• Derek has a 95% working interest on the overall 8000 acres of prime property located in a regional oil migration fairway in NE Wyoming's Powder River Basin.
• The 12 well program only is being conducted with a third party on a fifty-fifty cost basis, with the third party receiving fifty percent of the revenue until payback on their initial investment is met. Once payback is met, the third party's working interest (only on the 12 well program area) will revert to forty percent. Derek owns an approximate 4.42% royalty in the overall property.
• 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 are operating successfully. LAK Ranch is producing a high quality, low sulphur and low paraffin oil.
• Derek's management is 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.
• Several hydrocarbon targets have been identified with our extensive $1.1 Million USD 3D seismic survey that continues to aid management in identifying potential new 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.

• Increase overall production as reservoir heats up from the 12 well program.
• Purchase, permit and install another steam generator to provide more steam into the reservoir.
• Conduct another drilling program in 2008 to increase production, earnings, and cash flow per share, thereby increasing shareholder value.
• Continue modifying the long term economic & development plan as new reservoir information is received.

• Reach commercial production levels from LAK Ranch.
• Ensure the best price is being received for oil produced.
• Be a significant oil supplier to North America.

• Deeper horizons identified in the 3D seismic are a major part of Derek's future development program.
• Once the Newcastle Formation is producing on a positive cash flow basis, Derek plans on re-investing in the exploration and development of similar types of projects & locations.

• Derek has a 95% working interest on the overall 8000 acres of prime property located in a regional oil migration fairway in NE Wyoming's Powder River Basin
• The 12 well program only is being conducted jointly with a third party on a fifty-fifty cost basis, with the third party receiving fifty percent of the revenue until payback on their initial investment is met. Once payback is met, the third party's revenue interest (only on the 12 well program production) will revert to forty percent. Derek will have a 95% working interest in any current and future development and production on the property outside this 12 well program area.
• Derek owns an approximate 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
• 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

• Successfully tested an economically viable EOR to extract the viscous oil
• Derek's consultants Peterson Energy Management, Inc., SI International, Inc. & Pacific Geotechnical Associates, Inc. continue to assist in the development of the project
• 12 wells have been completed
• Fiber optic system has been invaluable in monitoring the reservoir temperature
• Derek has signed a new contract for oil sales which ties the price received to West Texas Intermediate (WTI)
• Steaming has commenced in a portion of the newly developed 12 well program
• Multiple deeper targets for future development have been identified in the 3D seismic interpretation by Derek's consultants

• February 21, 2007: Derek signs drilling contract with Elenburg Exploration, Inc.
  
  
• February 28, 2007: Derek receives formal approval for drill permit application from Wyoming Oil and Gas Conservation Commission; Elenburg Exploration, Inc. mobilizing drilling equipment to site.
  
  
• March 6, 2007: Derek announces spudding of first well of the new 12 well program.
  
  
• March 22, 2007: Derek announces successful drilling of first four wells of new 12 well program.
  
  
• April 24, 2007: Derek announces that it has successfully finished drilling casing and cementing of all 12 wells of new 12 well program
  
  
• May 15, 2007: Derek announces recommencement of steam injection at LAK Ranch.

• Increase overall production with production from the 12 well program
• Increase shareholder value
• Continue preparation of a long term economic & development plan

• Reach commercial production levels from LAK Ranch
• Ensure the best price is being received for oil produced
• Be a significant oil supplier to North America Derek's Blue Sky Potential:
• Deeper horizons identified in the 3D seismic is a major part of Derek's future development program
• Once the Newcastle Formation is producing on a cash flow basis Derek plans on re-investing into an exploration program for similar type projects & locations

• Ensuring up-to-date public awareness through continuous updates of corporate material
• Be cognizant of the importance of good shareholder relations
• Seek further Analyst coverage
• Corporate presentation & streamlined corporate package or link is always available for mailing or emailing to current & future shareholders
• Third Party Report written by Fundamental Research Corp. on Derek Oil & Gas Corporation available on their website at www.researchfrc.com or through General and Subscription Inquiries from Fundamental Research Corp.: Phone: 604-682-7050 Toll Free: 1-800-913-2377 Fax: 604-682-7001 or E-mail:

• Launch new corporate website
• Dissemination of follow up Analyst Coverage by Fundamental Research Corp.

• Cash on hand- CDN$250,000.00
• Shares Issued- 45,126,550
• Warrants o/s- 4,637,500
• Options o/s- 3,830,080
• Fully Diluted- 53,594,050

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

• Derek owns approximately 8000 acres of prime property located in a regional oil migration fairway in NE Wyoming's Powder River Basin
• Derek owns a 5.42% royalty
• The property is conveniently located five miles from the Newcastle Refinery
• The reservoir contains 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 has been built by Bateman Engineering Inc.
• The Pilot Plant & above ground facilities have been paid for by Derek and are successfully operating and 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 believe that a Modified SAGD program and/or a vertical well development program is applicable on the LAK Ranch property
• We have already identified several hydrocarbon targets in our extensive 3D seismic survey completed in Q4/04 & 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

• Derek continues to place full attention on the LAK Ranch project
• The limited "Continuous Steaming Program" that commenced in November 2005 continues to demonstrate positive reservoir reactions, increasing temperature readings, decreasing viscosity and increased oil production
• Successful results are being observed in the limited Pilot Program
• Multiple targets for future development identified in the 3D seismic interpretation by Derek's geophysicist & geology consultants
• Fiber optic system has been invaluable in monitoring the reservoir temperature
• Produced water treatment expenses were greatly reduced with a more effective chemical used for reverse breaker (removes residual oil particles from produced water)
• A major refiner of produced oil came back on line months ago and oil prices returned to normal which for Derek means receiving a US$2.25 dollar premium to Wyoming Sweet Crude (other) benchmark
• Successfully tested an economically viable EOR to extract the viscous oil

