SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

CHECK ONE

|X|     Quarterly report under Section 13 or 15(d) of the Securities Exchange
        Act of 1934 for the quarterly period ended June 30, 2006
                                       or

|_|     Transition report under Section 13 or 15(d) of the Securities Exchange
        Act of 1934

COMMISSION FILE NUMBER 0-12500

                                  ISRAMCO, INC.
             (Exact Name of registrant as Specified in its Charter)



                Delaware                             13-3145265
    (State or other Jurisdiction of            I.R.S. Employer Number
     Incorporation or Organization)


                      11767 KATY FREEWAY, HOUSTON, TX 77079
                    (Address of Principal Executive Offices)

                                  713-621-5946
              (Registrant's Telephone Number, Including Area Code)

        Indicate by check whether the registrant: (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes |X| No |_|

        Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer |_|  Accelerated filer  |_|   Non-accelerated filer  |X|

        Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

        The number of shares outstanding of the registrant's Common Stock as
August 10, 2006 was 2,717,691.







                                      INDEX
                                                                                                       PAGE
                                                                                                       ----
                                                                                                      
   PART I - FINANCIAL INFORMATION:

   Item 1.  Financial Statements

            Consolidated Balance Sheets at June 30, 2006 and December 31, 2005                            1

            Consolidated Statements of Operations for the three and six months
            ended June 30, 2006 and 2005                                                                  2

            Consolidated Statements of Cash Flows for the six months ended
            June 30, 2006 and 2005                                                                        3

            Notes to Consolidated Financial Statements                                                    4

   Item 2.  Management's discussion and analysis of Financial Condition and
            Result of Operation                                                                           8

   Item 3. Quantitative and Qualitative Disclosures about Market Risk                                    11

   Item 4. Controls and Procedures                                                                       12

   PART II.OTHER INFORMATION

   Item 1. Legal Proceedings                                                                             13

   Item 2. Changes in Securities and Use of Proceeds and Issuer Purchases of
           Equity Securities                                                                             13

   Item 3. Defaults upon senior securities                                                               13

   Item 4. Submission of Matters to a Vote of Security Holders                                           13

   Item 5. Other Information                                                                             14

   Item 6. Exhibits                                                                                      14

              Signatures                                                                                 15









                           FORWARD LOOKING STATEMENTS

        CERTAIN STATEMENTS MADE IN THIS QUARTERLY REPORT ON FORM 10-Q ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY
TERMINOLOGY SUCH AS "MAY", "WILL", "SHOULD", "EXPECTS", "INTENDS",
"ANTICIPATES", "BELIEVES", "ESTIMATES", "PREDICTS", OR "CONTINUE" OR THE
NEGATIVE OF THESE TERMS OR OTHER COMPARABLE TERMINOLOGY AND INCLUDE, WITHOUT
LIMITATION, STATEMENTS BELOW REGARDING EXPLORATION AND DRILLING PLANS, FUTURE
GENERAL AND ADMINISTRATIVE EXPENSES, FUTURE GROWTH, FUTURE EXPLORATION, FUTURE
GEOPHYSICAL AND GEOLOGICAL DATA, GENERATION OF ADDITIONAL PROPERTIES, RESERVES,
NEW PROSPECTS AND DRILLING LOCATIONS, FUTURE CAPITAL EXPENDITURES, SUFFICIENCY
OF WORKING CAPITAL, ABILITY TO RAISE ADDITIONAL CAPITAL, PROJECTED CASH FLOWS
FROM OPERATIONS, OUTCOME OF ANY LEGAL PROCEEDINGS, DRILLING PLANS, THE NUMBER,
TIMING OR RESULTS OF ANY WELLS, INTERPRETATION AND RESULTS OF SEISMIC SURVEYS OR
SEISMIC DATA, FUTURE PRODUCTION OR RESERVES, LEASE OPTIONS OR RIGHTS,
PARTICIPATION OF OPERATING PARTNERS, CONTINUED RECEIPT OF ROYALTIES, AND ANY
OTHER STATEMENTS REGARDING FUTURE OPERATIONS, FINANCIAL RESULTS, OPPORTUNITIES,
GROWTH, BUSINESS PLANS AND STRATEGY. BECAUSE FORWARD-LOOKING STATEMENTS INVOLVE
RISKS AND UNCERTAINTIES, THERE ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE
FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT EXPECTATIONS
REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CANNOT GUARANTEE
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS. MOREOVER, NEITHER THE COMPANY NOR
ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF
THESE FORWARD-LOOKING STATEMENTS. THE COMPANY IS UNDER NO DUTY TO UPDATE ANY
FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS REPORT TO CONFORM SUCH
STATEMENTS TO ACTUAL RESULTS.









