UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10**-**Q**





**x** **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended March 31, 2006





**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)





**Delaware**
            
            **1311**
            
            **75-2692967**(State
                of other jurisdiction of incorporation or organization)
            
            (Primary
                Standard Industrial Classification Code Number)
            
            (I.R.S.
                Employer Identification Number)





**6300
      Bridge Point Parkway, Building 2, Suite 500, Austin, Texas
      78730**


(Address
      of principal executive offices)





**(512)
      427-3300**


(Registrant's
      telephone number, including area code)





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 for such shorter period that the registrant was
      required to file such reports) and (2) has been subject to such filing
      requirements for the past 90 days.





Yes x    No  ̈




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.




Large
                  Accelerated Filer ̈
              Accelerated
                  Filerx
              Non-Accelerated
                  Filer ̈


Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes  ̈    No x





At
      May 3,
      2006, 45,478,308 shares of the Registrant’s Common Stock were
      outstanding.










**Brigham
      Exploration Company**





**First
      Quarter 2006 Form 10-Q Report**





**TABLE
      OF CONTENTS**





Page**PART
                I - FINANCIAL INFORMATION**ITEM
                1.
            FINANCIAL
                STATEMENTSConsolidated
                Balance Sheets - March 31, 2006 and December 31,
                2005
            1Consolidated
                Statements of Operations - Three months ended
                March 31, 2006 and 2005
            2Consolidated
                Statement of Changes in Stockholders’ Equity -
                Three months ended March 31, 2006
            3Consolidated
                Statements of Cash Flows - Three months ended
                March 31, 2006 and 2005
            4Notes
                to the Consolidated Financial
                Statements
            5ITEM
                2.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                RESULTS OF OPERATIONS
            14ITEM
                3.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK
            30ITEM
                4.
            CONTROLS
                AND PROCEDURES
            33**PART
                II - OTHER INFORMATION**ITEM
                1.
            LEGAL
                PROCEEDINGS
            33ITEM
              1A.
            RISK
              FACTORS
            33ITEM
                2.
            UNREGISTERED
                SALES OF EQUITYSECURITIES
                AND USE OF PROCEEDS
            39ITEM
                3.
            DEFALTS
                UPON SENIOR SECURITIES
            39ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS
            39ITEM
                5.
            OTHER
                INFORMATION
            39ITEM
                6.
            EXHIBITS
            39SIGNATURES
            41




*Table
          of Contents*




PART
      I -
      FINANCIAL INFORMATION


ITEM
      1.
      FINANCIAL STATEMENTS




**BRIGHAM
      EXPLORATION COMPANY**


**CONSOLIDATED
      BALANCE SHEETS**


**(In
      thousands, except share data)**





**March
                31,**
            
            **December
                31,****2006**
            
            **2005****(Unaudited)****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            7,753
            
            $
            3,975Accounts
                receivable
            
            
            16,714
            
            
            22,825Deferred
                income taxes
            
            
            —
            
            
            482Other
                current assets
            
            
            3,792
            
            
            1,043Total
                current assets
            
            
            28,259
            
            
            28,325Oil
                and natural gas properties, net (full cost method)
            
            
            377,214
            
            
            347,329Other
                property and equipment, net
            
            
            1,011
            
            
            1,027Deferred
                loan fees
            
            
            2,055
            
            
            2,174Other
                noncurrent assets
            
            
            1,445
            
            
            1,572Total
                assets
            
            $
            409,984
            
            $
            380,427**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            13,783
            
            $
            12,128Royalties
                payable
            
            
            5,984
            
            
            6,886Accrued
                drilling costs
            
            
            18,458
            
            
            12,218Participant
                advances received
            
            
            1,919
            
            
            2,116Deferred
                income taxes
            
            
            746
            
            
            —Other
                current liabilities
            
            
            2,474
            
            
            4,119Total
                current liabilities
            
            
            43,364
            
            
            37,467Senior
                credit facility
            
            
            44,300
            
            
            33,100Senior
                subordinated notes
            
            
            30,000
            
            
            30,000Series
                A Preferred Stock, mandatorily redeemable, $.01 par value, $20 stated
                and
                redemption value, 2,250,000 shares authorized, 505,051 shares issued
                and
                outstanding at March 31, 2006 December 31, 2005
            