• The upside hydrocarbon potential in deeper horizons identified in the 3D seismic is still a major part of Derek's future development program.
• Derek management has decided to resume the discussions & exploration strategies for the deeper hydrocarbon potential at a time when the Newcastle Formation is producing levels that are providing cash flow for re-investing into an exploration program
• There is ongoing search for property located in North America with similar opportunities and characteristics to the LAK Ranch
• We are still working on obtaining further acreage contiguous to the LAK Ranch

• Continue preparation of the economic analysis
• Board approval for reserve form & file on SEDAR
• Continue to perfect short term development program options
• Develop & implement optimum independent drill program if required

• Enter Phase II and increase oil production
• Reach commercial production levels from LAK Ranch
• Ensure the best price is being received for oil produced
• Be a significant oil supplier to North America
• Re-invest cash flow from the Newcastle Formation's produced oil into the exploration potential identified in deeper horizons or other properties similar to LAK Ranch

• Investor Relations program with Stockgroup - ongoing
• Investment Strategy Analyst, Dr. Michael Berry continues his endeavors for further exposure for Derek in the US market
• Flash presentation & streamlined corporate package or link is always available for mailing or emailing to current & future shareholders
• Prepare new corporate website
  
  Upcoming:
• Reserve form will be filed at www.sedar.com upon board approval
• Annual Report will be finalized, filed and mailed by August 28th, 2006
• Launch re-built corporate website pending editor and management approvals

To Derek Shareholders & Potential Investors:

The Derek management team & its active board of directors are pleased to inform our shareholders and investors that the past few months have been dedicated to developing new corporate strategies to increase the pace of operations on the LAK Ranch.

Quick Overview for new readers:

• Derek owns approximately 8000 acres of prime property located in NE Wyoming's Powder River Basin
• The property is conveniently located five miles from the Newcastle Refinery
• The reservoir contains millions of barrels of high quality oil
• The oil is viscous and requires an enhanced oil recovery method (EOR) to extract
• The infrastructure required to extract the oil has been built by Bateman Engineering Inc.
• The Pilot Plant and above ground facilities have been paid for by Derek and are successfully operating and producing
• We are producing a high quality, low sulphur and low paraffin oil receiving Wyoming Sweet Crude (other) pricing through TEPPCO
• We believe that the Modified SAGD process is applicable & duplicable on the property
• We have identified several hydrocarbon targets in our extensive 3D seismic survey completed in Q4/04 for future drilling
• Derek management and its highly qualified board of directors are focused and determined on making this property a domestic oil supplier to the United States of America

Shares Issued & Outstanding: 39,526,628
Options: 3,005,000
Warrants: 2,705,000
Fully Diluted: 45,891,128

	Share Price TSX Venture Exchange (DRK)	Share Price OTC Bulletin Board (DRKOF)
High	$ 0.55	$ 0.50
Low	$ 0.37	$ 0.32

Recent Operation Observations:

• The operator's focus has been pre-occupied with projects other than the LAK Ranch
• Derek continues to place full attention on the LAK Ranch project
• The "Continuous Steaming Program" that commenced in November 2005 has demonstrated positive reservoir reactions, increasing temperature readings, decreasing viscosity and increased oil production
• Successful results are being observed in the Pilot Program
• Multiple targets for future development identified in the 3D seismic interpretation by Derek's geophysicist and geology consultants
• Project has surpassed the exploration stage
• Successfully tested an economically viable EOR to extract the viscous oil

• The upside hydrocarbon potential identified in the 3D seismic in deeper horizons is still a major part of Derek's future development program. However, Derek management has decided to resume the discussions and exploration strategies for the deeper hydrocarbon potential when the Newcastle Formation is producing levels that are providing cash flow for re-investing into an exploration program
• Exploration for property located in North America with similar opportunities and characteristics to the LAK Ranch is ongoing
• We are still working on obtaining further acreage contiguous to the LAK Ranch

The above observations have provided Derek with the confidence, drive and knowledge to implement the following strategies for LAK Ranch development:

What is on the short term agenda?

• Preparing economic analysis
• Preparing a reserve report
• Designing a potential development program to be implemented on the LAK Ranch
• Implementing an independent drill program

• Commercial Production from the LAK Ranch
• Ensure the best price is being received for oil produced
• Be a significant oil supplier to the USA
• Re-invest cash flow from the Newcastle Formation's produced oil into the exploration potential in deeper horizons or other properties similar to LAK Ranch

Given the upcoming changes and in order to ensure effective time management on the new developments being implemented by Derek, we have decided to combine the monthly progress reports and provide our shareholders and potential investors with a quarterly President's Report. Please note that Ms. Erica Bearss is always available to update our shareholders and potential investors via email: erica@derekoilandgas.com or telephone toll free: 1-888-756-0066.

Management remains focused on developing strong communications by effectively executing its corporate goals:

• Investor Relations program with Stockgroup - ongoing
• Re-building the Derek website to ensure that the most up to date information is being presented effectively
• Derek will be participating in the Money Show in Las Vegas from May 15 to May 18, 2006 in order to introduce Derek's investment opportunity to the investment community

Please click on the following link to find out more information or to register: http://www.lasvegasmoneyshow.com/MS/lasVegas/main.asp

• Investment Strategy Analyst, Dr. Michael Berry will continue his endeavors for further exposure for Derek in the US market
• Our flash presentation & streamlined corporate package or link is always available for mailing or emailing to current & future shareholders
• Please visit www.sedar.com to view all of Derek's publicly-filed documents
• Watch out for upcoming Press Releases on our website and note that our next President's Report will be sent out in August 2006