<PAGE>   1

================================================================================

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

                                    FORM 10-Q

             [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                For the quarterly period ended September 30, 1999

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

             For the transition period from              to
                                           -------------    -----------

                        Commission File Number 000-22433

                           BRIGHAM EXPLORATION COMPANY
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                         <C>                                      <C>
               DELAWARE                                 1311                               75-2692967
     (State of other jurisdiction           (Primary Standard Industrial                (I.R.S. Employer
   of incorporation or organization)         Classification Code Number)             Identification Number)
</TABLE>

                            6300 BRIDGE POINT PARKWAY
                               BLDG. 2, SUITE 500
                               AUSTIN, TEXAS 78730
                                 (512) 427-3300

 (Name, address, including zip code, and telephone number, including area code,
                  of Registrant's principal executive offices)


   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or 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    .
    ---      ---

As of November 1, 1999, 14,517,786 shares of Common Stock, $.01 per share, were
outstanding.

================================================================================


<PAGE>   2



                           BRIGHAM EXPLORATION COMPANY

                                      INDEX


<TABLE>
<CAPTION>
                                                                                                          PAGE
PART I.   FINANCIAL INFORMATION:                                                                         NUMBER
                                                                                                         ------
<S>               <C>                                                                                    <C>
Item 1.   Unaudited Financial Statements

              Condensed Consolidated Financial Statements of Brigham Exploration Company
                  Balance Sheets - December 31, 1998 and September 30, 1999.........................        1
                  Statements of Operations - Three and nine months ended
                    September 30, 1998 and 1999.....................................................        2
                  Statements of Cash Flows - Nine months ended September 30, 1998 and 1999..........        3
                  Statement of Changes in Stockholders' Equity - Nine months ended
                     September 30, 1999.............................................................        4
                  Notes to Condensed Consolidated Financial Statements..............................      5 - 7

              Condensed Financial Statements of Brigham Exploration Company Subsidiaries
                  Balance Sheets - September 30, 1999...............................................        8
                  Balance Sheets - December 31, 1998................................................        9
                  Statements of Operations - Three months ended September 30, 1999..................       10
                  Statements of Operations - Three months ended September 30, 1998..................       11
                  Statements of Operations - Nine months ended September 30, 1999...................       12
                  Statements of Operations - Nine months ended September 30, 1998...................       13
                  Statements of Cash Flows - Nine months ended September 30, 1999...................       14
                  Statements of Cash Flows - Nine months ended September 30, 1998...................       15
                  Statements of Changes in Equity - Nine months ended September 30, 1999............       16
                  Notes to Condensed Financial Statements...........................................      17-19

          As all Brigham Exploration Company subsidiaries fully and unconditionally guarantee the
          Senior Subordinated Secured Notes and the Company has no significant assets other than its
          investments in its subsidiaries, the consolidated financial statements are substantially
          the same as the financial statements of the subsidiary guarantors and separate financial
          statements have been omitted as they would not be meaningful to investors.

Item 2.   Management's Discussion and Analysis of Results of
              Operations and Financial Condition....................................................      20-29


PART II.  OTHER INFORMATION:

Item 2.   Changes in Securities.....................................................................       30

Item 6.   Exhibits and Reports on Form 8-K..........................................................       30
</TABLE>


<PAGE>   3


PART I.   FINANCIAL INFORMATION:

Item 1.   Financial Statements

                           BRIGHAM EXPLORATION COMPANY

                             CONDENSED CONSOLIDATED
                                 BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                December 31,       September 30,
                                                                                   1998                1999
                                                                                ------------       -------------
                                                                                                    (unaudited)
<S>                                                                             <C>                <C>
                                     ASSETS
Current assets:
     Cash and cash equivalents                                                  $      2,569       $       3,381
     Accounts receivable                                                               7,938               5,627
     Prepaid expenses                                                                    290                 480
                                                                                ------------       -------------
        Total current assets                                                          10,797               9,488
                                                                                ------------       -------------

Natural gas and oil properties, at cost, net                                         134,317             106,498
Other property and equipment, at cost, net                                             2,014               1,813
Drilling advances paid                                                                   230                 532
Deferred loan fees                                                                     3,146               4,052
Other noncurrent assets                                                                   12                 101
                                                                                ------------       -------------
                                                                                $    150,516       $     122,484
                                                                                ============       =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                           $     19,883       $      13,621
     Accrued drilling costs                                                            1,219                  70
     Participant advances received                                                       764               1,804
     Other current liabilities                                                         1,647               1,498
                                                                                ------------       -------------
        Total current liabilities                                                     23,513              16,993
                                                                                ------------       -------------

Notes payable                                                                         59,000              55,000
Senior subordinated notes, net                                                        35,786              39,729
Other noncurrent liabilities                                                           7,536               1,449

Stockholders' equity:
     Preferred stock, $.01 par value, 10 million shares
        authorized, none issued and outstanding                                           --                  --
     Common stock, $.01 par value, 30 million shares
        authorized, 13,306,206 and 14,517,786 issued and outstanding at
        December 31, 1998 and September 30, 1999, respectively                           133                 145
     Additional paid-in capital                                                       58,838              64,218
     Unearned stock compensation                                                        (890)               (358)
     Accumulated deficit                                                             (33,400)            (54,692)
                                                                                ------------       -------------
        Total stockholders' equity                                                    24,681               9,313
                                                                                ------------       -------------
                                                                                $    150,516       $     122,484
                                                                                ============       =============
</TABLE>

  Natural gas and oil properties are accounted for using the full cost method.
   See accompanying notes to the condensed consolidated financial statements.


                                        1
<PAGE>   4


                           BRIGHAM EXPLORATION COMPANY

                             CONDENSED CONSOLIDATED
                            STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                Three Months                      Nine Months
                                                            Ended September 30,               Ended September 30,
                                                       --------------------------------------------------------------------
                                                            1998             1999               1998              1999
                                                       --------------   --------------     --------------    --------------
<S>                                                    <C>              <C>                 <C>              <C>
Revenues:
     Natural gas and oil sales                         $        4,162   $        4,109      $      11,292    $       10,855
     Workstation revenue                                           75               86                322               247
                                                       --------------   --------------     --------------    --------------
                                                                4,237            4,195             11,614            11,102
                                                       --------------   --------------     --------------    --------------
Costs and expenses:
     Lease operating                                              564              525              1,542             1,679
     Production taxes                                             255              300                705               685
     General and administrative                                 1,069              901              3,362             2,710
     Depletion of natural gas and oil properties                1,690            2,839              4,480             5,650
     Depreciation and amortization                                113              132                288               398
     Amortization of stock compensation                            65             (123)               298               (10)
                                                       --------------   --------------     --------------    --------------
                                                                3,756            4,574             10,675            11,112
                                                       --------------   --------------     --------------    --------------
        Operating income                                          481             (379)               939               (10)
                                                       --------------   --------------     --------------    --------------

Other income (expense):
     Interest income                                               37               40                114               134
     Interest expense                                          (1,979)          (3,250)            (4,411)           (9,221)
     Loss on sale of natural gas and oil properties                --               --                 --           (12,195)
                                                       --------------   --------------     --------------    --------------
                                                               (1,942)          (3,210)            (4,297)          (21,282)
                                                       --------------   --------------     --------------    --------------

Net loss before income taxes                                   (1,461)          (3,589)            (3,358)          (21,292)
Income tax benefit                                                497               --              1,135                --
                                                       --------------   --------------     --------------    --------------
     Net loss                                          $         (964)  $       (3,589)    $       (2,223)   $      (21,292)
                                                       ==============   ==============     ==============    ==============

Net loss per share:
     Basic / Diluted                                   $        (0.08)  $        (0.25)     $       (0.18)   $        (1.52)

Weighted average common shares outstanding:
     Basic / Diluted                                           12,677           14,447             12,396            14,028
</TABLE>



   See accompanying notes to the condensed consolidated financial statements.



                                       2
<PAGE>   5


                          BRIGHAM EXPLORATION COMPANY

                             CONDENSED CONSOLIDATED
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                         Nine               Nine
                                                                                     Months Ended       Months Ended
                                                                                    September 30,       September 30,
                                                                                         1998                1999
                                                                                   -----------------    -------------
<S>                                                                                <C>                  <C>
Cash flows from operating activities:
     Net loss                                                                      $          (2,223)   $     (21,292)
     Adjustments to reconcile net loss to cash provided (used)
     by operating activities:
         Depletion of natural gas and oil properties                                           4,480             5,650
         Depreciation and amortization                                                           288               398
         Amortization of stock compensation                                                      298               (10)
         Interest paid through issuance of senior subordinated notes                              --             4,028
         Amortization of deferred loan fees                                                      463             1,160
         Amortization of discount on senior subordinated notes                                    74               394
         Loss on sale of natural gas and oil properties                                           --            12,195
         Changes in deferred income tax liability                                             (1,135)               --
         Changes in working capital and other items:
            (Increase) decrease in accounts receivable                                        (3,198)            2,311
            Increase in prepaid expenses                                                         (74)             (190)
            Increase (decrease) in accounts payable                                            1,759            (2,466)
            Decrease in participant advances received                                            437             1,040
            Increase (decrease) in other current liabilities                                   1,612              (137)
            Other noncurrent assets                                                                6               (89)
            Other noncurrent liabilities                                                         (94)           (5,663)
                                                                                   -----------------     -------------
            Net cash provided (used) by operating activities                                   2,693            (2,671)
                                                                                   -----------------     -------------

Cash flows from investing activities:
     Additions to natural gas and oil properties                                             (52,782)          (18,310)
     Proceeds from sale of natural gas and oil properties                                         --            27,122
     Additions to other property and equipment                                                  (511)             (146)
     Increase in drilling advances paid                                                         (326)             (302)
                                                                                   -----------------     -------------
            Net cash provided (used) by investing activities                                 (53,619)            8,364
                                                                                   -----------------     -------------

Cash flows from financing activities:
     Proceeds from issuance of common stock                                                    9,448                --
     Proceeds from issuance of senior subordinated notes                                      40,000                --
     Increase in notes payable                                                                83,800            12,750
     Repayment of notes payable                                                              (78,800)          (16,750)
     Principal payments on capital lease obligations                                            (176)             (193)
     Deferred loan fees paid                                                                  (3,796)             (688)
                                                                                   -----------------     -------------
            Net cash (used) provided by financing activities                                  50,476            (4,881)
                                                                                   -----------------     -------------

Net increase (decrease) in cash and cash equivalents                                            (450)              812

Cash and cash equivalents, beginning of period                                                 1,701             2,569
                                                                                   -----------------     -------------
Cash and cash equivalents, end of period                                           $           1,251     $       3,381
                                                                                   =================     =============

Supplemental disclosure of cash flow information:
     Cash paid during the period for interest                                      $           3,182     $       3,739
                                                                                   =================     =============

Supplemental disclosure of noncash investing and financing activities:
     Capital lease asset additions                                                 $             320     $          51
                                                                                   =================     =============
     Decrease in accounts payable and other noncurrent liabilities in exchange
         for issuance of common stock                                              $              --     $       4,240
                                                                                   =================     =============
     Increase in accounts payable for deferred loan fees to be
         paid in future periods                                                    $              --     $         150
                                                                                   =================     =============
     Increase in deferred loan fees for issuance of warrants                       $              --     $       1,228
                                                                                   =================     =============
</TABLE>

   See accompanying notes to the condensed consolidated financial statements.



