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

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) ~~July~~December 5, 2006

SOURCE PETROLEUM INC.
(Exact name of registrant as specified in its charter)

Nevada(State or other jurisdiction of incorporation)000-51241(Commission File Number)98-0443283(IRS Employer Identification No.)~~Suite 305 –1530 West 8th AvenueVancouver, British Columbia, V6J 5M6, Canada(Address of principal executive offices and Zip Code)(778) 863-2259Registrant's telephone number, including area code~~

~~Red~~Suite ~~Sky~~620, ~~Resources~~304 - ~~Inc.(Former~~8th ~~name~~Avenue, orS.W., ~~former address~~Calgary, ~~if changed~~Alberta ~~since~~T2P ~~last~~1C1 ~~report)~~Canada

(Address of principal executive offices and Zip Code)

403.444.2893 x 223
Registrant's telephone number, including area code

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

Item 32.0203 ~~Unregistered~~Creation ~~Sales~~ of ~~Equity~~a ~~Securities~~Direct Financial Obligation or an Obligation under an Off-Balance Sheet

OnArrangement ~~July 5, 2006, we closed a private placement consisting~~ of ~~4,003,327 units of our securities at~~ a ~~price of US$1.50~~ per unit for gross proceeds of $6,004,991. Each unit of the securities consists of one common share in the capital of our company and one common share purchase warrant, with one of such warrants entitling the holder thereof to purchase one share of our common stock at a price of USD$2.25 per share. All of the warrants will be exercisable before July 5, 2008.Registrant

On December 5, 2006 we entered into a Forbearance Agreement among our company, K2 Principal Fund L.P. and Fuel-x International 2Inc. We signed a letter of intent with Fuel-x International Inc. on November 17, 2006 to potentially acquire the business of Fuel-x International. One of the condition precedents in the letter of intent was satisfactory negotiation with K2 Principal Fund L.P. because Fuel-x International Inc. is indebted to K2 Principal Fund L.P. in the amount of $9,300,000. The Forbearance Agreement signed among our company, K2 Principal Fund L.P. and Fuel-x International Inc. was the result of such negotiation.

~~We issued the securities to eighteen (18) non~~-~~U.S.~~ ~~persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(~~2) ~~of the Securities Act of 1933 and to two (2) U.S. Accredited Investor (as this term is defined in Regulation D under the 1933 Act).~~-

~~Item~~Pursuant ~~9.01~~to ~~Financial~~the ~~Statements~~Forbearance ~~and~~Agreement ~~Exhibits~~so K2 Principal Fund L.P. 10would forbear Fuel-x International Inc.1’s ~~Form~~obligations under ofthe ~~Subscription~~Credit Facility Agreement entered into on January 31, 2006 and subsequently amended on August 10, 2006 and October 19, 2006, upon completion of the followings:

1. a cash payment of Cdn $2,500,000 from ~~SIGNATURES~~our company to K2 Principal Fund L.P., which we have made upon execution of the Forbearance Agreement;

~~Pursuant~~2. toa ~~the~~cash ~~requirements~~payment of ~~the~~Cdn ~~Securities~~$3,500,000 ~~Exchange~~to ~~Act~~K2 Principal ofFund ~~1934,~~L.P. ~~the~~upon ~~registrant~~completion ~~has~~of ~~duly~~a ~~caused~~plan ~~this~~of ~~report~~arrangement toor beother ~~signed~~business combination onbetween ~~its~~our ~~behalf~~company byand ~~the~~Fuel-x ~~undersigned~~International ~~hereunto duly authorized~~Inc.;

3. conversion of the remaining principal ~~RED~~and ~~SKY~~accrued ~~RESOURCES~~interest ~~INC.~~due on the credit facility into common shares in the capital stock of our company or of the company resulting from the plan of ~~By:~~arrangement ~~/s/~~between ~~Jeff~~our ~~Gillis~~company and Fuel-x International Inc. at a deemed value of US $1.23 per common share (subject to adjustment);

4. upon completion of the plan of ~~Jeff~~arrangement ~~Gillis~~or other business combination between our company and Fuel-x ~~President~~International Inc., ~~Chief~~we ~~Executive~~will ~~Officer~~convert K2 Principal Fund L.P.’s 3,720,000 warrants ~~Chief~~of ~~Financial~~Fuel-x ~~Officer,~~International ~~Treasurer~~Inc. for 1,660,714 ~~Secretary~~warrants ~~and~~of ~~Director~~the resulting company; and

5. upon completion of the plan of ~~Date:~~arrangement ~~July~~or 6other business combination between our company and Fuel-x International Inc., ~~2006~~we will further issue 2,000,000 warrants of the resulting company to K2 Principal Fund L.P. to purchase a common share of the resulting company at US $1.80 for a period 24 months.

However, if Fuel-x International Inc. is not able to get at least 66.66% of its debenture holders, who hold debentures issued by Fuel-x International Inc. in the aggregate amount of Cdn $11,770,000 to enter into a lockup and standstill agreement by December 15, 2006, or if we announce that we will proceed with a plan of arrangement or other business combination with Fuel-x International Inc. before such lockup and standstill agreement is executed, K2 Principal Fund L.P. will return the Cdn $2,500,000 to us and our obligations under the Forbearance Agreement will cease. In the event that a lockup and standstill agreement with the debenture holders is signed by December 15, 2006 and the plan of arrangement or other business combination between our company and Fuel-x International Inc. is not completed by March 31, 2007, the Forbearance Agreement will also terminate and the payment by our company to K2 Principal Fund L.P. of the Cdn $2,500,000 shall be treated as a loan to Fuel-x International Inc.

Item 9.01. Financial Statements and Exhibits.

10.1 Forbearance Agreement dated December 5, 2006 among our company, K2 Principal Fund L.P. and Fuel-x International Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

SOURCE PROJECTS INC.

/s/ Tarik Elsaghir
By: Tarik Elsaghir
Director
Date: December 12, 2006

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