S-1

As filed with the Securities and Exchange Commission on February 13, 2006.

Registration Statement No. 333-•

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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Sky Petroleum, Inc.
(Formerly Seaside Exploration, Inc.)
(Exact name of Registrant as specified in its charter)

Nevada
(State or jurisdiction of
incorporation or
organization)
1311
(Primary Standard
Industrial Classification
Code Number)
32-0027992
(I.R.S. Employee
Identification No.)

108 Wild Basin Road, Suite 222
Austin, TX 78746
(Address of principal executive offices) (512) 437-2582
(Registrant’s telephone number, including area code)

Michael D. Noonan
108 Wild Basin Road, Suite 222
Austin, TX 78746
512-437-2582
(Name, address and telephone number of agent for service)

_________________

Copy to:

Kenneth G. Sam, Esq.
Dorsey & Whitney LLP
Republic Plaza, Suite 4700
370 Seventeenth St. Denver, CO 80202
(303) 629-3445

Approximate date of proposed sale to the public: From time to time after the effective date of this registration statement.

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If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box.   ý

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If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

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If  this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

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CALCULATION OF REGISTRATION FEE

Title of Shares to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Share(1)	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Common stock to be	16,013,620	$1.94	$31,066,422	$3,324.11
offered for resale by
selling shareholders

(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933, as amended, solely for purposes of calculating amount of registration fee, based on the average of the bid and ask sales prices of the Registrant’s common stock on February 9, 2006, as quoted in the National Association of Securities Dealers Over-the-Counter Bulletin Board.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information contained in this prospectus is not complete and may be changed. The selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these shares, and the selling shareholders are not soliciting an offer to buy these shares in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS

Subject To Completion: Dated February 13, 2006

Sky Petroleum, Inc.

16,013,620 Shares of Common Stock

        This is a public offering up to 16,013,620 shares of the common stock, par value $0.001 per share, of Sky Petroleum, Inc. All of the shares being offered, when sold, will be sold by selling shareholders as listed in this prospectus on page 12 of this prospectus. The price at which the selling shareholders may sell the shares will be determined by the prevailing market price for the shares or in negotiated transactions.

        We will not receive any proceeds from the sale or distribution of the common stock by the selling shareholders.

        Our common stock is quoted on the National Association of Securities Dealers “NASD” Over-the-Counter Bulletin Board “OTCBB” under the symbol “SKPI:OB”. On February 10, 2006, the closing sale price for our common stock was $1.95 on the NASD OTCBB.

        Investing in our common stock involves risks. See “Risk Factors and Uncertainties” beginning on page 5.

        These securities have not been approved or disapproved by the SEC or any state securities commission nor has the SEC or any state securities commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is ___________________, 2006.

TABLE OF CONTENTS

	Page
SUMMARY INFORMATION	2
RISK FACTORS AND UNCERTAINTIES	4
FORWARD-LOOKING STATEMENTS	10
DIVIDEND POLICY	11
SELLING SHAREHOLDERS	11
PLAN OF DISTRIBUTION	23
LEGAL PROCEEDINGS	24
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS	24
EXECUTIVE COMPENSATION	27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	32
DESCRIPTION OF SECURITIES	33
THE SEC'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES	35
DESCRIPTION OF THE BUSINESS	36
DESCRIPTION OF PROPERTY	46
MANAGEMENT'S DISCUSSION AND ANALYSIS	46
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS	52
TRANSFER AGENT AND REGISTRAR	53
USE OF PROCEEDS	53
LEGAL MATTERS	53
EXPERTS AND CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE	53
WHERE YOU CAN FIND MORE INFORMATION	53
FINANCIAL STATEMENTS	F-1
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 and 2004 (UNAUDITED)	F-2
YEAR ENDED DECEMBER 31, 2004 AND 2003	F-11

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You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from the information contained in this prospectus. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of when this prospectus is delivered or when any sale of our common stock occurs.

SUMMARY INFORMATION

The Offering

        This is an offering of up to 16,013,620 shares of our common stock by certain selling shareholders.

Shares Offered By the Selling Shareholders 16,013,620 shares of common stock, $0.001 par value per share.

Offering Price Determined at the time of sale by the selling shareholders

Common Stock Outstanding as of
February 10, 2006 46,571,485 shares⁽¹⁾

Use of Proceeds We will not receive any of the proceeds of the shares offered by the selling shareholders.

Dividend Policy We currently intend to retain any future earnings to fund the development and growth of our business. Therefore, we do not currently anticipate paying cash dividends on our common stock.

OTC Bulletin Board Symbol SKPI:OB

(1) Outstanding common stock excludes shares of common stock acquirable upon exercise of the following convertible securities:

• 4,250,000 shares of common stock acquirable upon exercise of option at exercise prices ranging from $0.50 to $1.88 per share; and

• 12,222,224 shares of common stock acquirable upon conversion of Series A Preferred Stock.

Summary of Our Business

        Our primary business is currently to identify opportunities to make direct property acquisitions and to fund exploration and development of oil and natural gas properties of others under arrangements in which we will finance the cost of exploration drilling in exchange for interests in the oil or natural gas revenue generated by the properties. Such arrangements are commonly referred to as farm-ins to us, or farm-outs by the property owners to us.

        We, Sky Petroleum, Inc. (formerly Seaside Exploration, Inc.), were incorporated in the state of Nevada in August, 2002 under the name The Flower Valet. We were formed to engage in the business of marketing, selling and distributing floral products, gifts and gourmet foods through the internet at www.flowervalet.com. On September 3, 2002, we became an affiliate of LinkShare, an on-line portal with various links to online suppliers of floral products, gifts and gourmet foods. We were unable to generate any meaningful revenues through our on-line floral business.

        In 2004, we began to reassess our business plan and to seek business opportunities in other industries, including the oil and gas industry. On December 20, 2004, at our annual meeting of shareholders, our shareholders approved an amendment to our Articles of Incorporation, changing our name from The Flower Valet to Seaside

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Exploration, Inc. Subsequently, on March 28, 2005, we changed our name from Seaside Exploration, Inc. to Sky Petroleum, Inc.

        On March 28, 2005, we increased our authorized capital from 100,000,000 shares of common stock, $0.001 par value per share, to 150,000,000 shares of common stock, $0.001 par value per share. We completed a 4 for 1 forward stock-split of our issued and outstanding shares of common stock on March 28, 2005, increasing the number of shares outstanding from 6,500,000 to 26,000,000 shares. Information contained in this prospectus gives effect to the forward split. We are also authorized to issue 10,000,000 shares of preferred stock, $0.001 par value per share, of which 3,055,556 shares have been designated Series A Preferred Stock. As of February 10, 2006, there were 3,055,556 shares of Series A Preferred Stock outstanding.

        On May 18, 2005, we announced that our wholly-owned subsidiary, Sastaro Limited, entered into a Participation Agreement with Buttes Gas and Oil Co. International Inc., a wholly-owned subsidiary of Crescent Petroleum Company International Limited. Under the terms of the Participation agreement, Sastaro has the right to participate in a share of the future production revenue by contributing $25 million in drilling costs related to two wells in an off-shore oil and gas project in the United Arab Emirates. The project is located in the Ilam/Mishriff reservoir of the Mubarek Field area near Abu Musa Island in the Arabian Gulf. The Participation Agreement does not grant Sastaro any interest in the concession area other than the right to receive a share of future production revenue from wells in which Sastaro participates. Sastaro was required to make a $2 million payment within seven days of signing the Participation Agreement and additional payments totaling $12.5 million before November 30, 2005. Sastaro made these payments. Sastaro has made an additional payment of $3.5 million upon spudding of the first well, and will make additional payments of $3.5 million within 30 days of spudding the first well and $3.5 million within 60 days after the spudding the first well. The first well was spud on January 31, 2006, and Sastaro paid Buttes Gas and Oil $3.5 million on February 7, 2006.

        In exchange for the payment obligations described above, Sastaro will receive:

• 75% of the combined production revenue from the wells, if any, until Sastaro has been reimbursed its total investment;

• thereafter, 40% of the combined production revenue from the wells, if any, until Sastaro has been reimbursed twice its total investment; and

• thereafter, 9.2% of the combined production revenue from the wells, if any, until the expiration of the Participation Agreement, less (1) a 14.5% contribution to royalty obligations, (2) $3 per barrel of crude oil, attributable to Sastaro’s share of the concession for operating costs and (3) certain other costs.

        Buttes Gas and Oil, as operator of the concession, will be responsible for all drilling and completion work related to the wells. During the second quarter of 2005, we raised $2.5 million by issuing 5,000,000 shares of common stock at $0.50 per share to fund Sastaro’s initial payment under the Participation Agreement. During the third quarter, we raised approximately $8.45 million by issuing 10,557,865 shares of common stock at $0.80 per share, and $11 million by issuing 3,055,556 shares of Series A Preferred Stock at $3.60 per share, which are convertible into 12,222,224 shares of common stock. We registered 5,000,000 shares of common stock and the 10,557,865 shares of common stock for resale under the Securities Act of 1933, as amended. In the fourth quarter of 2005, we raised approximately $16 million by issuing 16,013,620 shares of common stock at $1.00 per share. We have used the proceeds of these offerings to fund Sastaro’s obligations under the Participation Agreement and to fund our general corporate and working capital requirements. Our plan of operation for 2006 is to fund Sastaro’s obligations under the Participation Agreement and to identify and participate in other oil and gas exploration and development projects.

        Our principal corporate and executive offices are located at 108 Wild Basin Road, Suite 222, Austin, Texas 78746. Our telephone number is (512) 437-2582. We maintain a website at www.skypetroleum.com. Information contained on our website is not part of this prospectus.

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Selected Financial Data

        The selected financial information presented below as of and for the periods indicated is derived from our financial statements contained elsewhere in this prospectus and should be read in conjunction with those financial statements.

INCOME STATEMENT DATA

	Year Ended December 31						Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2005			2004			2005			2004
							(unaudited)						(unaudited)
Revenue	$	49		$	--		$	--		$	--		$	--		$	49
Operating Expenses	$	20,531		$	7,000		$	2,550,385		$	750		$	3,377,856		$	3,500
Net (Loss)	$	(20,482	)	$	(7,000	)	$	(2,589,807	)	$	(750	)	$	(3,450,763	)	$	(3,451	)
(Loss) per Common share*		--			--		$	(0.08	)		--		$	(0.12	)		--
Weighted Average Number of
Common Shares Outstanding		26,000,000			26,000,000			31,227,770			26,000,000			28,744,319			26,000,000

BALANCE SHEET DATA:

	At December 31, 2004			At September 30, 2005 (unaudited)
Working Capital (Deficiency)	$	6,542		$	12,221,545
Total Assets	$	6,542		$	19,299,829
Accumulated (Deficit)	$	(30,458	)	$	(3,481,222	)
Shareholders' Equity	$	6,542		$	19,222,020

* Basic and diluted.

        Subsequent to September 30, 2005, we issued 16,013,620 shares of common stock at $1.00 per share for gross proceeds of $16,013,620. We paid placement fees of $1,601,312 in connection with the offering.

        In addition, subsequent to December 21, 2005, we issued 500,000 shares of common stock to Paraskevi Investment Company S.A. under the terms of a Compensation Agreement.

RISK FACTORS AND UNCERTAINTIES

        Readers should carefully consider the risks and uncertainties described below before deciding whether to invest in shares of our common stock.

        Our failure to successfully address the risks and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations, and the trading price of our common stock may decline and investors may lose all or part of their investment. We cannot assure you that we will successfully address these risks or other unknown risks that may affect our business.

Risks related to our company and the oil and natural gas industry

Our future performance is difficult to evaluate because we have a limited operating history.

        We were incorporated in August 2002 and we began to implement our current business strategy in the oil and gas industry in the beginning of 2005. We have had no significant operations and since incorporation our operating cash flow needs have been financed solely through an offering of our common stock.  As a result, we have

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little historical financial and operating information available to help you evaluate our performance or an investment in our common stock and warrants.   See “Financial Statements.”

Because of our historical losses and expected losses in the future, it will be difficult to forecast when we will achieve profitability, if ever.

        We incurred net losses of $20,482 and $7,000 in the years ended December 31, 2004 and 2003, respectively and net losses of $3,450,763 and $3,451 in the nine months ended September 30, 2005 and September 30, 2004, respectively. As of December 31, 2004, we had an accumulated deficit of $30,458, and as of September 30, 2005, we had an accumulated deficit of $3,481,222. We have no revenues from operations and do not anticipate generating any revenues unless we receive revenues from production from our interest in the well drilled by Buttes Gas and Oil in connection with the off-shore oil and gas project in the United Arab Emirates. We incurred losses during the fourth quarter ending December 31, 2005, and may incur losses for the year ending December 31, 2006.

We have funding obligations of approximately $10.5 million under our obligations under the Participation Agreement, expected to be payable during the first half of 2006.

        Our Participation Agreement required us to make additional payments to Buttes Gas and Oil of $3.5 million on the spudding of the first well, $3.5 million within 30 days after the spudding of the first well and $3.5 million within 60 days after the spudding of the first well. As of December 31, 2005, we estimate we had approximately $18.4 million in working capital. The first well was spud on January 31, 2006, and Sastaro paid Buttes Gas and Oil $3.5 million on February 7, 2006. If we default on our payment obligations, our share of the production revenue from the well, if any, will be reduced.

Our only interest in the Mubarek Field oil project is the right to future production revenue for our advancement of funds.

        The Participation Agreement does not grant us any interest in the concession area other than the right to invest in a share of future production revenue. Under the terms of the Participation Agreement, Buttes Gas and Oil has agreed to conduct all drilling, field operations and related administrative services related to the wells. For our advancement of the drilling costs, we are entitled to receive a percentage of the production revenue as follows:

• 75% of the combined production revenue from the wells, if any, until Sastaro has been reimbursed its total investment;

• thereafter, 40% of the combined production revenue from the wells, if any, until Sastaro has been reimbursed twice its total investment; and

• thereafter, 9.2% of the combined production revenue from the wells, if any, until the expiration of the Participation Agreement;

less: (1) a 14.5% contribution to royalty obligations, (2) $3 per barrel of crude oil attributed to our share of revenue for operating costs and (3) certain other costs. Because we are not the operator, we are entirely dependent on the ability of Buttes Gas and Oil for future revenues from production at the Mubarek Field.

We have only nominal control over the timing or scope of the work done on the Mubarek Field project and are dependent on Buttes Gas and Oil to advance production.

        We have only nominal control over the drilling of the wells and after the initial two commitment wells of the decisions to drill new wells, and timing thereof, as the Mubarek Field is within the control of Buttes Gas and Oil. Buttes Gas and Oil is responsible for all drilling, field operations and related administrative services related to the wells. We have chosen, in conjunction with Buttes Gas and Oil, the locations for drilling the first two wells, but we have no control over the timing of drilling the wells as we are subject to the availability of securing a drilling rig. We are dependent on Buttes Gas and Oil to

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successfully develop the wells at the Mubarek Field in conjunction with our technical advisers. The decisions of Buttes Gas and Oil to develop or otherwise exploit sites at the Mubarek Field will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. If Buttes Gas and Oil fails to successfully develop the wells or there is no production at the Mubarek Field, we lose our investment in Mubarek Field.

We depend on our executive officers for critical management decisions and industry contacts.

        We are dependent upon the continued services of Brent Kinney, our chief executive officer, James Screaton, our chief financial officer, and Michael Noonan, our vice president, corporate, who have significant experience in the oil and gas industry. We do not carry key person insurance on their lives. The loss of the services of any of our executive officers, through incapacity or otherwise, would be costly to us and would require us to seek and retain other qualified personnel.  See “Management.”

A substantial or extended decline in oil and natural gas prices could reduce our future revenue and earnings.

        The price we receive for future oil and natural gas production will heavily influence our revenue, profitability, access to capital and rate of growth. Oil and natural gas are commodities and their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the markets for oil and natural gas have been volatile and currently oil and natural gas prices are significantly above historic levels. These markets will likely continue to be volatile in the future and current record prices for oil and natural gas may decline in the future. The prices we may receive for any future production, and the levels of this production, depend on numerous factors beyond our control. These factors include the following:

• changes in global supply and demand for oil and natural gas;

• actions by the Organization of Petroleum Exporting Countries, or OPEC;

• political conditions, including embargoes, which affect other oil-producing activities;

• levels of global oil and natural gas exploration and production activity;

• levels of global oil and natural gas inventories;

• weather conditions affecting energy consumption;

• technological advances affecting energy consumption; and

• prices and availability of alternative fuels.

        Lower oil and natural gas prices may not only decrease our future revenues but also may reduce the amount of oil and natural gas that we can produce economically. A substantial or extended decline in oil or natural gas prices may reduce our earnings, cash flow and working capital.

Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could substantially increase our costs and reduce our profitability.

        Oil and natural gas exploration is subject to numerous risks beyond our control, including the risk that drilling will not result in any commercially viable oil or natural gas reserves. Failure to successfully discover oil or natural gas resources at the Mubarek Field may result in the entire loss of the funds we advance to Buttes Gas and Oil. The decisions of Buttes Gas and Oil to develop or otherwise exploit sites at the Mubarek Field will depend in part on the evaluation of resource estimates based on assumptions that may turn out to be inaccurate.

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        The total cost of drilling, completing and operating wells will be uncertain before drilling commences. Overruns in budgeted expenditures are common risks that can make a particular project uneconomical. Further, many factors may curtail, delay or cancel drilling, including the following:

• delays imposed by or resulting from compliance with regulatory requirements;

• pressure or irregularities in geological formations;

• shortages of or delays in obtaining equipment and qualified personnel;

• equipment failures or accidents;

• adverse weather conditions;

• reductions in oil and natural gas prices;

• land title problems; and

• limitations in the market for oil and natural gas.

We currently have no proved oil and or gas reserves and therefore we may face difficulties raising financing to fund our obligations under the Participation Agreement.  

        We have not discovered any oil and gas, and therefore we have no oil and gas reserves nor any revenue that would otherwise be generated from these reserves. Accordingly, we are unable to finance any of our overhead costs or obligations under the Participation Agreement from such revenues and will be required to fund these costs and expenses by offering additional debt or equity securities.

We may incur substantial losses and be subject to substantial liability claims as a result of our oil and natural gas operations.         

        The Mubarek Field operations will be subject to risks associated with oil and natural gas operations.  Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect the payment of production revenues from the wells, if any. The oil and natural gas exploration activities of Buttes Gas & Oil will be subject to all of the operating risks associated with drilling for and producing oil and natural gas, including the possibility of:

• environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination;

• abnormally pressured formations;

• mechanical difficulties, such as stuck oilfield drilling and service tools and casing collapse;

• fires and explosions;

• personal injuries and death; and

• natural disasters.

        Any of these risks could adversely affect our ability to operate or result in substantial losses to the Mubarek Field operations. These risks may not be insurable or Buttes Gas and Oil may elect not to obtain insurance if the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks

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generally are not fully insurable. If a significant accident or other event that is not fully covered by insurance occurs, it could adversely affect us.

Market conditions or operational impediments may hinder our access to oil and natural gas markets or delay our production.

        Market conditions or the unavailability of satisfactory oil and natural gas transportation arrangements may hinder access to oil and natural gas markets or delay production, if any, at the wells. The availability of a ready market for our future oil and natural gas production will depend on a number of factors, including the demand for and supply of oil and natural gas and the proximity of reserves to pipelines and terminal facilities. Butte Gas and Oil’s ability to market its production will depend in substantial part on the availability and capacity of gathering systems, pipelines and processing facilities owned and operated by third parties. Failure to obtain such services on acceptable terms could materially harm our business. Buttes Gas and Oil may be required to shut-in wells for a lack of a market or because of the inadequacy or unavailability of gathering system capacity. If that were to occur, we would be unable to realize revenue from those wells until production arrangements were made to deliver our production to market.  

We are subject to complex laws that can affect the cost, manner and feasibility of doing business thereby increasing our costs and reducing our profitability.

        Development, production and sale of oil and natural gas are subject to laws and regulations. Buttes Gas and Oil may be required to make large expenditures to comply with governmental regulations. Matters subject to regulation include:

• discharge permits for drilling operations;

• drilling bonds;

• reports concerning operations;

• spacing of wells;

• unitization and pooling of properties; and

• taxation.

        Failure to comply with these laws may also result in the suspension or termination of operations and liabilities under administrative, civil and criminal penalties. Moreover, these laws could change in ways that substantially increase the costs of doing business. Any such liabilities, penalties, suspensions, terminations or regulatory changes could materially and adversely affect our financial condition and results of operations.

The unavailability or high cost of drilling rigs, equipment, supplies, personnel and oilfield services could adversely affect our ability to execute our plans on a timely basis and within our budget.

        Shortages or the high cost of drilling rigs, equipment, supplies or personnel could delay or adversely affect our development operations at the Mubarek Field operations, which could have a material adverse effect on our business, financial condition or results of operations.

Competition in the oil and natural gas industry is intense, which may increase our costs and otherwise adversely affect our ability to compete.

        We operate in a highly competitive environment for prospects suitable for exploration, marketing of oil and natural gas and securing the services of trained personnel. Many of our competitors possess and employ financial, technical and personnel resources substantially greater than ours, which can be particularly important in the areas in

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which we operate. Those companies may be able to pay more for prospective oil and natural gas properties and prospects and to evaluate, bid for and purchase a greater number of properties and prospects than our financial or personnel resources permit.  In order for us to compete with these companies, we may have to increase the amounts we pay for prospects, thereby reducing our profitability.

We may not be able to compete successfully in acquiring prospective reserves, developing reserves, marketing oil and natural gas, attracting and retaining quality personnel and raising additional capital.

        Our ability to acquire additional prospects and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, there is substantial competition for capital available for investment in the oil and natural gas industry. Our inability to compete successfully in these areas could have a material adverse effect on our business, financial condition or results of operations.

We believe that period-to-period comparisons of our financial results are not meaningful and should not be relied upon as an indication of future performance because we recently changed the focus of our business plan from marketing flowers on the internet to engaging in the exploration and marketing of oil and natural gas.

        Prior to our entering into the Participation Agreement, we had no material business or operations. As a result, the historical information in this prospectus related to our prior operations will vary from our future results of operations. In addition, evaluation of our future prospects is difficult to assess because we have a limited operating history in the exploration and marketing of oil and natural gas. Our historical results of operations are not indicative of our future revenue and income potential.

Risks related to our securities and this offering

We have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the operation, development and expansion of our business.

        We do not anticipate paying cash dividends on our common stock in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that our board of directors considers relevant.

         Accordingly, investors will only see a return on their investment if the value of our securities appreciates.

The market for our common shares has been volatile in the past, and may be subject to fluctuations in the future.

        The market price of our common stock has ranged from a high of $2.20 and a low of $0.54 during the twelve month period ended December  31, 2005. See “Market for Common Equity and Related Shareholder Matters” beginning on page 51 of this prospectus. We cannot assure you that the market price of our common stock will not significantly fluctuate from its current level. The market price of our common stock may be subject to wide fluctuations in response to quarterly variations in operating results, changes in financial estimates by securities analysts, or other events or factors. In addition, the financial markets have experienced significant price and volume fluctuations for a number of reasons, including the failure of the operating results of certain companies to meet market expectations that have particularly affected the market prices of equity securities of many exploration companies that have often been unrelated to the operating performance of such companies. These broad market fluctuations, or any industry-specific market fluctuations, may adversely affect the market price of our common stock. In the past, following periods of volatility in the market price of a company’s securities, class action securities litigation has been instituted against such a company. Such litigation, whether with or without merit, could result in substantial costs and a diversion of management’s attention and resources, which would have a material adverse affect on our business, operating results and financial condition.

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Legislation, including the Sarbanes-Oxley Act of 2002, may make it difficult for us to retain or attract officers and directors.

        We may be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of the recent and currently proposed changes in the rules and regulations which govern publicly-held companies. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the Securities and Exchange Commission that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may deter qualified individuals from accepting these roles.

Broker-dealers may be discouraged from effecting transactions in our common stock because they are considered a penny stock and are subject to the penny stock rules.

        Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) impose sales practice and disclosure requirements on certain brokers-dealers who engage in certain transactions involving a “penny stock.” Subject to certain exceptions, a penny stock generally includes any non-NASDAQ equity security that has a market price of less than $5.00 per share. The market price of our common stock on the OTCBB during the period from November 6, 2003 to December 31, 2005, ranged between a high of $2.20 and a low of $0.54 per share, and our common stock is deemed penny stock for the purposes of the Exchange Act. The additional sales practice and disclosure requirements imposed upon brokers-dealers may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market liquidity of the stock and impede the sale of our stock in the secondary market.

        A broker-dealer selling penny stock to anyone other than an established customer or “accredited investor,” generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse, must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer’s account and information with respect to the limited market in penny stocks.

FORWARD-LOOKING STATEMENTS

        We use words like “expects,” “believes,” “intends,” “anticipates,” “plans,” “targets,” “projects” or “estimates” in this prospectus. When used, these words and other, similar words and phrases or statements that an event, action or result “will,” “may,” “could,” or “should” occur, be taken or be achieved, identify “forward-looking” statements. Such forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including, the risks and uncertainties outlined under the sections titled “Risk Factors and Uncertainties” beginning at page 5 of this prospectus, “Description of the Business” beginning at page 36 of this prospectus and “Management’s Discussion and Analysis” beginning at page 45 of this prospectus. 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.

        Our management has included projections and estimates in this prospectus, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the Securities and Exchange Commission or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

11

DIVIDEND POLICY

We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends on common stock in the foreseeable future. Any further determination to pay cash dividends will be at the discretion of our board of directors and will be dependent on the financial condition, operating results, capital requirements and other factors that our board deems relevant. We have never declared a dividend.

SELLING SHAREHOLDERS

        This prospectus covers the offering of up to 16,013,620 shares of our common stock by selling shareholders. We will not receive any proceeds from the sale of the shares by the selling shareholders.