                                       3
<PAGE>   6


                           BRIGHAM EXPLORATION COMPANY

                             CONDENSED CONSOLIDATED
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                          Common Stock          Additional     Unearned
                                   ---------------------------   Paid-in        Stock          Accum.
                                      Shares          Amounts    Capital     Compensation      Deficit          Total
                                   --------------    --------- ------------- --------------  --------------  --------------
<S>                                    <C>           <C>       <C>           <C>             <C>             <C>
Balance, December 31, 1998             13,306,206    $     133 $      58,838 $         (890) $      (33,400) $       24,681

     Net loss for the period
        ended Sept. 30, 1999                   --           --            --             --         (21,292)        (21,292)
     Issuance of common stock           1,211,580           12         4,228             --              --           4,240
     Forfeiture of stock options               --           --          (555)           555              --              --
     Revision in terms
                       of warrants             --           --           479             --              --             479
     Issuance of warrants                      --           --         1,228             --              --           1,228
     Amortization of unearned
                stock compensation             --           --            --            (23)             --             (23)

                                   --------------  ----------- ------------- --------------  --------------  --------------
Balance, September 30, 1999            14,517,786  $       145 $      64,218 $         (358) $      (54,692) $        9,313
                                   ==============  =========== ============= ==============  ==============  ==============
</TABLE>


   See accompanying notes to the condensed consolidated financial statements.



                                        4
<PAGE>   7


                           BRIGHAM EXPLORATION COMPANY

                             NOTES TO THE CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


1.     ORGANIZATION AND NATURE OF OPERATIONS

       Brigham Exploration Company (the "Company") is a Delaware corporation
       formed on February 25, 1997 for the purpose of exchanging its common
       stock for the common stock of Brigham, Inc. and the partnership interests
       of Brigham Oil & Gas, L.P. (the "Partnership"). Brigham, Inc. is a Nevada
       corporation whose only asset is its ownership interest in the
       Partnership. The Partnership was formed in May 1992 to explore and
       develop onshore domestic natural gas and oil properties using 3-D seismic
       imaging and other advanced technologies. Since its inception, the
       Partnership has focused its exploration and development of natural gas
       and oil properties primarily in West Texas, the Anadarko Basin and the
       onshore Gulf Coast.

2.     BASIS OF PRESENTATION

       The accompanying financial statements include the accounts of the Company
       and its wholly-owned subsidiaries, and its proportionate share of assets,
       liabilities and income and expenses of the limited partnerships in which
       the Company, or any of its subsidiaries, has a participating interest.
       All significant intercompany accounts and transactions have been
       eliminated.

       The accompanying condensed consolidated financial statements are
       unaudited, and in the opinion of management, reflect all adjustments that
       are necessary for a fair presentation of the financial position and
       results of operations for the periods presented. All such adjustments are
       of a normal and recurring nature. The results of operations for the
       periods presented are not necessarily indicative of the results to be
       expected for the entire year. The unaudited condensed consolidated
       financial statements should be read in conjunction with the Company's
       1998 Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the
       Securities Exchange Act of 1934.

3.     SALE OF NATURAL GAS AND OIL PROPERTIES

       In February 1999, the Company entered into a project financing
       arrangement with Duke Energy Financial Services, Inc. ("Duke") to fund
       the continued exploration of five projects covered by approximately 200
       square miles of 3-D seismic data acquired in 1998. In this transaction,
       the Company conveyed 100% of its working interest in land and seismic in
       these project areas to a newly formed limited liability company (the
       "Duke LLC") for a total consideration of $10 million. The Company is the
       managing member of the Duke LLC with a 1% interest, and Duke is the sole
       remaining member with a 99% interest. Pursuant to the terms of the Duke
       LLC agreement, the Company pays 100% of the drilling and completion costs
       for all wells drilled by the Duke LLC in exchange for a 70% working
       interest in the wells and their associated drilling and spacing units and
       allocable seismic data. Upon 100% project payout, the Company has certain
       rights to back-in for up to a 94% effective working interest in the Duke
       LLC properties.

       In June 1999, the Company sold all of its interests in certain producing
       and non-producing natural gas and oil properties for a total sales price
       of $17.1 million. Due to the magnitude of the reserve volumes that were
       attributable to these properties relative to the Company's remaining net
       reserve volumes, the Company recognized as a loss the difference between
       the sales price received, after adjustment for transaction costs, and the
       $28.9 million basis allocated to the divested properties in accordance
       with the full-cost method of accounting for oil and gas properties.


                                       5
<PAGE>   8
                           BRIGHAM EXPLORATION COMPANY

                             NOTES TO THE CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


4.     ISSUANCE OF COMMON STOCK

       In March 1999, the Company entered into an agreement with Veritas DGC
       Land, Inc. ("Veritas") to exchange 1,002,865 shares of newly issued
       Brigham common stock valued at $3.50 per share for approximately $3.5
       million of payment obligations due to Veritas in 1999 for certain
       seismic acquisition and processing services previously performed. In
       addition, this agreement provides for the payment by Brigham of up to $1
       million in future seismic processing services to be performed by Veritas
       through December 31, 1999, in newly issued shares of Brigham common stock
       valued at $3.50 per share, in the event that the Company does not elect
       to pay for such services in cash. The settlement of these seismic
       processing services has been determined on a quarterly basis. Subsequent
       to March 30, 1999, Brigham issued an additional 208,715 shares of common
       stock valued at $3.50 per share to Veritas pursuant to its election to
       settle certain seismic processing service obligations incurred during
       the second and third quarters of 1999 in common stock instead of cash.

5.     AMENDMENT TO REVOLVING CREDIT FACILITY

       In July 1999, the Company and its senior lenders entered into an
       amendment to the Company's revolving credit facility (the "Credit
       Facility"). This amendment provides the Company with borrowing
       availability of $56 million principally to fund its planned drilling
       activities and anticipated working capital requirements through the end
       of 1999. The Company's senior lenders have indicated that the borrowing
       availability provided under the amended Credit Facility exceeds that
       which would otherwise be made available under a more traditional
       conforming borrowing base calculation based on the estimated value of
       the Company's current net proved reserves and its cash flow. As
       consideration for this amendment to the Credit Facility, in July 1999
       the Company issued to its senior lenders one million warrants to
       purchase the Company's common stock at an exercise price of $2.25 per
       share. The warrants have a seven-year term from the date of issuance and
       are exercisable at the holders' option at any time. An estimated value
       of $1.2 million was attributed to these warrants by the Company and was
       recognized as additional deferred loan fees which will be amortized over
       the remaining period to maturity of the Credit Facility borrowings at
       January 26, 2001.

6.     HEDGING ACTIVITIES

       In September 1999, the Company entered into five call options with a
       counterparty for certain future oil and natural gas production. Under the
       terms of the contracts, for any month where the average index price (WTI
       or ANR Pipeline Company - Oklahoma) is greater than the strike price per
       the contract, the Company is required to pay to the counterparty the
       absolute value of that difference times the production volumes covered
       under the contract. If the average index price is less than the strike
       price for a given month, no settlement is required. These contracts are


                                       6
<PAGE>   9

       summarized as follows:

<TABLE>
<CAPTION>
                      Daily                             Total Volumes Hedged            Average
          Call       Volumes                       -------------------------------       Fixed
         Options     Hedged     Monthly Term         2000       2001        2000     Contract Price
       -----------   -------   --------------      ------    ---------   ---------   --------------
<S>                  <C>       <C>                 <C>       <C>         <C>         <C>
       Contract #1       600   October 1999 -      55,200       54,000          --           $24.00
                        Bbls   March 2000            Bbls         Bbls                      per Bbl

       Contract #2       600   April 2000 -        54,600           --          --           $22.00
                        Bbls   June 2000             Bbls                                   per Bbl

       Contract #3    10,000   May 2001 -              --    1,840,000          --           $2,665
                       MMBtu   October 2001                      MMBtu                    per MMBtu

       Contract #4    10,000   November 2000 -         --      610,000   1,200,000           $2,670
                       MMBtu   April 2002                        MMBtu       MMBtu        per MMBtu

       Contract #5    10,000   May 2002 -              --           --     610,000           $2,670
                       MMBtu   June 2002                                     MMBtu        per MMBtu
</TABLE>

7.     ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

       In June 1998, the Financial Accounting Standards Board (the "FASB")
       issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
       Activities." SFAS No. 133 requires that all derivative instruments be
       recorded on the balance sheet at fair value. Changes in the fair value of
       derivatives are recorded each period in current earnings or other
       comprehensive income, depending on whether a derivative is designated as
       part of a hedge transaction and, if it is, depending on the type of hedge
       transaction. For fair value hedge transactions in which the Company is
       hedging changes in an asset's, liability's, or firm commitment's fair
       value, changes in the fair value of the derivative instrument will
       generally be offset in the income statement by changes in the hedged
       item's fair value. For cash flow hedge transactions in which the Company
       is hedging the variability of cash flows related to a variable-rate
       asset, liability, or a forecasted transaction, changes in the fair value
       of the derivative instrument will be reported in other comprehensive
       income. The gains and losses on the derivative instrument that are
       reported in other comprehensive income will be reclassified as earnings
       in the periods in which earnings are impacted by the variability of the
       cash flows of the hedged item. The ineffective portion of all hedges will
       be recognized in current period earnings. The Company must adopt SFAS No.
       133, as amended by SFAS No. 137, effective January 1, 2001. The Company
       is in the process of analyzing the potential impact of this standard on
       its financial statement presentations.


                                       7
<PAGE>   10

                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                            CONDENSED BALANCE SHEETS
                            AS OF SEPTEMBER 30, 1999
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                              BRIGHAM                     BRIGHAM       BRIGHAM
                                                               OIL &        BRIGHAM,      HOLDINGS      HOLDINGS
                                                             GAS, L.P.        INC.         I, LLC        II, LLC
<S>                                                          <C>           <C>            <C>           <C>
                                                         ASSETS
Current assets:
     Cash and cash equivalents                               $   3,175     $   3,376      $       5     $       6
     Accounts receivable                                         5,627         5,627             --            --
     Prepaid expenses                                              480           480             --            --
                                                             ---------     ---------      ---------     ---------
        Total current assets                                     9,282         9,483              5             6
                                                             ---------     ---------      ---------     ---------

Natural gas and oil properties, at cost, net                   106,498       106,498             --            --
Other property and equipment, at cost, net                       1,813         1,813             --            --
Investment in subsidiaries
     and intercompany advances                                     329            --          1,339        46,372
Drilling advances paid                                             532           532             --            --
Deferred loan fees                                               2,586         2,586             --            --
Other noncurrent assets                                            101           101             --            --
                                                             ---------     ---------      ---------     ---------
                                                             $ 121,141     $ 121,013      $   1,344     $  46,378
                                                             =========     =========      =========     =========

                                                    LIABILITIES AND EQUITY
Current liabilities:
     Accounts payable                                        $  13,621     $  13,621      $      --     $      --
     Accrued drilling costs                                         70            70             --            --
     Participant advances received                               1,804         1,804             --            --
     Other current liabilities                                   1,444         1,444             --            --
                                                             ---------     ---------      ---------     ---------
        Total current liabilities                               16,939        16,939             --            --
                                                             ---------     ---------      ---------     ---------

Notes payable                                                   55,000        55,000             --            --
Other noncurrent liabilities                                     1,449         1,449             --            --
Intercompany accounts payable                                    1,739         1,626             --         1,760
Intercompany notes payable                                      44,028        44,028             --        44,028

Minority interest                                                   --         1,361             --            --

Equity
     Partners' capital                                           1,986            --          1,344           590
     Common stock, $1.00 par value, 1,000 shares
        authorized, issued and outstanding                          --             1             --            --
     Additional paid-in capital                                     --        17,832             --            --
     Accumulated deficit                                            --       (17,223)            --            --
                                                             ---------     ---------      ---------     ---------
        Total equity                                             1,986           610          1,344           590
                                                             ---------     ---------      ---------     ---------
                                                             $ 121,141     $ 121,013      $   1,344     $  46,378
                                                             =========     =========      =========     =========
</TABLE>

  Natural gas and oil properties are accounted for using the full cost method.
          See accompanying notes to the condensed financial statements.


