Dear Derek Supporters, Shareholders & Potential Investors:

First and foremost, on behalf of the entire team at Derek Oil & Gas Corporation, I would like to thank all of our shareholders, institutional investors, consultants and potential investors for their support and interest in 2006, and their continued support in 2007 and beyond.

The Derek team is very proud of the progress made this past quarter. Derek's active Board of Directors and focused management team worked exceptionally hard this past quarter to reposition the Company into a much stronger and more focused direction. By gaining a 95% working interest and becoming project operator, the Derek team is confident in its abilities to move this project forward at a quicker pace than 2006 and ensure an increase in oil production as well as shareholder value in 2007.

Please note that the reason for mailing this President's Report out in mid-January was to allow a few weeks for our readers to clean out their inboxes of all the holiday back up and wishes, as well as to include the recent closing of a non-brokered Private Placement.

Quick Overview for new readers:

• Derek acquired a 95% working interest on over 8000 acres of prime property located in a regional oil migration fairway in NE Wyoming's Powder River Basin
  
• Derek owns a 4.42% royalty
  
• The LAK Ranch property is located five miles from the Newcastle Refinery
  
• The reservoir contains tens of millions of barrels of high quality oil
  
• The oil is viscous & requires an enhanced oil recovery method (EOR) to extract
  
• The infrastructure required to extract the oil was designed & built by Bateman Engineering Inc.
  
• The above ground facilities have been paid for in full (by Derek) and have been successfully operating & producing
  
• We are producing a high quality, low sulphur and low paraffin oil receiving a US $2.25 premium to Wyoming Sweet Crude (other) pricing through TEPPCO
  
• We are confident that the modified Enhanced Oil Recovery (EOR) techniques we continue to implement are applicable, duplicable and economically viable for the Newcastle Sandstone formation being developed on the LAK Ranch property
  
• We have identified several hydrocarbon targets in our extensive $1.1 Million USD 3-D seismic survey & continue to identify new potential targets through further in-depth seismic interpretation
  
• Derek management and its highly qualified Board of Directors are focused & determined on making the LAK Ranch property a domestic oil supplier to the United States of America
  

Let's Recap DRK progress during the last quarter of the 2006 Calendar year:

• Tuesday, August 29, 2006 - Derek's LAK Ranch Project was featured in the American Oil & Gas Reporter

• Wednesday, October 25, 2006 - Derek agreed to buy Ivanhoe Energy's interest in the LAK Ranch project: ..."Derek reached an agreement to purchase all of Ivanhoe's interest in the LAK Ranch Project for US$800,000, comprised of US$600,000 due at closing and US$200,000 to be paid through a 5% gross overriding interest on future production from the LAK Ranch Project. The 5% royalty arrangement will terminate once US$200,000 has been paid."...

• Wednesday, November 08, 2006 - Derek Committed to a thirteen well drill program on LAK Ranch based on seismic interpretation: ..."This vertical well program will consist of a pattern of four injector and nine producer wells targeted to produce from the Newcastle sandstone formation. Derek's geological/geophysical consultants selected the well placements based on interpretations and targets identified in the US$1.1 million 3D seismic completed over 4 1/2 square miles of the property. Within the program area, the pay zone is estimated to be 40 to 70 feet thick"... "This program will be conducted jointly with SEC Oil and Gas Partnership ("SEC") on a fifty-fifty cost basis, with SEC receiving fifty percent of the revenue until payback of their initial investment."...

• Tuesday, December 5, 2006 - Derek completed the purchase of Ivanhoe Energy's LAK Ranch interest and retained a 95% working interest in 8000 + acres of prime property...

• Friday, December 22, 2006 - Mr. Edward Byrd, Derek's CFO and a member of the Board of Directors stepped down: Mr. Edward Byrd commented as follows: "With the acquisition of 95% of the LAK Ranch Property and the Company's commitment to a 13 well program unfolding at the same time as I move into the full retirement stage of my life, I feel now is the best time for me to step down and let experienced industry veterans take the Company to its next stage of development. I leave confident that the Company is in the capable hands of a strong Board of Directors and Management team. I look forward to closely following the Company's progress as it moves ahead with the development of the LAK Ranch oil potential"...