        The shares issued to the selling shareholders are “restricted” shares under applicable federal and state securities laws and are being registered to give the selling shareholders the opportunity to sell their shares. The registration of such shares does not necessarily mean, however, that any of these shares will be offered or sold by the selling shareholders. The selling shareholders may from time to time offer and sell all or a portion of their shares in the over-the-counter market, in negotiated transactions, or otherwise, at market prices prevailing at the time of sale or at negotiated prices.

        The registered shares may be sold directly or through brokers or dealers, or in a distribution by one or more underwriters on a firm commitment or best efforts basis. To the extent required, the names of any agent or broker-dealer and applicable commissions or discounts and any other required information with respect to any particular offer will be set forth in an accompanying prospectus supplement. See “Plan of Distribution” beginning on page 20 of this prospectus. Each of the selling shareholders reserves the sole right to accept or reject, in whole or in part, any proposed purchase of the registered shares to be made directly or through agents. The selling shareholders and any agents or broker-dealers that participate with the selling shareholders in the distribution of their registered shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, and any commissions received by them and any profit on the resale of the registered shares may be deemed to be underwriting commissions or discounts under the Securities Act.

        We will receive no proceeds from the sale of the registered shares, and we have agreed to bear the expenses of registration of the shares, other than commissions and discounts of agents or broker-dealers and transfer taxes, if any.

Selling Shareholders Information

        The following is a list of the selling shareholders who own an aggregate of 16,013,620 shares of our common stock covered in this prospectus. The selling shareholders acquired the shares of common stock in our private placement of units. See “Transactions with Selling Shareholders” beginning on page 20 of this prospectus for further details. At February 10, 2005, we had 46,571,485 shares of common stock issued and outstanding.

	Before Offering			After Offering
Name	Total Number of Shares Beneficially Owned	Percentage of Shares Owned(a)		Number of Shares Offered	Shares Owned After Offering(b)(c)	Percentage of Shares owned After Offering
Bank Vontobel(1)	200,000	*		200,000	—	—
Bahnhofstri, 3 P.O. Box
CH-Zurich Switzerland
Axwell Business SA(2)	1,000,000	2.15	%	1,000,000	—	—

12

	Before Offering			After Offering
Name	Total Number of Shares Beneficially Owned	Percentage of Shares Owned(a)		Number of Shares Offered	Shares Owned After Offering(b)(c)	Percentage of Shares owned After Offering
c/o Crochet and Crochet, 5
Quai de L'ile
1204 Geneva, Switzerland
Giancarlo Mantegani	100,000	*		100,000	—	—
Pres-De-La Gradelle A
CH-1223 Cologny/Ge
Switzerland
Banca Unione Bi Credito(3)	500,000	1.07	%	500,000	—	—
Cassello postal 5896, Piazza
Dante 7
CH 6900 Lugano, Switzerland
Anthony JC Wilkinson	100,000	*		100,000	—	—
c/o CLSA Ltd. 18/F One
Pacific Place
88 Queensway, Central,
Hong Kong
David Work	50,000	*		50,000	—	—
B1, 101 Repulse Bay Road
Hong Kong
AS Capital Parners, LLC(4)	50,000	*		50,000	—	—
2 Rector Street 3rd Floor
NY, NY 10006
Tom Hardman	37,500	*		25,000	12,500	*
Asian Credits, BGC Capital
Markets (Hong Kong) Limited
Suites 6402-08, Two IFC
Central, Hong Kong
Mark Bavis	20,000	*		20,000	—	—
Flat A1 2-28 Scenic Villas
Drive
Pokfulam, Hong Kong
Leonardo Capital Fund Ltd.(5)	1,000,000	2.15	%	1,000,000	—	—
Cragmuir Chambers, 2a
Road Town
Tortola British Virgin Islands
Due Effe SA Calle Obarrio 53, Swiss(6)	50,000	*		50,000	—	—
Bank 53,
Swiss Bank Tower
Panama, Republic of Panama
Lester Chau	32,500	*		20,000	12,500	*
Kingsford Garden, 106 Blue
Pool Road
Flat 1B, Happy Valley
Hong Kong
Daisy Davignon	23,000	*		23,000	—	—
Rue Gatti de Gamond, 164
1180 Bruxelles Belgium
Michael Gordon Palmer	100,000	*		100,000	—	—
GPO Box 2725 Central
Hong Kong
Topcover Limited(7)	100,000	*		100,000	—	—
P.O. Box 957, Road Town
British Virgin Islands
Alex Vanderpol	30,000	*		30,000	—	—
22 St. Thomas Walk,
St. Thomas Mansion #09-01
Singapore 238107

13

	Before Offering			After Offering
Name	Total Number of Shares Beneficially Owned	Percentage of Shares Owned(a)		Number of Shares Offered	Shares Owned After Offering(b)(c)	Percentage of Shares owned After Offering
Bradford Ainslie(8)	10,000	*		10,000	—	—
10 Arbothnot Road Apt 4-A
Central Hong Kong
Suhail Khoury	24,500	*		24,500	—	—
12520 102 Ave
Edmonton, Alberta T5N 0M3
Andreas Spiegelberg	20,000	*		20,000	—	—
Wolfsgangstrasse 89
Frankfurt, Germany 60322
Mark Paul Benson	40,000	*		40,000	—	—
Pantilles Copt Hill
Danbury Essex UK CM3 4NN
Metage Special Emerging(9)	2,000,000	4.30	%	2,000,000	—	—
Markets Limited Fund
P.O. Box 513 Strathvale House
North Church St
George Town, Grand Cayman,
Cayman Islands
Metage Funds Limited(9)	2,000,000	4.30	%	2,000,000	—	—
P.O. Box 513 Strathvale House
North Church St
George Town, Grand Cayman,
Cayman Islands
Theodore Gilissen Global	900,000	1.93	%	900,000	—	—
Custody N.V(10)
Nieuwe Poelenstraat 12-14
1012 CP Amsterdam,
The Netherlands
Huet & Cle B.V(11)	50,000	*		50,000	—	—
3 Rue Ami Lullin
1207 Geneve
Alan R. Mabee	7,500	*		7,500	—	—
10205 137 Street
Edmonton, Alberta, Canada
T5N 2G8
Merle Parsons	60,000	*		60,000	—	—
#4 529 Johnstone Rd
Parksvill, BC V0P 2K1
Neil Cunningham	10,000	*		10,000	—	—
757 Haliburton Cres
Edmonton, Alberta, Canada
T6R 2Z7
John Fraser	50,000	*		50,000	—	—
300 31 Bastiian Sq
Victoria, BC, Canada V8N 1J1
Wayne Margolin	120,000	*		120,000	—	—
1103 Mirror Tower
61 Moody Road
TST East Kowloon Hong Kong
Maerki-Baumann & Co AG(12)	50,000	*		50,000	—	—
Dreikoenistr 6
CH 8022 Zuerich, Switzerland
Judson P. Rich	10,000	*		10,000	—	—
11107 21 Ave
Edmonton, Alberta T5T 5C7

14

	Before Offering			After Offering
Name	Total Number of Shares Beneficially Owned	Percentage of Shares Owned(a)		Number of Shares Offered	Shares Owned After Offering(b)(c)	Percentage of Shares owned After Offering
Judson Holdings, Ltd(13)	20,000	*		20,000	—	—
11107 21 Ave
Edmonton, Alberta T5T 5C7
Mathew Brady	32,500	*		20,000	12,500	*
26 G Conduit Rd, Mid Levels
Hong Kong PRC
Fabrice Chaillet Guisti Del	90,000	*		90,000	—	—
Giardino
8 Av Dumas
1206 Geneve Switzerland
BNP Paribas Private Bank(14)	560,000	*		560,000	—	—
(Switzerland)
2 Place De Hollande,
CP 1211 Geneve 11 Switzerland
Ferrier Lullin & Cle SA(15)	1,270,000	2.73	%	1,270,000	—	—
rue Pierre-Fatio 7, case
postal 3124
CH-1211 genieve 3 Switzerland
Martine Tome Renaud, USB(16)	53,000	*		45,000	8,000	*
Montana
USB
Ch 3963 Montana
Switzerland
Ragnal International Limited(17)	1,000,000	2.15	%	1,000,000	—	—
Immenble Yasmine Las Berges
du Lac
2045 Tunis Tunisia
E.B. Vegelin van	50,000	*		50,000	—	—
Claerbergen-Pierson
P.O. Box 16710
2500 BS Den Haag (the Hague)
The Netherlands
Karen Libin	35,000	*		35,000	—	—
31842 South Saint Vrain
Lyons, Co 80540
Mario Del Pozzo	80,000	*		80,000	—	—
c/o Geforin S.A., 2 bis St
Leger
CH 1205 Geneve
L'aminco NV(18)	100,000	*		100,000	—	—
Chuchubiweg 17, Willemstad
Curacao, Neteherlands
Antilles
Craig Ivany	7,000	*		7,000	—	—
Suite 110, 17008 90th Avenue
Edmonton, Alberta T5T 1L
Jacqueline Mei Lin Wong	50,000	*		50,000	—	—
8 D Merry Terrace,
4 Seymour Road
Mid Levels, Hong Kong
U.B.S SA(19)	160,000	*		160,000	—	—
Ref Geoforin S.A
8 rue du Rone – CH 1204
Geneva

15

	Before Offering			After Offering
Name	Total Number of Shares Beneficially Owned	Percentage of Shares Owned(a)		Number of Shares Offered	Shares Owned After Offering(b)(c)	Percentage of Shares owned After Offering
Mees Pierson B.L.G(20)	30,000	*		30,000	—	—
20 bvd des Philiosophes
CH 1205 Geneva
Jonathan Kukuljan	75,000	*		75,000	—	—
9 Regency Terrace
London SW7 5QW
Thomas Sinton Atkinson	25,000	*		25,000	—	—
28 Berks Hill, Chorleywood,
Rickmansworth, Herts WD3 5AQ
United Kingdom
Banque Privee Edmund De(21)	40,000	*		40,000	—	—
Rothschild S.A
(Paola Mariani)
18 Rue ole Hess
CH 1211 Geneva
Alfa Development Limited(22)	20,000	*		20,000	—	—
Room 1701 Olympia Plaza,
255 Kings Road
North Point, Hong Kong
Anglo Irish Bank (Suisse) SA(23)	30,000	*		30,000	—	—
7, Rue Des Alpes Case
Postale 1380
1211 Geneve 1/Switzerland
Bank Vontobel(24)	200,000	*		200,000	—	—
Bahnhofstri, 3 P.O. Box
CH-Zurich Switzerland
Schroder & Co. Bank AG(25)	50,000	*		50,000	—	—
Central 2 Postfach 1820
8021 Zurich, Switzerland
Monclair NV(26)	50,000	*		50,000	—	—
Berg Arrarat 1;
PO Box 3889
Curacao, Netherlands Antilles
BBH Global Custody(27)	200,000	*		200,000	—	—
17 Avenue d'Ostende
MC 98000, Monaco
Lehman Brothers(28)	1,000,000	2.15	%	1,000,000	—	—
International Europe
25 Bank Street
London E14 5LE
Leon Granville Forbes	85,000	*		85,000	—	—
6A Chestnut Grove
Etwall, Derby DE656NG
United Kingdom
KULBIR SINGH ATWAL	85,000	*		85,000	—	—
The Hill House, Sinfin Lane
Barrow-ON-Trent
Derby DE73 1HH
Wanita S.A(29)	50,000	*		50,000	—	—
BNP Paribas Private Bank
(Switzerland)
Aeschengraben 26
4002 Bale, Switzerland
Alan Taylor	50,000	*		50,000	—	—
22 Floor, 3 Lockhart Road
Wan Chai Hong Kong

16

	Before Offering		After Offering
Name	Total Number of Shares Beneficially Owned	Percentage of Shares Owned(a)	Number of Shares Offered	Shares Owned After Offering(b)(c)	Percentage of Shares owned After Offering
Nite Capital LP(30)	250,000	*	250,000	—	—
100 East Cook Ave Suite 201
Libertyville, IL 60048
Thomas Schlerth	20,000	*	20,000	—	—
Fraunhoferstr. 280469
Munich, Germany
Robert Kaplan	25,000	*	25,000	—	—
245 E 87th Street
New York, NY 10128
Herbert Woo	30,000	*	30,000	—	—
Suite 439, 1406 Hodgson Way
Edmonton, Alberta T6R 3K1
Vision Opportunity Master(31)	250,000	*	250,000	—	—
Fund
954 3rd Avenue Suite 402
New York, NY 10022
Iroquois Capital(32)	150,000	*	150,000	—	—
641 Lexington Avenue, 26th
Floor
NY, NY 10022
City Platz(33)	150,000	*	150,000	—	—
c/o Trident Trust Company,
12-14 Finch Rd
Douglas, Isle of Man
IM99 1TT UK
Union Bancaire Privee(34)	50,000	*	50,000	—	—
96-98 Rue du Rhone,
P.O. Box 1320
CH1211 Geneva 1
Enable Growth Partners(35)	400,000	*	400,000	—	—
One Ferry Building, Suite 255
San Francisco, CA 94111
Douglas Graf v. Saurma	75,000	*	75,000	—	—
21 Bis Chemin De La Paumiere
CH 1231 Geneve
ERUM KABIR	24,080	*	24,080	—	—
17 Woodbury Hill
Luton LU2 7JP
KOMAL PURI	12,040	*	12,040	—	—
21 Bayliss Road, Wargrave,
Reading
Berkshire RG10 8DR
Crescent International, Ltd.(36)	250,000	*	250,000	—	—
c/o Cantara (Switzerland) SA
84 Av Louis-Casai
CH 1216 Cointrin, Geneva,
Switzerland
Enable Opportunity Fund(37)	100,000	*	100,000	—	—
One Ferry Building, Suite 255
San Francisco, CA 94111
Bouthong Sourachit	5,500	*	5,500	—	—
10617 154 Street
Edmonton, AB
Shari Otsuka	5,000	*	5,000	—	—
16441 W Ellsworth Ave
Golden, Colorado 80401

17

	Before Offering			After Offering
Name	Total Number of Shares Beneficially Owned	Percentage of Shares Owned(a)		Number of Shares Offered	Shares Owned After Offering(b)(c)	Percentage of Shares owned After Offering
Accelera Ventures Ltd.(38)	20,000	*		20,000	—	—
East Asia Chambers
P.O. Box 901
Road Town, Tortola
TOTAL	16,013,620	34.38	%	16,013,620	45,500	*

(a) All percentages are based on 46,571,485 shares of common stock issued and outstanding on February 10, 2006.

(b) This table assumes that each shareholder will sell all of its shares available for sale during the effectiveness of the registration statement that includes this prospectus. Shareholders are not required to sell their shares. See “Plan of Distribution” beginning on page 20.

(c) Assumes that all shares registered for resale by this prospectus have been sold.

1. G. Cavaziel and T. Dettwiler, as the principals of Bank Vontobel, have ultimate voting power and control over these shares, including control over the disposition of such shares.

2. Catherine Crochet, as the principal of Axwell Business, SA, has ultimate voting power and control over these shares, including control over the disposition of such shares.

3. Guido Pedazzini, as the principal of Banca Unione Bi Credito, has ultimate voting power and control over these shares, including control over the disposition of such shares.

4. Mike Coughlin, as the principal of AS Capital Partners, LLC, has ultimate voting power and control over these shares, including control over the disposition of such shares.

5. Keith O’Callaghan, as the principal of Leonardo Capital Fund Ltd., has ultimate voting power and control over these shares, including control over the disposition of such shares.

6. Vittorio Durante, as the principal of Due Effe SA, has ultimate voting power and control over these shares, including control over the disposition of such shares.

7. Paul McIntosh, as the principal of Topcover Limited, has ultimate voting power and control over these shares, including control over the disposition of such shares.

8. Bradford Ainsle is an NASD registered broker that is employed by Canter Fitzgerald LLC, an NASD member. Bradford Ainsle purchased the shares individually and not in his capacity as an employee of Canter Fitzgerald LLC. Neither Mr. Ainsel nor Canter Fitzgerald LLC participated in the offer and sale of securities and received no commissions.

9. Richard Ian Webb, as the principal of Metage Special Emerging Markets Limited Fund and Metage Funds Limited, has ultimate voting power and control over these shares, including control over the disposition of such shares. Collectively, Metage Special Emerging Markets Limited Fund and Metage Funds Limited beneficially own 4,000,000 shares of common stock or 8.6% of the issued and outstanding common stock as of February 10, 2006.

10. P.R. Moll, as the principal of Theodore Gilissen Global, has ultimate voting power and control over these shares, including control over the disposition of such shares.

11. H.L. Huet, as the principal of Huet & Cle B.V., has ultimate voting power and control over these shares, including control over the disposition of such shares.

12. Martin Brucker and Urs Reumer, as the principals of Maerki-Baumann & Co AG, have ultimate voting power and control over these shares, including control over the disposition of such shares.

13. Jud Rich, as the principal of Judson Holdings, Ltd., has ultimate voting power and control over these shares, including control over the disposition of such shares.

14. Raphael Petre and Alain Pont, as the principals of BNP Paribas Private Bank, have ultimate voting power and control over these shares, including control over the disposition of such shares.

15. Stephane Comazzi and Maguy Kolleger, as the principals of Ferier Lullin & Cle SA, have ultimate voting power and control over these shares, including control over the disposition of such shares.

16. Martine Tome, as the principal of Martine Tome Renaud, has ultimate voting power and control over these shares, including control over the disposition of such shares.

17. Kamel Lazaar, as the principal of Ragnal International Limited, has ultimate voting power and control over these shares, including control over the disposition of such shares.

18. G.J.G. Huet, as the principal of L’aminco NV, has ultimate voting power and control over these shares, including control over the disposition of such shares.

18

19. Mario del Pozzo, as the principal of Geforin S.A. and U.B.S. SA, has ultimate voting power and control over these shares, including control over the disposition of such shares.

20. R. Stephani and J.M. Porter, as the principals of Mees Pierson B.L.G., have ultimate voting power and control over these shares, including control over the disposition of such shares.

21. Mario del Pozzo, as the principal of Geforin S.A. and Banque Privee Edmund De Rothschild S.A., have ultimate voting power and control over these shares, including control over the disposition of such shares.

22. Dennis Kai Thai Leong, as the principal of Alfa Development Limited, has ultimate voting power and control over these shares, including control over the disposition of such shares.

23. Olivier Burrus and Thierry Weber, as the principals of Anglo Irish Bank (Suisse) SA, have ultimate voting power and control over these shares, including control over the disposition of such shares.

24. G. Cavaziel and T. Dettwiler, as the principals of Bank Vontobel, have ultimate voting power and control over these shares, including control over the disposition of such shares.

25. Ch. Schmid and T. Reichen, as the principals of Schroder & Co. Bank AG, have ultimate voting power and control over these shares, including control over the disposition of such shares.

26. A.A. Finessi and S. Antonius-Soedhoe, as the principals of Monclair NV, have ultimate voting power and control over these shares, including control over the disposition of such shares.

27. Gilbert Grosjean, as the principal of BBH Global Custody, has ultimate voting power and control over these shares, including control over the disposition of such shares.

28. Andrew Smith, as the principal of Lehman Brothers International Europe, has ultimate voting power and control over these shares, including control over the disposition of such shares. Lehman Brothers International Europe is part of the Lehman Brothers group of Companies, which includes Lehman Brothers Inc., an NASD member. Lehman Brothers International Europe acquired the securities in the ordinary course of business and neither Lehman Brothers International Europe nor Lehman Brothers Inc. participated in the offer and sale of securities by Sky Petroleum.

29. Raphael Petre and Alain Pont, as the principals of BNP Paribas Private Bank and Wanita S.A., have ultimate voting power and control over these shares, including control over the disposition of such shares.

30. Keith Goodman, as the principal of Nite Capital LP, has ultimate voting power and control over these shares, including control over the disposition of such shares.

31. Adam Benowitz, as the principal of Vision Opportunity Master Fund, has ultimate voting power and control over these shares, including control over the disposition of such shares.

32. Joshua Silverman, as the principal of Iroquois Capital, has ultimate voting power and control over these shares, including control over the disposition of such shares.

33. Gordon J. Munoy, as the principal of City Platz, has ultimate voting power and control over these shares, including control over the disposition of such shares.

34. O. Constantin and M. Rollier, as the principals of Union Bancaire Privee, have ultimate voting power and control over these shares, including control over the disposition of such shares.

35. Brendan O’Neill, as the principal of Enable Growth Partners, has ultimate voting power and control over these shares, including control over the disposition of such shares. Enable Growth Partners is affiliated with Enable Capital LLC, a registered broker dealer. Enable Growth Partners acquired the securities in the ordinary course of business and neither Enable Growth Partners nor Enable Capital LLC participated in the offer and sale of securities by Sky Petroleum

36. Mel Craw and Maxi Brezzi as the principals of Crescent International Ltd., have ultimate voting power and control over these shares, including control over the disposition of such shares.

37. Brendan O’Neill, as the principal of Enable Opportunity Partners, has ultimate voting power and control over these shares, including control over the disposition of such shares. Enable Opportunity Partners is affiliated with Enable Capital LLC, a registered broker dealer. Enable Opportunity Partners acquired the securities in the ordinary course of business and neither Enable Opportunity Partners nor Enable Capital LLC participated in the offer and sale of securities by Sky Petroleum

38. Dennis Kam Thai Leong, as the principal of Accelera Ventures Ltd., has ultimate voting power and control over these shares, including control over the disposition of such shares.

        Based on information provided to us, except as noted above, none of the selling shareholders are affiliated or have been affiliated with any broker-dealer in the United States. Except as otherwise provided in this prospectus, none of the selling shareholders are affiliated or have been affiliated with us, any of our predecessors or affiliates during the past three years.

19

Transactions with Selling Shareholders

        On December 16, 2005, we issued a treasury order for 16,013,620 shares of common stock at $1.00 per share pursuant to subscriptions in a private placement to selling shareholders. We offered and sold these shares outside the United States to non-U.S. persons in off-shore transactions pursuant to the exclusion from registration available under Regulation S of the Securities Act and in the United States in private transactions not involving a public offering pursuant to exemptions available under Rule 506 of Regulation D and Section 4(2) of the Securities Act. The shares in amounts set forth under “Number of Shares Offered” in the table above were issued to the selling shareholders listed.

        The following selling shareholders purchased common shares in the private placement closed on September 2, 2005 at $0.80 per share: Accelera Ventures Ltd. (62,500 shares), Anglo Irish Banke (Suisse) SA (285,000 shares), Axwell Business SA (1,500,000 shares), Bank Vontobel (80,000 shares), Banque Mees Pierson (625,000 shares), Mark Bavis (12,500 shares), Matthew Brady (12,500 shares), Lester Chau (12,500 shares), Neil Cunningham (10,000 shares), Daisy Davignon (30,000 shares), Ferrier Lullin & Cle SA (62,500 shares), John Fraser (50,000 shares), Tom Hardman (12,500 shares), Robert Kaplan (31,250 shares), Suhail Khoury (20,000 shares), Alan R. Mabee (7,500 shares), Giancarlo Mantegani (60,000 shares), Merle Parsons (30,000 shares), Alan Taylor (25,000 shares), and David Work (25,000 shares).

PLAN OF DISTRIBUTION

        We are registering the shares of common stock on behalf of the selling shareholders. When we refer to selling shareholders, we intend to include donees and pledgees selling shares received from a named selling shareholder after the date of this prospectus. All costs, expenses and fees in connection with this registration of the shares offered under this registration statement will be borne by us. Brokerage commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by the selling shareholders. Sales of shares may be effected by the selling shareholders from time to time in one or more types of transactions (which may include block transactions) on the over-the-counter market, in negotiated transactions, through put or call options transactions relating to the shares, through short sales of shares, or a combination of such methods of sale, at market prices prevailing at the time of sale, or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling shareholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their securities, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of shares by the selling shareholders.

        The selling shareholders may effect such transactions by selling shares directly to purchasers or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions, or commissions from the selling shareholders and/or purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions).

        The selling shareholders and any broker-dealers that act in connection with the sale of shares might be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, and any commissions received by such broker-dealers and any profit on the resale of shares sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. The selling shareholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against some liabilities arising under the Securities Act.

        Because the selling shareholders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, the selling shareholders will be subject to the prospectus delivery requirements of the Securities Act. We have informed the selling shareholders that the anti-manipulative provisions of Regulation M promulgated under the Exchange Act may apply to their sales in the market.

        In the event that the registration statement is no longer effective, the selling shareholders may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of such Rule, including the minimum one year holding period.

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        Upon being notified by any selling shareholder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, we will file a supplement to this prospectus, if required, under Rule 424(b) of the Act, disclosing:

• the name of each selling shareholder(s) and of the participating broker-dealer(s),

• the number of shares involved,

• the price at which the shares were sold,

• the commissions paid or discounts or concessions allowed to the broker-dealer(s), where applicable,

• that the broker-dealer(s) did not conduct any investigation to verify information set out or incorporated by reference in this prospectus; and

• other facts material to the transaction.

LEGAL PROCEEDINGS

        Neither we nor any of our property are currently subject to any material legal proceedings or other regulatory proceedings.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

        The following table sets forth certain information with respect to our current directors, executive officers and key employees. The term for each director expires at our next annual meeting or until his or her successor is appointed. The ages of the directors, executive officers and key employees are shown as of December 31, 2005.

Name	Position	Director/Officer Since	Age
Brent D. Kinney	Chief Executive Officer, Director	November 1, 2005(1)	63
	and Principal Executive Officer
Daniel F. Meyer	President, Secretary, Treasurer and Director	December 20, 2004	51
James R. Screaton	Vice President, Finance and	August 25, 2005	50
	Chief Financial Officer
Michael D. Noonan(2)	Vice President, Corporate, Director	August 25, 2005	47
Karim Jobanputra	Director	November 2, 2005	41
Ian R. Baron	Director	November 16, 2005	49
Peter J. Cockcroft	Director	November 16, 2005	56

(1) Mr. Kinney was appointed Chief Executive Officer on November 1, 2005, and appointed as director on November 16, 2005.

(2) Mr. Noonan was appointed as director on November 16, 2005.