                                       8
<PAGE>   11


                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                            CONDENSED BALANCE SHEETS
                             AS OF DECEMBER 31, 1998
                                 (in thousands)

<TABLE>
<CAPTION>
                                                              BRIGHAM                     BRIGHAM       BRIGHAM
                                                               OIL &        BRIGHAM,      HOLDINGS      HOLDINGS
                                                             GAS, L.P.        INC.         I, LLC        II, LLC
<S>                                                          <C>           <C>            <C>           <C>
                                                             ASSETS
Current assets:
     Cash and cash equivalents                               $   2,549     $   2,563      $       5     $       6
     Accounts receivable                                         7,938         7,938             --            --
     Prepaid expenses                                              290           290             --            --
                                                             ---------     ---------      ---------     ---------
        Total current assets                                    10,777        10,791              5             6
                                                             ---------     ---------      ---------     ---------

Natural gas and oil properties, at cost, net                   134,317       134,317             --            --
Other property and equipment, at cost, net                       2,014         2,014             --            --
Investment in subsidiaries
     and intercompany advances                                     115            16         11,714        46,913
Drilling advances paid                                             231           231             --            --
Deferred loan fees                                               1,397         1,397             --            --
Other noncurrent assets                                             12            12             --            --
                                                             ---------     ---------      ---------     ---------
                                                             $ 148,863     $ 148,778      $  11,719     $  46,919
                                                             =========     =========      =========     =========

                                                     LIABILITIES AND EQUITY
Current liabilities:
     Accounts payable                                        $  19,883     $  19,883      $      --     $      --
     Accrued drilling costs                                      1,219         1,219             --            --
     Participant advances received                                 764           764             --            --
     Other current liabilities                                   1,647         1,647             --            --
                                                             ---------     ---------      ---------     ---------
        Total current liabilities                               23,513        23,513             --            --
                                                             ---------     ---------      ---------     ---------

Notes payable                                                   59,000        59,000             --            --
Other noncurrent liabilities                                     7,536         7,536             --            --
Intercompany accounts payable                                    1,690         1,616             --         1,707
Intercompany notes payable                                      40,000        40,000             --        40,000

Minority interest                                                   --        11,730             --            --

Equity
     Partners' capital                                          17,124            --         11,719         5,212
     Common stock, $1.00 par value, 1,000 shares
        authorized, issued and outstanding                          --             1             --            --
     Additional paid-in capital                                     --        16,109             --            --
     Accumulated deficit                                            --       (10,727)            --            --
                                                             ---------     ---------      ---------     ---------
        Total equity                                            17,124         5,383         11,719         5,212
                                                             ---------     ---------      ---------     ---------
                                                             $ 148,863     $ 148,778      $  11,719     $  46,919
                                                             =========     =========      =========     =========
</TABLE>

  Natural gas and oil properties are accounted for using the full cost method.
          See accompanying notes to the condensed financial statements.


                                       9
<PAGE>   12


                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                       CONDENSED STATEMENTS OF OPERATIONS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                        BRIGHAM                   BRIGHAM      BRIGHAM
                                                         OIL &       BRIGHAM,     HOLDINGS     HOLDINGS
                                                       GAS, L.P.       INC.        I, LLC      II, LLC
<S>                                                    <C>           <C>          <C>          <C>
Revenues:
     Natural gas and oil sales                          $ 4,109      $ 4,109      $    --      $    --
     Workstation revenue                                     86           86           --           --
                                                        -------      -------      -------      -------
                                                          4,195        4,195           --           --
                                                        -------      -------      -------      -------
Costs and expenses:
     Lease operating                                        525          525           --           --
     Production taxes                                       300          300           --           --
     General and administrative                             901          901           --           --
     Depletion of natural gas and oil properties          2,839        2,839           --           --
     Depreciation and amortization                          132          132           --           --
     Amortization of stock compensation                    (123)        (123)          --           --
                                                        -------      -------      -------      -------
                                                          4,574        4,574           --           --
                                                        -------      -------      -------      -------
        Operating income (loss)                            (379)        (379)          --           --
                                                        -------      -------      -------      -------

Other income (expense):
     Interest income                                         40           40           --           --
     Interest expense                                    (1,586)      (1,586)          --           --
     Interest expense - intercompany                     (1,404)      (1,404)          --       (1,404)
     Loss on sale of natural gas and oil properties          --            0           --           --
                                                        -------      -------      -------      -------
                                                         (2,950)      (2,950)          --       (1,404)
                                                        -------      -------      -------      -------

Minority interest in net loss                                --       (2,280)          --           --

                                                        -------      -------      -------      -------
Net loss before income taxes                             (3,329)      (1,049)          --       (1,404)

Equity in net loss of investee                               --           --       (2,280)         389
                                                        -------      -------      -------      -------
     Net loss                                           $(3,329)     $(1,049)     $(2,280)     $(1,015)
                                                        =======      =======      =======      =======
</TABLE>



          See accompanying notes to the condensed financial statements.


                                       10
<PAGE>   13


                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                       CONDENSED STATEMENTS OF OPERATIONS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                     BRIGHAM                   BRIGHAM      BRIGHAM
                                                     OIL &        BRIGHAM,     HOLDINGS     HOLDINGS
                                                     GAS, L.P.      INC.       I, LLC       II, LLC
<S>                                                  <C>          <C>          <C>          <C>
Revenues:
     Natural gas and oil sales                       $ 4,162      $ 4,162      $    --      $    --
     Workstation revenue                                  75           75           --           --
                                                     -------      -------      -------      -------
                                                       4,237        4,237           --           --
                                                     -------      -------      -------      -------
Costs and expenses:
     Lease operating                                     564          564           --           --
     Production taxes                                    255          255           --           --
     General and administrative                        1,069        1,069           --           --
     Depletion of natural gas and oil properties       1,690        1,690           --           --
     Depreciation and amortization                       113          113           --           --
     Amortization of stock compensation                   65           65           --           --
                                                     -------      -------      -------      -------
                                                       3,756        3,756           --           --
                                                     -------      -------      -------      -------
        Operating income (loss)                          481          481           --           --
                                                     -------      -------      -------      -------

Other income (expense):
     Interest income                                      37           37           --           --
     Interest expense                                 (1,866)      (1,866)          --           --
                                                     -------      -------      -------      -------
                                                      (1,829)      (1,829)          --           --
                                                     -------      -------      -------      -------

Minority interest in net loss                             --         (923)          --           --
                                                     -------      -------      -------      -------
Net loss before income taxes                          (1,348)        (425)          --           --

Income tax benefit                                        --          145           --           --
Equity in net loss of investee                            --           --         (923)          96
                                                     -------      -------      -------      -------
     Net loss                                        $(1,348)     $  (280)     $  (923)     $    96
                                                     =======      =======      =======      =======
</TABLE>


                                       11
<PAGE>   14


                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                       CONDENSED STATEMENTS OF OPERATIONS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                             BRIGHAM                     BRIGHAM       BRIGHAM
                                                             OIL &         BRIGHAM,      HOLDINGS      HOLDINGS
                                                             GAS, L.P.       INC.         I, LLC       II, LLC
<S>                                                          <C>           <C>           <C>           <C>
Revenues:
     Natural gas and oil sales                               $ 10,855      $ 10,855      $     --      $     --
     Workstation revenue                                          247           247            --            --
                                                             --------      --------      --------      --------
                                                               11,102        11,102            --            --
                                                             --------      --------      --------      --------
Costs and expenses:
     Lease operating                                            1,679         1,679            --            --
     Production taxes                                             685           685            --            --
     General and administrative                                 2,700         2,705             5             5
     Depletion of natural gas and oil properties                5,650         5,650            --            --
     Depreciation and amortization                                398           398            --            --
     Amortization of stock compensation                           (10)          (10)           --            --
                                                             --------      --------      --------      --------
                                                               11,102        11,107             5             5
                                                             --------      --------      --------      --------
        Operating income (loss)                                     0            (5)           (5)           (5)
                                                             --------      --------      --------      --------

Other income (expense):
     Interest income                                              134           134            --            --
     Interest expense                                          (4,464)       (4,464)           --            --
     Interest expense - intercompany                           (4,082)       (4,082)           --        (4,082)
     Loss on sale of natural gas and oil properties           (12,195)      (12,195)           --            --
                                                             --------      --------      --------      --------
                                                              (20,607)      (20,607)           --        (4,082)
                                                             --------      --------      --------      --------

Minority interest in net loss                                      --       (14,116)           --            --

                                                             --------      --------      --------      --------
Net loss before income taxes                                  (20,607)       (6,496)           (5)       (4,087)

Equity in net loss of investee                                     --            --       (14,116)       (2,203)
                                                             --------      --------      --------      --------
     Net loss                                                $(20,607)     $ (6,496)     $(14,121)     $ (6,290)
                                                             ========      ========      ========      ========
</TABLE>


          See accompanying notes to the condensed financial statements.


                                       12
<PAGE>   15


                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                       CONDENSED STATEMENTS OF OPERATIONS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                     BRIGHAM                     BRIGHAM       BRIGHAM
                                                     OIL &         BRIGHAM,      HOLDINGS      HOLDINGS
                                                     GAS, L.P.       INC.         I, LLC       II, LLC
<S>                                                  <C>           <C>           <C>           <C>
Revenues:
     Natural gas and oil sales                       $ 11,292      $ 11,292      $     --      $     --
     Workstation revenue                                  322           322            --            --
                                                     --------      --------      --------      --------
                                                       11,614        11,614            --            --
                                                     --------      --------      --------      --------
Costs and expenses:
     Lease operating                                    1,542         1,542            --            --
     Production taxes                                     705           705            --            --
     General and administrative                         3,351         3,357             6             6
     Depletion of natural gas and oil properties        4,480         4,480            --            --
     Depreciation and amortization                        288           288            --            --
     Amortization of stock compensation                   298           298            --            --
                                                     --------      --------      --------      --------
                                                       10,664        10,670             6             6
                                                     --------      --------      --------      --------
       Operating income (loss)                            950           944            (6)           (6)
                                                     --------      --------      --------      --------

Other income (expense):
     Interest income                                      114           114            --            --
     Interest expense                                  (4,298)       (4,298)           --          (507)
                                                     --------      --------      --------      --------
                                                       (4,184)       (4,184)           --          (507)
                                                     --------      --------      --------      --------

Minority interest in net loss                              --        (2,215)           --            --
                                                     --------      --------      --------      --------
Net loss before income taxes                           (3,234)       (1,025)           (6)         (513)

Income tax benefit                                         --           337            --            --
Equity in net loss of investee                             --            --        (2,215)         (479)
                                                     --------      --------      --------      --------
     Net loss                                        $ (3,234)     $   (688)     $ (2,221)     $   (992)
                                                     ========      ========      ========      ========
</TABLE>



          See accompanying notes to the condensed financial statements.