                                     ISRAMCO INC. AND SUBSIDIARIES
                                    (A) CONSOLIDATED BALANCE SHEETS
                              (in thousands except for share information)

                                                                           June 30,        December 31,
                                                                             2006              2005
                                                                           --------         ---------
                                                                          (Unaudited)
                                              ASSETS
                                                                                      
Current assets:
         Cash and cash equivalents                                        $  2,124          $  1,249
         Marketable securities, at market                                    5,320             5,570
         Accounts receivable - Trade                                           542               605
         Prepaid expenses and other current assets                             131                98
                                                                          --------          --------
         Total current assets                                                8,118             7,522

Property and equipment (successful efforts method for oil and gas
properties)                                                                  6,261             5,110
Real Estate                                                                  1,887             1,887
Marketable securities, at market                                             3,631             3,619
Investment in affiliates                                                    11,128            11,836
Investment in Vessel                                                         5,748             8,479
Other                                                                          162               162
                                                                          --------          --------
                  Total assets                                            $ 40,757          $ 38,615
                                                                          ========          ========




                           LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                                      
Current Liabilities:
         Accounts payable and accrued expenses                            $  2,631          $  2,243
         Income tax payable                                                  1,131              --
         Credit from Bank                                                     --                 370
         Bank Loan                                                           1,244             1,010
                                                                          --------          --------
Total current liabilities                                                    5,006             3,623

Long Term Liabilities

Asset retirement obligations                                                   333               343
Deferred tax liability                                                       2,408             2,899
Current portion of long-term bank loan                                       2,738             3,257
                                                                          --------          --------
Total Long Term Liabilities                                                  5,479             6,498
                                                                          --------          --------
Total Liabilities                                                           10,485            10,122
Commitments, contingencies and other matters
Common stock $.0l par value; authorized 7,500,000 shares;
  issued 2,746,958 shares; outstanding 2,717,891 shares                         27                27
Additional paid-in capital                                                  26,240            26,240
Retained earnings                                                            3,112             1,557
Accumulated other comprehensive income (loss)                                1,152               833
Treasury stock, 29,267 shares                                                 (164)             (164)
                                                                          --------          --------
Total shareholders' equity                                                  30,272            28,493
                                                                          --------          --------
                  Total liabilities and shareholders' equity              $ 40,757          $ 38,615
                                                                          ========          ========

                          See notes to the consolidated financial statements.

                                       -1-







                                           ISRAMCO INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                    (in thousands except for share information)
                                                    (Unaudited)




                                                         Three Months Ended                Six Months Ended
                                                               June 30,                         June 30,
                                                    ----------------------------      ----------------------------
                                                        2006             2005             2006             2005
                                                    -----------      -----------      -----------      -----------
                                                                                           
REVENUES:
         Operator fees from related party           $        14      $        18      $        35      $        36
         Oil and gas sales                                  541              672            1,206            1,517
         Revenue from Vessel                                688              568              688              568
         Interest income                                     42               55              297              156
         Office services to affiliate and other             194              273              380              456
         Gain on marketable securities                      527               --              812              219
         Equity in net income of Investees                  958               --            1,663              389
         Net gain in legal settlement                        --               --            2,565               --
         Other Income                                        28               35              593               64
                                                    -----------      -----------      -----------      -----------
Total revenues                                      $     2,993      $     1,621      $     8,239      $     3,405
                                                    -----------      -----------      -----------      -----------

COSTS AND EXPENSES:
         Interest expenses                                   88               91              211              156
         Cost of vessel revenues                            152              444            1,017              741
         Depreciation, depletion
           amortization and impairment                      317              323              819              830
         Accretion expenses                                  37               15               37               19
         Lease operating expenses and
           severance taxes                                  179              320              400              625
         Exploration costs                                   90              160               90              160
         Operator expense                                   200              139              376              362
         General and administrative                         363              463              772              803
         Loss on marketable securities                      --                 7               --               --
         Impairment of vessel                               --                --            2,200               --
         Equity in net loss of Investees                    --               411               --               --
                                                    -----------      -----------      -----------      -----------
Total expenses                                            1,425            2,373            5,920            3,698
                                                    -----------      -----------      -----------      -----------
Income (loss) before income taxes                         1,568             (752)           2,318             (293)

Income tax (expense) benefit                               (502)             156             (858)
                                                    -----------      -----------      -----------      -----------
Net income (loss)                                   $     1,066      $      (596)     $     1,460      $      (293)
                                                    ===========      ===========      ===========      ===========

Earnings (loss) per common share -
  basic and diluted                                 $      0.39      $     (0.22)     $      0.54      $     (0.11)
                                                    ===========      ===========      ===========      ===========

Weighted average number of shares
   Outstanding - basic and diluted                    2,717,891        2,717,891        2,717,891        2,717,891
                                                    ===========      ===========      ===========      ===========


               See notes to the consolidated financial statements.