        Brent D. Kinney — Chief Executive Officer and Director. Mr. Kinney, aged 63, holds a BA in Geology and a LLM degree from the University of Manitoba, Canada. Mr. Kinney was a partner with one of Calgary Alberta’s leading energy law firms until 1991 when he moved to Doha, Qatar to advise the Minister of Energy on petroleum matters. On leaving Qatar, Mr. Kinney joined a law firm based in London to work at its Hong Kong office and advised the clients on energy matters in China, Mongolia and several other countries in Asia. From 1997 to 2000, he was in private legal practice in Dubai, UAE. In 2000, he managed a joint venture with Renaissance Energy Ltd., a Canadian based energy and petroleum company, to pursue opportunities on energy and petroleum matters in Iran. This joint venture was dissolved in 2001, and since that time, Mr. Kinney has worked in Dubai as an independent consultant advising governments and international oil companies. Mr. Kinney sits on the boards of

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directors of four companies, Husky Energy, Inc., Dragon Oil plc and Western Silver Corporation and Benchmark Energy Corp.

        Daniel F. Meyer – President, Secretary, Treasurer and Director. Daniel F. Meyer, age 51, has been the Company’s President, Secretary and Treasurer and a director since December 20, 2004. From November 2003 to the present, Mr. Meyer was self-employed as a financial consultant. From April 2003 to November 2003, Mr. Meyer was Vice President of Operations for Canada’s Choice at Home’n Officer Inc., a division of Canada’s Choice Spring Water Co. Mr. Meyer was responsible for all operations, marketing and client relationship management for Northern Alberta. From 1994 to 2003, Mr. Meyer was president and principle shareholder of Canyon Springs Water Co. Ltd., a private Alberta bottled water company. Mr. Meyer was responsible for overseeing all aspects of the business, including client relations, marketing, strategic planning, transportation and financial and business development. Under Mr. Meyer’s management, Canyon Springs grew to be one of the largest bottled water companies in Alberta, packaging both wholesale and retail water products for distribution to home, office, major grocery chains and other major distribution plants such as Dairyland Alberta. Canyon Springs had offices in Edmonton and Calgary. The company was purchased by Canada’s Choice in 2003.

        James R. Screaton – Vice President, Finance and Chief Financial Officer. James R. Screaton, age 49, has been the Company’s Vice President, Finance and Chief Financial Officer since August 25, 2005. Mr. Screaton obtained a degree in B. Commerce (Honours) in 1979 from Queen’s University and has his Chartered Accountant certification from the Institutes of Chartered Accountants of Ontario and Alberta. Mr. Screaton was Vice President, Finance and Chief Financial Officer of Sentra Resources Corporation from 2003 until September 2004, at which time Sentra was sold to Blue Mountain Energy Ltd. Sentra was a public company that traded on the Toronto Stock Exchange. In 2003, he acted as financial advisor and CFO for two start-up companies in the energy sector. From 1996 to 2003, he was VP Finance, Corporate Secretary and a director of Harvard International Resources Ltd., a private oil and gas company. From 1991 to 1996, he was the Controller at Numac Energy Inc. a public company with operations in Canada and Africa, and prior thereto had gained extensive financial and accounting experience at Amerada Hess Canada Ltd., Esso Resources Canada Limited and Ernst & Young Chartered Accountants. Mr. Screaton is on the Board of Directors of the Small Explorers & Producers Association of Canada (SEPAC) and serves as Co-Chairman of both the Finance Committee and the Securities Compliance Committee.

        Michael D. Noonan – Vice President, Corporate and Director. Michael D. Noonan, age 47, has been the Company’s Vice President, Corporate since August 25, 2005. Mr. Noonan has more than 15 years of investor relations, corporate finance and corporate governance experience. Prior to joining the Company, Mr. Noonan worked for Forgent Networks since May, 2002 where he most recently served as the Senior Director of Investor Relations. Prior to working at Forgent, Mr. Noonan was employed for two years by Pierpont Communications, an investor and public relations firm, where he was a Senior Vice President. Mr. Noonan has also served as director of investor relations and corporate communications at Integrated Electrical Services, a electrical services company, and manager of investor relations and public affairs for Sterling Chemicals, a manufacturer of commodity chemicals. Mr. Noonan is a member of the National Investor Relations Institute (NIRI) and is past president of the award-winning NIRI Houston chapter. He received a Master of Business Administration degree from Athabasca University in Alberta, Canada, a Bachelor of Arts degree in Business Administration and Economics from Simon Fraser University in British Columbia, Canada, and an Executive Juris Doctor from Concord School of Law in Los Angeles, California,

        Karim Jobanputra – Director. Mr. Jobanputra, age 41, is an entrepreneur and owns companies that do business mostly in the Middle East and Europe. Mr. Jobanputra has experience in the areas of corporate finance and international business development, and also works as a self-employed consultant based in the United Kingdom. For the past 5 years he has provided consulting services to companies in the areas of corporate finance and business development in the Asian and Middle East markets, including Indonesia, Qatar, Saudi Arabia, India and China. Karim Jobanputra has been a director of O2Diesel Corp. since July 15, 2003. Mr. Jobanputra was nominated as a director by Sheikh Hamad Bin Jassim Bin Jabr al-Thani, the holder of 3,055,556 shares of Series A Preferred Stock purchased on September 20, 2005. Under the terms of the certificate of designation of rights and preferences of the Series A Preferred Stock, holders of the Series A Preferred Stock are entitled to elect one director to our board of directors. See, “Right to Appoint Directors,” below.

        Ian  R. Baron – Director. Mr. Baron, age 49, is the founding partner of Energy Services Group Dubai since February 2002. Mr. Baron is a graduate of Manchester University with a degree in geology. He has served as

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exploration director of Meridian Oil &Petrogulf Resources, Australia; Vice-President Conoco Middle East Ltd.; and CEO Dragon Oil plc (August 1999-February 2002); COO Aurado Energy Inc., Canada. He currently serves as non-executive director of Forum Energy plc, UK; executive director Drakeley Ltd. BVI.

        Peter J. Cockcroft – Director. Mr. Cockcroft, age 56, is a geologist (University of Sydney) and consultant. Mr. Cockcroft has graduate business qualifications, he has recently been honored as a 2004 – 2005 Distinguished Lecturer for the Society of Petroleum Engineers on the topic of International Risk Management. Permanent Resident of Singapore, he was recently appointed as a Research Fellow at Institute of South East Asian Studies (a Singapore “thinktank”) where he is writing a book on Asian Energy Investment. Mr. Cockcroft is a Life Fellow of the Royal Geographical Society, a Life Member of the Society of Petroleum Engineers, as well as also a non-executive Director of Baraka Petroleum Ltd. and Australian Oil Company Pty. Ltd.

        None of our executive officers or key employees are related by blood, marriage or adoption to any other director or executive officer.

Right to Appoint Directors

        On September 20, 2005, we entered into an agreement with Sheikh Hamad Bin Jassen Bin Jaber Al Thani, wherein the Sheikh purchased 3,055,556 shares of our Series A Preferred Stock, representing all the authorized shares of Series A Preferred Stock. The holders of the Series A Preferred Stock are entitled to elect one director to our Board of Directors. The Sheikh exercised this right to appoint Karim Jobanputra as a director. After purchasing the Series A Preferred Stock, the Sheikh holds 15,296,424 shares of our common stock assuming conversion of the Series A Preferred stock on a 4 for 1 basis, consisting of 12,222,224 shares of Common Stock issuable upon conversion of the Series A Preferred Stock and 3,074,200 shares of Common Stock.

Board Committees

Audit Committee

        We do not have an Audit Committee. Our board of directors performs the functions of an Audit Committee, including engaging a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management’s administration of the system of internal accounting controls. We do not currently have a written audit committee charter or similar document, but expect to adopt one in the first half of 2006. We currently have no financial expert. We are in the process of evaluating nominees for our board of directors who would qualify as independent and as a financial expert.

Nominating Committee 

        We do not have a Nominating Committee or Nominating Committee Charter. Our board of directors currently performs the functions associated with a Nominating Committee. Prior to July 26, 2005, we did not compensate our Chief Executive Officer or any of our officers or directors. The compensation of Donald Cameron, our former Chief Executive Officer, was determined through negotiation between Mr. Cameron and our board of directors.

        On November 1, 2005, we entered into an employment agreement with Brent Kinney as our new Chief Executive Officer. Mr. Kinney’s compensation was determined through negotiation between Mr. Kinney and our board of directors.

        We intend to adopt a written Nomination Committee Charter and appoint a Nomination Committee in the first half of 2006.

        To our knowledge, there is no arrangement or understanding between any of our officers and any other person pursuant to which the officer was selected to serve as an officer.

Board Compensation

        No director received any compensation for his services as a director during the fiscal year ended December 31, 2004 or the nine-month period ended September 30, 2005. On January 11, 2006, our board of

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directors approved a compensation plan, effective November 16, 2005, pursuant to which each director would receive the following compensation:

• annual director fees of $30,000 per year, payable quarterly in arrears;

• director compensation options consisting of 200,000 options exercisable to acquire shares of common stock at $1.00 per share for non-U.S. directors and at fair market value on the date of grant for U.S. directors;

• meeting fees of $1,200 per meeting, including committee meetings; and

• reimbursement of expenses related to service in the capacity of a member of the Board.

        We also granted stock options to our directors during the year ended December 31, 2005, in connection with their appointments as directors.

Code of Ethics 

        A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:

1. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

2. Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made by an issuer;

3. Compliance with applicable governmental laws, rules and regulations;

4. The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

5. Accountability for adherence to the code.

        Prior to July 26, 2005, we only had limited business operations and only one officer and director operating as our sole management and believed a code of ethics would have had limited utility. We intend to adopt a code of ethics during the first quarter of 2006.

Compensation Interlocks and Insider Participation

        There were no compensation committee or board interlocks among the members of our board of directors.

Report of the Board of Directors on Executive Compensation

        During the year ended December 31, 2005, our Board of Directors was responsible for establishing compensation policy and administering the compensation programs of our executive officers.

        The amount of compensation paid by us to each of our directors and officers and the terms of those persons’ employment is determined solely by the Board of Directors. We believe that the compensation paid to its directors and officers is fair to the company.

        In the past, Daniel Meyer, our President, has negotiated all executive salaries on our behalf. The Board of Directors reviewed the compensation and benefits of all our executive officers and established and reviewed general policies relating to compensation and benefits of our employees. Currently, directors do not participate in approving or authorizing their own salaries as executive officers.

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        Our Board of Directors believes that the use of direct stock awards is at times appropriate for employees, and in the future intends to use direct stock awards to reward outstanding service or to attract and retain individuals with exceptional talent and credentials. The use of stock options and other awards is intended to strengthen the alignment of interests of executive officers and other key employees with those of our stockholders

EXECUTIVE COMPENSATION

Summary Compensation Table

        The following table sets forth compensation paid to each of the individuals who served as our Chief Executive Officer and our other most highly compensated executive officers (the “named executives officers”) for the fiscal years ended December 31, 2005, 2004 and 2003.

		Annual Compensation			Long Term Compensation
					Awards		Payouts
Name and Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compensation ($)	Common Shares Under Options/SARs Granted (#)	Restricted Shares or Restricted Share Units ($)	Long Term Incentive Plan Payouts ($)	All Other Compensation ($)
Brent D. Kinney(1) Chief Executive Officer, Director	2005	52,500	-0-	-0-	-0-	-0-	-0-	57,381	(6)
Daniel Meyer(2)	2005	63,000	-0-	-0-	-0-	-0-	-0-	3,462	(7)
President, Secretary	2004	-0-	-0-	-0-	-0-	-0-	-0-	-0-
and Treasurer, Director
Christine L. Szymarek	2004	-0-	-0-	-0-	-0-	-0-	-0-	-0-
Former, President &	2003	-0-	-0-	-0-	-0-	-0-	-0-	-0-
Secretary, Treasurer
Director
Donald C. Cameron	2005	99,000	-0-	-0-	-0-	-0-	-0-	-0-
Former Chief Executive
Officer(3)
James R. Screaton	2005	63,080	-0-	-0-	-0-	-0-	-0-	-0-
Vice President,
Finance and Chief
Financial Officer(4)
Michael Noonan(5)	2005	83,500	-0-	-0-	-0-	-0-	-0-	3,462	(7)
Vice President,
Corporate

(1) Mr. Kinney was appointed as our Chief Executive Officer on November 1, 2005 and appointed as a director on November 16, 2005.

(2) Mr. Meyer was elected as a director at the annual meeting of shareholders on December 20, 2004.

(3) Mr. Cameron was appointed as our Chief Executive Officer on July 26, 2005 and terminated on November 1, 2005. He was not an officer during 2004, 2003 or 2002. See, “Employment Contracts and Termination of Employment and Change-In-Control Arrangements” for a description of his compensatory arrangements for 2005.

(4) Mr. Screaton was appointed as our Vice President, Finance and Chief Financial Officer on August 25, 2005. He was not an officer during 2004, 2003 or 2002. See, “Employment Contracts and Termination of Employment and Change-In-Control Arrangements” for a description of his compensatory arrangements for 2005.

(5) Mr. Noonan was appointed as our Vice President, Corporate on August 25, 2005 and appointed as a director on November 16, 2005. He was not an officer during 2004, 2003 or 2002. See, “Employment Contracts and Termination of Employment and Change-In-Control Arrangements” for a description of his compensatory arrangements for 2005.

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(6) Includes legal fees of $53,919 paid to Mr. Kinney for legal services prior to his appointment as an officer of Sky Petroleum and directors’ fees of $3462.

(7) Consists of director’s fees.

Director and Officer Stock Option/Stock Appreciation Rights (“SARs”) Grants

        We did not grant any stock options or stock appreciation rights during the years ended December 31, 2004 or December 31, 2003. We granted a total of 4,250,000 stock options during the fiscal year ended December 31, 2005, excluding stock option grants that were rescinded.

        Subsequent to December 31, 2004, we adopted an incentive stock plan for non-U.S. residents on July 26, 2005, and an incentive stock plan for U.S. residents on August 25, 2005. Our stock incentive plan for non-U.S. residents authorizes the issuance of stock options to acquire up to 10% of our issued and outstanding shares of common stock and our stock incentive plan for U.S. residents authorizes the issuance of stock options to acquire up to a maximum of 3,321,600 shares of common stock (less the number of shares issuable upon exercise of options granted by us under all other stock incentive plans on the date of any grant under the plan).

        The following table sets forth the stock options granted to our named executive officers and directors during the period from January 1, 2005 to December  31, 2005. No stock appreciation rights were awarded.

	Individual Grants					Potential Realized Value at Assumed Annual Rates of Stock Appreciation for Option Term
	Number of securities underlying		Percent of total options/SARs granted	Exercise or
	options/SARs		to employees in	base price	Expiration	$000	$000	$000
Name	granted(#)		fiscal year(1)	($/Sh)	Date	5%($)	10%($)	0%($)
Daniel Meyer(2)	200,000	(10)	4.7%	$1.00	Nov. 16, 2012	330	534	177
President, Secretary
and Treasurer, Director
Brent Kinney(3)	1,450,000	(10)	34.12%	$1.00	Nov. 16, 2012	2,388	3,864	1,278
Chief Executive
Officer, Director
James R. Screaton(4)	400,000	(10)	9.4%	$0.50- $1.00	March 31, 2012	27	86	-0-
Vice President,
Finance
and Chief Financial
Officer
Michael Noonan(5)	600,000	(11)		$ 1.29	Sept. 21, 2015	487	1,234	-0-
Vice President	200,000	(11)		$ 1.88	Nov. 16, 2012	236	599	-0-
Corporate	800,000		18.82%			723	1,833	-0-
Karim Jobanputra(6)	200,000	(10)	4.7%	$1.00	Nov. 16, 2012	330	534	177
Director
Ian R. Baron(7)	600,000			$1.00	Nov. 16, 2013	1,065	1,818	528
Director	200,000			$1.00	Nov. 16, 2012	330	534	177
	800,000		18.82%			1,395	2,352	705
Peter J Cockcroft(8)	200,000	(10)	4.7%	$1.00	Nov. 16, 2012	330	534	177
Director
Donald C. Cameron(9)	100,000	(12)	2.35%	$1.00	April 30, 2008	118	150	88
Former Chief	100,000	(12)	2.35%	$1.00	April 30, 2009	128	175	88
Executive	200,000		4.7%			246	325	176
Officer
Total	4,250,000

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(1) We issued options to acquire a total of 4,250,000 to our officers, directors and employees during the period from January 1, 2005 to December 31, 2005.

(2) Mr. Meyer was elected as a director at the annual meeting of shareholders on December 20, 2004. Mr. Meyer was granted 200,000 options, effective November 16, 2005, under our non-U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(3) Mr. Kinney was appointed as our Chief Executive Officer on November 1, 2005. Under the terms of his employment agreement we granted Mr. Kinney options to purchase 1,250,000 shares of common stock of the Company at an exercise price of $1.00 per share, vesting one-third on October 1, 2006, one-third on October 1, 2007 and one-third on October 1, 2008. Mr. Kinney was appointed as a director on November 16, 2005, and was granted 200,000 options, effective November 16, 2005, under our non-U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(4) Mr. Screaton was appointed as our Vice President, Finance and Chief Financial Officer on August 25, 2005. On August 25, 2005, we agreed to grant Mr. Screaton options to purchase 400,000 shares of common stock of which 133,333 exercisable at $0.50 vest on April 30, 2006, 133,333 exercisable at $0.80 per share vest on April 30, 2007 and 133,334 exercisable at $1.00 per share vest on April 30, 2008.

(5) Mr. Noonan was appointed as our Vice President, Corporate on August 25, 2005. On August 25, 2005, we agreed to grant Mr. Noonan options to purchase 600,000 shares of common stock exercisable at $1.29 per share, vesting 200,000 options on each April 30th beginning on April 30, 2006. Mr. Noonan was appointed to our board of directors on November 16, 2005 and was granted 200,000 options, effective November 16, 2005, under our U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(6) Mr. Jobanputra was appointed to our board of directors on November 16, 2005 and was granted 200,000 options, effective November 16, 2005, under our non-U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(7) Mr. Baron was appointed to our board of directors on November 16, 2005 and was granted 200,000 options, effective November 16, 2005, under our non-U.S. Employee Stock Option Plan, 1/3 vesting the first anniversary of the grant and 1/3 vesting each anniversary thereafter. We granted Mr. Baron 600,000 options, effective November 16, 2005, under the terms of an option agreement, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(8) Mr. Cockcroft was appointed to our board of directors on November 16, 2005 and was granted 200,000 options, effective November 16, 2005, under our non-U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(9) Mr. Cameron served as our Chief Executive Officer from July 26, 2005 to November 1, 2005. We entered into a termination and severance agreement with Mr. Cameron under which we agreed to grant Mr. Cameron 200,000 options exercisable at $1.00 per share, vesting 100,000 options on April 30, 2006 and the balance will vest on April 30, 2007.

(10) Granted under our non-U.S. resident stock option plan.

(11) Granted under our U.S. resident stock option plan.

(12) Granted under option agreement separate from our non-U.S. resident and U.S. resident stock option plans.

Aggregated Option/SAR Exercises in Last Fiscal Year- and Fiscal Year-End Option/SAR Values

	Number of Shares Acquired on Exercise		Number of Securities Underlying Unexercised Options At December 31, 2005		Value of Unexercised In-the-Money Options At December 31, 2005 (1)
Name	Exercised	Value Realized	Exercisable	Unexercisable	Exercisable	Unexercisable
Daniel Meyer President, Secretary and Treasurer, Director	—	—	—	200,000	—	$171,000
Brent Kinney Chief Executive Officer, Director	—	—	—	1,450,000	—	1,239,750
James R. Screaton Vice President, Finance and Chief Financial Officer	—	—	—	400,000	—	435,333
Michael Noonan Vice President, Corporate	—	—	—	800,000	—	339,000
Karim Jobanputra Director	—	—	—	200,000	—	171,000

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	Number of Shares Acquired on Exercise		Number of Securities Underlying Unexercised Options At December 31, 2005		Value of Unexercised In-the-Money Options At December 31, 2005 (1)
Name	Exercised	Value Realized	Exercisable	Unexercisable	Exercisable	Unexercisable
Ian R. Baron Director	—	—	—	800,000	—	684,000
Peter J. Cockcroft Director	—	—	—	200,000	—	171,000
Donald C. Cameron Former Chief Executive Officer	—	—	—	200,000	—	171,000
(1)  Based on the closing price of our common stock on the NASD OTCBB on December 30, 2005, which was $1.835.

Long Term Incentive Plan Awards

        No long-term incentive plan awards have been made by the Company to date.

Defined Benefit or Actuarial Plan Disclosure

        We do not provide retirement benefits for the directors or officers.

Employment Contracts and Termination of Employment and Change-In-Control Arrangements

Employment Agreement with Brent D. Kinney

        On November 1, 2005, we entered into an employment agreement with Brent D. Kinney where Mr. Kinney was appointed as our chief executive officer. The following are the material terms and conditions of the Employment Agreement:

• Mr. Kinney shall perform the duties and services as CEO beginning on November 1, 2005 for a period of three years.

• During his employment, Mr. Kinney shall receive (i) a salary of $17,500 per month or such higher rate   as may from time-to-time be agreed between us and Mr. Kinney, (ii) an annual bonus in the amount determined by our board of directors, in its sole discretion, and (iii) options to purchase 1,250,000 shares of our common stock at an exercise price of $1.00 per share, vesting one-third on October 1, 2006, one-third on October 1, 2007 and one-third on October 1, 2008.

• We may by notice terminate the Employment Agreement, if at any time after October 1, 2006, the two Obligation Wells (as defined in the Participation Agreement) have failed to meet our expectations and the Sir Abu Nu’ayr exploration program does not provide us with commercially useful petroleum assets.

        Before Mr. Kinney was appointed as a chief executive officer of the Company, he was retained by us as special legal counsel to advise us on petroleum matters as of April 1, 2005 and received legal cost of $53,919 from us for these services.

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Consulting Agreement with James Screaton

        In connection with the appointment of Mr. James Screaton as our Chief Financial Officer on August 25, 2005, we entered into an Independent Contractor Services Agreement and a Confidentiality Agreement, effective April 1, 2005, with Shorewood Financial Inc. for the services of Mr. Screaton as our Chief Financial Officer. Under these agreements, we anticipate that Mr. Screaton will serve as our Chief Financial Officer until July 31, 2006 at a salary of $500 per day on a per diem basis. Under the terms of the Confidentiality Agreement, Mr. Screaton is prohibited from disclosing certain confidential information with respect to Sky Petroleum for a period of five years following the termination of the Independent Contractor Services Agreement. In connection with Mr. Screaton’s appointment as Chief Financial Officer, we agreed to grant Mr. Screaton options to purchase 400,000 shares of common stock of which 133,333 exercisable at $0.50 vest on April 30, 2006, 133,333 exercisable at $0.80 per share vest on April 30, 2007 and 133,334 exercisable at $1.00 per share vest on April 30, 2008.

Consulting Agreement with Michael Noonan

        In connection with the appointment of Mr. Michael Noonan as our Vice President Corporate on August 25, 2005, we entered into an Independent Contractor Services Agreement and a Confidentiality Agreement for the services of Mr. Noonan as our Vice President Corporate. Under these agreements, we anticipate that Mr. Noonan will serve as our Vice President Corporate until July 31, 2006 at a base salary of $10,000 per month. Under the terms of the Confidentiality Agreement, Mr. Noonan is prohibited from disclosing certain confidential information with respect to Sky Petroleum for a period of five years following the termination of the Independent Contractor Services Agreement. In connection with Mr. Noonan’s appointment as Vice President Corporate, we granted Mr. Noonan stock options exercisable to acquire 600,000 shares of common stock exercisable at $1.29 per share of which 200,000 shares vest on April 30, 2006, 200,000 vest on April 30, 2007 and 200,000 shares vest on April 30, 2008.

Consulting Arrangement with Daniel Meyer

        We paid Daniel Meyer a consulting fee of $5,000 per month up to September 30, 2005 for his services as our President under the terms of an arrangement approved by the Board of Directors. On October 1, 2005, we increased the consulting fee paid to Mr. Meyer to $7,500 per month.

Consulting Agreement with Energy Services Group Dubai

        Mr. Ian Baron, a director, is the founding partner of Energy Services Group Dubai (ESG), with which we entered into a Consulting Agreement dated April 1, 2005, to retain the services of ESG to assist us to evaluate and develop oil and gas opportunities in the Mubarek field area near Abu Musa Island in the Arabian Gulf. Pursuant to the Consulting Agreement, EGS receives $1,500 per day for the first five days of a month and $1,250 per day for thereafter in a month. At a minimum, EGS receives a monthly retainer fee of $7,500 per month. During the fiscal year ended December 31, 2005, we incurred fees of $75,775. The Consulting Agreement may be terminated on sixty day notice by either party.

        Effective November 16, 2005, we entered into an option agreement with Mr. Baron, pursuant to which we granted Mr. Baron stock options exercisable to acquire 600,000 shares of common stock at $1.00 per share, vesting 1/3 per year beginning on November 16, 2006 and expiring on the earlier of November 16, 2013 or 90 days after Mr. Baron ceases to be a director or consultant to the corporation.

Separation Agreement with Donald Cameron

        We entered into a separation agreement with Donald C. Cameron, our former Chief Executive Officer, and Donald C. Cameron Consulting Ltd. The following are the material terms and conditions of the Separation Agreement:

• The Independent Contractor Services Agreement dated April 1, 2005, between us and Mr. Cameron, under which Mr. Cameron provided services as our CEO, was terminated effective October 31, 2005.

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Mr. Cameron will receive monthly fee of $11,000 for the months of November 2005, December 2005 and January 2006.

• Under a Contractor Agreement, we will retain Mr. Cameron for six months beginning February 1, 2006 through July 31, 2006 at a monthly consulting fee of $11,000 per month. We will also grant Mr. Cameron stock options exercisable to acquire 200,000 shares of common stock at $1.00 per share, which will vest and become exercisable over two years. The first half will vest on April 30, 2006 and the balance will vest on April 30, 2007.

• Stock options previously granted to Mr. Cameron under the Contractor Agreement were terminated.