                                       13
<PAGE>   16


                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                       CONDENSED STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                           BRIGHAM                       BRIGHAM       BRIGHAM
                                                                            OIL &         BRIGHAM,       HOLDINGS      HOLDINGS
                                                                           GAS, L.P.        INC.          I, LLC       II, LLC
<S>                                                                        <C>           <C>             <C>           <C>
Cash flows from operating activities:
     Net loss                                                              $(20,607)     $ (6,496)       $(14,121)     $ (6,290)
     Adjustments to reconcile net loss to cash
     provided by operating activities:
         Depletion of natural gas and oil properties                          5,650         5,650              --            --
         Depreciation and amortization                                          398           398              --            --
         Amortization of stock compensation                                     (10)          (10)             --            --
         Amortization of deferred loan fees and debt issuance costs             878           878              --            --
         Loss on sale of natural gas and oil properties                      12,195        12,195              --            --
         Minority interest in net loss                                           --       (14,116)             --            --
         Equity in net loss of investee                                          --            --          14,116         2,203
         Changes in working capital and other items:
            Decrease in accounts receivable                                   2,311         2,311              --            --
            Increase in prepaid expenses                                       (190)         (190)             --            --
            Decrease in accounts payable                                     (2,466)       (2,466)             --            --
            Increase in participant advances received                         1,040         1,040              --            --
            Decrease in other current liabilities                              (203)         (203)             --            --
            Increase in intercompany accounts payable                            49            11              --            53
            Other noncurrent assets                                             (76)          (76)             --            --
            Other noncurrent liabilities                                     (5,663)       (5,663)             --            --
                                                                           --------      --------        --------      --------
                                                                             (6,694)       (6,737)             (5)       (4,034)
                                                                           --------      --------        --------      --------
Cash flows from investing activities:
     Additions to natural gas and oil properties                            (18,310)      (18,310)             --            --
     Proceeds from sale of natural gas and oil properties                    27,122        27,122              --            --
     Additions to other property and equipment                                 (146)         (146)             --            --
     Change in investment in subsidiaries and intercompany advances            (191)           39               5             6
     Change in drilling advances paid                                          (302)         (302)             --            --
                                                                           --------      --------        --------      --------
                                                                              8,173         8,403               5             6
                                                                           --------      --------        --------      --------
Cash flows from financing activities:
     Increase in notes payable                                               12,750        12,750              --            --
     Repayment of notes payable                                             (16,750)      (16,750)             --            --
     Increase in intercompany notes payable                                   4,028         4,028              --         4,028
     Principal payments on capital lease obligations                           (193)         (193)             --            --
     Deferred loan fees paid                                                   (688)         (688)             --            --
                                                                           --------      --------        --------      --------
                                                                               (853)         (853)             --         4,028
                                                                           --------      --------        --------      --------

Net increase in cash and cash equivalents                                       626           813              --            --

Cash and cash equivalents, beginning of period                                2,549         2,563               5             6
                                                                           --------      --------        --------      --------
Cash and cash equivalents, end of period                                   $  3,175      $  3,376        $      5      $      6
                                                                           ========      ========        ========      ========

Supplemental disclosure of cash flow information:
     Cash paid during the period for interest                              $  3,739      $  3,739        $     --      $     --

Supplemental disclosure of noncash investing and financing activities:
     Capital lease asset additions                                         $     51      $     51        $     --      $     --
     Increase in accounts payable for deferred loan fees to be
         paid in future periods                                            $    150      $    150        $     --      $     --
     Capital contribution received in exchange for accounts
         payable and other noncurrent liabilities                          $  5,469      $     --        $     --      $     --
     Intercompany capital contributions                                    $     --      $  1,723        $  3,746      $  1,668

</TABLE>


          See accompanying notes to the condensed financial statements.


                                       14
<PAGE>   17


                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                       CONDENSED STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                           BRIGHAM                      BRIGHAM       BRIGHAM
                                                                            OIL &        BRIGHAM,       HOLDINGS      HOLDINGS
                                                                           GAS, L.P.       INC.        I, LLC         II, LLC
<S>                                                                        <C>           <C>            <C>           <C>
Cash flows from operating activities:
     Net loss                                                              $ (3,234)     $   (688)      $ (2,221)     $   (992)
     Adjustments to reconcile net loss to cash
     used by operating activities:
         Depletion of natural gas and oil properties                          4,480         4,480             --            --
         Depreciation and amortization                                          288           288             --            --
         Amortization of stock compensation                                     298           298             --            --
         Amortization of deferred loan fees and debt issuance costs             425           425             --            --
         Minority interest in net loss                                           --        (2,215)            --            --
         Equity in net loss of investee                                          --            --          2,215           479
         Changes in working capital and other items:
            Increase in accounts receivable                                  (3,198)       (3,198)            --            --
            Increase in prepaid expenses                                        (74)          (74)            --            --
            Increase in accounts payable                                      1,759         1,759             --            --
            Increase in participant advances received                           437           437             --            --
            Increase in other current liabilities                             1,612         1,612             --            --
            Decrease in deferred income tax liability                            --          (336)            --            --
            Other noncurrent assets                                               6             6             --            --
            Other noncurrent liabilities                                        (94)          (94)            --            --
                                                                           --------      --------       --------      --------
                                                                              2,705         2,700             (6)         (513)
                                                                           --------      --------       --------      --------
Cash flows from investing activities:
     Additions to natural gas and oil properties                            (52,782)      (52,782)            --            --
     Additions to other property and equipment                                 (511)         (511)            --            --
     Change in investment in subsidiaries and intercompany advances            (408)          (13)        (5,223)      (41,812)
     Change in drilling advances paid                                          (326)         (326)            --            --
                                                                           --------      --------       --------      --------
                                                                            (54,027)      (53,632)        (5,223)      (41,812)
                                                                           --------      --------       --------      --------
Cash flows from financing activities:
     Capital contributions received                                           7,642         7,642          5,235        42,331
     Increase in notes payable                                               83,800        83,800             --            --
     Repayment of notes payable                                             (78,800)      (78,800)            --            --
     Increase in intercompany notes payable                                  40,000        40,000             --            --
     Principal payments on capital lease obligations                           (176)         (176)            --            --
     Deferred loan fees paid                                                 (1,990)       (1,990)            --            --
                                                                           --------      --------       --------      --------
                                                                             50,476        50,476          5,235        42,331
                                                                           --------      --------       --------      --------

Net decrease in cash and cash equivalents                                      (846)         (456)             6             6

Cash and cash equivalents, beginning of period                                1,701         1,701             --            --
                                                                           --------      --------       --------      --------
Cash and cash equivalents, end of period                                   $    855      $  1,245       $      6      $      6
                                                                           ========      ========       ========      ========

Supplemental disclosure of cash flow information:
     Cash paid during the period for interest                              $  3,182      $  3,182       $     --      $     --

Supplemental disclosure of noncash investing and financing activities:
     Capital lease asset additions                                         $    320      $    320       $     --      $     --
     Intercompany capital contributions                                    $     --      $     --       $ 29,911      $ 13,318

</TABLE>



          See accompanying notes to the condensed financial statements.


                                       15
<PAGE>   18


                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                    CONDENSED STATEMENTS OF CHANGES IN EQUITY
                          (in thousands, except shares)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                       Retained
                                             Common Stock              Additional     Earnings/
                                        --------------------------       Paid-in     Accumulated     Partners'
                                          Shares        Amounts          Capital       Deficit        Capital       Total
                                        ----------     -----------     -----------     --------      --------      --------
<S>                                     <C>            <C>             <C>             <C>            <C>          <C>
Brigham Oil & Gas, L.P.
     Balance,
       December 31, 1998                        --     $        --     $        --     $     --      $ 17,124      $ 17,124
     Capital contribution                       --              --              --           --         5,469         5,469
     Net loss                                   --              --              --           --       (20,607)      (20,607)
                                        ----------     -----------     -----------     --------      --------      --------
     Balance,
       September 30, 1999                       --     $        --     $        --     $     --      $  1,986      $  1,986
                                        ==========     ===========     ===========     ========      ========      ========

Brigham Inc.
     Balance,
       December 31, 1998                     1,000     $         1     $    16,109     $(10,727)     $     --      $  5,383
     Capital contribution                       --              --           1,723           --            --         1,723
     Net loss                                   --              --              --       (6,496)           --        (6,496)
                                        ----------     -----------     -----------     --------      --------      --------
     Balance,
       September 30, 1999                    1,000     $         1     $    17,832     $(17,223)     $     --      $    610
                                        ==========     ===========     ===========     ========      ========      ========

Brigham Holding I, LLC
     Balance,
       December 31, 1998                        --     $        --     $        --     $     --      $ 11,719      $ 11,719
     Capital contribution                       --              --              --           --         3,746         3,746
     Net loss                                   --              --              --           --       (14,121)      (14,121)
                                        ----------     -----------     -----------     --------      --------      --------
     Balance,
       September 30, 1999                       --     $        --     $        --     $     --      $  1,344      $  1,344
                                        ==========     ===========     ===========     ========      ========      ========

Brigham Holdings II, LLC
     Balance,
       December 31, 1998                        --     $        --     $        --     $     --      $  5,212      $  5,212
     Capital contribution                       --              --              --           --         1,668         1,668
     Net loss                                   --              --              --           --        (6,290)       (6,290)
                                        ----------     -----------     -----------     --------      --------      --------
     Balance,
       September 30, 1999                       --     $        --     $        --     $     --      $    590      $    590
                                        ==========     ===========     ===========     ========      ========      ========
</TABLE>


          See accompanying notes to the condensed financial statements.


                                       16
<PAGE>   19


                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)



1.     ORGANIZATION AND BACKGROUND

       In August 1998, upon the filing of a registration statement with the SEC,
       Brigham Exploration Company, a Delaware corporation, (the "Company")
       issued $50 million of debt and equity securities to two affiliated
       institutional investors. The financing transaction consisted of the
       issuance of $40 million of senior subordinated secured notes (the
       "Notes"). The Notes are fully and unconditionally guaranteed, on a joint
       and several basis, by each of the Company's directly or indirectly
       wholly-owned subsidiaries which are Brigham Oil & Gas, L.P. (the
       "Partnership"), Brigham Inc., Brigham Holdings I LLC ("Holdings I"), and
       Brigham Holdings II LLC ("Holdings II"). Furthermore, these subsidiaries
       have pledged their respective stock and partnership interests as
       collateral for the Notes. These financial statements include the
       financial statements for the wholly owned subsidiaries whose securities
       and partnership interests comprise substantially all of the collateral
       pledged for the Notes.