                                       -2-







                                           ISRAMCO INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (in thousands)
                                                    (Unaudited)



                                                                               Six Month Ended June 30,
                                                                  ------------------------------------------------
                                                                          2006                       2005
                                                                        -------                     -------
                                                                                              
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                       $ 1,460                     $  (293)
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation, depletion amortization and impairment                         834                         830
Impairment of vessel                                                      2,200                          --
Accretion expense                                                            37                          19
Loss (gain) on marketable securities                                       (811)                       (219)
Equity in net loss (gain) of investees                                   (1,663)                       (389)
Deferred taxes                                                             (496)                         --
Changes in assets and liabilities:
Accounts receivable                                                          62                         176
Prepaid expenses and other current assets                                   (34)                       (124)
Accounts payable and accrued liabilities                                    228                         276
Income tax payable                                                        1,131                          --
                                                                        -------                     -------
Net cash provided by operating activities                                 2,948                         276
                                                                        -------                     -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliate                                                     (979)                        --
Addition to property and equipment                                        (1,500)                     (1,768)
Purchase of marketable securities                                        (1,373)                     (2,150)
Proceeds from sale of marketable securities                               2,435                       4,197
                                                                        -------                     -------
Net cash provided  (used) in investing activities                        (1,417)                        279
                                                                        -------                     -------
Net cash provided by financial activities
Repayment of loan                                                          (501)                       (236)
Change in short term credit from banks                                     (154)                       (840)
                                                                        -------                     -------
Net cash provided (used) by financial activities                           (655)                     (1,076)
                                                                        -------                     -------
Net increase (decrease) in cash and cash equivalents                        876                        (521)
Cash and cash equivalents-beginning of period                             1,249                       2,087
                                                                        -------                     -------
Cash and cash equivalents-end period                                    $ 2,125                     $ 1,566
                                                                        =======                     =======

See notes to the consolidated financial statements.

                                       -3-




                         ISRAMCO INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - BASIS OF  PRESENTATION

As used in these financial statements, the terms "Company" and "Isramco" refer
to Isramco, Inc. and subsidiaries.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of Management, all adjustments (consisting of only normal recurring adjustments)
considered necessary for a fair presentation have been included. Results for the
three month period ended June 30, 2006, are not necessarily indicative of the
results that may be expected for the year ended December 31, 2006. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Isramco's Annual Report on Form 10-K for the fiscal year
ended December 31, 2005. Certain re-classification of prior year amounts have
been made to conform to current presentation.

Stock-Based Compensation

On January 1, 2006, Isramco adopted Statement of Financial Accounting Standards
Board ("SFAS") No. 123(R), "Share-Based Payment" ("SFAS 123(R)"). SFAS 123(R)
replaced SFAS No. 123 and supersedes APB Opinion No. 25. SFAS 123(R) requires
all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair
values. The pro forma disclosures previously permitted under SFAS 123 are no
longer an alternative to financial statement recognition. Isramco adopted SFAS
123(R) using the modified prospective method which requires the application of
the accounting standard as of January 1, 2006. The consolidated financial
statements as of and for the quarter ended March 31, 2006 reflect the impact of
adopting SFAS 123(R). In accordance with the modified prospective method, the
consolidated financial statements for prior periods have not been restated to
reflect, and do not include, the impact of SFAS 123(R).

Prior to 2006, Isramco accounted for employee stock-based compensation granted
under our long-term incentive plans using the intrinsic value method prescribed
by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Isramco did not have any compensation
expense for the three months periods ended June 30, 2006 and 2005, as there were
no options granted in either of the periods and options historically granted
were fully vested on the date of grant. The following table illustrates the
effect on net income and earnings per share if we had applied the fair value
recognition provisions of SFAS 123 to stock-based employee compensation:




                                                                               THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                               ------------------     ----------------
                                                                                 JUNE 30, 2005         JUNE 30, 2005
                                                                                 -------------         -------------
                                                                                                  
Net loss, as reported                                                               $(596,000)           $ (293,000)
                                                                                    ==========           ===========
Add:  Total stock-based employee compensation expense determined under
         intrinsic value based method for all awards, net
         of related tax effects                                                          --                     --
Deduct:  Total stock-based employee compensation expense determined under
          fair value based method for all awards, net
          of related tax effects                                                         --                     --
                                                                                    ---------            -----------

Pro forma net loss                                                                  $(596,000)           $ (293,000)
                                                                                    ==========           ===========

Net loss per share:
          Basic and diluted - as reported                                           $   (0.22)           $    (0.11)
                                                                                    ----------           ===========
          Basic and diluted - pro forma                                             $   (0.22)           $    (0.11)
                                                                                    ----------           ===========


                                       -4-




NOTE 2 - CONSOLIDATION

The consolidated financial statements include the accounts of Isramco, its
direct and indirect non U.S. based wholly-owned subsidiaries Isramco Oil and Gas
Ltd. ("Oil and Gas") and Magic 1 Cruise Line Corp. ("Magic") and its U.S. based
wholly-owned subsidiaries: Jay Petroleum, L.L.C. ("Jay"), Jay Management L.L.C.
("Jay Management"). Intercompany balances and transactions have been eliminated
in consolidation.