            
            10,101
            
            
            10,101Deferred
                income taxes
            
            
            27,115
            
            
            23,563Other
                noncurrent liabilities
            
            
            4,678
            
            
            4,556Commitments
                and contingencies (Note 3)Stockholders'
                equity:Common
                stock, $.01 par value, 50 million shares authorized, 45,006,968 and
                44,917,768 shares issued and 44,989,000 and 44,917,768 shares outstanding
                at March 31, 2006 and December 31, 2005, respectively
            
            
            450
            
            
            449Additional
                paid-in capital
            
            
            200,592
            
            
            202,127Treasury
                stock, at cost; 17,968 shares at March 31, 2006
            
            
            (211
            )
            
            —Unearned
                stock compensation
            
            
            —
            
            
            (2,299
            )Accumulated
                other comprehensive income (loss)
            
            
            1,931
            
            
            (426
            )Retained
                earnings
            
            
            47,664
            
            
            41,789Total
                stockholders’ equity
            
            
            250,426
            
            
            241,640Total
                liabilities and stockholders' equity
            
            $
            409,984
            
            $
            380,427





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


1
 *Table
          of Contents*


**BRIGHAM
      EXPLORATION COMPANY**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(In
      thousands, except per share data)**


**(Unaudited)**





**Three
                Months Ended****March
                31,****2006**
            
            **2005**Revenues:Oil
                and natural gas sales
            
            $
            25,796
            
            $
            16,703Other
                revenue
            
            
            (22
            )
            
            4325,774
            
            
            16,746Costs
                and expenses:Lease
                operating
            
            
            2,730
            
            
            2,218Production
                taxes
            
            
            1,144
            
            
            802General
                and administrative
            
            
            1,642
            
            
            1,098Depletion
                of oil and natural gas properties
            
            
            10,256
            
            
            6,453Depreciation
                and amortization
            
            
            242
            
            
            182Accretion
                of discount on asset retirement obligations
            
            
            70
            
            
            3916,084
            
            
            10,792Operating
                income
            
            
            9,690
            
            
            5,954Other
                income (expense):Interest
                income
            
            
            106
            
            
            39Interest
                expense, net
            
            
            (1,089
            )
            
            (741
            )Other
                income (expense)
            
            
            679
            
            
            (531
            )(304
            )
            
            (1,233
            )Income
                before income taxes
            
            
            9,386
            
            
            4,721Income
                tax expense:Current
            
            
            —
            
            
            —Deferred
            
            
            (3,511
            )
            
            (1,673
            )(3,511
            )
            
            (1,673
            )Net
                income
            
            $
            5,875
            
            $
            3,048Net
                income per share available to common stockholders:Basic
            
            $
            0.13
            
            $
            0.07Diluted
            
            $
            0.13
            
            $
            0.07Weighted
                average shares outstanding:Basic
            
            
            44,986
            
            
            42,124Diluted
            
            
            45,579
            
            
            43,166





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


2
 *Table
          of Contents*


**BRIGHAM
      EXPLORATION COMPANY**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY**


**(In
      thousands)**


**(Unaudited)**




**Common
                  Stock****Shares**
              
              **Amounts**
              
              **Additional
                  Paid In Capital**
              
              **Treasury
                  Stock**
              
              **Unearned
                  Stock Compensation**
              
              **Accumulated
                  Other Comprehensive Income (Loss)**
              
              **Retained
                  Earnings**
              
              **Total
                  Stockholders' Equity**Balance,
                  December 31, 2005
              
              
              44,918
              
              $
              449
              
              $
              202,127
              
              $
              —
              
              $
              (2,299
              )
              $
              (426
              )
              $
              41,789
              
              $
              241,640Comprehensive
                  income:Net
                  income
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              5,875
              
              
              5,875Unrealized
                  gain (losses) on cash flow hedges
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              4,461
              
              
              —
              
              
              4,461Tax
                  benefits (provisions) related to cash flow hedges
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,269
              )
              
              —
              
              
              (1,269
              )Reclassification
                  adjust- ments for settled hedging positions
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (835
              )
              