       The Partnership was formed in May 1992 to explore and develop onshore
       domestic natural gas and oil properties using 3-D seismic imaging and
       other advanced technologies. Since its inception, the Partnership has
       focused its exploration and development of natural gas and oil properties
       primarily in West Texas, the Anadarko Basin and the onshore Gulf Coast.
       Brigham, Inc. is a Nevada corporation whose only asset prior to the
       Exchange was its less than 1% ownership interest in the Partnership.
       Brigham, Inc. is the managing general partner of the Partnership.

       On February 25, 1997, the Company was formed for the purpose of
       exchanging its common stock for the common stock of Brigham, Inc. and the
       partnership interests of the Partnership. Subsequent to the Exchange and
       the Offering, the Company owned a 68.5% interest in the Partnership and
       Brigham, Inc. owned a 31.50% interest in the Partnership. Effective
       January 1, 1998, Brigham, Inc. contributed 30.5% of its 31.5% interest in
       the Partnership to Holdings II, a newly formed Nevada LLC and wholly
       owned subsidiary of Brigham, Inc., whose only asset is its investment in
       the Partnership. Also effective January 1, 1998 the Company contributed
       its 68.5% interest in the Partnership to Brigham Holdings I, a newly
       formed Nevada LLC and wholly owned subsidiary of the Company whose only
       asset is its investment in the Partnership

2.     BASIS OF PRESENTATION

       The accompanying financial condensed financial statements are unaudited,
       and in the opinion of management, reflect all adjustments that are
       necessary for a fair presentation of the financial position and results
       of operations for the periods presented. All such adjustments are of a
       normal and recurring nature. The results of operations for the periods
       presented are not necessarily indicative of the results to be expected
       for the entire year. The unaudited condensed financial statements should
       be read in conjunction with the Company's 1998 Annual Report on Form 10-K
       pursuant to Section 13 or 15(d) of the Securities and Exchange Act of
       1934.

3.     SALE OF NATURAL GAS AND OIL PROPERTIES

       In February 1999, the Partnership entered into a project financing
       arrangement with Duke Energy Financial Services, Inc. ("Duke") to fund
       the continued exploration of five projects covered by approximately 200
       square miles of 3-D seismic data acquired in 1998. In this transaction,
       the Partnership conveyed 100% of its working interest in land and seismic
       in these project areas to a newly formed limited liability company (the
       "Duke LLC") for a total consideration of $10 million. The Partnership is
       the managing member of the Duke LLC with a 1% interest, and Duke is the
       sole remaining member with a 99% interest. Pursuant to the terms of the
       Duke LLC agreement, the Partnership pays 100% of the drilling and
       completion costs for all wells drilled by the Duke LLC


                                       17
<PAGE>   20
                    BRIGHAM EXPLORATION COMPANY SUBSIDIARIES

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)


       in exchange for a 70% working interest in the wells and their associated
       drilling and spacing units and allocable seismic data. Upon 100% project
       payout, the Partnership has certain rights to back-in for up to a 94%
       effective working interest in the Duke LLC properties.

       In June 1999, the Company sold all of its interests in certain producing
       and non-producing natural gas and oil properties for a total sales price
       of $17.1 million. Due to the magnitude of the reserve volumes that were
       attributable to these properties relative to the Company's remaining net
       reserve volumes, the Company recognized as a loss the difference between
       the sales price received, after adjustment for transaction costs, and the
       $28.9 million basis allocated to the divested properties in accordance
       with the full-cost method of accounting for oil and gas properties.

4.     ISSUANCE OF COMMON STOCK

       In March 1999, the Partnership entered into an agreement with Veritas DGC
       Land, Inc. ("Veritas") to exchange 1,002,865 shares of newly issued
       Brigham Exploration Company common stock valued at $3.50 per share for
       approximately $3.5 million of payment obligations due from the
       Partnership to Veritas in 1999 for certain seismic acquisition and
       processing services previously performed. In addition, this agreement
       provides for the payment by the Partnership of up to $1 million in
       future seismic processing services to be performed by Veritas through
       December 31, 1999, in newly issued shares of the Company's common stock
       valued at $3.50 per share, in the event that the Partnership does not
       elect to pay for such services in cash. The settlement of these seismic
       processing services has been determined on a quarterly basis. Subsequent
       to March 30, 1999, the Company issued an additional 208,715 shares of
       common stock valued at $3.50 per share to Veritas pursuant to the
       Partnership's election to settle certain seismic processing service
       obligations incurred during the second and third quarters of 1999 in the
       Company's common stock instead of cash.

5.     AMENDMENT TO REVOLVING CREDIT FACILITY

       In July 1999, the Partnership and its senior lenders entered into an
       amendment to the Partnership's revolving credit facility  (the "Credit
       Facility"). This amendment provides the Partnership with borrowing
       availability of $56 million principally to fund its planned drilling
       activities and anticipated working capital requirements through the end
       of 1999. The Partnership's senior lenders have indicated that the
       borrowing availability provided under the amended Credit Facility exceeds
       that which would otherwise be made available under a more traditional
       conforming borrowing base calculation based on the estimated value of the
       Partnership's current net proved reserves and its cash flow. As
       consideration for this amendment to the Credit Facility, in July 1999
       Brigham Exploration Company issued to the Partnership's senior lenders
       one million warrants to purchase the Company's common stock at an
       exercise price of $2.25 per share. The warrants have a seven-year term
       from the date of issuance and are exercisable at the holders' option at
       any time. An estimated value of $1.2 million was attributed to these
       warrants by the Partnership and was recognized as additional deferred
       loan fees which will be amortized over the remaining period to maturity
       of the Credit Facility borrowings at January 26, 2001.

6.     HEDGING ACTIVITIES

       In September 1999, the Partnership entered into five call options with a
       counterparty for certain future oil and natural gas production. Under the
       terms of the contracts, for any month where the average index price (WTI
       or ANR Pipeline Company - Oklahoma) is greater than the strike price per
       the contract, the Partnership is required to pay to the counterparty the
       absolute value of that difference times the production volumes covered
       under the contract. If the average index price is less than the strike
       price for a given month, no settlement is required. These contracts are


                                       18
<PAGE>   21

       summarized as follows:

<TABLE>
<CAPTION>
                  Daily                           Total Volumes Hedged       Average
  Call           Volumes                       -------------------------      Fixed
Options           Hedged      Monthly Term      2000     2001      2000   Contract Price
-------         --------     -------------     ------  -------   -------  --------------
<S>             <C>         <C>                <C>     <C>       <C>      <C>
Contract #1       600        October 1999 -    55,200   54,000      -         $24.00
                  Bbls        March 2000        Bbls     Bbls                per Bbl

Contract #2       600         April 2000 -     54,600     -         -         $22.00
                  Bbls         June 2000        Bbls                         per Bbl

Contract #3      10,000        May 2001 -        -     1,840,000    -         $2.665
                 MMBtu       October 2001                MMBtu               per MMBtu

Contract #4      10,000      November 2000 -     -      610,000  1,200,000    $2.670
                 MMBtu         April 2002                MMBtu    MMBtu      per MMBtu

Contract #5      10,000        May 2002 -        -        -       610,000     $2.670
                 MMBtu        June 2002                            MMBtu     per MMBtu
</TABLE>

7.     ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

       In June 1998, the Financial Accounting Standards Board (the "FASB")
       issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
       Activities." SFAS No. 133 requires that all derivative instruments be
       recorded on the balance sheet at fair value. Changes in the fair value of
       derivatives are recorded each period in current earnings or other
       comprehensive income, depending on whether a derivative is designated as
       part of a hedge transaction and, if it is, depending on the type of hedge
       transaction. For fair value hedge transactions in which the Partnership
       is hedging changes in an asset's, liability's, or firm commitment's fair
       value, changes in the fair value of the derivative instrument will
       generally be offset in the income statement by changes in the hedged
       item's fair value. For cash flow hedge transactions in which the
       Partnership is hedging the variability of cash flows related to a
       variable-rate asset, liability, or a forecasted transaction, changes in
       the fair value of the derivative instrument will be reported in other
       comprehensive income. The gains and losses on the derivative instrument
       that are reported in other comprehensive income will be reclassified as
       earnings in the periods in which earnings are impacted by the variability
       of the cash flows of the hedged item. The ineffective portion of all
       hedges will be recognized in current period earnings. The Partnership
       must adopt SFAS No. 133, as amended by SFAS No. 137, effective January 1,
       2001. The Partnership is in the process of analyzing the potential impact
       of this standard on its financial statement presentations.


                                       19
<PAGE>   22



Item 2.  Management's Discussion and Analysis of Results of Operations and
         Financial Condition

RESULTS OF OPERATIONS

Comparison of three month periods ended September 30, 1998 and September 30,
1999

      Natural gas and oil sales. Natural gas and oil sales decreased 1% from
$4.2 million in the third quarter of 1998 to $4.1 million in the third quarter
of 1999. Of this net decrease, $483,000 was attributable to a decrease in
production volumes, offset in part by $430,000 attributable to an increase in
the average sales price for natural gas and oil. Production volumes for natural
gas decreased 5% from 1,198 MMcf in the third quarter of 1998 to 1,142 MMcf in
the third quarter of 1999. Net natural gas volumes for the third quarter of 1998
included approximately 205 MMcf attributable to properties sold by Brigham in
June 1999. Therefore, after adjusting for the effects of the property
divestitures, net natural gas volumes increased 15% in the third quarter of
1999, compared to the same period in 1998, as a result of the completion of
wells drilled early in 1999 and recompletion and workover projects performed by
the Company on certain producing wells. The average price received for natural
gas decreased 13% from $2.32 per Mcf in the third quarter of 1998 to $2.01 per
Mcf in the third quarter of 1999. As a result of natural gas hedging activities,
losses of $610,000, or $0.53 per Mcf, were realized in the third quarter of
1999, compared to gains of $236,000, or $0.20 per Mcf, in the third quarter of
1998. Production volumes for oil decreased 24% from 114 MBbls in the third
quarter of 1998 to 87 MBbls in the third quarter of 1999. This decrease in net
oil production volumes was primarily due to the natural decline of existing
producing oil wells coupled with the Company's strategic decision to reduce its
drilling for oil prospects during the previous 12 months in favor of natural gas
projects. Additionally, Brigham's June 1999 property divestitures resulted in a
9 MBbl reduction of net oil production volumes in the third quarter of 1999
compared to the third quarter of 1998. The average price received for oil
increased 71% from $12.14 per Bbl in the third quarter of 1998 to $20.76 per Bbl
in the third quarter of 1999.

      Workstation revenue. Workstation revenue increased 15% from $75,000 in the
third quarter of 1998 to $86,000 in the third quarter of 1999. Brigham
recognizes workstation revenue as industry participants in the Company's seismic
programs are charged an hourly rate for the work performed by Brigham on its 3-D
seismic interpretation workstations.

      Lease operating expenses. Lease operating expenses decreased 7% from
$564,000 for the third quarter of 1998 to $525,000 for the third quarter of 1999
and, on a per unit of production basis, lease operating expenses for the same
periods increased 7% from $0.30 per Mcfe to $0.32 per Mcfe. The decrease in
lease operating expenses was primarily due to a decrease in the number of
producing wells in the third quarter of 1999, as compared with the same period
in 1998, as a result of Brigham's June 1999 property divestitures.