NOTE 3 - INVESTMENT IN VESSEL

In February 2006, Isramco's wholly owned subsidiary Magic, entered into a
bareboat charter with a tour operator pursuant to which Magic's luxury cruise
liner is being leased for three specific periods, with the first such period
having commenced on April 6, 2006 and scheduled to terminate on November 5,
2006, the period thereafter to commence on March 29, 2007 and terminate on
October 28, 2007 and the third period to commence on April 8, 2008 and terminate
on November 7, 2008, at a daily rate of $8,000. The operator may cancel the
second and third charter periods by giving a written notice to the Magic to such
effect by no later that November 1, 2006 and it may cancel the third charter
period by giving a written notice to the Magic to such effect by no later than
November 1, 2007.

Following management's assessment conducted in April and May 2006 as part of the
preparation of the financial statements for the period ended March 31, 2006,
management determined that there has been a decrease in the fair market value of
Isramco's investment in such vessel and, that as a consequence thereof, Isramco
believed the investment to have been impaired. Accordingly, Isramco recorded an
impairment charge in March 2006 in the amount of $2,200,000 for the three month
period ended March 31, 2006.

NOTE 4 - EARNINGS PER SHARE COMPUTATION

SFAS No. 128 requires a reconciliation of the numerator (income) and denominator
(shares) of the basic earnings per share ("EPS") computation to the numerator
and denominator of the diluted EPS computation. The reconciliation is as
follows:




                                               For the Three Months Ended June 30,
                                               ------------------------------------
                                               2006                             2005
                                       ------------------------       ------------------------
                                        Income          Shares          Income        Shares
                                       ---------      ---------       -----------   ----------
                                                                            
Earnings (loss) - Basic               $1,066,000       2,717,891      $ (596,000)    2,717,891
Effect of dilutive securities of
stock options                               --              --              --             --
                                      ----------      ----------      ----------    ----------
Earnings (loss) - Diluted             $1,066,000       2,717,891      $ (596,000)    2,717,891
                                      ==========      ==========      ==========    ==========

--------------------------------------------------------------------------------------------------------------

                                               For the Six Months Ended June 30,
                                               ------------------------------------
                                               2006                             2005
                                      ------------------------       ------------------------
                                       Income          Shares          Income       Shares
                                      ---------      ---------       -----------   ----------
Earnings (loss) - Basic              $1,460,000       2,717,891      $ (293,000)    2,717,891
Effect of dilutive securities of
stock options                               --              --              --             --
                                     ----------      ----------      ----------    ----------
Earnings (loss) - Diluted            $1,460,000       2,717,891      $ (293,000)    2,717,891
                                     ==========      ==========      ==========    ==========

--------------------------------------------------------------------------------------------------------------

                                       -5-









NOTE 5 - GEOGRAPHICAL SEGMENT INFORMATION
Isramco's operations for 2006 involve two industry segments - the exploration,
development production and transportation of oil and natural gas and holding and
leasing its cruise live vessel. Prior to 2004 Isramco operated in a single
operating segment - oil and gas activities. Its current oil and gas activities
are concentrated in the United States and Israel. Operating outside the United
States subjects the company to inherent risks such as a loss of revenues,
property and equipment from such hazards as exploration. Nationalization, war
and other political risks, risks of increase of takes and governmental
royalties, renegotiation of contracts with governmental royalties, renegotiation
of contracts with government entities and change in laws and policies governing
operations of foreign-based companies.

Isramco's oil and gas business is subject to operating risks associated with the
exploration, and production of oil and gas, including blowouts, pollution and
acts of nature that could result in damage to oil and gas wells, production
facilities of formations. In additions, oil and gas prices have fluctuated
substantially in recent years as a result of events, which were outside of
Isramco's control. Isramco does not directly operator the operators. This
segment of Isramco's business is subject to many risks all of which cannot be
presently anticipated, including losses resulting from unexpected repairs and
maintenance and competition.