• Mr. Cameron releases and discharges us from any claims, liabilities, costs and damages which Mr. Cameron has or may have against us for any act or omission occurred on or prior to the date of Mr. Cameron’s execution of the Separation Agreement.

• Mr. Cameron acknowledged that all of the confidential information is valuable, proprietary and the exclusive property of the Company and that he will not use or reveal, divulge or permit the use by the third parties of any confidential information.

Report on Repricing of Options/SARs

        We did not reprice any options or SARs outstanding during the fiscal year ended December 31, 2004 or 2005.

Board Compensation Committee Report on Executive Compensation

        The primary objectives of our executive compensation program are to enable us to attract, motivate and retain outstanding individuals and to align their success with that of our shareholders through the achievement of strategic corporate objectives and creation of shareholder value. The level of compensation paid to an individual is based on the individual’s overall experience, responsibility and performance. Our executive compensation program consists of a base salary, performance bonuses and stock options.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding the beneficial ownership of shares of our common stock as of December 31, 2005 by:

• each person who is known by us to beneficially own more than 5% of our issued and outstanding shares of common stock;

• our named executive officers;

• our directors; and

• all of our executive officers and directors as a group.

Name of Shareholder	Address	Amount and Nature of Beneficial Ownership	Percent of Class(1)
Directors and Named Executive Officers
Daniel Meyer(2)	Suite 200 - 625 4th Ave. SW	2,000,000(2)	4.34%(2)
President, Secretary, Treasurer and Director	Calgary, Alberta, Canada T2P OK2

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Name of Shareholder	Address	Amount and Nature of Beneficial Ownership	Percent of Class(1)
Directors and Named Executive Officers
Brent Kinney(3) Chief Executive Officer	P.O. Box 211247 Dubai United Arab Emirates	—	—
James R. Screaton(4)	Suite 200 - 625 4th Ave. SW	—	—
Vice President, Finance and Chief Financial Officer	Calgary, Alberta, Canada T2P OK2
Michael Noonan(5)	108 Wild Basin Road	—	—
Vice President, Corporate	Suite 222 Austin, Texas USA 78746
Karim Jobanputra(6)	P.O. Box 4044	—	—
Director	Albwajbam Palace Doha Qatar
Ian R. Baron(7)	P.O. Box 72794	—	—
Director	Dubai United Arab Emirates
Peter Cockcroft(8)	350 Orchard Road	—	—
Director	#21-01 Shaw House Singapore 238868
All Officers & Directors as a		2,000,000(9)	4.34%(9)
Group(9)
5% Shareholders
Sheikh Hamad Bin Jassen Bin Jaber Al Thani(10)	PO Box 4044 Alwajbam Palace Dotia, Qatar	15,296,424(10)	24.93%(10)
Metage Capital Limited(11)	8 Pollen Street London, W1S 1NG	4,000,000(11)	8.59%(11)

(1) Based on 46,571,485 shares issued and outstanding as of December 31, 2005, plus, for each person, the number of shares of common stock such person has the right to acquire within the 60 days after such date. Excludes 12,222,224 shares of common stock acquirable upon conversion of Series A Preferred Stock and stock options that are not exercisable within 60 days of February 10, 2006.

(2) Mr. Meyer was elected as a director at the annual meeting of shareholders on December 20, 2004. On August 25, 2005, we accepted 12,000,000 shares of common stock for cancellation from Mr. Meyer. Mr. Meyer was granted 200,000 options, effective November 16, 2005, under our non-U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(3) Mr. Kinney was appointed as our Chief Executive Officer on November 1, 2005. We granted Mr. Kinney options to purchase 1,250,000 shares of common stock exercisable at $1.00 per share. None of the options will vest within 60 days of February 10, 2006. Mr. Kinney was appointed to our board of directors on November 16, 2005 and was granted 200,000 options, effective November 16, 2005, under our U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(4) Mr. Screaton was appointed as our Vice President, Finance and Chief Financial Officer on August 25, 2005. On August 25, 2005, we agreed to grant Mr. Screaton options to purchase 400,000 shares of common stock exercisable at exercise prices of $0.50 to $1.00 per share. None of the options will vest within 60 days of February 10, 2006.

(5) Mr. Noonan was appointed as our Vice President, Corporate on August 25, 2005. On September 21, 2005, we granted Mr. Noonan options to purchase 600,000 shares of common stock at $1.29 per share, of which 200,000 shares vest on April 30, 2006, 200,000 vest on April 30, 2007 and 200,000 shares vest on April 30, 2008. None of the options will vest within 60 days of February 10, 2006.

(6) Mr. Jobanputra was appointed to our board of directors on November 16, 2005 and was granted 200,000 options, effective November 16, 2005, under our non-U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(7) Mr. Baron was appointed to our board of directors on November 16, 2005 and was granted 200,000 options, effective November 16, 2005, under our non-U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter. We granted Mr. Baron 600,000 options, effective November 16, 2005, under the terms of an option agreement, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

(8) Mr. Cockcroft was appointed to our board of directors on November 16, 2005 and was granted 200,000 options, effective November 16, 2005, under our non-U.S. Employee Stock Option Plan, 1/3 vesting on the first anniversary of the grant and 1/3 vesting each anniversary thereafter.

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(9) Includes 2,000,000 shares of common stock held by Daniel Meyer, excluding stock options which are not exercisable within 30 days of February 10, 2006.

(10) Includes 3,074,200 shares of common stock held by the Sheikh and 12,222,224 shares of common stock issuable upon conversion of 3,055,556 shares of Series A Preferred Stock held by the shareholder.

(11) Metage Capital Limited beneficially owns 2,000,000 common shares through Metage Funds Limited, a Cayman Islands investment company, and 2,000,000 common shares through Metage Special Emerging Markets Fund Limited, a Cayman Islands investment company. Metage Funds Limited and Metage Special Emerging Markets Fund Limited are named as selling shareholders in this prospectus.

        We have no knowledge of any other arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of our company.

        We are not, to the best of our knowledge, directly or indirectly owned or controlled by another corporation or foreign government.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Except for the transactions described in the section entitled “Employment Contracts and Termination of Employment and Change-In-Control Arrangements” and below, none of our directors, named executive officers or more-than-five-percent shareholders, nor any associate or affiliate of the foregoing, have any interest, direct or indirect, in any transaction, from our inception (August 2002) to the date of this prospectus, or in any proposed transactions which has materially affected or will materially affect us.

Equity Compensation Plan Information

        Subsequent to December 31, 2004, we adopted an incentive stock plan for non-U.S. residents on July 26, 2005, and an incentive stock plan for U.S. residents on August 25, 2005. Our stock incentive plan for non-U.S. residents authorizes the issuance of stock options to acquire up to 10% of our issued and outstanding shares of common stock and our stock incentive plan for U.S. residents authorizes the issuance of stock options to acquire up to a maximum of 3,321,600 shares of common stock (less the number of shares issuable upon exercise of options granted by the us under all other stock incentive plans on the date of any grant under the plan).

Adoption of Non-U.S. Stock Option Plan

        On July 26, 2005, we adopted, subject to receiving shareholder approval, the Sky Petroleum, Inc. Non-U.S. Stock Option Plan, effective as of April 1, 2005. The Non-U.S. Plan authorizes the issuance of stock options to acquire up to 10% of our issued and outstanding shares of common stock. The purpose of the Non-U.S. Plan is to aid us in retaining and attracting Non-U.S. residents that are capable of enhancing our prospects for future success, to offer such personnel additional incentives to exert maximum efforts for the success of our business, and to afford such personnel an opportunity to acquire a proprietary interest in the company through stock options. Our Board of Directors or our Compensation Committee, if any, will administer the Non-U.S. Plan and determine the terms and conditions under which options to purchase shares of our common stock may be awarded. The term of an option granted under the Non-U.S. Plan cannot exceed seven years and the exercise price for options granted under the Non-U.S. Plan cannot be less than the fair market value of our common stock on the date of grant.

Adoption of 2005 U.S. Stock Incentive Plan

        On August 25, 2005, we adopted, subject to receiving shareholder approval, the Sky Petroleum, Inc. 2005 U.S. Stock Incentive Plan for U.S. residents. The U.S. Plan authorizes the issuance of stock options and other awards to acquire up to a maximum of 3,321,600 shares of our common stock (less the number of shares issuable upon exercise of options granted by us under all other stock incentive plans on the date of any grant under the plan). The purpose of the U.S. Plan is to aid the Company in retaining and attracting U.S. personnel capable of enhancing our prospects for future success, to offer such personnel additional incentives to exert maximum efforts for the success of our business, and to afford such personnel an opportunity to acquire a proprietary interest in the company

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through stock options and other awards. The U.S. Plan provides for the grant of incentive stock options (within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended), options that are not incentive stock options, stock appreciation rights and various other stock-based grants. Our Board of Directors or a committee thereof, if any, will administer the U.S. Plan and determine the terms and conditions under which options to purchase shares of our common stock or other awards may be granted to eligible participants. The term of an incentive stock option granted under the U.S. Plan cannot exceed ten years and the exercise price for options granted under the U.S. Plan cannot be less than the fair market value of our common stock on the date of grant.

Equity Compensation Plan Information

The following table sets forth information related to our equity compensation plans as of December 31, 2005.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity Compensation	--	--	--
Plans approved by
Security Holders(1)(2)
Equity Compensation	4,250,000	$1.075	1,157,098(3)
Plans not approved by
Security Holders
Total	4,250,000	$1.075	1,157,098(3)

⁽¹⁾ We have two stock option plans: a stock incentive plan for non-U.S. residents and a stock incentive plan for U.S. residents. Our stock incentive plan for non-U.S. residents authorizes the issuance of stock options to acquire up to 10% of our issued and outstanding shares of common stock and our stock incentive plan for U.S. residents authorizes the issuance of stock options to acquire up to a maximum of 3,321,600 shares of common stock (less the number of shares issuable upon exercise of options granted by the us under all other stock incentive plans on the date of any grant under the plan).

⁽²⁾ We intend to submit our incentive stock option plans for shareholder approval at our next annual meeting of shareholders.

⁽³⁾ Issuable under our non-U.S. Stock Option Plan.

DESCRIPTION OF SECURITIES

        Sky Petroleum is authorized to issue 150,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par value.

Common Stock

        Each holder of our common stock is entitled to one vote per share in the election of directors and on all other matters submitted to the vote of shareholders. No holder of our common stock may cumulate votes in voting for our directors.

        Subject to the rights of the holders of any our preferred stock that may be outstanding from time to time, each share of our common stock will have an equal and ratable right to receive dividends as may be declared by our board of directors out of funds legally available for the payment of dividends, and, in the event of liquidation, dissolution or winding up of our corporation, will be entitled to share equally and ratably in the assets available for distribution to our shareholders. No holder of our common stock will have any preemptive right to subscribe for any our securities.

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        Our common stock is quoted on the NASD Over-the-Counter Bulletin Board under the trading symbol “SKPI.OB.”

Preferred Stock

        Our directors are authorized by our Articles of Incorporation to issue, by resolution and without any action by our shareholders, up to 10,000,000 shares of preferred stock, par value $0.001, in one or more series, and our directors may establish the designations, dividend rights, dividend rate, conversion rights, voting rights, terms of redemption, liquidation preference, sinking fund terms and all other preferences and rights of any series of preferred stock, including rights that could adversely affect the voting power of the holders of our common stock.

        One of the effects of undesignated preferred stock may be to enable the board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance of shares of preferred stock pursuant to the board of directors’ authority described above may adversely affect the rights of holders of common stock. For example, preferred stock issued by us may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for the common stock at a premium or may otherwise adversely affect the market price of the common stock.

        On September 16, 2005, the Company filed a certificate of designation of rights and preferences of the Series A Preferred Stock with the Secretary of State of the state of Nevada. Pursuant to the certificate of designation, 3,055,556 shares of Series A Preferred Stock were designated. Currently, 3,055,556 shares of Series A Preferred Stock are outstanding.

        Each share of Series A Preferred Stock is initially convertible into four shares of the Common Stock of the Company, subject to adjustment for stock splits, recapitalization or other reorganizations. In addition, the Series A Preferred Stock have broad-based weighted average antidilution protection that will cause the conversion price to adjust downward in the event that the Company issues shares of Common Stock or securities convertible into Common Stock at a price of less than the conversion price of the Series A Preferred Stock then in effect. The shares of Series A Preferred Stock may be converted into Common Stock at the option of the holder. In addition, at any time after the closing bid price for the Company’s Common Stock on the NASD OTCBB or the primary United State exchange on which the Common Stock is then traded exceeds $3.00 during any five consecutive trading days, the Company may, at its sole option, convert the Series A Preferred and any accrued but unpaid dividends into Common Shares at the then-applicable conversion price by providing written notice of such conversion to the holders of the Series A Preferred; provided that there is an effective registration statement under the Securities Act registering the resale of the Common Stock to be issued upon such conversion.

        Each share of Series A Preferred Stock is entitled to receive a dividend of 7% per annum prior and in preference to the Common Stock of the Company. The dividend begins to accrue on December 30, 2005 and will be payable quarterly thereafter. The dividend is cumulative. In the event of a liquidation or acquisition of the Company, the holders of the Series A Preferred Stock will be entitled to receive an amount equal to any accrued and unpaid dividend prior and in preference to any distributions to the holders of the Common Stock. Thereafter, the holders of the Series A Preferred Stock will be entitled to participate in distributions on an as converted to Common Stock basis.

        The holders of the Series A Preferred Stock are entitled to elect one director to the Company’s board of directors. In addition, the holders of the Series A Preferred Stock shall vote on all other matters on an “as converted” to Common Stock basis.

        Shares of Series A Preferred may be redeemed, in whole or in part, by the Company out of funds lawfully available therefor from the holders of the then outstanding shares of Series A Preferred on a pro ratabasis, at any time by providing written notice to the holders of the Series A Preferred. On the redemption date, the Company shall redeem, on a pro rata basis in accordance with the number of shares of Series A Preferred owned by each holder, that number of outstanding shares of Series A Preferred that the Company has elected to purchase for the following consideration: (i) an amount equal to a price per share equal to the $3.60 plus any accrued and unpaid dividends multiplied

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by the number of shares of Series A Preferred being redeemed from such holder and (ii) the issuance of the number of shares of Common Stock equal to seventeen and one-half percent (17.5%) of the shares of Common Stock then issuable upon conversion of the shares of Series A Preferred being redeemed from such holder. A cash payment will be provided in lieu of any fractional shares of Common Stock that would otherwise be issuable at a price per share of Common Stock equal to the then-applicable conversion price.

Nevada Corporate Law

        The Nevada Business Corporation Law contains a provision governing “acquisition of controlling interest.” This law provides generally that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly-held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested shareholders of the corporation elects to restore such voting rights in whole or in part. The control share acquisition act provides that a person or entity acquires “control shares” whenever it acquires shares that, but for the operation of the control share acquisition act, would bring its voting power within any of the following three ranges:

• 20 to 33 1/3%;

• 33 1/3 to 50%; or

• more than 50%.

        A “control share acquisition” is generally defined as the direct or indirect acquisition of either ownership or voting power associated with issued and outstanding control shares. The shareholders or board of directors of a corporation may elect to exempt the stock of the corporation from the provisions of the control share acquisition act through adoption of a provision to that effect in the articles of incorporation or bylaws of the corporation. Our articles of incorporation and bylaws do not exempt our common stock from the control share acquisition act.

        The control share acquisition act is applicable only to shares of “Issuing Corporations” as defined by the Nevada law. An Issuing Corporation is a Nevada corporation, which:

• has 200 or more shareholders, with at least 100 of such shareholders being both shareholders of record and residents of Nevada; and

• does business in Nevada directly or through an affiliated corporation.

        At this time, we do not have 100 shareholders of record resident of Nevada. Therefore, the provisions of the control share acquisition act do not apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply, the provisions of the control share acquisition act may discourage companies or persons interested in acquiring a significant interest in or control of us, regardless of whether such acquisition may be in the interest of our shareholders.

        The Nevada “Combination with Interested Shareholders Statute” may also have an effect of delaying or making it more difficult to effect a change in control of us. This statute prevents an “interested shareholder” and a resident domestic Nevada corporation from entering into a “combination,” unless certain conditions are met. The statute defines “combination” to include any merger or consolidation with an “interested shareholder,” or any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions with an “interested shareholder” having:

• an aggregate market value equal to 5 percent or more of the aggregate market value of the assets of the corporation;

• an aggregate market value equal to 5 percent or more of the aggregate market value of all outstanding shares of the corporation; or

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• representing 10 percent or more of the earning power or net income of the corporation.

        An “interested shareholder” means the beneficial owner of 10 percent or more of the voting shares of a resident domestic corporation, or an affiliate or associate thereof. A corporation affected by the statute may not engage in a “combination” within three years after the interested shareholder acquires its shares unless the combination or purchase is approved by the board of directors before the interested shareholder acquired such shares. If approval is not obtained, then after the expiration of the three-year period, the business combination may be consummated with the approval of the board of directors or a majority of the voting power held by disinterested shareholders, or if the consideration to be paid by the interested shareholder is at least equal to the highest of:

• the highest price per share paid by the interested shareholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which he became an interested shareholder, whichever is higher;

• the market value per common share on the date of announcement of the combination or the date the interested shareholder acquired the shares, whichever is higher; or

• if higher for the holders of preferred stock, the highest liquidation value of the preferred stock.

Transfer Agent

        The transfer agent and registrar for the our common stock is Pacific Stock Transfer Company.

THE SEC’S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

        Our bylaws provide that directors and officers shall be indemnified by us to the fullest extent authorized by the Nevada Revised Statutes Section 78.7502, against all expenses and liabilities reasonably incurred in connection with services for us or on our behalf. The bylaws also authorize the board of directors to indemnify any other person who we have the power to indemnify under Nevada law, and indemnification for such a person may be greater or different from that provided in the bylaws.

        Our employment agreements with Donald Cameron and James Screaton provide for indemnification of these individuals to the fullest extent permitted by Nevada law. This includes indemnifying each such person for all expenses and liabilities, including criminal monetary judgments, penalties and fines, incurred by such person in connection with any criminal or civil action brought or threatened against such person by reason of such person being or having been our officer or director or employee, except for gross negligence or willful misconduct.

        To the extent that indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

DESCRIPTION OF THE BUSINESS

Overview

        Our primary business is currently to identify opportunities to make direct property acquisitions and to fund exploration and development of oil and natural gas properties of others under arrangements in which we will finance the cost of exploration drilling in exchange for interests in the oil or natural gas revenue generated by the properties. Such arrangements are commonly referred to as farm-ins to us, or farm-outs by the property owners to us.

        We were incorporated in the state of Nevada in August, 2002 as The Flower Valet. We were formed to engage in the business of marketing, selling and distributing floral products, gifts and gourmet foods through the internet at www.flowervalet.com. On September 3, 2002, we became an affiliate of LinkShare, an on-line portal with various links to online suppliers of floral products, gifts and gourmet foods. We were unable to generate any meaningful revenues through our on-line floral business.

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        In 2004, we began to reassess our business plan and to seek business opportunities in other industries, including the oil and gas industry. On December 20, 2004, at our annual meeting of shareholders, our shareholders approved an amendment to our Articles of Incorporation, changing our name from The Flower Valet to Seaside Exploration, Inc. Subsequently, on March 28, 2005, we changed our name from Seaside Exploration, Inc. to Sky Petroleum, Inc. and began actively identifying opportunities to make direct property acquisitions and to fund exploration and development of oil and natural gas properties.

        On March 28, 2005, we increased our authorized capital from 100,000,000 shares of common stock, $0.001 par value per share, to 150,000,000 shares of common stock, $0.001 par value per share. On March 28, 2005, we effected a 4 for 1 forward stock-split of our issued and outstanding shares of common stock, increasing the number of shares outstanding from 6,500,000 to 26,000,000 shares. Information contained in this prospectus gives effect to the forward split. We are also authorized to issue 10,000,000 shares of preferred stock, $0.001 par value per share, and as of December 31, 2005 we have designated 3,055,556 shares of Preferred Stock as Series A Preferred Stock, all of which are currently outstanding. The Series A Preferred Stock is convertible into 12,222,224 shares of common stock.

        We manage our business through our wholly-owned subsidiaries in Cyprus: Sastaro Limited and Bekata Limited.

____________________________________________

Sky Petroleum, Inc.
a Nevada corporation
____________________________________________
              |            
                 |      100%
____________________________________________

Bekata Limited
a Cypus holding company
____________________________________________
             |           
                 |      100%
____________________________________________

Sastaro Limited
a Cypus operating company
____________________________________________

        Sastaro Limited was incorporated on March 28, 2005. Bekata Limited was incorporated on February 7, 2005.

        Our principal corporate and executive offices are located at 108 Wild Basin Road, Suite 222, Austin, Texas 78746. Our telephone number is (512) 437-3582. We maintain a website at www.skypetroleum.com. Information contained on our website is not part of this prospectus.

Mubarek Field - Participation Agreement

        On May 18, 2005, we announced that our wholly-owned subsidiary, Sastaro Limited, entered into a Participation Agreement with Buttes Gas and Oil Co. International Inc., a wholly-owned subsidiary of Crescent Petroleum Company International Limited. Under the terms of the Participation Agreement, Sastaro has the right to participate in a share of the future production revenue by contributing $25 million in drilling costs related to two wells in an off-shore oil and gas project in the United Arab Emirates. The project is located in the Ilam/Mishriff reservoir of the Mubarek Field area near Abu Musa Island in the Arabian Gulf, which we refer to as the “Concession

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Area”. The Participation Agreement does not grant Sastaro any interest in the Concession Area other than the right to receive a share of future production revenue.

        The Participation Agreement obligates Sastaro to pay $25 million in drilling costs related to two wells according to the following schedule:

• $2.0 million within seven days of the later of (i) the signing of the Participation Agreement or (ii) certification by Buttes Gas and Oil’s external auditors that, as of December 31, 2004, Buttes Gas and Oil’s assets were not less than $100 million, its net current assets were not less than $2.5 million and its long term indebtedness was not more than $25 million (paid);

• $2.5 million on June 30, 2005 (paid);

• $2.5 million on July 15, 2005 (paid);

• $4.0 million on October 15, 2005 (paid);

• $1.5 million on November 1, 2005 (paid);

• $ 2.0 million on November 30, 2005 (paid);

• $3.5 million upon the spudding of the first well (paid);

• $3.5 million within 30 days after the spudding of the first well; and

• $3.5 million within 60 days after the spudding of the first well.

        If the actual drilling and completion costs are less than the amounts paid by Sastaro, Buttes Gas and Oil will reimburse Sastaro the difference between the actual drilling and completion costs and the actual amounts paid by Sastaro. If Buttes Gas and Oil estimates that the drilling and completion costs of the second well will increase the total drilling and completion costs of the two wells above $25 million, Sastaro will have the option, but not the obligation, to pay these additional costs. Upon exercising this option, Sastaro will become obligated to pay the total costs of the second well whether above or below Buttes Gas and Oil’s estimate.

        In addition, if Buttes Gas and Oil decides to drill additional wells in the Concession Area, we will have the option to participate in these wells and, upon exercise of the option, will be obligated to pay 100% of the drilling and completion costs of any of these wells.

        If the first well has not been spudded by August 1, 2006, Sastaro may demand repayment of all funds prior to August 1, 2006. However, if on August 1, 2006 Buttes Gas and Oil has a rig under contract to spud the first well not later than September 30, 2006, the right to demand a repayment of funds shall be suspended until September 30, 2006 and if the first well is not spudded by September 30, 2006, Buttes Gas and Oil shall repay all funds paid by Sastaro to that date if then demanded. If Sastaro does not demand the repayment of funds by October 30, 2006, then Sastaro shall be deemed to have elected to have continued with the work program, with Buttes Gas and Oil remaining obligated to spud the first well as soon as reasonably possible thereafter. If, however, Sastaro makes demand for repayment of the funds previously paid by it, then Buttes Gas and Oil shall be entitled to deduct from the amount to be repaid 50% percent of the drilling and completion costs incurred to date (less a 3% overhead charge). Except for the right to demand repayment described in this paragraph, Sastaro’s ability to recover costs funded by it is limited to Sastaro’s right to receive a share of future production revenue as described below.

        If Sastaro defaults on any of its payment obligations outlined above, then:

• if less than $12.5 million has been paid prior to the payment default, then Sastaro will forfeit all funds paid by it and all interest in the wells to Buttes Gas and Oil and all other rights of Sastaro under the Participation Agreement will terminate; or

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• if at least $12.5 million has been paid by Sastaro prior to the payment default, then Buttes Gas and Oil will complete the first well and pay any drilling and completion costs required for such completion if the payments made by Sastaro are insufficient for such purpose.

• In addition, if Sastaro defaults on any payment obligations after paying at least $12.5 million, Sastaro’s right to receive a portion of the production revenue (as described below) may be reduced or limited to the production revenue from the first well, depending on whether the drilling and completion costs for the first well exceeded the amounts paid by Sastaro prior to the default.

        Sastaro has paid Buttes Gas and Oil $14.5 million under the Participation Agreement as of December 31, 2005. The first well was spud on January 31, 2006, and Sastaro paid Buttes Gas and Oil $3.5 million on February 7, 2006.

        In exchange for the payment obligations described above, Sastaro will receive:

• 75% of the combined production revenue from the wells, if any, until Sastaro has been reimbursed its total investment;

• thereafter, 40% of the combined production revenue from the wells, if any, until Sastaro has been reimbursed twice its total investment; and

• thereafter, 9.2% of the combined production revenue from the wells, if any, until the expiration of the Participation Agreement.

• less: (i) a 14.5% contribution to royalty obligations, (ii) $3 per barrel of crude oil attributable to Sastaro’s share of revenue for operating costs and (iii) certain other costs.

• Buttes Gas and Oil will be responsible for all drilling and completion work related to the obligation wells in excess of $25 million.

        If the drilling and completion costs of the first two wells exceed $25 million and those excess costs have been paid by Buttes Gas & Oil, then the payments to Sastaro described above will be decreased proportionately.