      Production taxes. Production taxes increased 18% from $255,000 ($0.14 per
Mcfe) for the third quarter of 1998 to $300,000 ($0.18 per Mcfe) for the third
quarter of 1999, primarily as a result of a 36% increase in the average price
received for natural gas and oil sales before the effects of hedging gains and
losses, partially offset by the 12% decrease in equivalent natural gas and oil
production volumes during the third quarter of 1999.

      General and administrative expenses. General and administrative expenses
decreased 16% from $1.1 million for the third quarter of 1998 to $901,000 for
the third quarter of 1999 primarily due to the reduction of various
administrative costs, including the elimination of accrued employee bonuses for
1999, a 10% payroll reduction effective mid-May 1999, and a $66,000 increase in
overhead fees billed to working interest participants on Company-operated wells.
On a per unit of production basis, general and administrative


                                       20

<PAGE>   23


expenses decreased from $0.57 per Mcfe for the third quarter of 1998 to $0.54
per Mcfe for the third quarter of 1999.

      Depletion of natural gas and oil properties. Depletion of natural gas and
oil properties increased from $1.7 million ($0.90 per Mcfe) in the third quarter
of 1998 to $2.8 million ($1.71 per Mcfe) in the third quarter of 1999. Of this
net increase, $1.4 million was due to an increase in the depletion rate per unit
of production, partially offset by $196,000 due to a 12% decrease in production
volumes. The increased depletion rate reflected the effect of revising the 1999
year to date depletion rate to recognize lower reserve volume estimates
resulting from Brigham's reduced level of drilling activity during 1999 and the
Company's June 1999 property divestitures.

      Interest expense. Net interest expense increased 65% from $1.9 million in
the third quarter of 1998 to $3.2 million in the third quarter of 1999. This
increase was due to a higher average debt balance with a higher average interest
rate in the third quarter of 1999 compared with the third quarter of 1998. The
weighted average outstanding debt balance increased from $71.6 million in the
third quarter of 1998 to $94.7 million in the third quarter of 1999. The average
effective annual interest rate on borrowings outstanding during the third
quarter of 1998 was 10.8% compared to 13.4% for the third quarter of 1999.
Interest expense in the third quarter of 1999 included $2.1 million of non-cash
charges, including (i) $1.4 million of interest expense related to the
Subordinated Notes that was paid through the issuance of additional Subordinated
Notes (or "paid-in-kind"), (ii) $533,000 for amortization of deferred financing
fees, and (iii) $166,000 for amortization of debt discounts related to the
issuance of the Subordinated Notes. In connection with issuance of the
Subordinated Notes in August 1998, the Company recorded the Subordinated Notes
at a discount of $4.5 million to reflect the estimated value of the warrants to
purchase common stock that were issued in connection with the issuance of the
Subordinated Notes. This discount was increased by $479,000 in March 1999 to
adjust the estimated value of the warrants based on the amendment of certain
terms of the warrants, including a decrease in the exercise price per share and
an increase in the term of the warrants. The Company amortizes this debt
discount over the five-year term of the Subordinated Notes based on the interest
method of amortization and includes such amortization in interest expense. In
connection with the amendment to the Credit Facility executed in July 1999, the
Company issued to its senior lenders one million warrants to purchase the
Company's common stock at an exercise price of $2.25 per share. An estimated
value of $1.2 million was attributed to these warrants by the Company and was
recognized as additional deferred loan fees which will be amortized and included
in interest expense over the remaining period to maturity of the Credit Facility
borrowings at January 26, 2001.


Comparison of nine month periods ended September 30, 1998 and September 30, 1999

      Natural gas and oil sales. Natural gas and oil sales decreased 4% from
$11.3 million in the first nine months of 1998 to $10.9 million in the first
nine months of 1999. Of this net decrease, $938,000 was attributable to a
decrease in production volumes, offset in part by $501,000 attributable to an
increase in the average sales price for natural gas and oil. Production volumes
for natural gas increased 2% from 3,145 MMcf in the first nine months of 1998 to
3,194 MMcf in the first nine months of 1999. Net natural gas volumes decreased
in the first nine months of 1999 compared to the first nine months of 1998 by
219 MMcf attributable to the properties sold by Brigham in June 1999. Therefore,
after adjusting for the effects of the property divestitures, net natural gas
volumes for the period increased by 11% as a result of the completion of wells
drilled early in 1999, and recompletion and workover projects performed by the
Company on certain producing wells. The average price received for natural gas
decreased 6% from $2.18 per Mcf in the first nine months of 1998 to $2.06 per
Mcf in the first nine months of 1999. As a result of natural gas hedging
activities, losses


                                       21

<PAGE>   24



of $42,000, or $0.01 per Mcf, were realized in the first nine months of 1999,
compared to gains of $275,000, or $0.09 per Mcf in the first nine months of
1998. Production volumes for oil decreased 23% from 346 MBbls in the first nine
months of 1998 to 266 MBbls in the first nine months of 1999. This decrease in
net oil production volumes was primarily due to the natural decline of existing
producing oil wells coupled with the Company's strategic decision to reduce its
drilling for oil prospects during 1998 and 1999 and the curtailment of certain
producing oil wells in early 1999, both in response to low oil prices.
Additionally, Brigham's June 1999 property divestitures resulted in a 9 MBbl
reduction of net oil production volumes for the first nine months of 1999
compared to the first nine months of 1998. The average price received for oil
increased 26% from $12.82 per Bbl in the first nine months of 1998 to $16.12 per
Bbl in the first nine months of 1999.

      Workstation revenue. Workstation revenue decreased 23% from $322,000 in
the first nine months of 1998 to $247,000 in the first nine months of 1999.
Brigham recognizes workstation revenue as industry participants in the Company's
seismic programs are charged an hourly rate for the work performed by Brigham on
its 3-D seismic interpretation workstations. This decrease is primarily
attributable to the Company's increased working interests in its most recently
acquired 3-D seismic data, which reduces the amount of workstation
interpretation costs that Brigham can bill to its project participants. The
Company expects workstation revenue to continue to decline in 1999 due to the
Company's increased working interests in the square miles of 3-D seismic it
acquired in 1997 and 1998.

      Lease operating expenses. Lease operating expenses increased 9% from $1.5
million for the first nine months of 1998 to $1.7 million for the first nine
months of 1999, and, on a per unit of production basis, lease operating expenses
for the same periods increased 17% from $0.30 per Mcfe to $0.35 per Mcfe. The
increase in lease operating expenses was primarily attributable to higher costs
incurred related to recompletion and workover projects performed during 1999 on
certain producing wells. This increase was partially offset by a 5% decrease in
lease operating expenses resulting from Brigham's June 1999 property
divestitures.

      Production taxes. Production taxes decreased 3% from $705,000 ($0.14 per
Mcfe) for the first nine months of 1998 to $685,000 ($0.14 per Mcfe) for the
first nine months of 1999, primarily as a result of the 8% decrease in
equivalent natural gas and oil production volumes, partially offset by the 5%
increase in the average price received for equivalent natural gas and oil sales
during the first nine months of 1999.

      General and administrative expenses. General and administrative expenses
decreased 19% from $3.4 million for the first nine months of 1998 to $2.7
million for the first nine months of 1999 primarily due to the reduction of
various administrative costs, including the elimination of accrued employee
bonuses for 1999, a 10% payroll reduction effective mid-May 1999, and a $331,000
increase in overhead fees billed to working interest participants on
Company-operated wells. On a per unit of production basis, general and
administrative expenses decreased 12% from $0.64 per Mcfe for the first nine
months of 1998 to $0.57 per Mcfe for the first nine months of 1999.

      Depletion of natural gas and oil properties. Depletion of natural gas and
oil properties increased from $4.5 million ($0.86 per Mcfe) in the first nine
months of 1998 to $5.7 million ($1.18 per Mcfe) in the first nine months of
1999. Of this net increase, $1.5 million was due to a 37% increase in the
depletion rate per unit of production, which was partially offset by $372,000
due to the decrease in production volumes. The increased depletion rate
reflected the recognition of lower reserve volume estimates as a result of
Brigham's reduced level of drilling activity during 1999 and the Company's June
1999 property divestitures.

      Interest expense. Net interest expense increased 115% from $4.3 million in
the first nine months of 1998 to $9.1 million in the first nine months of 1999.
This increase was due to a higher average debt balance with


                                       22

<PAGE>   25



a higher average interest rate in the first nine months of 1999 compared with
the first nine months of 1998. The weighted average outstanding debt balance
increased from $58.1 million in the first nine months of 1998 to $99.5 million
in the first nine months of 1999. The average effective annual interest rate on
borrowings outstanding during the first nine months of 1999 was 12.2% compared
to 10% for the first nine months of 1998. Interest expense in the first nine
months of 1999 included $5.6 million of non-cash charges, including (i) $4.1
million of interest expense related to the Subordinated Notes that was paid
through the issuance of additional Subordinated Notes (or "paid-in-kind"), (ii)
$1.2 million for amortization of deferred financing fees, and (iii) $393,000 for
amortization of debt discounts related to the issuance of the Subordinated
Notes. In connection with issuance of the Subordinated Notes in August 1998, the
Company recorded the Subordinated Notes at a discount of $4.5 million to reflect
the estimated value of the warrants to purchase common stock that were issued in
connection with the issuance of the Subordinated Notes. This discount was
increased by $479,000 in March 1999 to adjust the estimated value of the
warrants based on the amendment of certain terms of the warrants, including a
decrease in the exercise price per share and an increase in the term of the
warrants. The Company amortizes this debt discount over the five-year term of
the Subordinated Notes based on the interest method of amortization and includes
such amortization in interest expense. In connection with the amendment to the
Credit Facility executed in July 1999, the Company issued to its senior lenders
one million warrants to purchase the Company's common stock at an exercise price
of $2.25 per share. An estimated value of $1.2 million was attributed to these
warrants by the Company and was recognized as additional deferred loan fees
which will be amortized and included in interest expense over the remaining
period to maturity of the Credit Facility borrowings at January 26, 2001.

      Loss on sale of natural gas and oil properties. In June 1999, the Company
sold all of its interests in certain producing and non-producing natural gas and
oil properties for a total sales price of $17.1 million. Due to the magnitude of
the reserve volumes that were attributable to these properties relative to the
Company's remaining net reserve volumes, the Company recognized as a loss the
difference between the sales price received, after adjustment for transaction
costs, and the $28.9 million basis allocated to the divested properties in
accordance with the full-cost method of accounting for oil and natural gas
properties. No property divestitures occurred during the first nine months of
1998 for which recognition of gain or loss was appropriate.