                                                 United                            Total            Vessel        Consolidated
                                                 States           Israel         Oil and gas                          Total
                                                --------         --------         --------         --------         --------
                                                                                                    
Identifiable assets at June 30, 2006            $  5,960         $     60         $  6,261         $  5,748         $ 12,009
Cash and corporate assets                                                                                           $ 28,748
                                                                                                                    --------
                                                                                                                    $ 40,757
Total Assets at June 30, 2006                                                                                       ========

Identifiable assets at December 31, 2005        $  5,326         $     68         $  5,304         $  8,479         $ 13,783
Cash and corporate assets                                                                                           $ 25,048
                                                                                                                    --------
Total Assets at December 31, 2005                                                                                   $ 38,615

Six Months Ended June 30, 2006

Sales and other operating revenue               $  1,319         $    301         $  1,620         $    688         $  2,308
Costs and operating expenses                    $   (802)        $    (11)        $ (1,034)        $ (1,548)        $ (2,582)
                                                --------         --------         --------         --------         --------
Operating profit                                $    517         $    290         $    807         $   (860)        $    (53)
                                                ========         ========         ========         ========         ========
Interest income                                                                                                          297
Financial Income, net                                                                                                   (211)
General corporate expenses                                                                                            (1,148)
Gain on marketable securities and                                                                                      2,475
equity in net income of investees
Impairment of vessel                                                                                                  (2,200)
Other income                                                                                                           3,158
Income Taxes                                                                                                            (858)
                                                                                                                    --------
Net income                                                                                                             1,460
Six Months Ended June 30, 2005

Sales and other operating revenue               $  1,609         $    400         $  2,009         $    568         $  2,577
Costs and operating expenses                    $  1,115         $   (372)        $ (1,487)        $ (1,252)        $ (2,739)
                                                --------         --------         --------         --------         --------

Operating profit                                $    494         $     28         $    522         $   (684)        $   (162)

Interest income                                                                                                          156
Financial Income, net                                                                                                   (156)
General corporate expenses                                                                                              (803)
Loss on marketable securities and
  equity in net income of investees                                                                                      608
Other income                                                                                                              64
Income taxes                                                                                                              --
Net income                                                                                                              (293)
                                                                                                                    ========
                                       -6-








  Three Months Ended June 30, 2006

                                                                                                         
Sales and other operating revenue                                   $   620      $   130      $   750      $   688      $ 1,438
Costs and operating expenses                                        $  (386)     $    (6)     $  (392)     $  (382)     $  (774)
                                                                    -------      -------      -------      -------      -------
Operating profit                                                    $   234      $   124      $   358      $  (306)     $   664
                                                                    =======      =======      =======      =======      =======
Interest Income                                                                                                              42
Financial Income, net                                                                                                       (88)
General corporate expenses                                                                                                 (563)

Gain (Loss) on marketable securities and
Equity in net income of investees                                                                                        1,485
Other Income                                                                                                                28
Income Taxes                                                                                                              (502)
                                                                                                                        -------
                                                                                                                         1,066
Net income

                                                 United                            Total            Vessel        Consolidated
                                                 States           Israel         Oil and gas                          Total
                                                --------         --------         --------         --------         --------
Three Months Ended June 30, 2005

Sales and other operating revenue                    749              247              996              568            1,564
Costs and operating expenses                        (574)            (134)            (708)            (683)          (1,391)
                                                   --------         --------         --------         --------        --------
Operating profit                                     175              113              288             (115)             173
                                                   ========         ========         ========         ========        ========
Interest Income                                                                                                          55
Financial Income, net                                                                                                   (91)
General corporate expenses                                                                                             (506)
Loss on marketable securities                                                                                            (7)
Equity in net loss of investees                                                                                        (411)
Other income                                                                                                             35
Income taxes                                                                                                            156
                                                                                                                      --------
Net loss                                                                                                               (596)
                                                                                                                      ========


NOTE 6 - COMPREHENSIVE INCOME

Isramco's comprehensive income for the three months ended June 30, 2006 and 2005
was as follows:



                                                                                                      Three months
                                                                                                     ended June 30,
                                                                                              2006                        2005
                                                                                              ----                        ----
                                                                                                                  
Net income (loss)                                                                          $ 1,066                      $  (596)
Other comprehensive gain (loss)
  available-for-sale securities                                                                (96)                        (340)
  foreign currency translation adjustments                                                     415                         (477)
                                                                                       ------------                   ------------
Comprehensive income (loss)                                                                  1,385                       (1,413)
                                                                                       ============                   ============


                                      .-7-





 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                                 OF OPERATIONS

        THE FOLLOWING COMMENTARY SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES CONTAINED ELSEWHERE IN THIS
REPORT ON FORM 10-Q. THE DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THESE STATEMENTS RELATE TO FUTURE EVENTS OR OUR
FUTURE FINANCIAL PERFORMANCE. IN SOME CASES, YOU CAN IDENTIFY THESE
FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD,"
"EXPECT," "PLAN," "ANTICIPATE," "BELIEVE," "ESTIMATE," "PREDICT," "POTENTIAL,"
"INTEND," OR "CONTINUE," AND SIMILAR EXPRESSIONS. THESE STATEMENTS ARE ONLY
PREDICTIONS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF A VARIETY OF FACTORS, INCLUDING,
BUT NOT LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
REPORT ON FORM 10-Q FOR THE YEAR ENDED DECEMBER 31, 2005. ISRAMCO INC. DISCLAIMS
ANY OBLIGATION TO UPDATE SUCH FORWARD LOOKING STATEMENTS.