              —
              
              
              (835
              )Comprehensive
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              8,232Adoption
                  of SFAS No. 123R
              
              
              —
              
              
              —
              
              
              (2,299
              )
              
              —
              
              
              2,299
              
              
              —
              
              
              —
              
              
              —Exercises
                  of employee stock options
              
              
              24
              
              
              —
              
              
              153
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              153Vesting
                  of restricted stock
              
              
              65
              
              
              1
              
              
              (1
              )
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Stock
                  based compensation
              
              
              —
              
              
              —
              
              
              364
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              364Repurchases
                  of common stock
              
              
              —
              
              
              —
              
              
              —
              
              
              (211
              )
              
              —
              
              
              —
              
              
              —
              
              
              (211
              )Amortization
                  of unearned stock compensation
              
              
              —
              
              
              —
              
              
              248
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              248Balance,
                  March 31, 2006
              
              
              45,007
              
              $
              450
              
              $
              200,592
              
              $
              (211
              )
              $
              —
              
              $
              1,931
              
              $
              47,664
              
              $
              250,426





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


3
 *Table
          of Contents*


**BRIGHAM
      EXPLORATION COMPANY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(In
      thousands)**


**(Unaudited)**





**Three
                Months Ended****March
                31,****2006**
            
            **2005**Cash
                flows from operating activities:Net
                income
            
            $
            5,875
            
            $
            3,048Adjustments
                to reconcile net income to cash provided by operating
                activities:Depletion
                of oil and natural gas properties
            
            
            10,256
            
            
            6,453Depreciation
                and amortization
            
            
            242
            
            
            182Interest
                paid through issuance of additional mandatorily redeemable preferred
                stock
            
            
            —
            
            
            188Stock
                based compensation
            
            
            364
            
            
            —Amortization
                of deferred loan fees and debt issuance costs
            
            
            119
            
            
            126Market
                value adjustment for derivative instruments
            
            
            (715
            )
            
            606Accretion
                of discount on asset retirement obligations
            
            
            70
            
            
            39Deferred
                income taxes
            
            
            3,511
            
            
            1,673Other
                noncash items
            
            
            42
            
            
            12Changes
                in assets and liabilities:Accounts
                receivable
            
            
            6,111
            
            
            812Other
                current assets
            
            
            (336
            )
            
            85Accounts
                payable
            
            
            1,655
            
            
            (4,616
            )Royalties
                payable
            
            
            (902
            )
            
            (1,630
            )Participant
                advances received
            
            
            (197
            )
            
            (949
            )Other
                current liabilities
            
            
            147
            
            
            226Other
                noncurrent assets and liabilities
            
            
            (54
            )
            
            (11
            )Net
                cash provided by operating activities
            
            
            26,188
            
            
            6,244Cash
                flows from investing activities:Additions
                to oil and natural gas properties
            
            
            (33,674
            )
            
            (20,738
            )Additions
                to other property and equipment
            
            
            (142
            )
            
            (65
            )(Increase)
                Decrease in drilling advances paid
            
            
            324
            
            
            159Net
                cash used by investing activities
            
            
            (33,492
            )
            
            (20,644
            )Cash
                flows from financing activities:Increase
                in senior credit facility
            
            
            14,500
            
            
            17,100Repayment
                of senior credit facility
            
            
            (3,300
            )
            
            —Deferred
                equity costs and loan fees paid
            
            
            (60
            )
            
            (401
            )Proceeds
                from exercise of employee stock options
            
            
            153
            
            
            251Repurchases
                of common stock
            
            
            (211
            )
            
            (190
            )Net
                cash provided by financing activities
            
            
            11,082
            
            
            16,760Net
                increase in cash and cash equivalents
            
            
            3,778
            
            
            2,360Cash
                and cash equivalents, beginning of year
            
            
            3,975
            
            
            2,281Cash
                and cash equivalents, end of period
            
            $
            7,753
            
            $
            4,641





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


4
 *Table
          of Contents*


**BRIGHAM
        EXPLORATION COMPANY**
 
 **NOTES
        TO THE** **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **(Unaudited)**


**1.**
            **Organization
                and Nature of
                Operations**





Brigham
      Exploration 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”). Hereinafter, Brigham Exploration Company and the Partnership are
      collectively referred to as “Brigham.” 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 oil and natural
      gas properties using 3-D seismic imaging and other advanced technologies. Since
      its inception, the Partnership has focused its exploration and development
      of
      oil and natural gas properties primarily in the onshore Gulf Coast, the Anadarko
      Basin and West Texas.