        Sastaro may assign its rights and obligations under the Participation Agreement provided that the proposed assignee would not materially impact the business and affairs of Buttes Gas and Oil and subject Buttes Gas and Oil’s approval, which will not be unreasonably withheld.

        The term of the Participation Agreement shall continue until the Mubarek Field has reached the end of its economic life as determined by Buttes Gas and Oil or until otherwise terminated under the terms of the Participation Agreement.

        In January 2006, we announced that Buttes Gas and Oil, the operator of the Mubarak Field, signed a contract with P.T. Apexindo Pratama Duta Tbk (JSX: APEX), the largest Indonesian oil and gas drilling company, to drill the first of two obligation wells using the Rani Woro jackup rig. The Rani Woro can operate to a water depth of 350 feet and has a 25,000 foot drilling capacity.

        Our plan of operation for 2006 is to fund Sastaro’s obligations under the Participation Agreement and to identify and participate in other oil and gas exploration and development projects.

Compensation Agreement

        On May 18, 2005, we entered into a Compensation Agreement with Paraskevi Investment Company S.A. pursuant to which Paraskevi will provide certain advisory services to us in connection with the Participation Agreement in exchange for 1 million shares of our common stock. Under the Compensation Agreement, we are required:

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• to issue to Paraskevi 500,000 shares of the Company’s common stock upon the signing of the definitive Participation Agreement; and

• to issue to Paraskevi an additional 500,000 shares of the Company’s common stock once Sastaro provides US$12.5 million of funding to Buttes Gas and Oil for drilling costs pursuant to the Participation Agreement.

        We issued Paraskevi 500,000 shares of common stock under the terms of the Compensation Agreement in connection with the signing of the Participation Agreement and an additional 500,000 shares of common stock were issued on February 6, 2006.

Mubarek Field Program

        We retained Energy Services Group Dubai (“ESG”) to provide an independent technical review of a project in the Mubarek Field project based on an evaluation of data provided to us by Buttes Gas and Oil. Ian Baron, a director of our company appointed in November 2005, is a founding partner of ESG. Information in this section entitled Mubarek Field Program are based on information contained in ESG’s report.

Overview

        The Mubarek Field was discovered in 1972 and is located in about 200 feet of water 12 kilometers from Abu Musa Island offshore Sharjah, United Arab Emirates.

        The field is a large anticlinal structure with about 600 feet of vertical relief and is approximately 15 by 11 kilometers in area. Hydrocarbons were encountered in the Cretaceous Ilam, Mishrif and Thamama reservoirs. Only the Ilam / Mishrif reservoirs are involved in this in-fill drilling project.

        The area was awarded to a consortium led by Buttes Gas and Oil in the 1970’s, and Butte Gas and Oil has since been involved in exploring and developing oil and gas from all or parts of the area.

        A total of nine production wells were drilled into this reservoir up to 1995, all within a small crestal area. The currently producing wells have a high water cut in view of their maturity. Wells drilled early in the field life

produced at initial rates between 12,000 and 22,000 barrels of oil per day (bopd) and achieved cumulative production of up to 22 million barrels per well. The more recent wells have had cumulative production in excess of 1 million barrels. The reservoir is generally low porosity and fractures play a major role in the production.

Technical Review

        Based on ESG’s assessment, the infill drilling locations proposed by Buttes Gas and Oil are considered to lie within the field limits and above the oil water contact, and both locations are expected to have adequate untapped reserves (although depleted pressures) to justify the drilling of the two wells.

        According to different sources, the initial oil in place estimated for the Ilam/Mishrif reservoir ranges from 275 to 450 million barrels and taking the average of these it is reasonable use the figure of 360 million barrels. Approximately 86 million barrels have been produced putting recovery somewhere between 20% and 30%. Given the recovery to date, the distribution of the wells and the layered nature of the reservoir, it is the view of ESG that there are significant additional recoverable oil reserves remaining in the field. Hence the potential for additional in-

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fill wells. ESG interpret the proposed locations for these wells to well above the oil water contact and they can be reached from existing platforms with available slots.

        Extensive production facilities have been installed during the life of the field and production from the proposed wells will be processed and exported through these facilities. This is expected to enable the wells to be tied in and brought on-stream promptly. In return, an operating fee of $3 per barrel will be paid to Buttes Gas and Oil.

        The field was formed by salt movements related to the major Abu Musa Island salt diaper some 15 kilometers west of the field. The reservoir poro-perm characteristics of the Ilam/Mishrif are generally low and fractures play a major role in the production. Faulting appears limited, based on recent three dimensional (“3D”) interpretation but where it occurs, it probably facilitates water incursion into the reservoir and complicates fluid dynamics in different parts of the field. Regional knowledge suggest faulting may be more ubiquitous than currently interpreted and further work is recommended on this topic as it has a major bearing on reservoir performance.

        The reservoir today is 700 psi above the bubble point and there is no gas cap. There is no pressure maintenance of the reservoir and gas lift is used to enhance oil production. The early wells produced at rates of up to 20,000 bopd and achieved cumulative production of up to 22 million barrels per well. The recent wells, however, have initial production rates at 1500 – 2000 bopd with cumulative production in excess of 1 million barrels, with water cuts in the order of 50% early in the life of the well. In order to reduce the risk of rapid water incursion, it is essential to locate the wells away from faults and areas remote from the depleted crestal area.

3D Seismic Survey

A 3D ocean bottom cable (OBC) seismic survey was carried out in 1997. The data quality is fair due to the effects of the geological section overlying the reservoir. This causes two main problems:

1. severe multiple interference predominantly generated from the Base Miocene Salt reflector. The time from seabed to Base Salt is almost the same as Base Salt to Top Ilam Mishrif reservoir reflector hence the multiple frequently interferes with the most important mapping horizon, and

2. frequency attenuation is caused by the interbedded Fars section above the Miocene Salt which results in frequencies of less than 40 Hz at the reservoir level. This more or less prohibits any seismic analysis within the reservoir interval.

        As a result, the data quality at the reservoir level is limited in its frequency content and has serious multiple interference. This renders accurate fault interpretation across the field difficult. Further analysis of the 3D data using a variety of display techniques suggests the fault pattern may be more extensive than currently mapped.

        In addition to the problems with seismic data quality, the overlying section has rapid lateral velocity variations due to salt movements causing problems in depth conversion. As a result, the seismic data allows mapping of the structure and major faults (>50 feet), but is of limited value in mapping reservoir characteristics.

Reservoir Description

        Well log data over the reservoir section is available on 19 wells in the Mubarek Field. All wells show generally low porosity over the Ilam/Mishrif section, mainly less than 10%. Only 4 wells in the field have core data, however this date clearly shows that even in the better looking reservoir sections, porosity and permeability is low. Based on the well test results showing that wells tested at rates in excess of 15,000 bopd, clearly fracture porosity is playing a major role in the reservoir performance. In addition, erosion and leaching are known to have affected the Ilam/Mishif reservoir in other fields in the area and should be expected to play a role in reservoir performance in Mubarek. Reservoir quality allegedly deteriorates towards the flanks of the structure due to reduction in fracture density away from the crest. However, there is only limited data to support this assertion.

        The reservoir has been described as having 19 zones which can be mapped across the field, 5 in the Ilam, 5 in the Upper Mishrif, 4 in the Middle Mishrif and 5 in the Lower Mishrif.

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        The zones comprise a mixture of carbonate muds and sands and there is significant lateral facies variation within these zones which will influence fluid flow and reserve distribution. Well evidence indicates watering out of some zones confirming reservoir layering to be a significant factor in reservoir performance. A recent reservoir study by Dean Potter, a consulting geologist, has updated this zoning scheme and provides a better understanding of the reservoir and its remaining potential. This analysis is aligned in principle with work the authors have been involved with in other nearby fields with Ilam/Mishrif reservoirs. However there are apparent discrepancies between the log data and the reservoir maps created, and significant interpretive license has been taken in areas remote from well control. This does not reduce the value of the work but increases the level of certainty in reservoir prediction.

        It is noted that the oil water contact is put at around 13,100 feet based on calculations, as it has never been encountered. Based on knowledge from other fields in the area hydrodynamics may cause the oil water contact to be tilted from east to west. This could affect reserve distribution and volume on a field wide scale but will not affect the wells being proposed for this program.

Proposed Drilling Locations

        ESG reviewed 4 potential new well locations on the Mubarek field with the objective of selecting the 2 most optimal for oil production within the Ilam-Mishrif reservoir. Initially a review of the geological, petrophysical and reservoir aspects were made to determine the preferred locations. A geophysical review of the preferred locations was then made to ensure there were no seismic concerns, mainly with respect to faulting.

        The Ilam/Mishrif reservoir within Mubarek field has produced approximately 86 million barrels of oil to date, after first production in 1974. The current oil production rate from the remaining production wells E-1 ST, G-1 and J-1, is approximately 650 barrels of oil per day at a producing water-cut of 92 percent. This is down from initial production levels of approximately 50000 barrels of oil per day at zero water-cut. Estimates of recovery factor vary depending on various estimates of OIIP, however it is considered that the current recovery factor lies between 25 and 30 percent.

        Some 9 wells have been produced from the reservoir over the 31 years of field life, all are located in a small area near the crest of the structure. Many of the wells experienced operational problems during production, resulting in early loss of the well for production purposes (e.g. casing collapse due to external salt pressure).

        Depending on their time on production and when they were drilled, the production character of all wells appears to follow a very similar trend characterized by early water ingress, followed by a rapid increase in water cut to between 50 and 80 percent. This water cut then show steady increase (but at lower rate) through to present day levels.

        The static reservoir pressure data from the wells shows that there is a high level of inter-well communication. In fact, the pressure decline history of all wells through out the history of the field is very nearly identical. Matrix permeability’s generally vary from 0.1 to 10 millidarcies in both Ilam and Mishrif formations. However, interpreted test permeability’s are generally between 1 and 2 orders of magnitude higher than this range. This difference is considered to be likely to natural fracturing within the reservoir and is supported by the highly negative well bore skins calculated from well testing.

Reservoir Drive Mechanism

        It would appear that the drive mechanism for production has been a combination of fluid expansion drive with the reservoir fluid being highly under saturated (bubble point pressure is 3300 psi compared to initial reservoir pressure of 6700 psi) and relatively weak water drive due to water influx.

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        While natural water influx to the reservoir is obviously occurring, describing the path of this influx is very difficult due to the undefined influence of natural fracturing and the fact that most wells were co-mingled from all productive zones. There is also an overall paucity of data describing relative production from specific perforated zones.

        Given that there are many identifiable intervals with good porosity and reasonable permeability, it is considered likely that the nature of the water influx to the reservoir will be a combination of both flooding through the fracture system and the rock matrix itself.

Given the decline in reservoir pressure and considering the rise of aquifer water through the original oil column it is also expected that some degree of water-oil gravity drainage may also be occurring.

Well Location Selection

        The objective of the review was to select those well locations with the highest productive oil potential. The major influences on determining this included the following:

• position on structure

• potential net pay

• well productivity

• water-cut

        Of the 4 well locations pre-selected for review, two locations were selected as being most attractive for potential oil production.

        In terms of well productivity, no clearly identifiable trend has been identified across the field. This is complicated by the co-mingling of production over various reservoir intervals in different wells through the production history of the field. Given the inability to either describe or predict the fracture system within the reservoir (which clearly dominates resultant well productivity) any predictions of well productivity at particular locations will carry a high degree of uncertainty.

        Given the difficulty in determining how (or more importantly where) water influx to the reservoir has occurred, any identification of areas of un-swept oil within the reservoirs will also be difficult. It should also be considered that while well productivity and fracturing are clearly linked, fracturing is also likely to influence water influx, in that water from the aquifer will sweep through the fracture system preferentially.

        Well locations have been assessed with consideration to optimal structural position and net pay. Another dominant factor in selecting locations has been the consideration of likely initial water-cut. In this case, the optimal locations will potentially have the lowest possible initial water-cut resulting in the highest possible oil rate. The two chosen locations are considered to fulfill this criteria from within the 4 pre-selected well locations.

        The chosen well locations are also slightly more peripheral to the central well area when compared to the rejected locations. It is possible therefore, that these wells may not be so pervasively fractured as compared to the wells located near to the crest of the structure. Normally, a greater intensity of fracturing would be expected at the crest of the structure than on the flanks.

        To some degree, a lower intensity of fracturing at the flank locations may decrease the productive potential of the well. However, more importantly, it decreases the possibility that the area has been swept by aquifer water thereby allowing for the potential of considerably lower water cut during the initial production period. It is considered that this could result in higher overall oil rates being achieved.

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        In January 2006, we announced that Buttes Gas and Oil, the operator of the Mubarak Field, signed a contract with P.T. Apexindo Pratama Duta Tbk (JSX: APEX), the largest Indonesian oil and gas drilling company, to drill the first of two obligation wells using the Rani Woro jackup rig. The Rani Woro can operate to a water depth of 350 feet and has a 25,000 foot drilling capacity. Buttes Gas and Oil spudded the first well on January 31, 2006.

        Buttes Gas and Oil estimated that the first well, Mubarak H-2, will take approximately 75 days to complete and results are anticipated prior to the end of April 2006. The rig will then be moved off location to another operator for one well and subject to the terms of the Agreement, will return to the Mubarak Field in approximately six months to drill and complete the Mubarak J- 3 well. We expect the second obligation well will be completed prior to the end of 2006.

        On September 15, 2005, we announced the target locations for the infill wells to be drilled to the Ilam/Mishrif reservoir in the Mubarek Field had been selected. The wells will be drilled from existing platforms into the Ilam/Mishrif oil reservoir. The H-2 and J-3 wells target locations are located approximately one kilometer from wells which have produced oil from the Ilam/Mishrif. The field has complete 3D seismic coverage and extensive production and export infrastructure already in place with adequate capacity to process production from the two new wells.

Sir Abu Nu’Ayr Island Project.

         Pursuant to the Participation Agreement, we have the right of first refusal to participate in a project that is expected to result in an exploration program conducted by Buttes Gas and Oil, or its affiliate, as concession operator, in a concession located in the offshore waters around Sir Abu Nu’Ayr Island. The island of Sir Abu Nu’Ayr, which sits in the center of the concession area, is part of the Emirate of Sharjah but is located in the middle of the offshore oil territory of Abu Dhabi. We expect to successfully negotiate an agreement with Buttes Gas and Oil with respect to Sir Abu Nu’Ayr during the next twelve months. We are presently planning a potential comprehensive 3D seismic survey around the Island to further evaluate the project’s potential.

Employees and Consultants

        As of December 31, 2005, we have retained the services of four consultants:

• James Screaton to serve as our Vice President, Finance and Chief Financial Officer,

• Michael Noonan to serve as our Vice President, Corporate,

• Daniel Meyer to serve as our President, Secretary and Treasurer, and

• Donald Cameron to provide general consulting services.

        We have an employment agreement with Brent Kinney, our chief executive officer.

        We also have a consulting agreement with Energy Services Group Dubai (ESG). Ian Baron, a director of our company, is a founding partner of ESG.

        We had no other employees or consultants.  In order to control costs and limit the number of our administrative personnel, we anticipate that we will retain consultants to provide or that our consultants will provide administrative type services during until we are able to generate sufficient revenues from operations, if any, to hire personnel.  

Competition

        The oil and natural gas industry is intensely competitive, and we compete with other companies that have greater resources. Many of these companies not only explore for and produce oil and natural gas, but also carry on

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midstream and refining operations and market petroleum and other products on a regional, national or worldwide basis. These companies may be able to pay more for productive oil and natural gas properties and exploratory prospects or define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, these companies may have a greater ability to continue exploration activities during periods of low oil and natural gas market prices. Our larger or integrated competitors may be able to absorb the burden of existing, and any changes to, federal, state, local and tribal laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to acquire additional properties and to discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, because we have fewer financial and human resources than many companies in our industry, we may be at a disadvantage in bidding for exploratory prospects and producing oil and natural gas properties.

Government regulation

        The operations of Buttes Gas & Oil on the Ilam-Mishrif reservoir project in Sharjah, United Arab Emirates are subject to intense governmental regulation.

DESCRIPTION OF PROPERTY

        Our principal corporate and executive offices are located at 108 Wild Basin Road, Suite 222, Austin, Texas 78746. Our telephone number is (512) 437-2582. We rent our office space. We do not currently maintain any investments in real estate, real estate mortgages or securities of persons primarily engaged in real estate activities, nor do we expect to do so in the foreseeable future.

MANAGEMENT’S DISCUSSION AND ANALYSIS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under “Risk Factors and Uncertainties” and elsewhere in this prospectus.

        This discussion and analysis should be read in conjunction with the accompanying Consolidated Financial Statements and related notes. The discussion and analysis of the financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis the company reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that the company believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but the company does not believe such differences will materially affect our financial position or results of operations. Critical accounting policies, the policies the company believes are most important to the presentation of its financial statements and require the most difficult, subjective and complex judgments, are outlined below in “Critical Accounting Policies,” and have not changed significantly.

        In addition, certain statements made in this report may constitute “forward-looking statements”. These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Except for historical information, the matters set forth herein, which are forward-looking statements, involve certain risks and uncertainties that could cause actual results to differ. Potential risks and uncertainties include, but are not limited to, Sky Petroleum’s ability to raise additional capital to fund its commitments under the Participation Agreement, the success of the proposed infill drilling programs, Sky Petroleum’s ability to access opportunities, the contemplated

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continued production at the Mubarek field, our expectations related to the Sir Abu Nu’Ayr Island Project, the competitive environment within the oil and gas industry, the extent and cost effectiveness with which Sky Petroleum is able to implement exploration and development programs in the oil and gas industry, obtaining drilling equipment on a timely fashion, commodity price risk, and the market acceptance and successful technical and economic implementation of Sky Petroleum’s intended plan. Forward-looking statements can be identified by terminology such as “may,” “will,” “should,”“expects,” “intends,” “plans,” “anticipates,”“believes,” “estimates,” “predicts,” “potential,”“continues” or the negative of these terms or other comparable terminology. Although Sky Petroleum believe that the expectations reflected-in the forward-looking statements are reasonable, the company cannot guarantee future results, levels of activity, performance or achievements.

Overview

        We are an oil and gas exploration company, with the primary focus of seeking opportunities where discoveries can be appraised rapidly and advanced either by using existing infrastructure or by entering into arrangements with joint-venture partners.

        As part of our business strategy, we, through our wholly-owned subsidiary, Sastaro, entered into a Participation Agreement for the financing of a drilling program in the Mubarek field, an offshore region in a concession area surrounding Abu Musa Island in the Arabian Gulf, with Buttes Gas and Oil Co. International Inc., a wholly-owned subsidiary of Crescent Petroleum Company International Limited. Under the terms of the Participation Agreement, Sastaro has the right to participate in a share of the future production revenue by contributing $25 million in drilling costs related to two wells in an off-shore oil and gas project in the United Arab Emirates. The Participation Agreement does not grant Sastaro any interest in the concession area other than the right to receive a share of future production revenue, if any.

        We were incorporated on August 22, 2002, pursuant to the laws of the State of Nevada under the name of The Flower Valet. In 2004, we began to reassess our business plan and to seek business opportunities in other industries, including the oil and gas industry. On December 20, 2004, at our annual shareholder’s meeting, our shareholders voted to change the management and approve the change of our name to Seaside Exploration, Inc. Subsequently, on March 28, 2005, we changed our name to Sky Petroleum, Inc.

        Since our incorporation on August 22, 2002 through December 31, 2004, we were primarily engaged in the business of marketing, selling and distributing floral products, gifts and gourmet foods through its website. We only generated $49 in revenues during this period. As a result of determining the potential lack of viability of its previous business model, and the lack of capital to pursue the previous business model, the company changed its business strategy and decided to pursue other business opportunities in the oil and gas industry. Since our inception through September 30, 2005, we had a net cumulative loss of $3,481,222.

Plan of Operation

        Our plan of operation and business strategy is to focus on producing or near-production oil and gas properties in the Middle East and North Africa. We intend to seek niche opportunities through the contacts of our officers and directors in the region. We intend to limit our administrative and overhead expenses by seeking operating partners and participating in projects as non-operator. We intend to use contractors or consultants as much and where possible.

        As the Company has sufficient working capital, our goal during the next twelve months ending December 31, 2006 is to drill two commitment wells in our first project in the Mubarek Field under the Participation Agreement with BGOI, and to assess and obtain additional joint venture opportunities in new regions.

        The strategic overview of Sky Petroleum is as follows:

• To identify opportunities to participate in oil and gas projects in the Middle East and North Africa through strategic participation agreements, farm-ins or joint ventures.

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• To focus initially on lower risk development or exploitation projects in areas with known oil or natural gas reserves / production and infrastructure.

• To participate as a non-operator on projects with working operators with experience in a specific region.

• To raise sufficient capital to fund our operations and to establish ongoing production revenue.

        Our plan of operation includes the following goals during the next twelve months:

• Fund two wells in Mubarek Field in United Arab Emirates to be drilled by BGOI.

• Evaluate new farm-in / joint venture opportunities in the Middle East or North Africa.

• First production from the Mubarek Field is expected.

• Evaluate additional infill drilling locations in Mubarek Field.

• Negotiate an agreement with BGOI on Sir Abu Nu’Ayr project and fund a work program.

        There can be no assurance that we will successfully implement our business strategy or meet our goals during the next twelve months, if ever.

Liquidity and Capital Resources

        A critical component of our operating plan is the ability to obtain additional capital through additional equity and/or debt financing. Sky Petroleum does not anticipate receiving enough positive internal operating cash flow, if any, until it can generate substantial revenues from its participation interests, which may take the next few years to fully realize, if ever. In the event we cannot obtain the necessary capital to pursue our strategic plan, we may have to cease or significantly curtail our operations. This would materially impact our ability to continue operations.

        Since inception, we have financed our cash flow requirements through the issuance of common stock and preferred stock. As we expand our activities, we may continue to experience net negative cash flows from operations, pending receipt of revenues. Additionally we anticipate obtaining additional financing to fund operations through common stock or preferred stock offerings, debt financings and bank borrowings, to the extent available, or to obtain additional financing to the extent necessary to augment working capital.

        As of December 31, 2005, we have raised approximately $38.0 million through private placements of shares of common stock and shares of convertible preferred stock. During the nine month period ended September 30, 2005, we raised short-term bridge financing by issuing $4.15 million in notes, $2.95 million plus applicable interest of $28,000 of which were converted into common stock in the financing closed on August 15, 2005, and the remaining notes, including all accrued interest, were retired with proceeds from the same offering. In December 2005, we raised an additional $16 million.

        As of December 31, 2004, we had assets of $6,542 and $0 in liabilities, resulting in a shareholder’s equity of $6,542. During the year ended December 31, 2004, we did not raise any capital.

        As of September 30, 2005, we had current assets of $12,299,354, including cash and cash equivalents of $12,299,324, and current liabilities of $77,809.

        On January 7, 2005 and March 12, 2005, we raised $200,000 in bridge financing by issuing demand promissory notes with interest thereon at 8% per annum. The notes were subsequently repaid, including interest, in August, 2005.

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        On April 6, 2005, we issued 5,000,000 shares of common stock at $0.50 per share in a private placement totaling $2.5 million. We incurred costs of $655 in connection with the offering. We filed a registration statement with the Securities and Exchange Commission to register the resale of these securities.

        In May, 2005, we advanced $2 million to Sastaro to fund its initial commitment to Buttes Gas & Oil under the Participation Agreement.

        In June 2005, we received various bridge loans totaling $1,500,000 due on demand and bearing interest at a rate of 8%. Proceeds from the loans were used to meet funding commitments under the Participation Agreement. We repaid these bridge loans in August 2005, as described below.

        In July, 2005, we received additional bridge loans totaling $2.45 million dollars due on demand and bearing interest at a rate of 8%. Proceeds from loans were used to meet funding commitments to Buttes Gas & Oil under the Participation Agreement. We repaid these bridge loans in August 2005, as described below.

        On July 26, 2005, we issued a total of 1,716,687 shares of common stock, which included the 1,150,000 shares of common stock issuable pursuant to the subscriptions we accepted during the quarter ended June 30, 2005, and additional 566,687 shares of common stock issuable at $0.80 per share to raise approximately $453,350 (less a placement fee of 10%). We filed a registration statement with the Securities and Exchange Commission to register the resale of these securities.

        In August, 2005, we accepted subscriptions to purchase 8,841,178 shares of common stock at $0.80 per share for total proceeds of approximately $7,072,942.40 (less a placement fee of 10%) and issued a treasury order to our transfer agent. Our transfer agent delivered the shares certificate to the investors on September 9, 2005. The holders of the bridge loans in the principal amount of $2,950,000 plus interest of $28,000 described above subscribed for shares of common stock in the private placement. In addition, a portion of the proceeds from this private placement were used to repay the remaining notes payable. This included notes of $200,000 and bridge loans of $1,000,000 that were issued in July, 2005. Interest of $15,408 was paid on these notes in August. We filed a registration statement with the Securities and Exchange Commission to register the resale of these securities.

        In August 2005, we accepted for cancellation 12,000,000 shares of common stock from Daniel Meyer, a director.

        As of September 30, 2005 and December 31, 2005, we had no outstanding bridge loans.

        On September 20, 2005 we issued 3,055,556 shares of Series A Preferred Stock to one investor at a price per share of $3.60 for aggregate gross proceeds to us of $11,000,000. Each share of Series A Preferred Stock is initially convertible into four of our shares of Common Stock, subject to adjustment for stock splits, recapitalization or other reorganizations. In addition, the Series A Preferred Stock have broad-based weighted average antidilution protection that will cause the conversion price to adjust downward in the event that we issue shares of Common Stock or securities convertible into Common Stock at a price of less than the conversion price of the Series A Preferred Stock then in effect. The shares of Series A Preferred Stock may be converted into Common Stock at the option of the holder. In addition, at any time after the closing bid price for our Common Stock on the NASD OTCBB or the primary United State exchange on which the Common Stock is then traded exceeds $3.00 during any five consecutive trading days, we may, at our sole option, convert the Series A Preferred and any accrued but unpaid dividends into Common Shares at the then-applicable conversion price by providing written notice of such conversion to the holders of the Series A Preferred; provided that there is an effective registration statement under the Securities Act registering the resale of the Common Stock to be issued upon such conversion. Each share of Series A Preferred Stock is entitled to receive a dividend of 7% per annum prior and in preference to our Common Stock. The dividend begins to accrue on December 30, 2005 and will be payable quarterly thereafter. The dividend is cumulative. In the event of a liquidation or acquisition of the Company, the holders of the Series A Preferred Stock will be entitled to receive an amount equal to any accrued and unpaid dividend prior and in preference to any distributions to the holders of the Common Stock. Thereafter, the holders of the Series A Preferred Stock will be entitled to participate in distributions on an as converted to Common Stock basis. The holders of the Series A Preferred Stock are entitled to elect one director to the Company’s board of directors. In addition, the holders of the Series A Preferred Stock shall vote on all other matters on an “as converted” to Common Stock basis.