OVERVIEW

        Isramco, Inc., a Delaware company, is active in the exploration of oil
and gas in Israel and the United States. The Company acts as an operator of
certain leases and licenses and also hold participation interests in certain
other interests. The Company also holds certain non-oil and gas properties.

CRITICAL ACCOUNTING POLICIES

        The Company identified the accounting principles which it believes are
most critical to the reported financial status by considering accounting
policies that involve the most complex of subjective decisions or assessments.

        The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of customers to make required payments. If
the financial condition of customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

        The Company records an investment impairment charge when it believes an
investment has experienced a decline in value that is other than is temporary.
Future adverse changes in market conditions or poor operating results of
underlying investments could result in losses or an inability to recover the
carrying value of the investment that may not be reflected in an investment's
current carrying value, thereby possibly requiring an impairment charge in the
future.

        The Company does not participate in, nor has it created, any off-balance
sheet special purpose entities or other off-balance sheet financing. In
addition, the Company does not enter into any derivative financial instruments.

        The Company records a liability for asset retirement obligation at fair
value in the period in which it is incurred and a corresponding increase in the
carrying amount of the related long live assets.


LIQUIDITY AND CAPITAL RESOURCES


        The Company finances its operations primarily from cash generated by
operations.

        During the three months ended June 30, 2006, the Company's consolidated
cash and cash equivalents increased by $876,000 from $1,249,000 at December 31,
2005 to $2,124,000 at June 30, 2006. The increase in the Company's consolidated
cash and cash equivalents is primarily attributable to the receipt of $2,565,000
from the settlement of two lawsuit initiated by the Company.

                                      -8-


        Net cash used in investing activities for the six-month period ended
June 30, 2006 was $1,417,000 compared to $279,000 provided during the six-month
period ended June 30, 2005. The cash used in 2006 period was used for investment
in the drilling of gas wells in Texas.

        The Company believes that existing cash balances and cash flows from
activities will be sufficient to meet its financing needs. The Company intends
to finance its ongoing oil and gas exploration activities from working capital.

RESULTS OF OPERATIONS

        SIX MONTHS ENDED JUNE 30, 2006 (THE "2006 PERIOD") COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2005 (THE "2005 PERIOD") AND THE THREE MONTHS ENDED JUNE
30, 2006 COMPARED TO THE THREE MONTHS JUNE 30, 2005.

        The Company reported a net income of $1,460,000 ($(0.54 per share) for
the six-month period ended June 30, 2006 compared to net loss of $293,000 ($0.11
per share) for the same period in 2005 and net income of $1,066,000 ($0.39 per
share) for the three months period ended June 30, 2006 compared to net loss of
$596,000 ($0.22 per share) for the same period in 2005. The increase in net
income for the three month ended June 30, 2006 compared to the same period in
2005 is primarily attributable to an increase in the gain on marketable
securities and an increase in the equity in net income of investees, offset by a
decrease in gas sales. The increase in the net income for the 2006 Period
compared to the 2005 Period is primarily attributable to the recording of a
non-recurring one time payment of $2,565,000 for the settlement of certain
lawsuits that were initiated by the Company, offset by decreases in oil and gas
sales and impairment of the cruise line vessel discussed below.

Set forth below is a break-down of these results:

United States

Oil and Gas Revenues (in thousands)



                                                    Three Months ended June 30,                     Six Months ended June 30,
                                                    2005                   2006                    2005                    2006

                                                                                                                
Oil Volume Sold (Bbl)                               3.2                    3.6                     7.1                      7.1

Gas Volume Sold (MCF)                                85                     51                     195                      112

Oil Sales ($)                                       158                    218                     325                      427

Gas Sales ($)                                       541                    291                   1,181                      740

Average Unit Price

Oil ($/Bbl) *                                    $46.64                 $60.22                 $ 45.45                  $ 59.57
                                                 $ 6.38                 $ 5.75                 $  6.05                  $  6.60
Gas ($/MCF) **




        o       Bbl - Stock Market Barrel Equivalent to 42 U.S. Gallons

        **      MCF - 1,000 Cubic Feet






                                       -9-





SUMMARY OF EXPLORATION EFFORTS IN THE UNITED STATES

        The Company, through its wholly-owned subsidiaries, Jay Petroleum LLC
("Jay Petroleum") and Jay Management LLC ("Jay Management"), is involved in oil
and gas production in the United States. Jay Petroleum owns varying working
interests in oil and gas wells in Louisiana, Texas, Oklahoma and Wyoming.
Independent estimates of the reserves held by Jay Petroleum as of December 31,
2005 are approximately 106,638 net barrels of proved developed producing oil and
1,645 net MMCFs of proved developed producing natural gas. Jay Management acts
as the operator of certain of the producing oil and gas interests owned or
acquired by Jay Petroleum.