**2.**
            **Basis
                of Presentation**





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





The
      accompanying 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
      unaudited consolidated financial statements are presented in accordance with
      the
      requirements of Form 10-Q and do not include all disclosures normally required
      by accounting principles generally accepted in the United States of America.
      The
      results of operations for the periods presented are not necessarily indicative
      of the results to be expected for the entire year. The unaudited consolidated
      financial statements should be read in conjunction with Brigham's 2005 Annual
      Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934.





See
      Note
      7. for a discussion of the accounting policy pertaining to the adoption of
      Statement of Financial Accounting Standard (SFAS) No. 123R, “Share-Based
      Payment” (SFAS 123R) effective January 1, 2006 using the modified prospective
      approach.




**3.**
            **Commitments
                and Contingencies**





Brigham
      is, from time to time, party to certain lawsuits and claims arising in the
      ordinary course of business. While the outcome of lawsuits and claims cannot
      be
      predicted with certainty, management does not expect these matters to have
      a
      materially adverse effect on the financial condition, results of operations
      or
      cash flows of Brigham.





As
      of
      March 31, 2006, there are no known environmental or other regulatory matters
      related to Brigham’s operations that are reasonably expected to result in a
      material liability to Brigham. Compliance with environmental laws and
      regulations has not had, and is not expected to have, a material adverse effect
      on Brigham’s financial position, results of operations or cash
      flows.





**4.**
            **Earnings
                Per Common Share**





Basic
      earnings per share (EPS) is computed by dividing net income (the numerator)
      by
      the weighted average number of common shares outstanding for the period (the
      denominator). Diluted EPS is computed by dividing net income by the weighted
      average number of common shares and potential common shares outstanding (if
      dilutive) during each period. Potential common shares include stock options
      and
      restricted stock. The number of potential common shares outstanding relating
      to
      stock options and restricted stock is computed using the treasury stock
      method.




5
 *Table
          of Contents*


**BRIGHAM
      EXPLORATION COMPANY**





**NOTES
      TO THE** **CONSOLIDATED
      FINANCIAL STATEMENTS**


**(Unaudited)**


The
      reconciliation of the denominators used to calculate basic EPS and diluted
      EPS
      for the three months ended March 31, 2006 and 2005 are as follows (in
      thousands):





**Three
                Months Ended**
              **March
                31,****2006**
            
            **2005**Weighted
                average common shares outstanding - basic
            
            
            44,986
            
            
            42,124Plus:
                Potential common sharesStock
                options and restricted stock
            
            
            593
            
            
            1,042Weighted
                average common shares outstanding - diluted
            
            
            45,579
            
            
            43,166Stock
                options excluded from diluted EPS due to the anti-dilutive
                effect
            
            
            1,246
            
            
            718





**5.**
            **Derivative
                Instruments and Hedging
                Activities**





Brigham
      utilizes various commodity swap and option contracts to (i) reduce the effects
      of volatility in price changes on the oil and natural gas commodities it
      produces and sells, (ii) reduce commodity price risk and (iii) provide a base
      level of cash flow in order to assure it can execute at least a portion of
      its
      capital spending plans.