48

        On December 16, 2005, we issued a treasury order to issue 16,013,620 shares of unregistered common stock at a price of $1.00 per share from investors for aggregate gross proceeds of 16,013,620. Certain individuals served as placement agents for this offering and received payments equal to 10% of the funds raised by such placement agent. We granted registration rights to each of the investors and filed a registration statement to register the shares.

        On February 6, 2006, we issued 500,000 shares as compensation under the terms of a Compensation Agreement dated May 18, 2005 with Paraskevi Investment Company S.A.

        On February 7, 2006, we, through our subsidiary, Sastaro, paid $3.5 million to Buttes Gas and Oil in accordance with the terms of the Participation Agreement, which required payment on the spudding of the first well. Buttes Gas and Oil spudded the first well on January 31, 2006.

        Over the next twelve months, we believe that existing capital and anticipated funds from operations, if any, will not be sufficient to sustain operations and planned funding of Sastaro’s obligations under the Participation Agreement. We may seek additional capital to fund growth and expansion through private equity or debt financing or credit facilities.

         Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies searching for opportunities in the oil and gas industry. Such risks include, but are not limited to, our ability to secure a drilling rig, our ability to successfully drill for hydrocarbons, commodity price fluctuations, delays in drilling or bringing production, if any, on line, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, implement and successfully execute our business and development plan, successfully identify future drilling locations, continue to rely on Buttes Gas and Oil’s efforts, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

Off-Balance Sheet Arrangements

        We have no off-balance sheet arrangements.

Inflation

        We do not believe that inflation has had a significant impact on our consolidated results of operations or financial condition.

Critical Accounting Policies

Use of estimates

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.

Fair value of financial instruments

        Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2005. The respective carrying value of certain on-balance sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable and notes payable. Fair values were assumed to approximate carrying values for cash, payables and notes payable

49

because they are short term in nature and their carrying amounts approximate fair values as they are payable on demand.

Impairment of long lived assets

        Long lived assets held and used by us are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable or is impaired. No such impairments have been identified by management at December 31, 2005.

Income taxes

        We follow Statement of Financial Accounting Standard No. 109, “Accounting for Income Taxes” (“SFAS No. 109”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

Recent pronouncements

        In December, 2004, the FASB issued SFAS No. 123 (revised 2004) Share-Based Payment, which is a revision of SFAS No.123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends SFAS No. 95, Statement of Cash flows. Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The new standard will be effective for us in the first interim or annual reporting period beginning after December 15, 2005. We expect the adoption of this standard will have a material impact on its financial statements as stock options were granted in July, 2005 to an employee.

Contractual Obligations

        As of December 31, 2005, we had the following contractual obligations:

	Payments Due by Period
	Total		Less than 1 Year		2-3 Years		4-5 Years		More than 5 Years
Long-term Debt	$	Nil	$	Nil	$	Nil	$	Nil	$	Nil
Contractual Obligation(1)		10,500,000		10,500,000
Contractual Obligations(2)		595,000		210,000		385,000
Contractual Obligations(3)		77,000		77,000
Total		11,172,000		10,787,000		385,000

50

(1) On May 18, 2005, the Company’s wholly-owned subsidiary, Sastaro Limited, entered into a “Participation Agreement” with Buttes Gas and Oil Co. International, Inc. (“BGOI”), a wholly-owned subsidiary of Crescent Petroleum Company International Limited, whereby the Company will provide cash in the amount of $25,000,000, to be used for drilling costs associated with two oil wells located in the Arabian Gulf in exchange for a variable percentage of future production revenue. Pursuant to the Agreement, the Company will provide capital to BGOI in developmental increments. Upon commencement of production, the Company will receive a preferred 75% of combined production revenue until such time as the Company has recouped its initial investment and thereafter an incremental decrease of production revenue to 40% until the Company has recouped two times its initial investment and thereafter at 9.2%. To the period ended December 31, 2005, the Company has paid $14,500,000 to BGOI pursuant to the Agreement. The Company has additional commitments of $10,500,00 as follows: (i) $3,500,000 upon spudding the first well, which occurred January, 2006 (paid in February, 2006); (ii) $3,500,000 within 30 days of spudding the first well; and (iii) $3,500,000 within 60 days of spudding the first well.

(2) On November 1, 2005, the Company entered into an employment agreement with Brent D. Kinney, under which Mr. Kinney was appointed as the chief executive officer of the Company (“CEO”) for a period of three years. In connection with Mr. Kinney’s appointment, the Company agreed to pay Mr. Kinney $17,500 per month. The annual commitment for future compensation is $210,000 per year.

(3) In connection with the appointment of Mr. Kinney, the Company accepted the resignation of Mr. Cameron as the Company’s chief executive officer and entered into a separation agreement with Donald C. Cameron and Donald C. Cameron Consulting Ltd. (the “Separation Agreement”). Under the terms of the Separation Agreement, the Company agreed to pay Mr. Cameron a monthly severance payment of $11,000 per month through July 31, 2006.

        We believe that we have sufficient working capital to meet our currently anticipated expenditure levels for the next 12 months. Working capital is estimated to be $18.4 million at December 31, 2005.

Quantitative and Qualitative Disclosures About Market Risk

        We hold a participation interest in an oil and gas project. As a result, changes in the price of oil and gas could significantly affect our stock price. We hold our cash and cash equivalents in U.S. dollars and our obligations are in U.S. dollars. Consequently, we do not face currency exchange risks. We do not have any debt that would expose us to market risks related to changes in interest rates.

        Our ability to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. The accompanying financial statements do not include any adjustments that might be required should we be unable to recover the value of our assets or satisfy our liabilities.

MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

        Our common stock is quoted on the OTC Bulletin Board which is sponsored by the National Association of Securities Dealers (NASD). The OTC Bulletin Board is a network of security dealers who buy and sell stock. The dealers are connected by a computer network which provides information on current “bids” and “asks” as well as volume information. The OTC Bulletin Board is not considered a “national exchange.” Our common shares commenced trading on the OTC Bulletin Board in November 2003.

        The high and low bid quotations of our common stock on the OTC Bulletin Board as reported by the NASD were as follows:

Period	High	Low
2005
First Quarter	$      1.276	$      1.276
Second Quarter	$        1.09	$        0.54
Third Quarter	$        1.72	$        0.97
Fourth Quarter	$        2.20	$        1.55
2004
First Quarter	$        0.51	$        0.00
Second Quarter	$        0.51	$        0.10
Third Quarter	$        0.50	$        0.50
Fourth Quarter	$        0.50	$        0.15

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Period	High	Low
2003
November 3 to December 31(1)	$        --	$        --

⁽¹⁾ Our shares were initially quoted for trading on November 3, 2003. There was no quote during the period from November 3, 2003 to December 31, 2003.

        The above quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.

        As of February 10, 2006, the closing bid quotation for our common stock was $1.95 per share as quoted by the NASD OTCBB.

        As of December 31, 2005, we had 46,571,485 shares of common stock issued and outstanding, held by 141 registered shareholders.

        The declaration of dividends on our shares is within the discretion of our board of directors and will depend upon the assessment of, among other factors, results of operations, capital requirements and the operating and financial condition of Sky Petroleum. The Board has never declared a dividend. At the present time, we anticipate that all available funds will be invested to finance the growth of our business.

        Given our recent change in business, we do not believe that a performance graph comparing yearly percentage change with a market index is relevant.

TRANSFER AGENT AND REGISTRAR

        Our registrar and transfer agent for our common and preferred stock is Pacific Stock Transfer Company located at 500 East Warm Spring Road, Suite 240, Las Vegas, Nevada 89119.

USE OF PROCEEDS

        We will not receive any proceeds from the sale of shares by the selling shareholders.

LEGAL MATTERS

        The law firm of Woodburn and Wedge, Reno, Nevada has acted as our counsel by providing an opinion on the validity of the securities.

EXPERTS AND CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        We have not changed auditors since our inception.

WHERE YOU CAN FIND MORE INFORMATION

        We are subject to the informational requirements of the Exchange Act and, accordingly, file current and periodic reports, proxy statements and other information with the SEC. We have also filed a registration statement on Form S-1 under the Securities Act, as amended, in connection with this offering. This prospectus, which is part of the registration statement, does not contain all of the information contained in the registration statement. For further information with respect to us and the shares of common stock offered hereby, reference is made to such registration statement, including the exhibits thereto, which may be read, without charge, and copied at the public reference facilities maintained by the SEC at Judiciary Plaza, 100 F. Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains a site on the World Wide Web at http://www.sec.gov that contains current and periodic reports, proxy statements and other information regarding registrants that filed electronically with the SEC. Statements contained in this prospectus as to the intent of any contract or other document referred to are not necessarily complete, and in

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each instance reference is made to the copy of such contract or other document filed as an exhibit to this registration statement, each such statement being qualified in all respects by such reference.

53

INDEX TO FINANCIAL STATEMENTS

UNAUDITED INTERIM FINANCIAL STATEMENTS FOR SEPTEMBER 30, 2005

Consolidated Balance Sheet F-2

Consolidated Statement of Operations F-3

Consolidated Statements of Cash Flows F-4

Notes to Unaudited Consolidated Financial Statements F-5

AUDITED FINANCIAL STATEMENTS (Restated)

Report Of Independent Registered Public Accounting Firm F-11

Balance Sheet Restated F-12

Statement of Operations Restated F-13

Statement of Changes in Stockholders’ Equity Restated F-14

Statement of Cash Flows Restated F-15

Notes Restated F-16

F-1

Sky Petroleum, Inc.
(formerly Seaside Exploration, Inc.)
(a Development Stage Company)
Consolidated Balance Sheet
(Unaudited)

	September 30 2005
Assets
Current assets:
Cash and cash equivalents	$	12,299,324
Prepaid expenses		30
Total current assets		12,299,354
Other assets:
Deposits		475
Capitalized oil & gas development (note 5)		7,000,000
Total other assets		7,000,475
	$	19,299,829
Liabilities and Stockholders' Equity
Current liabilities
Interest payable	$	16,500
Accrued expenses		61,309
Total current liabilities		77,809
Stockholders' Equity:
Preferred stock, $0.001 par value, 10,000,000
shares authorized, 3,055,556 shares issued and
outstanding (notes 6 and 8)		3,056
Common stock, $0.001 par value, 150,000,000
shares authorized, 30,057,865 shares issued and
outstanding (note 6)		30,058
Stock subscriptions payable (note 6)		203,660
Additional paid-in capital		22,470,178
Foreign currency re-measurement		(3,710	)
(Deficit) accumulated during development stage		(3,481,222)
		19,222,020
	$	19,299,829

The Accompanying Notes are an Integral Part of These Consolidated Unaudited Financial Statements.

F-2

Sky Petroleum, Inc.
(a Development Stage Company)
Consolidated Statement of Operations
(Unaudited)

	Three Months Ending September 30						Nine Months Ending September 30						August 22, 2002 (inception) to September 30,
	2005			2004			2005			2004			2005
Revenue	$	--		$	--		$	--		$	49		$	49
Expenses:
Consulting services		161,225			--			302,905			--			302,905
Stock-based compensation (note 7)		--			--			520,000			--			520,000
Compensation - related party (note 9)		15,000			--			45,500			--			45,500
Financing fees		1,952,571			--			1,952,571			--			1,952,571
Investor relations expense		189,396			--			189,396			--			189,396
Professional fees		168,141			--			195,891			--			195,891
General and administrative expenses		64,052			750			171,593			3,500			202,101
Total expenses		2,550,385			750			3,377,856			3,500			3,408,364
Net operating (loss)		(2,550,385	)		(750	)		(3,377,856	)		(3,451	)		(3,408,315	)
Other income (expense)
Interest (expense)		(39,627	)		--			(43,627	)		--			(43,627	)
Foreign currency gain (loss)		205			--			(29,280	)		--			(29,280	)
Net (loss)	$	(2,589,807	)	$	(750	)	$	(3,450,763	)	$	(3,451	)	$	(3,481,222	)
Weighted average number of common shares
outstanding - basic and fully diluted		31,227,770			26,000,000			28,744,319			26,000,000			--
Net (loss) per share	$	(0.08	)	$	(0.00	)	$	(0.12	)	$	(0.00	)		--

The Accompanying Notes are an Integral Part of These Consolidated Unaudited Financial Statements.

F-3

Sky Petroleum, Inc.
(a Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)

	Nine Months Ending September 30,						August 22, 2002 (inception) to September 30,
	2005			2004			2005
Cash flows from operating activities
Net (loss)	$	(3,450,763	)	$	(3,451	)	$	(3,481,222	)
Shares issued for compensation		520,000			--			520,000
Adjustment to reconcile net (loss) to net
cash used by operations
Prepaid expenses		(30	)		--			(30	)
Deposits		(475	)		--			(475	)
Accrued expenses		61,309			--			61,309
Interest payable		16,500			--			16,500
Net cash (used) by operating activities		(2,853,459	)		(3,451	)		(2,883,918	)
Cash flows from investing activities
Oil and gas development		(7,000,000	)		--			(7,000,000	)
Net cash (used) in investing activities		(7,000,000	)		--			(7,000,000	)
Cash flows from financing activities
Proceeds from notes payable		4,150,000			--			4,150,000
Payments on notes payable		(4,150,000	)		--			(4,150,000	)
Stock subscriptions		203,660			--			203,660
Foreign currency re-measurement		(3,710	)		--			(3,710	)
Issuance of common stock		10,946,292			--			10,983,292
Issuance of preferred stock		11,000,000			--			11,000,000
Net cash provided by financing activities		22,146,242			--			22,183,242
Net (decrease) increase in cash and cash
equivalents		12,292,783			(3,451	)		12,299,324
Cash and cash equivalents- beginning		6,542			27,024			--
Cash and cash equivalents - ending	$	12,299,324		$	23,573		$	12,299,324
Supplemental disclosures:
Interest paid	$	43,627		$	--		$	43,627
Income taxes paid	$	--		$	--		$	--
Shares issued for services	$	520,000		$	--		$	520,000
Number of shares issued for services		500,000			--			500,000

The Accompanying Notes are an Integral Part of These Consolidated Unaudited Financial Statements.

F-4

Sky Petroleum, Inc.
(a Development Stage Company)
Notes to Unaudited Consolidated Financial Statements

Note 1 — Organization

The Company was organized on August 22, 2002 (Date of Inception) under the laws of the State of Nevada, as The Flower Valet. On December 20, 2004, the Company amended its articles of incorporation to change its name to Seaside Exploration, Inc. Subsequently, on March 28, 2005, the company changed its name to Sky Petroleum, Inc. During the first six months of 2005, the Company reassessed its business plan and begun pursuing opportunities in the oil and gas industry. In May, 2005, the Company signed an agreement to participate in a development drilling opportunity in the United Arab Emirates (see note 5).

In order to manage its international oil and gas operations, the Company established two corporations in Cyprus. Bekata Limited, a wholly-owned subsidiary of Sky Petroleum, Inc. owns a 100% interest in Sastaro Limited (“Sastaro”). Sastaro is the entity that signed the Participation Agreement in the United Arab Emirates discussed in note 5 to these financial statements.

These consolidated financial statements include the assets and liabilities of Sastaro Limited and Bekata Limited.

Note 2 — Basis of Presentation

The condensed interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. It is suggested that these condensed interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2004 and notes thereto included in the Company’s Form 10-KSB annual report. The Company follows the same accounting policies in the preparation of interim reports.

Results of operation for the interim period are not indicative of annual results.

Note 3 – Oil and Gas Properties

The Company follows the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration, and development of oil and gas reserves, including directly related overhead costs and interest, are capitalized.

Note 4 — Notes Payable

On January 7, 2005, the Company entered into a Demand Promissory Note with Harbin Corporation for the principal amount of $100,000 with interest thereon at 8% per annum.

On March 12, 2005, the Company entered into a second Demand Promissory Note with Harbin Corporation for the principal amount of $100,000 with interest thereon at 8% per annum.

On August 17, 2005, the Company made payments of $200,000 to repay the Harbin notes issued in January and March. Interest of $8,329 was paid on these notes.

F-5

Sky Petroleum, Inc.
(a Development Stage Company)
Notes to Unaudited Consolidated Financial Statements

Note 4 – Notes Payable (continued)

On June 29, 2005, the Company received various bridge loans totaling $1,500,000 due on demand and bearing interest at a rate of 8%. Proceeds from loans were used to meet funding commitments of its “Participation Agreement” dated May 18, 2005.

In July 2005, the Company received additional bridge loans totaling $2,450,000 due on demand and bearing interest at a rate of 8%. Proceeds from loans were used to meet funding commitments of its “Participation Agreement” dated May 18, 2005.

On August 15, 2005, the Company made principal payments of $1,000,000 and $7,014 in interest to repay a portion of the bridge loans received in June. Certain of the note holders elected to convert the remaining bridge loans totaling $2,950,000 together with $28,285 in interest to 3,722,856 common shares.

There are no outstanding notes payable as of September 30, 2005.

Note 5 – Commitments

Effective April 1, 2005, the Company entered into a “Consulting Agreement” with Donald C. Cameron Consulting Ltd. whereby Mr. Cameron would provide services as Chief Executive Officer until July 31, 2006. The agreement provides for compensation in the amount of $11,000 per month. The aggregate commitment for future compensation at September 30, 2005, excluding bonuses, was approximately $110,000. As discussed in note 10, this arrangement has subsequently been cancelled.

On May 18, 2005, the Company’s wholly owned subsidiary, Sastaro Limited, entered into a “Participation Agreement” with Buttes Gas and Oil Co. International, Inc., (“BGOI”) a wholly-owned subsidiary of Crescent Petroleum Company International Limited, whereby the Company will provide cash in the amount of $25,000,000, to be used for drilling costs associated with two oil wells located in the Arabian Gulf in exchange for a variable percentage of future production revenue. Pursuant to the Agreement, the Company will provide capital to BGOI in developmental increments. Upon commencement of production, the Company will receive a preferred 75% of combined production revenue until such time as the Company has recouped its initial investment and thereafter an incremental decrease of production revenue to 40% until the Company has recouped two times its initial investment and thereafter at 9.2%. To the period ended September 30, 2005, the Company has paid $7,000,000 to BGOI pursuant to the Agreement.

On May 18, 2005, the Company entered into a “Consulting Agreement” with Paraskevi Investment Company S.A. (“PARA”) whereby the Company has agreed to issue PARA 1,000,000 shares of its common stock for services rendered in connection with the “Participation Agreement.” Pursuant to the Agreement, stock will be issued in 500,000 increments based on two milestones. The first issuance occurred upon signing of the aforementioned “Participation Agreement” and the second issuance shall be made at the point the Company has provided $12,500,000 of its capital obligation to BGOI. As of September 30, 2005 $7,000,000 of the obligation has been fulfilled.

On September 20, 2005, the Company issued 3,055,556 of $.001 par value shares of Series A Preferred Stock at $3.60 per share under Regulation-S for cash totaling $11,000,000. The Company agreed to hold any unused funds in short-term investment and remit any interest earned thereon to the investor for a period of 90 days after the closing of the sale of the shares in lieu of payment of a dividend during such period. As of September 30, 2005, the investment has earned $16,500 in interest; the Company has recorded interest payable of $16,500.

F-6

Sky Petroleum, Inc.
(a Development Stage Company)
Notes to Unaudited Consolidated Financial Statements

Note 6 — Stockholders’ Equity

On March 28, 2005, the Company increased its authorized shares from 100,000,000 to 150,000,000 shares of its $0.001 par value common stock.

On March 28, 2005, the Company approved a forward stock split on the basis of 4 for 1. All stock issuances have been retroactively restated.

On May 12, 2005, the Company issued 5,000,000 shares of its $0.001 par value common stock for cash in the amount of $2,500,000 to four accredited offshore investors pursuant to subscription agreements dated April 6, 2005.

On May 20, 2005, the Company issued 500,000 shares to PARA in exchange for services provided in connection with the execution of a material “Participation Agreement”. The Company has recorded an expense in the amount of $520,000, the fair value of the underlying shares as of June 30, 2005.

On August 4, 2005, the Company issued 1,716,687 shares of its $0.001 par value common stock for cash in the amount of $1,373,350 to thirteen accredited investors.

On August 15, 2005, certain of the note holders elected to convert bridge loans in note 4 above totaling $2,950,000 together with $28,285 in interest to 3,722,856 common shares issued on September 9, 2005 pursuant to subscription agreements dated June 29, 2005.

On September 9, 2005, the Company issued 5,118,322 shares of its $0.001 par value common stock for cash in the amount of $4,094,658 to 100 accredited investors pursuant to subscription agreements dated August 25, 2005.

On September 6, 2005, an officer and director of the Company contributed 12,000,000 common shares as additional capital pursuant to the August 25, 2005, contribution agreement.

On September 20, 2005, the Company issued 3,055,556 of $.001 par value shares of Series A Preferred Stock (See Note 8) at $3.60 per share under Regulation S of the Securities Act of 1933, as amended, for cash totaling $11,000,000. The Company agreed to hold any unused funds in short-term investment and remit any interest earned thereon to the investor for a period of 90 days after the closing of the sale of the shares in lieu of payment of a dividend during such period. As of September 30, 2005, the investment has earned $16,500 in interest; the Company recorded interest payable of $16,500 as of September 30, 2005.

The company paid $1,952,571 in financing costs relating to these issuances.

During the period ended September 30, 2005, the Company received subscriptions for 204,575 shares of its $0.001 par value common stock and received cash in the amount of $203,660.

Note 7 — Warrants and options

On July 26, 2005, the Company adopted, subject to receiving shareholder approval, the Sky Petroleum, Inc. Canadian Stock Option Plan (the “Canadian Plan”), effective as of April 1, 2005. The Canadian Plan authorizes the issuance of stock options to acquire up to 10% of the Company’s issued and outstanding shares of common stock.

On August 25, 2005, the Company adopted, subject to receiving shareholder approval, the Sky Petroleum, Inc. 2005 U.S. Stock Incentive Plan (the “U.S. Plan”). The U.S. Plan authorizes the issuance of stock options and other awards to acquire up to a maximum of 3,321,600 shares of the Company’s common stock (less the number of shares issuable upon exercise of options granted by the Company under all other stock incentive plans on the date of any grant under the U.S. Plan). The U.S. Plan provides for the grant of incentive stock options (within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended), options that are not incentive stock options, stock appreciation rights and various other stock-based grants.

F-7

Sky Petroleum, Inc.
(a Development Stage Company)
Notes to Unaudited Consolidated Financial Statements

Note 7 — Warrants and options (continued)

On July 26, 2005, in connection with the appointment of Donald C. Cameron as the Company’s Chief Executive Officer, the Company granted Mr. Cameron options to purchase 1,500,000 shares of common stock of which 500,000 are exercisable at $0.50 and vest on April 30, 2006, 500,000 are exercisable at $0.80 per share and vest on April 30, 2007 and 500,000 are exercisable at $1.00 per share and vest on April 30, 2008, with a seven-year life. As discussed in Note 10, these options were cancelled.

On August 25, 2005, in connection with the appointment of James R. Screaton as the Company’s Vice President, Finance and Chief Financial Officer, the Company granted Mr. Screaton options to purchase 400,000 shares of common stock of which 133,333 are exercisable at $0.50 and vest on April 30, 2006, 133,333 are exercisable at $0.80 per share and vest on April 30, 2007 and 133,334 are exercisable at $1.00 per share and vest on April 30, 2008, with a seven-year life.

On September 21, 2005, in connection with the appointment of Michael D. Noonan as the Company’s Vice President, Corporate, the Company granted Mr. Noonan a non-qualified option to purchase 600,000 shares of common stock at a price of US$1.29 per share. The option expires ten years from the date of grant and vests with respect to 200,000 shares on April 30, 2006 and with respect to 200,000 shares for each of the two years thereafter.

As of September 30, 2005, there are 2,500,000 options outstanding, of which none has vested, and therefore no expense was recorded.

Note 8 – Series A Preferred Stock

On September 16, 2005, the Company filed a certificate of designation of rights and preferences of the Series A Preferred Stock with the Secretary of State of the state of Nevada. Pursuant to the certificate of designation, 3,055,556 shares of Series A Preferred Stock were designated.

Each share of Series A Preferred Stock is initially convertible into four shares of the Common Stock of the Company, subject to adjustment for stock splits, recapitalization or other reorganizations. In addition, the Series A Preferred Stock have broad-based weighted average antidilution protection that will cause the conversion price to adjust downward in the event that the Company issues shares of Common Stock or securities convertible into Common Stock at a price of less than the conversion price of the Series A Preferred Stock then in effect. The shares of Series A Preferred Stock may be converted into Common Stock at the option of the holder. In addition, at any time after the closing bid price for the Company’s Common Stock on the NASD OTCBB or the primary United State exchange on which the Common Stock is then traded exceeds $3.00 during any five consecutive trading days, the Company may, at its sole option, convert the Series A Preferred and any accrued but unpaid dividends into Common Shares at the then-applicable conversion price by providing written notice of such conversion to the holders of the Series A Preferred; provided that there is an effective registration statement under the Securities Act registering the resale of the Common Stock to be issued upon such conversion.