        During the six months ended June 30, 2006 the Company continued to
invest in drilling activities in the Barnett Shale in North Central Texas
(Parker County) in which the Company holds 15% working interests. To date, seven
gas wells have been drilled of which one well has been completed for production
and the remainder are in various stages of completion. The total investments of
the Company in the six months period of 2006 was $ 1,498,342.

OPERATOR'S FEES

        During the 2006 Period, the Company earned $35,000 in operator fees
compared to $14,000 for the 2005 Period and $14,000 for the three months ended
June 30, 2006 compared to $18,000 for the comparable period in 2005.

OIL & GAS REVENUES

        During the 2006 Period, the Company had oil and gas revenues of
$1,206,000 compared to $1,517,000 for the 2005 Period and $541,000 for the three
months ended June 30, 2005 compared to $672,000 for the comparable period in
2005. The decrease in 2006 Period and for the three months ended June 2006
compared to same periods in 2005 ,is attributable to a decline of production in
the gas wells and the shutdown of production caused by unanticipated pipeline
maintenance in one of the fields.

LEASE OPERATING EXPENSES AND SEVERANCE TAXES

        Lease operating expenses and severance taxes were primarily in
connection with oil and gas fields in the United States. Oil and gas lease
operating expenses and severance taxes for the 2006 Period were $400,000
compared to $625,000 for the 2005 Period and $179,000 for the three months ended
June 30, 2006 compared to $320,000 for the comparable period in 2005. Texas.

OIL AND GAS EXPLORATION COSTS

        During the 2006 Period the Company incurred expenses for exploration
costs in the amount of $90,000 compared to $160,000 for the 2005 Period.

INTEREST INCOME

        Interest income in respect of the 2006 Period was $297,000 compared to
$156,000 for the 2005 Period and $42,000 in respect of the three months ended
June 30, 2006 compared to $55,000 for the same period in 2005.

GAIN (LOSS) ON MARKETABLE SECURITIES

        During the 2006 Period, the Company recognized a net realized and
unrealized gain on trading securities of $812,000 compared to gain of $219,000
for the 2005 Period and gain of $527,000 for the three months ended June 30,
2006 compared to loss of $7,000 for the same period in 2005.

        Increases or decreases in the gains and losses from marketable
securities are dependent on the market prices in general and the composition of
the portfolio of the Company.

EQUITY IN NET INCOME OF INVESTEES

        The Company's equity in the net income of investees for the 2006 Period
was 1,663,000 compared to its equity in net income of $389,000 for the 2005
Period and gain of $958,000 in respect of the three months ended June 30, 2006
compared to

                                      -10-


loss of $411,000 for the same three month period in 2005. The increase is
primarily attributable to increase in the market value of the marketable
securities held by Negev 2 and IOC Dead Sea LP.

OPERATOR EXPENSE

        Operator expenses were incurred primarily in connection with the
offshore activities in Israel. Operator expenses for the 2006 Period were
$376,000 compared to $362,000 for the 2005 Period and $200,000 for the three
months ended June 30, 2005 compared to $139,000 for the corresponding period in
2005

GENERAL AND ADMINISTRATIVE EXPENSES

        General and administrative expenses for the 2005 Period were $ 772,000
compared to $ 803,000 for the 2005 Period and $ 363,000 for the three months
ended June 30, 2006 compared to $ 463,000 for the same period in 2005.

CRUISE LINE VESSEL REVENUES

        During the 2006 period the Company earned $688,000 from leasing the
cruise line Vessel. The lease began in April 6, 2006 and is scheduled to expire
in October 31, 2006.

CRUISE LIVE VESSEL EXPENSES

        Cruise Line vessel expenses for the 2006 Period were $1,017,000 and
$152,000 for the three months ended June 30, 2006. The expenses are primarily
attributable to maintenance, repairs and payroll.

DEPRECIATION, DEPLETION AND AMORTIZATION

        Depreciation depletion and amortization expenses are connected to the
producing wells in the United States and to the cruise line. During the 2006
Period, the Company recorded the amount of $819,000 compared to $830,000 for the
2005 Period and $317,000 for the three months ended June 2006 compared to
$323,000 for the comparable period in 2005. The increase is 2006 Period and for
the three months is primarily attributable to increase in the deprecation of the
oil and gas wells.