LIQUIDITY

      Despite the Company's success in building its inventory of 3-D seismic
data and potential drilling locations, a number of key factors have contributed
to significantly limit the Company's capital resources available to fund its
continued long-term growth-oriented exploration strategy. Management believes
these principal factors include: (i) lower commodity sales prices during the
second half of 1998 and the early part of 1999, which reduced revenues and cash
flow from the Company's production volumes, (ii) reduced access to public,
private and industry sources of capital on cost-effective terms due to the
continuing low commodity price environment and outlook, (iii) less than
anticipated success in placing working interests with industry or financial
participants in certain of its high equity interest projects during the second
half of 1998, resulting in lower levels of project cost recoupment than
budgeted, (iv) high levels of expenditures in 1997 and 1998 for 3-D seismic and
land activities that do not generate proved reserves and cash flow until the
drilling stage of the project cycle, (v) the utilization of high levels of debt
to fund its accelerating exploration expenditures, and (vi) disappointing
drilling results on a number of high equity interest exploratory and development
wells.

      As a result of these limiting factors and an expectation for continuing
difficult industry and capital markets conditions, Brigham has substantially
reduced its planned capital budget for 1999 and has undertaken


                                       23

<PAGE>   26



a number of strategic initiatives in an effort to improve and preserve its
capital liquidity in the current environment. While the Company remains focused
on its long-term growth objectives and the continuation of its established
business model for 3-D seismic-based exploration, Brigham has adapted its
business strategy in an effort to maximize value for its shareholders on a
long-term basis through the implementation of the following principal strategic
initiatives: (i) focusing all of the Company's planned exploration efforts in
1999 toward the drilling of its highest-grade 3-D prospects identified in its
Anadarko Basin and Gulf Coast projects, concentrated primarily in trends where
Brigham has achieved exploration success, (ii) elimination of substantially all
planned seismic and land expenditures for new projects until its capital
resources can support such additional activity, (iii) divestitures of certain
producing natural gas and oil properties to raise capital to reduce debt
borrowings and to redirect capital to drilling projects that have the potential
to generate higher investment returns, (iv) restructuring its outstanding senior
and subordinated debt agreements to provide the Company with flexibility needed
to preserve cash flow to fund its expected near-term exploration activities, (v)
implementation of an overhead reduction plan to reduce general and
administrative expenses, and (vi) evaluating opportunities to raise additional
capital either through the sales of project equity interests, further
restructuring of its senior debt or the issuance of equity or equity-linked
securities. The Company believes that the successful execution of these
strategic initiatives will provide Brigham with sufficient capital resources to
execute its planned 1999 exploration program and position the Company to realize
the significant value it believes it has captured in its inventory of 3-D
seismic projects and delineated drilling locations. While the Company has
initiated each of these strategic directives in late 1998 and 1999, and has
effected certain of them to date, the successful completion of any or all of
these efforts to improve the Company's liquidity and capital availability within
the expected timeframe is uncertain and will likely have a material impact on
the Company's near-term capital expenditure levels and growth profile.

      On March 30, 1999, the Company entered into an agreement with Veritas DGC
Land, Inc. ("Veritas") to exchange 1,002,865 shares of newly issued Brigham
common stock valued at $3.50 per share for approximately $3.5 million of payment
obligations due to Veritas in 1999 for certain seismic acquisition and
processing services previously performed. In addition, this agreement provides
for the payment by Brigham of up to $1 million in future seismic processing
services to be performed by Veritas through December 31, 1999, in newly issued
shares of Brigham common stock valued at $3.50 per share, in the event that the
Company does not elect to pay for such services in cash. The settlement of these
seismic processing services has been determined on a quarterly basis. Subsequent
to March 30, 1999, Brigham issued an additional 208,715 shares of common stock
valued at $3.50 per share to Veritas pursuant to its election to settle certain
seismic processing service obligations incurred during the second and third
quarters of 1999 in common stock instead of cash. Brigham considers this
arrangement to have been beneficial as it has enabled the Company to reduce its
working capital commitments and preserve additional cash flow and capital
availability to fund its 1999 drilling program.

CAPITAL RESOURCES

      The Company's primary sources of capital have been its revolving credit
facility and other debt borrowings, public and private equity financings, the
sale of interests in projects and properties, and funds generated by operations.
The Company's primary capital requirements are 3-D seismic acquisition,
processing and interpretation costs, land acquisition costs and drilling
expenditures. In January 1998, the Company entered into a new revolving credit
facility that provided for an initial borrowing availability of $75 million that
was used to repay its then outstanding borrowings under its previous credit
facility and to fund capital expenditures. This Credit Facility has been
subsequently amended, most recently in July 1999, to provide for a borrowing
availability of $56 million. In August 1998, the Company issued $50 million of
debt and equity securities, including $40 million of Subordinated Notes, that
generated proceeds of approximately $47.5


                                       24

<PAGE>   27



million, net of offering costs, that were used to repay a portion of then
outstanding borrowings under the Credit Facility, thereby increasing the
Company's borrowing availability under its Credit Facility to fund capital
expenditures. In late June 1999, the Company received $17.1 million ($16.8
million after the adjustment for transaction costs and post-closing adjustments)
from the sale of its interests in producing and non-producing natural gas and
oil properties within two non-operated fields in its Anadarko Basin province.

Cash Flow Analysis

      In the first nine months of 1999, cash flow used by operating activities
was $2.7 million primarily as a result of a $5.7 million decrease in other
noncurrent liabilities partially offset by a net $458,000 increase in non-cash
working capital and a net $2.5 million from total revenues, less lease operating
expenses, production taxes, general and administrative expenses and cash
interest expenses. Cash flow provided by investing activities was $8.4 million
in the first nine months of 1999 primarily as a net result of $18.3 million of
capital expenditures related to exploration activities and $27.1 million of
proceeds received from the sale of interests in certain seismic projects and
natural gas and oil properties. Cash flow used in financing activities was $4.9
million in the first nine months of 1999 resulting from a $4.0 million net
reduction in notes payable attributable to the repayment of outstanding
borrowings under the Credit Facility and the payment of deferred loan fees and
principal payments made on capital lease obligations.

Revolving Credit Facility

      In January 1998, the Company entered into a new revolving credit agreement
(the "Credit Facility"), which provided for an initial borrowing availability of
$75 million. The Credit Facility was amended in March 1999 to reduce the
borrowing availability, extend the date of borrowing base redetermination,
modify certain financial covenants, include certain additional covenants that
place significant restrictions on the Company's ability to incur certain capital
expenditures, and to increase the interest rate on outstanding borrowings.

      As a result of the completion of the majority of the Company's strategic
initiatives to improve its capital resources, including the late June 1999
property divestitures and the application of the net sales proceeds to reduce
borrowings outstanding under the Credit Facility, the Company and its senior
lenders entered into an amendment to the Credit Facility in July 1999. This
amendment provides the Company with borrowing availability of $56 million
principally to fund its planned drilling activities and anticipated working
capital requirements through the end of 1999. The Company's lenders have
indicated that the borrowing availability provided under the amended Credit
Facility exceeds that which would otherwise be made available under a more
traditional conforming borrowing base calculation based on the estimated value
of the Company's current net proved reserves and its cash flow. As consideration
for this amendment to the Credit Facility, in July 1999 the Company issued to
its senior lenders one million warrants to purchase the Company's common stock
at an exercise price of $2.25 per share. The warrants have a seven-year term
from the date of issuance and are exercisable at the holders' option at any
time. An estimated value of $1.2 million was attributed to these warrants by the
Company and was recognized as additional deferred loan fees which will be
amortized over the remaining period to maturity of the Credit Facility
borrowings at January 26, 2001.

      Principal outstanding under the Credit Facility is due at maturity on
January 26, 2001 with interest due monthly for base rate tranches or
periodically as LIBOR tranches mature. The annual interest rate for borrowings
under the Credit Facility is either the lender's base rate or LIBOR plus 3.00%,
at the Company's option. The Company's obligations under the Credit Facility are
secured by substantially all of the natural gas and oil properties and other
tangible assets of the Company. The borrowing availability will be redetermined
by the senior lenders at January 31, 2000, based on the Company's then estimated
net proved reserve value and cash flow.


                                       25

<PAGE>   28


      At November 10, 1999, the Company had $55 million in borrowings
outstanding under the Credit Facility, which bear interest at an average annual
rate of 8.54%.

      The Credit Facility has certain financial covenants including current and
interest coverage ratios, as defined. The Company and its lenders effected the
March 1999 amendment to the Credit Facility to enable the Company to comply with
certain financial covenants of the Credit Facility, including the minimum
current ratio, minimum interest coverage ratio and the limitation on capital
expenditures related to seismic and land activities. The Company believes its
amendments are indicative of its senior lenders' cooperation in the current oil
and natural gas industry environment. If oil and natural prices deteriorate
beyond the date of redetermination of borrowing availability or the Company does
not generate its expected growth in proved reserves through its drilling
activities planned for the remainder of 1999, the Company believes its senior
lenders may require the Company to reduce its level of borrowing under the
Credit Facility accordingly. Should the Company be unable to comply with certain
of the financial covenants, its senior lenders may be unwilling to waive
compliance or amend the covenants in the future. In such instance, the Company's
liquidity may be adversely affected, which could in turn have an adverse impact
on the Company's future financial position and results of operations.

Subordinated Notes

      In August 1998, the Company issued $50 million of debt and equity
securities to affiliates of Enron Corp. ("Enron"). Securities issued by the
Company in connection with this financing transaction included: (i) $40 million
of Subordinated Notes, (ii) warrants to purchase 1,000,000 shares of the
Company's common stock at a price of $10.45 per share (the "Warrants"), and
(iii) 1,052,632 shares of the Company's common stock at a price of $9.50 per
share. The approximate $47.5 million in net proceeds received by the Company
from this financing transaction were used to repay a portion of outstanding
borrowings under its Credit Facility, which increased the Company's borrowing
availability under its Credit Facility to fund capital expenditures.

      Principal outstanding under the Subordinated Notes is due at maturity on
August 20, 2003. Interest on the Subordinated Notes is payable quarterly at
rates that vary depending upon whether accrued interest is paid in cash or "in
kind" through the issuance of additional Subordinated Notes. Interest shall be
paid in cash at interest rates of 12%, 13% and 14% per annum during years one
through three, year four and year five, respectively, of the term of the
Subordinated Notes; provided, however, that the Company may pay interest in kind
for a cumulative total of six quarterly interest payments at interest rates of
13%, 14% and 15% per annum during years one through three, year four and year
five, respectively, of the term of the Notes.

      The Subordinated Notes rank subordinate in right of payment to Senior
Indebtedness (as defined) and senior to all other financings (other than any
allowed capital leases and purchase money financings) of the Company. The
Subordinated Notes are secured by a second lien against substantially all of the
natural gas and oil properties and other tangible assets of the Company. The
Subordinated Notes may be prepaid at any time, in whole or in part, without
premium or penalty, provided that all partial prepayments must be pro rata to
the various holders of the Subordinated Notes. The Subordinated Notes were
issued pursuant to an indenture (the "Indenture") that contains certain
covenants that, among other things, limit the ability of the Company and its
subsidiaries to incur additional indebtedness, pay dividends, make
distributions, enter into certain sale and leaseback transactions, enter into
certain transactions with affiliates, dispose of certain assets, incur liens,
and engage in mergers and consolidations.


                                       26

<PAGE>   29



      In March 1999, the Company and Chase Bank of Texas, National Association,
as trustee (the "Trustee") for the holders of the Subordinated Notes, entered
into an amendment to the Indenture. This amendment provides the Company with the
option to pay interest due on the Subordinated Notes in kind, for any reason,
through the second quarter of 2000. In addition, certain financial and other
covenants were amended. The amendment also provides for a reduction in the
exercise price per share of the Warrants from $10.45 per share to $3.50 per
share and extended the term of the Warrants from seven to ten years.