Each share of Series A Preferred Stock is entitled to receive a dividend of 7% per annum prior and in preference to the Common Stock of the Company. The dividend begins to accrue on December 30, 2005 and will be payable quarterly thereafter. The dividend is cumulative. In the event of a liquidation or acquisition of the Company, the holders of the Series A Preferred Stock will be entitled to receive an amount equal to any accrued and unpaid dividend prior and in preference to any distributions to the holders of the Common Stock. Thereafter, the holders of the Series A Preferred Stock will be entitled to participate in distributions on an as converted to Common Stock basis.

The holders of the Series A Preferred Stock are entitled to elect one director to the Company’s board of directors. In addition, the holders of the Series A Preferred Stock shall vote on all other matters on an “as converted” to Common Stock basis.

F-8

Sky Petroleum, Inc.
(a Development Stage Company)
Notes to Unaudited Consolidated Financial Statements

Note 8 – Series A Preferred Stock (continued)

Shares of Series A Preferred may be redeemed, in whole or in part, by the Company out of funds lawfully available therefor from the holders of the then outstanding shares of Series A Preferred on a pro rata basis, at any time by providing written notice to the holders of the Series A Preferred. On the redemption date, the Company shall redeem, on a pro rata basis in accordance with the number of shares of Series A Preferred owned by each holder, that number of outstanding shares of Series A Preferred that the Company has elected to purchase for the following consideration: (i) an amount equal to a price per share equal to the $3.60 plus any accrued and unpaid dividends multiplied by the number of shares of Series A Preferred being redeemed from such holder and (ii) the issuance of the number of shares of Common Stock equal to seventeen and one-half percent (17.5%) of the shares of Common Stock then issuable upon conversion of the shares of Series A Preferred being redeemed from such holder. A cash payment will be provided in lieu of any fractional shares of Common Stock that would otherwise be issuable at a price per share of Common Stock equal to the then-applicable conversion price.

Note 9 — Related Party Transactions

During the three months ended September 30, 2005, an officer and director of the Company received compensation totaling $15,000.

F-9

Sky Petroleum, Inc.
(a Development Stage Company)
Notes to Unaudited Consolidated Financial Statements

Note 10 — Subsequent Events

On October 7, 2005 the company made a payment of $4,000,000 and an additional payment of $1,500,000 on November 1, 2005 to BGOI pursuant to the agreement in note 5. As of November 3, 2005 the Company has paid $12,500,000 of its capital obligation to BGOI. Pursuant to the consulting agreement in note 5 the company will make the second issuance of 500,000 common shares to PARA.

On November 1, 2005, the Company entered into an employment agreement with Brent D. Kinney, under which Mr. Kinney was appointed as the chief executive officer of the Company (“CEO”). In connection with Mr. Kinney’s appointment the Company agreed to grant Mr. Kinney options to purchase 1,250,000 shares of common stock of the Company at an exercise price of $1.00 per share, vesting one-third on October 1, 2006, one-third on October 1, 2007 and one-third on October 1, 2008.

On November 2, 2005, the board of directors of the Registrant appointed Karim Jobanputra as a member of the board of directors. Mr. Jobanputra was nominated as a director by Sheikh Hamad Bin Jassim Bin Jabr al-Thani, the holder of 3,055,556 shares of Series A Preferred Stock purchased on September 20, 2005. Under the terms of the certificate of designation of rights and preferences of the Series A Preferred Stock, holders of the Series A Preferred Stock are entitled to elect one director to the Registrant’s board of directors.

In connection with the appointment of Mr. Kinney, the Company accepted the resignation of Mr. Cameron as the Company’s chief executive officer and entered into a separation agreement with Donald C. Cameron and Donald C. Cameron Consulting Ltd. (the “Separation Agreement”). Under the terms of the Separation Agreement, the Company agreed to pay Mr. Cameron a monthly severance payment of $11,000 per month through July 31, 2006, and to grant Mr. Cameron stock options exercisable to acquire exercisable to acquire 200,000 shares of common stock at $1.00 per share, which will vest and become exercisable over two years. The first half will vest on April 30, 2006 and the balance will vest on April 30, 2007. Stock options previously granted to Mr. Cameron under the Contractor Agreement were terminated.

F-10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying restated balance sheet of Seaside Explorations, Inc. (formerly The Flower Valet) (the “Company”) (A Development Stage Company), as of December 31, 2004 and 2003, and the related restated statements of operations, stockholders’ equity, and cash flows for the period ended December 31, 2004 and 2003 and from August 22, 2002 (Date of Inception) to December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the restated financial statements referred to above present fairly, in all material respects, the financial position of Seaside Explorations, Inc. (formerly The Flower Valet) (A Development Stage Company) as of December 31, 2004, and the restated results of its operations and cash flows for the period ended December 31, 2004 and 2003 and for the period August 22, 2002 (Date of Inception) to December 31, 2004, in conformity with U.S. generally accepted accounting principles.

The accompanying restated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had limited operations and have not commenced planned principal operations. This raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Beckstead and Watts, LLP
Las Vegas, NV
August 29, 2005

F-11

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
Balance Sheet
Restated

	December 31, 2004		December 31, 2003
Assets
Current assets:
Cash (see note 1)	$   6,542		$   27,024
Total current assets	6,542		$   27,024
	$   6,542		$   27,024
Liabilities and Stockholders' Equity
Current liabilities:	$        --		$        --
Stockholders' equity: (see note 4)
Preferred stock, $0.001 par value, 10,000,000 shares authorized,
zero shares issued and outstanding	--		--
Common stock, $0.001 par value, 150,000,000 shares authorized,
26,000,000 shares issued and outstanding (see notes 4 and 7)	26,000		6,500
Additional paid-in capital	11,000		30,500
(Deficit) accumulated during development stage	(30,458	)	(9,976	)
	6,542		27,024
	$   6,542		$   27,024

The accompanying notes are an integral part of these financial statements.

F-12

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
Statement of Operations
Restated

	For the Year Ended December 31,				August 22, 2002 (inception) to December 31,
	2004		2003		2004
Revenue	$               49		$               --		$          49
Expenses:
General and administrative expenses	20,531		7,000		30,507
Total expenses	20,531		7,000		30,507
Net (loss)	$     (20,482	)	$       (7,000	)	$(30,458	)
Weighted average number of common shares outstanding -
basic and fully diluted	26,000,000		26,000,000
Net (loss) per share - basic and fully diluted	$         (0.00	)	$         (0.00	)

The accompanying notes are an integral part of these financial statements.

F-13

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
Statement of Changes in Stockholders’ Equity
Restated

	Common Stock		Additional Paid-in		(Deficit) Accumulated During Development		Total Stockholders'
	Shares	Amount	Capital		Stage		Equity
August 22, 2002
Shares issued for cash	14,000,000	$ 14,000	$(7,000	)	$        --		$  7,000
Net (loss)
For the year ended December 31, 2002					(2,976	)	(2,976	)
Balance, December 31, 2002	14,000,000	14,000	(7,000	)	(2,976	)	4,024
June 30, 2003
Shares issued for cash	12,000,000	12,000	18,000				30,000
Net (loss)
For the year ended December 31, 2003					(7,000	)	(7,000	)
Balance, December 31, 2003	26,000,000	26,000	11,000		(9,976	)	27,024
Net (loss)
For the year ended December 31, 2004					(20,482	)	(20,482	)
Balance, December 31, 2004	26,000,000	$ 26,000	$ 11,000		$(30,458	)	$  6,542

The accompanying notes are an integral part of these financial statements.

F-14

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
Statement of Cash Flows
Restated

	For the Year Ended December 31,				August 22, 2002 (inception) to December 31,
	2004		2003		2004
Cash flows from operating activities
Net (loss)	$(20,482	)	$(7,000	)	$(30,458	)
Net cash used by operating activities	(20,482	)	(7,000	)	(30,458	)
Cash flows from financing activities
Issuance of common stock issued	--		30,000		37,000
Net cash provided by financing activities	--		30,000		37,000
Net (decrease) increase in cash	(20,482	)	23,000		6,542
Cash - beginning	27,024		4,024		--
Cash - ending	$   6,542		$ 27,024		$   6,542
Supplemental disclosures:
Interest paid	$        --		$        --		$        --
Income taxes paid	$        --		$        --		$        --

The accompanying notes are an integral part of these financial statements.

F-15

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
NOTES
Restated

Note 1 — Summary of significant accounting policies

Organization
The Company was organized August 22, 2002 (Date of Inception) under the laws of the State of Nevada, as The Flower Valet. On December 20, 2004, the Company amended its articles of incorporation to change its name to Seaside Explorations, Inc. Subsequently, on March 28, 2005 the Company changed its name to Sky Petroleum, Inc.

The Company began the business of marketing, selling and distributing floral products, gourmet foods, and gift items. The Company has been unsuccessful in conducting any business. Although the Company has not ceased pursuit of their original business plan, it is currently exploring other opportunities and does not intend to continue with its original business plan, once another viable opportunity is located.

The Company has not commenced significant operations and, in accordance with SFAS #7, the Company is considered a development stage company.

Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.

Cash and cash equivalents
For the purpose of the statements of cash flows, all highly liquid investments with the maturity of three months or less are considered to be cash equivalents.

Revenue recognition
The Company’s revenues and cost of sales are to be recorded on a net basis upon receipt of the revenues generated from commissions earned as the result of sales generated from our website on products sold by our online merchants.

Advertising Costs
The Company expenses all costs of advertising as incurred. There were no advertising costs included in general and administrative expenses as of December 31, 2004.

F-16

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
NOTES
Restated

Fair value of financial instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2004. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Impairment of long-lived assets
Long-lived assets held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable or is impaired. No such impairments have been identified by management at December 31, 2004.

Earnings per share
The Company follows Statement of Financial Accounting Standards No. 128. “Earnings Per Share” (“SFAS No. 128”). Basic earning per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earning per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti- dilutive they are not considered in the computation.

Segment reporting
The Company follows Statement of Financial Accounting Standards No. 130, “Disclosures About Segments of an Enterprise and Related Information”. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

Income taxes
The Company follows Statement of Financial Accounting Standard No. 109, “Accounting for Income Taxes” (“SFAS No. 109”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be

F-17

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
NOTES
Restated

realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.   Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

Recent pronouncements
In January 2004, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities”, an interpretation of Accounting Research Bulletin No. 51. FIN No. 46 requires that variable interest entities be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the entity’s residual returns or both. FIN No. 46 also requires disclosures about variable interest entities that companies are not required to consolidate but in which a company has a significant variable interest. The consolidation requirements of FIN No. 46 will apply immediately to variable interest entities created after January 31, 2004. The consolidation requirements will apply to entities established prior to January 31, 2004 in the first fiscal year or interim period beginning after June 15, 2004. The disclosure requirements will apply in all financial statements issued after January 31, 2004. The company will begin to adopt the provisions of FIN No. 46 during the first quarter of fiscal 2004.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4. SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handing costs, and spoilage. This statement requires that those items be recognized as current period charges regardless of whether they meet the criterion of “so abnormal” which was the criterion specified in ARB No. 43. In addition, this Statement requires that allocation of fixed production overheads to the cost of production be based on normal capacity of the production facilities. This pronouncement is effective for the Company beginning October 1, 2005. The Company does not believe adopting this new standard will have a significant impact to its financial statements.

F-18

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
NOTES
Restated

In December 2004, the FASB issued SFAS No. 123 (revised 2004). Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The new standard will be effective for the Company in the first interim or annual reporting period beginning after December 15, 2005. The Company expects the adoption of this standard will have a material impact on its financial statements assuming employee stock options are granted in the future.

Note 2 — Going concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company  is in the development stage and, accordingly, has not yet generated revenues from operations. Since its inception, the Company has been engaged substantially in financing activities and developing its product line, setting up its e-commerce website, and incurring substantial costs and expenses. As a result, the Company incurred accumulated net losses from August 22, 2002 (inception) through the period ended December 31, 2004 of $30,458. In addition, the Company’s development activities since inception have been financially sustained through equity financing.

The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities   

Note 3 — Income taxes

For the period ended December 31, 2004 the Company incurred net operating losses and accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2004, the Company had approximately $30,458 of federal and state net operating losses. The net operating loss carry-forwards, if not utilized will begin to expire in 2015.

The components of the Company’s deferred tax asset are as follows:

F-19

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
NOTES
Restated

	As of December 31, 2004		As of December 31, 2003
Deferred tax assets:
Net operating loss carry-forwards	$ 30,458		$ 9,976
Total deferred tax assets	30,458		9,976
Deferred tax liabilities:
Depreciation	--		--
Net deferred tax assets before valuation allowance	30,458		9,976
	(30,458	)	(9,976	)
Less: Valuation allowance
Net deferred tax assets	$        --		$      --

For financial reporting purposes, the Company has incurred a loss in each period since its inception. Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the deferred tax assets will not be fully realizable. Accordingly, the Company provided a full valuation allowance against its net deferred tax assets at December 31, 2004.

Note 4 — Stockholder’s equity

The Company is authorized to issue 10,000,000 shares of it $0.001 par value preferred stock and 150,000,000 shares of its $0.001 par value common stock.

On August 22, 2002, the Company issued 14,000,000 shares of its $0.001 par valued common stock to an officer of the Company for cash in the amount of $7,000.

During June 2003, the Company completed a public offering on Form SB-2 registered under the Securities Act of 1933, as amended. The Company sold 300,000 (pre split) shares of its $0.001 par value common stock at a price of $0.10 per share for a total amount raised of $30,000.

On July 30, 2003, the Company approved a forward stock split on the basis of 10 for 1. All references to the number of shares issued and outstanding have been retroactively restated to reflect the forward split.

There have been no other issuances of common or preferred stock.

Note 5 — Warrants and options

There are no warrants or options outstanding to acquire any additional shares of common stock.  

F-20

SKY PETROLEUM, INC.
(formerly Seaside Explorations, Inc.)
(a Development Stage Company)
NOTES
Restated

Note 6 — Related party transactions

The Company does not lease or rent any property other than the mailbox address. Office services are provided without charge by the Company’s director. Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein. The estimated fair market value for such facilities are estimated to be $600 per annum.

Note 7 — Subsequent Events

On January 7, 2005 and March 12, 2005, the Company entered into two Demand Promissory Notes with Harbin Corporation for the principal amount of $100,000 for each note with interest thereon at 8% per annum.

On March 28, 2005, the Company increased its authorized shares from 100,000,000 to 150,000,000 shares of its $0.001 par value common stock.

On March 28, 2005, the Company approved a forward stock split on the basis of 4 for 1. All references to the number of shares issued and outstanding have been retroactively restated to reflect the forward split.

Effective April 1, 2005, the Company entered into a “Consulting Agreement” with Donald C. Cameron Consulting Ltd. whereby Mr. Cameron would provide services as Chief Executive Officer until July 31, 2006. The agreement provides for compensation in the amount of $11,000 per month. The aggregate commitment for future compensation at June 30, 2005, excluding bonuses, was approximately $132,000.

On July 26, 2005, the Company adopted an incentive stock plan for Canadian residents and on August 25, 2005, the Company adopted an incentive stock option plan for non-Canadian residents. The stock incentive plan for Canadian residents authorizes the issuance of stock options to acquire up to 10% of the Company's issued and outstanding shares of common stock and the Company's stock incentive plan for non-Canadian residents authorizes the issuance of stock options to acquire up to a maximum of 3,321,600 shares of common stock (less the number of shares issuable upon exercise of options granted by the Company under all other stock incentive plans on the date of any grant under the plan).

On May 12, 2005, the Company issued 5,000,0000 shares of its $0.001 par value common stock for cash in the amount of $2,500,000 to four accredited offshore investors pursuant to subscription agreements dated April 6, 2005.

On May 18, 2005, the Company’s wholly-owned subsidiary, Sastaro Limited, entered into a “Participation Agreement” with Buttes Gas and Oil Co. International, Inc. (“BGOI”), a wholly-owned subsidiary of Crescent Petroleum Company International Limited, whereby the Company will provide cash in the amount of $25,000,000, to be used for drilling costs associated with two oil wells located in the Arabian Gulf in exchange for a variable percentage of future production revenue. Pursuant to the Consulting Agreement, the Company will provide capital to BGOI in developmental increments. Upon commencement of production, the Company will receive a preferred 75% of combined production revenue until such time as the Company has recouped its initial investment and thereafter an incremental decrease of production revenue from 40% to 9.2%. To the period ended June 30, 2005, the Company has paid $4.5 million to BGOI under the Agreement, and has paid an additional $2.5 million subsequent to the period end.

On May 18, 2005, the Company entered into a “Consulting Agreement” with Paraskevi Investment Company S.A. (“PARA”) whereby the Company has agreed to issue PARA 1,000,000 shares of its common stock for services rendered in connection with the “Participation Agreement.” Pursuant to the Agreement, stock will be issued in 500,000 increments based on two milestones. The first issuance occurred upon signing of the Participation Agreement and the second issuance will be made at the point the Company has funded $12,500,000 of its capital obligation to BGOI.

On May 20, 2005, the Company issued 500,000 shares to PARA in exchange for services provided in connection with the execution of a material “Participation Agreement”. The Company has recorded an expense in the amount of $520,000, the fair value of the underlying shares as of June 30, 2005.

In June 2005, the Company received various bridge loans totaling $1,500,000 due on demand and bearing interest at a rate of 8%. Proceeds from the loans were used to meet funding commitments under the Participation Agreement.

On July 26, 2005, the Company appointed Mr. Donald Cameron as Chief Executive Officer for a term of one year expiring on July 31, 2006. Mr. Cameron was granted options to purchase an aggregate of 1,500,000 shares of the Company’s common stock at strike prices ranging from $0.50 to $1.00 per share.

In July, 2005, the Company has received additional bridge loans totaling $2.45 million dollars due on demand and bearing interest at a rate of 8%. Proceeds from loans were used to meet funding commitments of its “Participation Agreement” dated May 18, 2005.

In July 2005, the Company completed a private placement of 1,716,687 shares of common stock at $0.80 per share to raise approximately $1,373,350 (less finder’s fees of approximately $137,335).

In August, 2005, the Company accepted subscriptions for a private placement of its $0.001 par value common stock to issue 8,841,178 shares at $0.80 per share for total proceeds of approximately $7,072,942.40 (less finder’s fees of $707,294.24). These shares were issued on September 9, 2005. Certain of the holders of the bridge loans described above subscribed for the private placement and will convert the principal and interest value of the notes to common shares. The total amount of notes payable to be reduced upon conversion is $2,950,000 plus interest of $28,000. In addition, a portion of the proceeds from this private placement were used to repay the remaining notes payable. This included the Harbin notes of $200,000 and bridge loans of $1,000,000 that were issued in July, 2005. Interest of $15,408 was paid on these notes in August. There were no outstanding notes payable as of August 25, 2005.

In August 2005, the Company accepted for cancellation 12,000,000 shares of common stock from Daniel Meyer, a director. After giving effect to these transactions, the Company had 30,057,865 shares of common stock issued and outstanding as of September 9, 2005.

F-21

SKY PETROLEUM, INC.

16,013,620 Shares of Common Stock

PROSPECTUS

______________________, 2006

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Other Expenses of Issuance and Distribution.

	Amount
Securities and Exchange Commission Registration Fee	$3,324
Legal Fees and Expenses	20,000
Accounting Fees and Expenses	5,000
Printing and Engraving Expenses	1,000
Miscellaneous Expenses	1,000
Total	$30,324

Item 14.   Indemnification of Directors and Officers

        Pursuant to our bylaws, we are required to indemnify all of our officers and directors for such expenses and liabilities, in such manner, under such circumstances to such extent as permitted by the Nevada Business Corporations Act, as now enacted or hereafter amended. Unless otherwise approved by our board of directors, we shall not indemnify any of our employees who are not otherwise entitled to indemnification pursuant to our bylaws.

        Nevada law permits a corporation, under specified circumstances, to indemnify its directors, officers, employees or agents against expenses (including attorney’s fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by them in connection with any action, suit or proceeding brought by third parties by reason of the fact that they were or are directors, officers, employees or agents of the corporation, if such directors, officers, employees or agents acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reason to believe their conduct was unlawful. In a derivative action, that is, one by or in the right of the corporation, indemnification may be made only for expenses actually and reasonably incurred by directors, officers, employees or agents in connection with the defense or settlement of an action or suit, and only with respect to a matter as to which they shall have acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made if such person shall have been adjudged liable to the corporation, unless and only to the extent that the court in which the action or suit was brought shall determine upon application that the defendant directors, officers, employees or agents are fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.

        Our Articles of Incorporation and Bylaws also contain provisions stating that no director shall be liable to our company or any of our shareholders for monetary damages for breach of fiduciary duty as a director, except with respect to (1) a breach of the director’s duty of loyalty to the corporation or its shareholders, (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) liability under Nevada law (for unlawful payment of dividends, or unlawful stock purchases or redemptions) or (4) a transaction from which the director derived an improper personal benefit. The intention of the foregoing provisions is to eliminate the liability of our directors to our shareholders to the fullest extent permitted by Nevada law.

Item 15.  Recent Sales of Unregistered Securities

        Since our inception we have offered and sold the following securities in unregistered transactions pursuant to exemptions under the Securities Act of 1933, as amended.

        On April 6, 2005, we issued 5,000,000 shares of common stock at $0.50 per share in a private placement totaling $2.5 million. We incurred costs of $655 in connection with the offering. The shares were issued to the selling shareholders named in the prospectus included in this registration statement. Each of the shareholders is a non-U.S. person who acquired the shares in off-shore transactions under an exclusion from registration available under Regulation S of the Securities Act of 1933, as amended.

II-1

        On July 26, 2005, we issued a total of 1,716,687 shares of common stock at $0.80 per share to raise approximately $1,373,350 (less placement fees of 10%) pursuant to subscriptions in a private placement. We offered and sold shares outside the United States to non-U.S. persons in off-shore transactions pursuant to the exclusion from registration available under Regulation S of the Securities Act and in the United States in private transactions not involving a public offering pursuant to exemptions available under Rule 506 of Regulation D and Section 4(2) of the Securities Act.

        On August 25, 2005, we accepted subscriptions for a total of 8,841,178 shares of common stock at $0.80 per share for total proceeds of approximately $7,072,942.40 (less placement fees of 10%) and issued a treasury order to our transfer agent. Our transfer agent delivered the shares certificate to the investors on September 9, 2005. We offered and sold shares outside the United States to non-U.S. persons in off-shore transactions pursuant to the exclusion from registration available under Regulation S of the Securities Act and in the United States in private transactions not involving a public offering pursuant to exemptions available under Rule 506 of Regulation D and Section 4(2) of the Securities Act.

        On July 26, 2005, we granted Donald Cameron, our Chief Executive Officer, options to purchase 1,500,000 shares of common stock exercisable at exercise prices ranging from $0.50 to $1.00 per share. Mr. Cameron is a non-U.S. person and acquired the options in an off shore transaction under an exclusion from registration available under Regulation S of the Securities Act of 1933, as amended.

        On August 25, 2005, we granted James Screaton, our Chief Financial Officer, options to purchase 400,000 shares of common stock exercisable at exercise prices ranging from $0.50 to $1.00 per share. Mr. Screaton is a non-U.S. person and acquired the options in an off shore transaction under an exclusion from registration available under Regulation S of the Securities Act of 1933, as amended.

        On September 21, 2005 we granted Michael Noonan, our Vice President, Corporate, an option to purchase 600,000 shares of common stock at $1.29 per share. Mr. Noonan is a U.S. person and acquired the options pursuant to the exemption from registration provided by Rule 701 promulgated under the Securities Act of 1933, as amended.

        On September 20, 2005, the Company accepted a subscription to purchase 3,055,556 shares of unregistered Series A Preferred Stock at a price of $3.60 per share from one non-U.S. person investor for aggregate gross proceeds of approximately $11,000,000. Certain individuals served as placement agents for this offering and received placement agent fees. The shares of Series A Preferred Stock were issued outside the United States to one non-U.S. person pursuant to an exclusion from the registration requirements of the Securities Act of 1933, as amended, available under Regulation S thereunder. The offer and sale of the shares of Series A Preferred Stock were made outside of the United States to a non-U.S. person. The placement was conducted without general solicitation or advertising and without directed selling efforts.

        On December 16, 2005, the Company issued a treasury order to issue 16,013,620 shares of unregistered common stock at a price of $1.00 per share from investors for aggregate gross proceeds of $16,013,620. Certain individuals served as placement agents for this offering and received payments equal to 10% of the funds raised by such placement agent. The Company believes that the offer and sale of the Shares is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), by virtue of the exemptions from registration provided by Regulation S and Rule 506 of Regulation D under the Securities Act. Substantially all of the offers and sales of the Shares were made outside of the United States to non-U.S. persons in off shore transaction in reliance upon the exception from registration available under Rule 903 of Regulation S of the Securities Act. Offers and sales were made exclusively to accredited investors (as such term is defined in Rule 501(a) of Regulation D) in the United States in offers and sales not involving a public offering. The private placement was conducted without general solicitation or advertising or directed selling efforts (as defined in Regulation S of the Securities Act). The subscribers were afforded an opportunity for effective access to the Company’s reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, which contained the relevant information needed to make its investment decision, including the Company’s financial statements. The Company reasonably believed that the subscribers, immediately prior to offering the Shares, had such knowledge and experience in financial and business matters that it was capable of evaluating the merits and risks of their investment. The Shares are restricted securities as defined under Rule 144 of the Securities Act.

        On February 6, 2006, we issued 500,000 shares of common stock as compensation under the terms of a Compensation Agreement dated May 18, 2005with Paraskevi Investment Company S.A. Paraskevi is a non-U.S. Person outside the United States and the shares of common stock were issued in an off-shore transaction pursuant to an exemption from registration available under Rule 903 of Regulation S of the Securities Act.