The
      following table sets forth Brigham’s oil and natural gas prices including and
      excluding the hedging gains and losses and the increase or decrease in oil
      and
      natural gas revenues as a result of the hedging activities for the three month
      periods ended March 31, 2006 and 2005:





**Three
                Months Ended**
              **March
                31,****2006**
            
            **2005*****Natural
                Gas***Average
                price per Mcf as reported (including hedging results)
            
            $
            7.38
            
            $
            5.80Average
                price per Mcf realized (excluding hedging results)
            
            $
            7.33
            
            $
            5.80Increase
                (decrease) in revenue (in thousands)
            
            $
            131
            
            $
            (10
            )***Oil***Average
                price per Bbl as reported (including hedging results)
            
            $
            61.03
            
            $
            43.74Average
                price per Bbl realized (excluding hedging results)
            
            $
            61.46
            
            $
            48.33Increase
                (decrease) in revenue (in thousands)
            
            $
            (50
            )
            $
            (541
            )





Ineffectiveness
      associated with Brigham's derivative commodity instruments designated as cash
      flow hedges is included in other income (expense). The following table provides
      a summary of the impact on earnings from ineffectiveness (in
      thousands):





**Three
                Months Ended March 31,****2006**
            
            **2005**Increase
                (decrease) in earnings due to ineffectiveness
            
            $
            835
            
            $
            (616
            )





***Natural
      Gas and Crude Oil Derivative Contracts***





***Cash-flow
      hedges***





Brigham's
      cash-flow hedges consisted of costless collars (purchased put options and
      written call options). The costless collars are used to establish floor and
      ceiling prices on anticipated future oil and natural gas production. There
      were
      no net premiums received when Brigham entered into these option agreements.


6
 *Table
          of Contents*


**BRIGHAM
        EXPLORATION COMPANY**
 
 **NOTES
        TO THE** **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **(Unaudited)**


Derivative
      positions included written put options that are not designated as hedges and
      are
      reflected at fair value on the balance sheet. These positions were entered
      into
      in conjunction with a costless collar to offset the cost of other option
      positions that are designated as hedges. At each balance sheet date, the value
      of derivative contracts not designated as cash flow hedges is adjusted to
      reflect current fair value and any gains or losses are recognized as other
      income (expense). The following table provides a summary of the fair value
      of
      these derivatives included in other current liabilities (in thousands):





**March
                31, 2006**
            
            **December
                31, 2005**Fair
                value of undesignated derivatives
            
            $
            (244
            )
            $
            (125
            )





The
      following table provides a summary of the impact on earnings from non-cash
      gains
      (losses) included in other income (expense) related to changes in the fair
      values of these derivative contracts (in thousands):





**Three
                Months Ended March 31,****2006**
            
            **2005**Increase
                (decrease) in earnings due to changes in fair value of undesignated
                derivatives
            
            $
            (120
            )
            $
            10





The
      following table reflects open commodity derivative contracts at March 31, 2006,
      the associated volumes and the corresponding weighted average NYMEX reference
      price.





**Notional
                Amount****Settlement
                Period**
            
            **Derivative****Instrument**
            
            **Hedge
                Strategy**
            
            **Gas****(MMBTU)**
            
            **Oil****(Barrels)**
            
            **Nymex
                Reference****Price*****Costless
                Collars***04/01/06
                - 06/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            16,500
            
            $
            54.80Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            16,500
            
            
            75.0004/01/06
                - 07/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            
            15.6004/01/06
                - 07/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            
            17.0004/01/06
                - 09/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            42,000
            
            $
            50.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            42,000
            
            
            75.6004/01/06
                - 10/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            490,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            490,000
            
            
            
            
            
            14.8508/01/06
                - 10/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            
            16.6510/01/06
                - 12/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            27,000
            
            $
            50.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            27,000
            
            
            77.5011/01/06
                - 01/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            540,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            540,000
            
            
            
            
            
            23.2511/01/06
                - 03/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            450,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            450,000
            
            
            
            
            
            21.2001/01/07
                - 03/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            24,000
            
            $
            50.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            24,000
            
            
            78.2502/01/07
                - 03/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            300,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            300,000
            
            
            
            
            
            25.7504/01/07
                - 09/30/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            30,000
            
            $
            50.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            30,000
            
            
            81.50




7
 *Table
          of Contents*


**BRIGHAM
        EXPLORATION COMPANY**
 
 **NOTES
        TO THE** **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **(Unaudited)**


**Notional
                Amount****Settlement
                Period**
            
            **Derivative****Instrument**
            
            **Hedge
                Strategy**
            
            **Gas****(MMBTU)**
            
            **Oil****(Barrels)**
            
            **Nymex
                Reference****Price*****Three
                Way Costless Collars***04/01/06
                - 06/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            7,500
            