      The Indenture governing the Subordinated Notes has certain financial
covenants including current and interest coverage ratios, as defined. The
Company and the holders of the Subordinated Notes effected the recent amendment
to the Indenture to enable the Company to comply with certain financial
covenants of the Indenture that parallel those of the Credit Facility, including
the minimum current ratio and the minimum interest coverage ratio. Should the
Company be unable to comply with certain of the financial covenants, the holders
of the Subordinated Notes may be unwilling to waive compliance or amend the
covenants in the future. In such instance, the Company's liquidity may be
adversely affected, which could in turn have an adverse impact on the Company's
future financial position and results of operations.

      At September 30, 1999 and November 10, 1999, the Company has $44 million
principal amount of Subordinated Notes outstanding.

Capital Expenditures

      As a result of the Company's limited available capital resources, Brigham
has significantly reduced its capital expenditure budget for 1999 from the
Company's previously anticipated levels in an effort to match its current and
expected future capital resources. The Company's current 1999 capital budget is
estimated to be $25 million, or approximately 30% of 1998 expenditures. The
Company's budgeted 1999 capital expenditures consist of approximately $15.5
million to drill an estimated 25 to 30 gross wells, $6 million for seismic and
land costs, consisting primarily of previous year commitments and obligations to
acquire 3-D data and acreage, and $4 million for capitalized general and
administrative expenses and other fixed asset expenditures. Brigham expects that
its 1999 drilling expenditures will be allocated to prospects identified among
its 3-D projects primarily in its Anadarko Basin and Gulf Coast provinces, and
such expenditures will be devoted to the drilling of the highest grade prospects
in the Company's inventory of potential drilling locations. The Company intends
to fund these budgeted capital expenditures through a combination of cash flow
from operations, available borrowings under its Credit Facility and the sales of
certain assets and equity interests (including the Anadarko Basin property
divestitures completed in late June 1999, the sale of interests in certain 3-D
seismic projects for $11.5 million completed in January 1999 and the potential
sales of additional interests in certain 3-D seismic projects during the second
half of 1999). The Company's capital availability during 1999 will depend to a
large extent on its success raising additional financing through its planned and
potential strategic initiatives discussed above, and therefore the Company's
actual 1999 capital expenditures may differ from its current estimates. In the
event additional financing is not available in the amounts or timing needed, the
Company may be required to curtail its planned exploration activities in 1999
and take further measures to reduce the size and scope of its business.


                                       27

<PAGE>   30

OTHER MATTERS

Year 2000 Issues

      Many computer software systems, as well as certain hardware and equipment
using date-sensitive data, were structured to use a two-digit date field meaning
that they may not be able to properly recognize dates in the year 2000. The
Company developed a plan to address this issue and has reviewed its information
technology systems, such as computer hardware and software, as well as
non-information technology systems, including computer controlled equipment and
electronic devices used to operate equipment involved in processing and
interpreting 3-D seismic data.

      The Company has completed the internal identification and remediation
phases of its plan by identifying all computerized systems and completing an
inventory of its equipment and component parts. The Company reviewed the
manufacturer's information and/or performance testing with respect to its
inventory. Where material problems were identified, the Company has undertaken
remediation, replacement or alternative procedures for non-compliant equipment
or facilities on a business priority basis. In addition, in the ordinary course
of replacing computer equipment and software, the Company attempts to obtain
replacements that are Year 2000 compliant

      As of September 30, 1999, all costs incurred by the Company in connection
with its Year 2000 compliance efforts were included within the Company's normal
general and administrative expenses (for example, regular maintenance of
software programs). The Company is currently expensing as incurred all costs
related to the assessment and remediation of the Year 2000 issue, and these
costs are being funded through operating cash flow. However, in certain
instances the Company may determine that replacing existing equipment may be
appropriate and may capitalize such replacements. The Company currently
estimates that its total out-of-pocket costs to become Year 2000 compliant will
be insignificant. The Company currently expects that such costs will not have a
material adverse effect on the Company's financial condition, operations or
liquidity.

      The Company cannot reasonably estimate the potential impact on its
financial condition and operations if key third parties including, among others,
suppliers, contractors, joint venture participants, financial institutions,
customers and governments do not become Year 2000 compliant on a timely basis.
The Company has identified third parties whose business significantly impacts
the Company and has attempted to contact those significant third parties to
determine the extent to which interfaces with such entities are vulnerable to
Year 2000 issues. All significant third party responses received to date have
indicated that such entities are either Year 2000 compliance or expect to be
Year 2000 compliant prior to January 1, 2000. The Company is in the process of
performing follow-up inquiries with respect to those significant third parties
that have not responded to the Company's previous Year 2000 compliance
information requests. The Company expects to have completed the remaining follow
up inquiries by November 30, 1999, and will endeavor to undertake any
appropriate remediation efforts that may be required as a result of those third
party investigations.

      If those with whom the Company conducts business are unsuccessful in
implementing timely solutions, Year 2000 issues could have a material adverse
effect on the Company's liquidity and results of operations. In the event third
parties are unable to timely resolve their Year 2000 problems, such failure
could partially affect the Company's ability to conduct its operations, sell its
oil and natural gas and receive related payments. Year 2000 failures could also
cause a shutdown of the pipeline systems into which the Company markets its
natural gas and oil production. In addition, there could be disruptions in
getting certain vendors to provide supplies and /or services in support of the
Company's operation. While this is the most likely worst case scenario, based
upon the responses received from industry partners and an analysis of the
services and products that are provided by those from whom the Company has not
yet received a response, the Company is not


                                       28

<PAGE>   31


currently aware of a likely business disruption. Since the elements of such a
scenario are outside of the Company's control and an effective contingency plan
would not be economically feasible, the Company has not developed a contingency
plan for dealing with a worst case scenario. However, the Company currently
believes that it will be able to resolve its own Year 2000 issues in a timely
manner.

      The disclosure set forth in this section is provided pursuant to
Securities Act Release No. 33-7558. As such it is protected as a forward-looking
statement under the Private Securities Litigation Reform Act of 1995. See
"Forward-Looking Information." This disclosure is also subject to protection
under the Year 2000 Information and Readiness Disclosure Act of 1998, Public Law
105-271, as a "Year 2000 Statement" and "Year 2000 Readiness Disclosure" as
defined therein.

Forward Looking Information

      The Company may make forward looking statements, oral or written,
including statements in this report, press releases and other filings with the
SEC, relating to the Company's drilling plans, its potential drilling locations,
capital expenditures, use of offering proceeds, the ability of expected sources
of liquidity to support working capital and capital expenditure requirements and
the Company's financial position, business strategy and other plans and
objectives for future operations. Such statements involve risks and
uncertainties, including those relating to the Company's dependence on
exploratory drilling activities, the volatility of natural gas and oil prices,
the risks associated with growth (including the risk of reduced availability of
seismic gathering and drilling services in the face of growing demand), the
substantial capital requirements of the Company's exploration and development
projects, operating hazards and uninsured risks and other factors detailed in
the Company's registration statement and other filings with the SEC. All
subsequent oral and written forward looking statements attributable to the
Company are expressly qualified in their entirety by these factors. The Company
assumes no obligation to update these statements.


                                       29

<PAGE>   32


PART II.  OTHER INFORMATION:

Item 2.   Changes in Securities

          In July 1999, the Company issued to Bank of Montreal and Societe
          General, Southwest Agency (the "Lenders"), warrants to purchase a
          total of one million shares of Brigham Exploration Company common
          stock at an exercise price of $2.25 per share. The warrants have a
          seven year term from the date of issuance and are exercisable at the
          holders' option at any time. The warrants were issued as consideration
          for an amendment executed in July 1999 to the revolving credit
          agreement between the Company and the Lenders. These shares were
          issued pursuant to the exemption provided by Section 4(2) of the
          Securities Act of 1933, as amended.

          Pursuant to the Company's agreement dated March 30, 1999 with Veritas
          DGC Land, Inc. ("Veritas"), in August 1999 the Company exchanged
          89,165 shares of newly issued Brigham Exploration Company common stock
          valued at $3.50 per share for approximately $312,000 of payment
          obligations due to Veritas in 1999 for certain seismic acquisition and
          processing services. These shares were issued pursuant to the
          exemption provided by Section 4(2) of the Securities Act of 1933, as
          amended. Veritas represented its intention to acquire the shares for
          investment purposes only and not for the purpose of resale or
          distribution, and appropriate legends were affixed to the certificate
          issued in such transaction. Veritas was given access to information
          about the Company.

Item 6.   Exhibits and Reports on Form 8-K

          (a)     Exhibits

                  10.1     Agreement dated as of August 16, 1999 between Brigham
                           Exploration Company and Jon L. Glass for the
                           amendment of an Employee Stock Ownership Agreement
                           and Option Agreements.

                  10.2     Agreement dated as of August 16, 1999 between Brigham
                           Exploration Company and Craig M. Fleming for the
                           amendment of an Employee Stock Ownership Agreement
                           and Option Agreement.

                  10.3     Form Change of Control Agreement dated as of
                           September 20, 1999 between Brigham Exploration
                           Company and certain Officers.

                  10.4     Warrant Agreement for the Purchase of Common Stock
                           dated as of July 19, 1999 by and between Brigham
                           Exploration Company and Bank of Montreal.

                  10.5     Warrant Agreement for the Purchase of Common Stock
                           dated as of July 19, 1999 by and between Brigham
                           Exploration Company and Societe Generale, Southwest
                           Agency.

                  27       Financial Data Schedule


                                       30

<PAGE>   33


                                   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 thereunto, duly authorized, in the City of Austin, State of Texas,
on the 12th day of November, 1999.

                                       BRIGHAM EXPLORATION COMPANY


                                   By:    /s/ BEN M. BRIGHAM
                                       ---------------------------------------
                                       Ben M. Brigham
                                       Chief Executive Officer, President and
                                          Chairman of the Board



                                   By:    /s/ CURTIS F. HARRELL
                                       ---------------------------------------
                                       Curtis F. Harrell
                                       Chief Financial Officer


                                       31

<PAGE>   34


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
    EXHIBIT
      NO.                                 DESCRIPTION
    -------                               -----------
<S>                 <C>
     10.1           Agreement dated as of August 16, 1999 between Brigham
                    Exploration Company and Jon L. Glass for the amendment of an
                    Employee Stock Ownership Agreement and Option Agreements.

     10.2           Agreement dated as of August 16, 1999 between Brigham
                    Exploration Company and Craig M. Fleming for the amendment
                    of an Employee Stock Ownership Agreement and Option
                    Agreements.

     10.3           Change of Control Agreement dated as of September 20, 1999
                    between Brigham Exploration Company and certain Officers.

     10.4           Warrant Agreement for the Purchase of Common Stock dated as
                    of July 19, 1999 by and between Brigham Exploration Company
                    and Bank of Montreal.

     10.5           Warrant Agreement for the Purchase of Common Stock dated as
                    of July 19, 1999 by and between Brigham Exploration Company
                    and Societe Generale, Southwest Agency.

      27            Financial Data Schedule
</TABLE>