Item 16.   Exhibits

        Other than contracts made in the ordinary course of business, the following are the material contracts that we have entered into within the two years preceding the date of this Registration Statement:

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EXHIBITS

        (a)   Exhibits

Exhibit Number		Description
3	.1(1)	Articles of Incorporation
3	.2(2)	Amendment to Articles of Incorporation
3	.3(2)	Amendment to Articles of Incorporation
3	.4(6)	Certificate of Designation of Rights and Preferences of Series A Preferred Stock
3	.5(1)	Bylaws
5	.1	Opinion of Woodbridge and Wedge LLP related to the issuance of 10,557,865 shares of common stock
10	.1(1)	Lease Agreement
10	.2(3)	Participation Agreement between Sastaro Limited and Buttes Gas and Oil Co. International Inc.
10	.3(3)	Compensation Agreement with Paraskevi Ltd.
10	.4(4)	Independent Contractor Services Agreement and a Confidentiality Agreement, effective April 1, 2005, with Donald C. Cameron Consulting Ltd.
10	.5(4)	Independent Contractor Services Agreement and a Confidentiality Agreement, effective April 1, 2005, for the services of Mr. Screaton as our Vice President, Finance and Chief Financial Officer
10	.6(5)	Independent Contractor Services Agreement and a Confidentiality Agreement, effective April 1, 2005, for the services of Mr. Noonan as our Vice President Corporate
10	.7(4)	Stock Option Plan - Canadian residents
10	.8(4)	2005 U.S. Stock Incentive Plan - non-Canadian residents
10	.9(7)	Form of Subscription Agreement used by selling shareholders
10	.10(8)	Employment Agreement between the Company and Brent Kinney
10	.11(8)	Separation Agreement between the Company and Donald C.Cameron Consulting Ltd.
10	.12	Consulting Agreement between the Company and Energy Services Group Dubai dated April 5, 2005
10	.13	Option Agreement between the Company and Ian Baron
23	.1	Consent of Beckstead and Watts, LLP
23	.2(5)	Consent of Woodbridge and Wedge (included in Exhibit 5.1)

⁽¹⁾ Previously filed with Form SB-2 on September 12, 2002

⁽²⁾ Previously filed with Form 10-KSB on March 31, 2005

⁽³⁾ Previously filed with Form 10-QSB on August 22, 2005

⁽⁴⁾ Previously filed with Form SB-2 (SEC File No. 333-127940) on August 30, 2005

⁽⁵⁾ Previously filed with Form SB-2/A Amendment No. 1 (SEC File No. 333-127940) on September 9, 2005

⁽⁶⁾ Previously filed as exhibit 3.1 to the Form 8-K filed on September 22, 2005

⁽⁷⁾ Previously filed with Form SB-2/A (SEC File No. 333-128285) on October 12, 2005

⁽⁸⁾ Previously filed with Form 10-QSB on November 15, 2005

Item 17.   Undertakings.

        (a)      The undersigned Registrant hereby undertakes:

        (1)      To file, during any period in which offers or sales of securities are being made, a post-effective amendment to this registration statement to:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

II-3

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

        (2)      That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        (3)      To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

        (4)              That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

        (b)      Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described herein, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II-4

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Dubai, United Arab Emirates on February 13, 2006.

Sky Petroleum, Inc.


By:  /s/ Brent Kinney                                       
       Brent Kinney
       Chief Executive Officer
       (Principal Executive Officer)

        Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Calgary, Alberta, on February 13, 2006.

By:  /s/ James R. Screaton                                      
        James R. Screaton
        Vice President, Finance and Chief Financial Officer
        (Principal Financial and Accounting Officer)

Name	Title	Date
/s/ Brent D. Kinney Brent D. Kinney	Director (Principal Executive Officer)	February 13, 2006
/s/ Daniel F. Meyer Daniel F. Meyer	Director	February 13, 2006
/s/Michael D. Noonan Michael D. Noonan	Director	February 13, 2006
Karim Jobanputra	Director
/s/Ian R. Baron Ian R. Baron	Director	February 13, 2006
Peter J. Cockcroft	Director

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints each of James Screaton, Brent Kinney and Daniel Meyer his or her attorney-in-fact and agent, with the full power of substitution and resubstitution and full power to act without the other, for them in any and all capacities, to sign any and all amendments, including post-effective amendments, and any registration statement relating to the same offering as this registration that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, to this registration statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof.

Name	Title	Date
/s/ Brent D. Kinney Brent D. Kinney	Director (Principal Executive Officer)	February 13, 2006
/s/ Daniel F. Meyer Daniel F. Meyer	Director	February 13, 2006
/s/Michael D. Noonan Michael D. Noonan	Director	February 13, 2006
Karim Jobanputra	Director
/s/Ian R. Baron Ian R. Baron	Director	February 13, 2006
Peter J. Cockcroft	Director

EX-5.1

EXHIBIT 5.1

February 10, 2006

Sky Petroleum, Inc.
Suite 200-625 4^th Avenue S.W.
Calgary, Alberta, Canada T2P OK2

Re: Registration Statement On Form S-1 for Sky Petroleum, Inc., a Nevada corporation

Ladies and Gentlemen:

        You have requested our opinion as special Nevada counsel for Sky Petroleum, Inc., a Nevada corporation (the “Company”) in connection with that certain Registration Statement on Form S-1 (the “Registration Statement”) of the Company to be filed with the Securities and Exchange Commission under the Securities Act of 1933, with respect to the sale of 16,013,620 shares of the Company’s common stock, par value $0.001 per share (the “Shares”) owned by certain stockholders listed in the Registration Statement (the “Selling Shareholders”).

        In connection with the opinions rendered in this letter, we have examined the following documents:

        a.     Copies of the following Articles of Incorporation and Amendments thereto of the Company filed in the office of the Nevada Secretary of State as follows:

(i) Articles of Incorporation of The Flower Valet filed August 22, 2002;

(ii) Certificate of Amendment to the Articles of Incorporation of the Company changing the name of the corporation from The Flower Valet to Seaside Exploration, Inc., filed December 22, 2004;

(iii) Certificate of Amendment changing the name of the Company from Seaside Exploration, Inc. to Sky Petroleum, Inc. filed March 28, 2005; and

(iv) Certificate of Designation filed September 16, 2005.

        b.     Certificate of Existence for the Company issued by the Nevada Secretary of State on February 9, 2006;

        c.     Copy of the Registration Statement;

        d.     Copy of the Bylaws of The Flower Valet, certified as being a true and correct copy thereof by Christine L. Szymarek on August 21, 2002;

        e.     Unanimous Written Consent of a Special Meeting of the Board of Directors of the Company approving the offer, sale and issuance to qualified accredited investors in the U.S. and qualified non-U.S. persons investors in “offshore” transactions of up to 25,000,000 shares of common stock and matters related thereto, signed by Daniel F. Meyer, the sole director of the Company on September 6, 2005;

Sky Petroleum, Inc.
February 10, 2006
Page 2

        f.     Unanimous Written Consent In Lieu of a Special Meeting of the Board of Directors of the Company approving the 4 to 1 stock split by way of share dividend to each stockholder of record on March 28, 2005, signed by Daniel F. Meyer, the sole director of the Company on August 29, 2005;

        g.     Certificate of Daniel Meyer, the President, Secretary and Treasurer of the Company, certifying copies of certain documents and resolutions, certifying as to the issuance of stock certificates to the Selling Stockholders and as to certain other matters and dated February 10, 2006.

        In rendering our opinions set forth below, we have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures and the conformity to authentic originals of all documents submitted to us as copies. We have also assumed a legal capacity for all purposes relevant hereto of all natural persons and, with respect to all parties to instruments relative hereto other than the Company, that such parties have the requisite power and authority (corporate or otherwise) to execute, deliver and perform such agreements or instruments, that such instruments or agreements have been duly authorized by all requisite action (corporate or otherwise), executed and delivered by such parties and that such agreements or instruments are valid, binding and enforceable obligations of such parties. As to questions of fact material to our opinions, we have relied upon the Certificate of Daniel Meyer, item (g) above, and the facts stated in the documents listed above. We have assumed that the Shares will be sold in accordance with the terms and conditions described in the Registration Statement and that stock certificates will be issued by the Company upon tender to the Company of the Selling Shareholders’ Shares described in the Registration Statement in accordance with the Bylaws and the Registration Statement itself.

        This firm practices law in Nevada. We express no opinion as to the laws of any jurisdiction other than the State of Nevada except that we express no opinion as to compliance with state securities or “Blue Sky” laws (including Nevada’s) and as to the compliance with federal securities laws.

        Based on the foregoing, we are of the opinion that, under Nevada law, the Shares have been validly issued and are outstanding, are fully paid and are non-assessable.

        The opinion is of the date hereof and we undertake no, and hereby disclaim any, obligation to advise you of any change in any matter set forth in this letter occurring after the date hereof. Without our prior written consent, this opinion may not be relied upon anyone other than you and your legal counsel or quoted in whole or in part or otherwise referred to in any report or document furnished to any person or entity. However, we hereby consent to the filing of this opinion as an exhibit to the Registration Statement.

Very truly yours,

WOODBURN AND WEDGE

By:  /s/ John P. Fowler                              
       John P. Fowler

JPF:bm

EX-10.12

EXHIBIT 10.12

CONSULTING AGREEMENT

THIS AGREEMENT made effective as of 05 April 2005

BETWEEN:

Sky Petroleum Inc a body corporate, having an office at 108 Wild Basin Road Austin Texas 78746 USA, (the “Company”)

OF THE FIRST PART AND

Ian Baron whose offices are at Suite 704, Al Moosa Tower 1, Shk Zayed Highway, Dubai, UAE (the “Consultant”)

OF THE SECOND PART

WHEREAS Company desires to retain the services of the Consultant to perform services to assist Company with evaluating and developing oil and gas opportunities as further described in Appendix A.

NOW THEREFORE IN CONSIDERATION of the covenants and conditions hereinafter contained and the payment provided for herein, it is agreed by the parties as follows:

ARTICLE 1

INTERPRETATION

1.1 The term “Company” as used in this Agreement shall mean the Company, its employees its authorized agents and its affiliates.

1.2 If any covenant or obligation of either party contained herein or any provision of this Agreement shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of such covenant or obligation shall not be affected, and each provision and each covenant and obligation contained in this Agreement shall be separately valid and enforceable to the fullest extent permitted by law or equity.

1.3 Time shall in all respects be of the essence in this Agreement.

1.4 No waiver or modification of this Agreement shall be binding unless it is in writing signed by the parties. No waiver of a breach of this Agreement shall be deemed to constitute a waiver of a future breach, whether of a similar or dissimilar nature.

ARTICLE 2

NATURE OF THE AGREEMENT

2.1 This is an agreement for the services of the Consultant, and no relationship of agency, partnership, joint venture, employer-employee, or master-servant is created between the Consultant and Company.

ARTICLE 3

TERM OF THE AGREEMENT AND OBLIGATIONS OF THE CONSULTANT

3.1 Company engages the Consultant to provide, and the Consultant agrees to provide, consulting services as set out in Appendix A (the “Services”) commencing 6^th April 2005 and continuing until terminated by the Company or the Consultant in accordance with the terms hereof.

3.2 The Consultant shall perform the consulting services in a good and workmanlike manner to the standard that would be expected from a professional providing similar services under similar circumstances, and in compliance with all applicable governmental statutes, regulations and policies.

ARTICLE 4

REMUNERATION & EXPENSES

4.1 Company shall pay the Consultant a fee of US$ one thousand five hundred (US$1,500) per day, payable within 15 days of receipt of an invoice for fees from the Consultant for each day services are requested by the Company and are provided.

4.2 Company shall pay to the Consultant all reasonable expenses actually and properly incurred by the Consultant in connection with the performance of his obligations under this Agreement.

4.3 Any air travel related to the performance of the services under this agreement shall be business class using the most economic fare available unless the actual flying time exceeds 8 hours in which case first class may be utilized.

4.4 The Consultant agrees that the Consultant, in his capacity as such, will not be entitled to be a participant in any of the employee or other benefit plans of Company.

ARTICLE 5

TERMINATION

5.1 This Agreement may be terminated on thirty days notice by either party.

ARTICLE 6

CONFIDENTIALITY AND CONFLICT OF INTEREST

6.1 Company consents to the Consultant continuing during the term of this Agreement to act as a consultant to third parties.

6.2 Notwithstanding 6.1, during the term of this Agreement the Consultant shall not enter into any contract with any other party to provide consulting services, the requirements of which would conflict with the Consultant’s duties and obligations under this Agreement, without first obtaining the written consent of Company.

6.3 All information not in the public domain which is provided to the Consultant by the Company during the term of this Agreement shall be kept confidential along with the results of any analysis carried out by the Consultant. All such information shall be kept confidential for two years following the termination of this Agreement.

6.4 Upon termination of this Agreement or the Consultant’s consulting services the Consultant shall deliver to Company all tangible displays and repositories of proprietary or confidential information or knowledge including without limitation records of research, proposals, information, reports, or other materials used or obtained by the Consultant in connection with the performance of the services under this Agreement.

ARTICLE 7
NOTICE

7.1 Any notice hereunder shall be effectively given if delivered personally or sent by facsimile. The addresses for service may be amended by giving notice in writing to the other party in accordance with this clause. The names and addresses of the authorized representatives of the parties are as follows:

Company:
Sky Petroleum Inc
108 Wild basin Road
Austin Texas 78746
USA

Consultant:
Suite 704,
Al Moosa Tower 1,
Shk Zayed Highway,
Dubai, UAE

ARTICLE 8

GOVERNING LAW

8.1 This Agreement shall be governed by and interpreted in accordance with the laws of England. The courts of England shall be the sole and proper forum with respect to any suits brought with respect to this Agreement.

IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and year first above written

On behalf of the CompanyC OMITTED][GRAPHIC OMITTED] On behalf of the Consultant

/s/ Donald Cameron
_______________________
Name: Donald Cameron
Position: Chief Executive Officer   /s/ Ian Baron
_______________________
Name: Ian Baron

APPENDIX “A”

Specific Duties

Technical advice on a project under consideration in Sharjah UAE and attendance of related technical meetings with Crescent Petroleum in Sharjah.

EX-10.13

EXHIBIT 10.13

STOCK OPTION AGREEMENT

        THIS STOCK OPTION AGREEMENT is entered into as of the 11th day of January, 2006 (“Date of Grant”) between IAN BARON (the “Optionee”), and SKY PETROLEUM, INC., a Nevada corporation (“Sky” or “Company”).

        WHEREAS, the Optionee and the Company have entered into a Consulting Agreement (“Consulting Agreement”) and the Company has agreed to grant the Optionee stock options exercisable to acquire 600,000 shares of the Company’s Common Stock at $1.00 per share, vesting one-third (1/3) each year, beginning on November 15, 2006 and expiring on the earlier of November 15, 2013 or 90 days after Optionee ceases to be a consultant to the Company or a Director of the Company (the “Options”);

        WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interest of the Company and its shareholders to enter into the Consulting Agreement and to grant the Optionee the Options;

        WHEREAS, the Board has authorized the grant to the Optionee of Options;

        WHEREAS, the Optionee has agreed to accept the Options as partial consideration under the Consulting Agreement; and

        WHEREAS, the Options are intended to be Non-Qualified Stock Options not intended to qualify as “Incentive Stock Options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”);

        NOW, THEREFORE, the Company and the Optionee agree as follows:

        1.        Option Grant. The Company hereby grants to the Optionee the option to purchase, upon the terms and conditions set forth herein, the Option to purchase 600,000 shares of Common Stock of the Company at an exercise price of US$1.00 per share.

        2.        Vesting and Termination Schedule. The Options shall vest and shall be fully exercisable as follows:

(a) Options exercisable to acquire 200,000 shares of Common Stock of the Company shall vest on November 15, 2006 and terminate on the earlier of November 15, 2013 or 90 days after Optionee ceases to be a consultant to or Director of the Company;

(b) Options exercisable to acquire 200,000 shares of Common Stock of the Company shall vest on November 15, 2007 and terminate on the earlier of November 15, 2013 or 90 days after Optionee ceases to be a consultant to or Director of the Company; and

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(c) Options exercisable to acquire 200,000 shares of Common Stock of the Company shall vest on November 15, 2008 and terminate on the earlier of November 15, 2013 or 90 days after Optionee ceases to be a consultant to or Director of the Company;.

        The vesting of one or more outstanding Options may be accelerated by the Board at such times and in such amounts as it shall determine in its sole discretion. The vesting of Options also shall be accelerated under the circumstances described in Sections 5 and 7 below.

        3.        Options not Transferable. Unless otherwise specified in this Agreement or by the Board, this Option and the rights and privileges conferred by this Agreement may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will or by applicable laws of descent and distribution and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, pledge, hypothecate or otherwise dispose of any Option or of any right or privilege conferred by this Agreement contrary to the provisions hereof, or upon the sale, levy or attachment or similar process upon the rights and privileges conferred by this Agreement, such Option shall thereupon terminate and become null and void.

        4.        Termination of Advisory Efforts and Options. Vested Options shall terminate and be null and void, to the extent not previously exercised, on the earlier of November 15, 2013 or 90 days after Optionee ceases to be a consultant to or Director of the Company.

        5.        Distributions, Reorganization or Liquidation. In the case of any unit distribution, unit split, liquidation or like change in the nature of Common Stock covered by this Agreement, the number of Common Stock and exercise price shall be proportionately adjusted as set forth below.

        (a)        If (i) the Company shall at any time be involved in a transaction described in Section 424(a) of the Code (or any successor provision) or any “corporate transaction” described in the regulations thereunder; (ii) the Company shall declare a distribution payable in, or shall subdivide or combine, its Common Stock or (iii) any other event with substantially the same effect shall occur, the Board shall, with respect to each outstanding Option, proportionately adjust the number of shares of Common Stock and/or the exercise price per Common Stock so as to preserve the rights of the Optionee substantially proportionate to the rights of the Optionee prior to such event, and to the extent such action shall include an increase or decrease in the number of Common Stock subject to outstanding options, the number of Common Stock available under this Agreement shall automatically be increased or decreased, as the case may be, proportionately, without further action on the part of the Board, the Company or the Company’s shareholders.

        (b)        If the Company is liquidated or dissolved, the Board shall allow the Optionee to exercise all or any part of the unvested portion of the Options held by him; provided, however, that such Options must be exercised prior to the effective date of such liquidation or dissolution. If the Optionee does not exercise his Options prior to such effective date, each outstanding option shall terminate as of the effective date of the liquidation or dissolution.

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        6.        Exercise of Option. The Options shall be exercisable, in whole or in part, at any time after vesting, until termination; provided, however, if the Optionee is subject to the reporting and liability provisions of Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) with respect to the Common Stock, he shall be precluded from selling or transferring any Common Stock or other security underlying an Option during the six (6) months immediately following the grant of that Option. If less than all of the shares of Common Stock included in the vested portion of the Options are purchased, the remainder may be purchased at any subsequent time prior to the expiration of the Option term.

        Each exercise of the Option shall be by means of delivery of a notice of election to exercise (which may be in the form attached hereto as Exhibit A) to the Chief Executive Officer of the Company at its principal executive office, specifying the number of Common Stock to be purchased and accompanied by payment in cash by certified check or cashier’s check in the amount of the full exercise price for the Common Stock to be purchased. During the lifetime of the Optionee, the Options are exercisable only by the Optionee.

        7.  Change in Control.

        (a)   Any and all Options that are outstanding hereunder for at least six (6) months at the time of occurrence of any of the events (a “Change in Control”) described in Subparagraphs (i), (ii), and (iii) below (each an “Eligible Option”) shall become immediately vested and fully exercisable for the periods indicated (each such exercise period referred to as an “Acceleration Window”):

(i) For a period of forty-five (45) days beginning on the day on which any “Person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than a shareholder of the Company on the date of this Agreement, the Company, any subsidiary or employee benefit plan of the Company including any trustee of such plan acting as trustee) together with all Affiliates and Associates of such Person, becomes, after the date of this Agreement, the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act) of fifty percent (50%) or more of the limited liability company interests then outstanding;

(ii) Beginning on the date that a tender or exchange offer for all of the Common Stock of the Company by any Person (other than the Company, any subsidiary of the Company, any employee benefit plan of the Company or of any subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan) is first published or sent or given within the meaning of Rule 14d-2 under the Exchange Act and continuing so long as such offer remains open (including any extensions or renewals of such offer), unless by the terms of such offer the offeror, upon consummation thereof, would be the Beneficial Owner of less than fifty percent (50%) of the limited liability company interests then outstanding;

(iii) For a period of twenty (20) days beginning on the day on which the shareholders of the Company duly approve any merger, consolidation, reorganization or other transaction providing for the conversion or exchange of more than fifty percent (50%) of the outstanding shares of Common Stock into securities of any entity, or

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cash, or property, or a combination of any of the foregoing; provided, that the holder has agreed in writing to waive his rights, if any, arising under Section 5 above in connection with the completion of the any of the transactions described in this clause.

Provided, however, that with respect to the event specified in Subparagraph (i) above, such accelerated vesting shall not occur if the event that would trigger the accelerated vesting of Eligible Options has received the prior approval by the affirmative vote of a majority of all of the members of the Board, excluding for such purposes the votes of managers who are managers or officers of, or have a material financial interest in, any entity (other than the Company) who is party to the event specified in Subparagraph (ii) above.

        (b)        The exercisability of any Eligible Option that remains unexercised following expiration of an Acceleration Window shall be governed by the vesting schedule and other terms of this Agreement.

        8.        Professional Advice. The acceptance of the Options and the sale of Common Stock issued pursuant to the exercise of Options may have consequences under federal and state tax and securities laws which may vary depending upon the individual circumstances of the Optionee. Accordingly, the Optionee acknowledges that he has been advised to consult his personal legal and tax advisor in connection with this Agreement and his dealings with respect to the Options for the Common Stock.

        9.        No Rights as a Stockholder. The Optionee shall have no rights as a stockholder with respect to any units covered by the Options until the Optionee becomes a record holder of such units, irrespective of whether the Optionee has given notice of exercise. Subject to the provisions of Sections 6 and 8 hereof, no rights shall accrue to the Optionee and no adjustments shall be made on account of dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights declared on, or created in, the Common Stock for which the record date is prior to the date the Optionee becomes a record holder of the shares of Common Stock covered by the Option, irrespective of whether the Optionee has given notice of exercise.

        10.        Securities Regulation and Withholding.

        (a)        Neither the Options nor the shares of Common Stock issuable upon exercise of the Options have been or will be registered under the Securities Act of 1933, as amended (the “Securities Act”), and the offer and sale of such securities is being made pursuant to an exemption from the registration requirements of the Securities Act. The Common Stock shall not be issued with respect to the Options unless the exercise of the Options and the issuance and delivery of such Common Stock shall comply with all relevant provisions of law, including, without limitation, any applicable state securities laws, the Securities Act, the Exchange Act, the rules and regulations thereunder and the requirements of any stock exchange upon which such shares may then be listed, and such issuance shall be further subject to the approval of counsel for the Company with respect to such compliance, including the availability of an exemption from registration for the issuance and sale of such units. The inability of the Company to obtain from any regulatory body the authority deemed by the Company to be necessary for the lawful issuance and sale of any shares under this Agreement, or the unavailability of an exemption from registration for the issuance and sale of any units under this

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Agreement, shall relieve the Company from any liability with respect to the non-issuance or sale of such units.

        As a condition to the exercise of the Options, the Board may require the Optionee to represent and warrant in writing at the time of such exercise that the units are being purchased only for investment and without any then-present intention to sell or distribute such Common Stock. The Common Stock issuable upon exercise of the Options will be restricted securities (as defined under Rule 144 of the Securities Act) and the certificates representing such securities shall bear a legend indicating that the stock may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided stating that such transfer is not in violation of any applicable law or regulation.

        (b)        As a condition to the exercise of the Options, the Optionee shall make such arrangements as the Board may require for the satisfaction of any federal, provincial, state or local withholding tax obligations that may arise in connection with such exercise.

        11.        Entire Agreement. This Agreement is the only agreement between the Optionee and the Company with respect to the Options, and this Agreement supersede all prior and contemporaneous oral and written statements and representations and contain the entire agreement between the parties with respect to the Options.

        12.        Notices. Any notice required or permitted to be made or given hereunder shall be mailed or delivered personally to the addresses set forth below, or as changed from time to time by written notice to the other:

The Company: SKY PETROLEUM, INC.

________________________

________________________

The Optionee: IAN BARON

________________________

________________________

SKY PETROLEUM, INC.

By:   /s/ Daniel Meyer
_____________________________

Its:  President
_____________________________ /s/ Ian Baron
_____________________________
Optionee

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        THE COMMON STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE “RESTRICTED SECURITIES” AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933 AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE COMPANY IS NOT OBLIGATED TO REGISTER THE COMMON STOCK OR TO MAKE AVAILABLE ANY EXEMPTION FROM REGISTRATION.

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EXHIBIT A

Notice of Election to Exercise

        This Notice of Election to Exercise shall constitute proper notice pursuant to Section 6 of that certain Stock Option Agreement (the “Agreement”) dated as of the ____ day of ___________, _____ between SKY PETROLEUM, INC. (the “Company”) and the undersigned.

        The undersigned hereby elects to exercise Optionee’s option to purchase __________ Common Stock of the Company at a price of [$___] per share, for aggregate consideration of $______, on the terms and conditions set forth in the Agreement. Such aggregate consideration, in the form specified in Section 6 of the Agreement, accompanies this notice.

        The undersigned has executed this Notice this ____ day of __________, 200__.

_____________________________________
Signature

_____________________________________
Name (typed or printed)

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EX-23.1

EXHIBIT 23.1

Beckstead and Watts, LLP
Certified Public Accountants

2425 W. Horizon Ridge Parkway
Henderson, NV 89052
702.257.1984
702.362.0540 fax

Securities and Exchange Commission
Washington, DC 20549

Ladies and Gentlemen:

We hereby consent to the use of our audit report dated August 29, 2005 relating to the restated financial statements of Sky Petroleum, Inc. for the year ended December 31, 2004 in the Registration Statement on Form S-1 dated February 13, 2006 of Sky Petroleum, Inc.

We hereby consent to the use of our audit report dated August 29, 2005 relating to the financial statements of Sky Petroleum, Inc. for the year ended December 31, 2003 in the Registration Statement on Form S-1 dated February 13, 2006 of Sky Petroleum, Inc.

Signed,

/s/ Beckstead and Watts LLP

February 13, 2006