with the Securities and Exchange Commission on September 22, 2009.

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, Canada 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 and trades on the pink sheets under the symbol DWOG. We maintain a website at www.deepwelloil.com.

Results of Operations for the Three Months Ended December 31, 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 the three months ended December 31, 2007, and for the comparable period, we generated no revenues from operations.

                                                        Three Months            Three Months            September 10,
                                                            Ended                   Ended                  2003 to
                                                      December 31, 2007       December 31, 2006       December 31, 2007

Revenue                                              $                 -     $                 -     $                 -

Expenses
Administrative                                       $           515,214     $           242,305     $         5,074,167
Amortization                                                       3,427                     249                   5,761
Share Based Compensation                                          32,703                  80,458                 838,228

Net Loss from Operations                                        (551,344 )              (323,012 )            (5,918,156 )

Other Income and Expenses
Interest Income                                                   23,415                   4,336                  89,568
Interest Expense                                                       -                 (17,851 )              (207,862 )
Forgiveness of loan payable                                            -                       -                 287,406
Settlement of Debt                                                     -                       -                  24,866

Net Loss and Comprehensive Loss                      $          (527,929 )   $          (336,527 )   $        (5,724,178 )

Our net loss and comprehensive loss for the three months ended December 31, 2007, was $527,929 compared to a net loss and comprehensive loss of $336,527 for the three months ended December 31, 2006. This was due primarily to an increase of $272,909 in general and administrative costs and a decrease of $47,755 in stock based compensation expense to the comparable quarter, see Note 8 of the consolidated financial statements disclosed in this report.

For the three months ended December 31, 2007, interest income increased by $19,079, compared to the three months ended December 31, 2006, due primarily to interest received from term deposits. For the three months ended December 31, 2007, interest expense decreased by $17,851, compared to the three months ended December 31, 2006, due primarily to a decrease of accrued interest payable.

Operations

Our Company successfully completed its 2008/2009 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 we believe confirmed that the main reservoir continues north. We are evaluating the options for production available to us to decide on a 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 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, 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. We have recently submitted an application with the Energy Resources Conservation Board for a commercial bitumen recovery scheme to evaluate the 12-14-092-13W5 well for potential development using Cyclic Steam Stimulation. Currently this application is pending regulatory approval.

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, totaling 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 totaled 8.7 km of an existing road.

On May 5, 2009, our Company was informed by the Alberta Department of Energy that it 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 has a primary lease, which is valid for an additional 15 years.

Liquidity and Capital Resources

As of December 31, 2007, our Company's total assets were $9,253,055, compared to $4,479,861 as of December 31, 2006. The increase in our total assets was due to cash received from the sale of securities. Our total liabilities as of December 31, 2007, were $211,611 compared with $1,180,089 as of December 31, 2006. The decrease in our total liabilities was due primarily to a reduction in accounts payable and the reversal of a loan payable to a former director of our Company.

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

                                                        Three Months            Three Months
                                                            Ended                   Ended                Year Ending
                                                      December 31, 2007       December 31, 2006       September 30, 2007

Current Assets                                       $         4,855,449     $           122,960     $          5,497,687
Current Liabilities                                              211,611                 881,391                  318,406
Working Capital                                      $         4,643,838     $          (758,431 )   $          5,179,281

At December 31, 2007, our Company had working capital of $4,643,838 compared to our working capital deficit of $758,431 at December 31, 2006. Our working capital increase was due primarily to the increase in cash received from the sale of securities. Our decrease in working capital from the September 30, 2007 year-end was due primarily to start up operation expenses incurred to prepare our six well sites for the 2008/2009 winter drilling program. Currently we have no long-term debt and our estimated working capital surplus, as of June 30, 2009, is approximately $1.62 million.

Our cash and cash equivalents for the period ending December 31, 2007, was $4,568,981, compared to $27,955 for the comparable period ending December 31, 2006. Our Company has raised sufficient funds to conduct our near-term operations during the fiscal years 2005, 2006, 2007, 2008, and 2009. From the period March 10, 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 had an aggregate of 42,818,138 outstanding warrants 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.

For our long term operations we anticipate that, among other alternatives, we may raise funds during the next twenty-four months through sales of our common stock. 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 our Company, as we are an exploration stage Company and due to the risky nature of our business.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Forward-Looking Statements

This quarterly report on Form 10-Q, 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 quarterly report on Form 10-Q 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 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-Q, in our Form 10-K for the fiscal year ended September 30, 2007, 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.