NET GAIN ON LEGAL SETTLEMENTS

        Net Gain on Legal Settlements in 2006 Period is attributable to the
receipt of approximately $3,050,000 from the settlement by the Company in
February 2006 of certain lawsuits that it initiated. The Company recorded a net
gain of $2,565,000.

OTHER INCOME

        Other income in the six months ended June 30, 2006 was $593,000 compared
to $64,000 during the corresponding period in 2005. Other income in 2006 is
primarily attributable to the mark to market of swap contracts on oil and gas
prices.

IMPAIRMENT OF ASSETS

        Following management's assessment conducted in April and May 2006 as
part of the preparation of the financial statements for the period ended March
31, 2006, management determined that there has been a decrease in the fair
market value of the Company's investment in such vessel and, that as a
consequence thereof, the Company believed the investment to have been impaired.
Accordingly, the Company recorded an impairment charge in March 2006 in the
amount of $2,200,000 for the three month period ended March 31, 2006.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Market risks relating to changes in interest rates and foreign currency
exchanges rates were reported in Item 7A of the Company's Annual Report on Form
10-K for the year ended December 31, 2005. There has been no material change in
these market risks since the end of the fiscal year 2005.

                                      -11-




ITEM 4. CONTROLS AND PROCEDURES

        EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Company's Exchange Act reports is recoded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to management, including our Chief Executive Officer (and Principal Financial
and Accounting Officer), as appropriate, to allow timely decisions regarding
required disclosure based closely on the definition of "disclosure controls and
procedures" in Rule 13 a- 14 c.

        As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with participation of management,
including its Chief Executive Officer (and Principal Financial and Accounting
Officer), of the effectiveness of the design and operation of the disclosure
controls and procedures. Based of the foregoing, the Company's Chief Executive
Officer (and Principal Financial and Accounting Officer) concluded that the
Company's disclosure controls and procedures were effective.

        CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. During the
quarter ended June 30, 2006, there have been no changes in the Company's
internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, these controls.

                                      -12-




                           PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS

        The Risk Factors included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2005 have not materially changed other
than as set forth below. The update to the risk factors contained below was
first included in the Company quarterly report on Form 10-QSB for the three
months ended March 31, 2006.

        In March 2004, the Company purchased a luxury cruise liner (the
"Vessel") for aggregate consideration of $8,050,000. The Vessel is being
operated by the Company's wholly owned subsidiary Magic. Based on a
re-evaluation of the vessel's recoverable amount completed in May 2006 that is
based on a revision of the vessel's anticipated maintenance costs, the Company's
management believes that there has been a decrease in the fair market value of
the vessel and that the Company's investment in the vessel has thus been
impaired. Accordingly, the Company recorded an impairment charge of $2,200,000
as of March 31, 2006. The Company periodically re-evaluates the carrying value
of the vessel. No assurance can be given that future developments in the cruise
line industry generally or in the costs associated with the maintenance of the
vessel will not result in additional impairment to the value of the vessel.

ITEM 2. CHANGE IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
        SECURITIES
        None


ITEM 3. DEFAULT UPON SENIOR SECURITIES
        None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        The Company's Annual Meeting of Stockholders was held on June 27, 2006.
The following matters were voted on: (1) Election of Directors and (2)
Appointment of Auditors. The vote tally was as follows:

        (1) Proposal to Elect Directors to Serve until the 2006 Annual Meeting
        of Stockholders.




                                      -13-



                                               FOR            WITHHOLD
                                           ------------      ------------
               Haim Tsuff                    2,181,507              6,021

               Jackob Maimon                 2,174,617             12,911

               Max Pridgeon                  2,182,317              5,211

               Donald D. Lovell              2,175,217             12,311

               Amir Mireskandari             2,182,317              5,211


2) Proposal to ratify the appointment of Malone & Bailey, PC as the Company's
auditors for the year ending December 31, 2006.

         FOR        AGAINST        ABSTAIN        BROKER NON-VOTE

       2,179,994     6,332          1,262                --

ITEM 5. OTHER INFORMATION

         None

ITEM 6. EXHIBITS

Exhibits

31      Certification of Chief Executive and Principal Financial Officer
        pursuant to Section 302 of Sarbanes-Oxley Act

32      Certification of Chief Executive and Principal Financial Officer
        pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
        of the Sarbanes-Oxley act of 2002

                                      -14-









                                   SIGNATURES

In accordance with 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, thereunto duly authorized.

                                  ISRAMCO, INC.





DATE: AUGUST 14, 2006                                BY /S/ HAIM TSUFF

                                                     CHAIRMAN OF THE BOARD,
                                                     CHIEF EXECUTIVE OFFICER
                                                     (AND PRINCIPAL
                                                     FINANCIAL AND ACCOUNTING
                                                     OFFICER)


                                      -15-