• Friday, January 12, 2007 - Derek announced a $1,643,250 non-brokered private placement... "subject only to regulatory approval, a non-brokered private placement of 4,695,000 units at a price of $0.35 per unit, raising $1,643,250."... "The Company will use these proceeds to pay its share of LAK Ranch costs towards an upcoming thirteen well drill program and for general working capital..." Please note: Subject to regulatory approval the Company will be closing an additional 500,000 units for a gross amount of $1, 818, 250 being raised for the upcoming 13 well program

  Derek is trading in Canada on the TSX Venture Exchange with the symbol DRK.

  As at: 1/23/07 1:00 PM	Share Price TSX.V Exchange
  Vancouver, BC	(DRK)
  High	$0.38
  Low	$ 0.37.5

  Recent Operation Observations:

  • Derek bought Ivanhoe Energy's interest in the LAK Ranch project
    
  • Derek has become operator of the LAK Ranch project
    
  • Derek hired consultants Peterson Energy Management, Inc., SI International Inc., & Pacific Geotechnical Associates, Inc. to develop the project
    
  • Well placements have been determined using a re-interpretation of the high definition, $1.1 Million USD 3-D seismic survey
    
  • Derek has committed to a 13 well program due to commence before March 31st, 2007
    
  • Fiber optic system has been invaluable in monitoring the reservoir temperature
    
  • A major refiner of produced oil came back on line months ago and oil prices returned to normal which reduced the price differential between LAK Oil and WTI
    
  • Successfully tested an economically viable EOR to extract the viscous oil
    
  • Multiple deeper targets for future development identified in the 3D seismic interpretation by Derek's consultants
  Blue Sky Potential:
  • The upside hydrocarbon potential in deeper horizons identified in the 3D seismic is a major part of Derek's future development program
    
  • potential until such a time as the Newcastle Formation is producing at levels that are providing cash flow for re-investing into an exploration program
    
  What is Derek's short term agenda?
  • Obtain all required permits for drilling on LAK Ranch project
    
  • Commence the 13 well drill program
    
  • Increase production
    
  • Increase shareholder value
    
  • Continue preparation of a long term economic plan
  What is Derek's long term goal?
  • Significantly increase oil production
    
  • Reach commercial production levels from LAK Ranch
    
  • Ensure the best price is being received for oil produced
    
  • Re-invest cash flow from the Newcastle Formation produced oil into the development of deeper horizons at LAK Ranch or other properties similar to LAK Ranch
    
  • Be a significant oil supplier to North America
    
  Corporate Communications Targets: Derek management continues to develop strong communications by effectively executing its corporate goals: Current:
  • Investor Relations program with Stockgroup -- ongoing
    
  • Seeking Analyst coverage
    
  • Updating Corporate material to include recent progress
    
  • Investment Strategy Analyst, Dr. Michael Berry continues his endeavors for further exposure for Derek
    

  Flash presentation & streamlined corporate package or link is always available for mailing or emailing to current & future shareholders

  Upcoming:

  • We will be participating in the Money Show 2007 in Orlando Florida from February 7 to February 10, 2007 and encourage all of you to come visit booth #723 to meet members of the Derek team face to face!
    

  To register please visit: http://www.worldmoneyshow.com/twms/?scode=007868

  • Prepare new corporate website
    
  • Launch re-built corporate website pending editor and management approvals
    
  Corporate activities in the last few months have certainly paved the way for 2007 development on the LAK Ranch property! So, watch out for upcoming press releases on our website at www.derekoilandgas.com Please note that our next Quarterly President's Report will be sent out in May of 2007 and that Ms. Erica Bearss is always available to provide updates to our shareholders and potential investors via email: erica@derekoilandgas.com or telephone toll free at 1-888-756-0066.

  Derek management and its active Board of Director's are energized to be a part of the new 13 well program and its development over the next few months!

  On behalf of the board of directors and management team at Derek Oil & Gas Corporation we would like to thank all of our current & future shareholders for their continued confidence & support.

  Barry C.J. Ehrl President & CEO Derek Oil & Gas Corporation

  Suite 1201 - 1111 West Hastings Street Vancouver, BC, Canada, V6E 2J3 Telephone: 604-331-1757 Fax: 604-669-5193 Toll Free: 1-888-756-0066 Website: www.derekoilandgas.com Email: info@derekoilandgas.com

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