            $
            63.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            7,500
            
            
            75.25Written
                put
            
            
            Undesignated
            
            
            
            
            
            7,500
            
            
            48.0004/01/06
                - 10/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            420,000
            
            
            
            
            $
            7.50Written
                call
            
            
            Cash
                flow
            
            
            420,000
            
            
            
            
            
            9.15Written
                put
            
            
            Undesignated
            
            
            420,000
            
            
            
            
            
            6.2504/01/06
                - 10/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            490,000
            
            
            
            
            $
            8.50Written
                call
            
            
            Cash
                flow
            
            
            490,000
            
            
            
            
            
            9.96Written
                put
            
            
            Undesignated
            
            
            490,000
            
            
            
            
            
            7.0007/01/06
                - 09/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            15,000
            
            $
            63.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            15,000
            
            
            75.65Written
                put
            
            
            Undesignated
            
            
            
            
            
            15,000
            
            
            48.00




The
      following table reflects commodity derivative contracts entered subsequent
      to
      March 31, 2006, the associated volumes and the corresponding weighted average
      NYMEX reference price.





**Notional
                Amount****Settlement
                Period**
            
            **Derivative****Instrument**
            
            **Hedge
                Strategy**
            
            **Gas****(MMBTU)**
            
            **Oil****(Barrels)**
            
            **Nymex
                Reference****Price*****Costless
                Collars***04/01/07
                - 09/30/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            12,000
            
            $
            56.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            12,000
            
            
            92.5004/01/07
                - 10/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            280,000
            
            
            
            
            $
            7.00Written
                call
            
            
            Cash
                flow
            
            
            280,000
            
            
            
            
            
            15.4504/01/07
                - 10/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            280,000
            
            
            
            
            $
            7.25Written
                call
            
            
            Cash
                flow
            
            
            280,000
            
            
            
            
            
            15.2510/01/07
                - 03/31/08
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            18,000
            
            $
            56.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            18,000
            
            
            89.95





***Interest
      rate swap***





Periodically,
      Brigham may use interest rate swap contracts to adjust the proportion of its
      total debt that is subject to variable interest rates to fixed rates. Under
      such
      an interest rate swap contract, Brigham agrees to pay an amount equal to a
      specified fixed-rate of interest for a certain notional amount and receive
      in
      return an amount equal to a variable-rate. The notional amounts of the contract
      are not exchanged. No other cash payments are made unless the contract is
      terminated prior to maturity. Although no collateral is held or exchanged for
      the contract, the interest rate swap contract is entered into with a major
      financial institution with an investment grade credit rating in order to
      minimize Brigham’s counterparty credit risk. The interest rate swap contract is
      designated as a cash flow hedge against changes in the amount of future cash
      flows associated with Brigham’s interest payments on variable-rate debt. The
      effect of this accounting on operating results is that interest expense on
      a
      portion of variable-rate debt being hedged is recorded based on fixed interest
      rates.





At
      March
      31, 2006, Brigham had an interest rate swap contract to pay a fixed-rate of
      interest of 7.6% on $20.0 million notional amount of senior subordinated notes.
      The $20.0 million notional amount of the outstanding contract matures in March
      2009. As of March 31, 2006 and 2005, approximately $847,000 and $481,000,
      respectively, of unrealized gains are included in accumulated other
      comprehensive income (loss) on the balance sheet which represents the fair
      value
      of the interest rate swap agreement as of that date. The fair value of the
      interest rate swap contract is based on quoted market prices and third-party
      provided calculations, which reflect the present values of the difference
      between estimated future variable-rate receipts and future fixed-rate payments.
      See Note 9 for a discussion of subsequent events.


8
 *Table
          of Contents*


**BRIGHAM
        EXPLORATION COMPANY**
 
 **NOTES
        TO THE** **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **(Unaudited)**


The
      fair
      value of derivative contracts designated as cash flow hedges is reflected on
      the
      balance sheet as detailed in the following schedule (in thousands). The current
      asset and liability amounts represent the fair values expected to be included
      in
      the results of operations for the subsequent year.





**March
                31, 2006**
            
            **December
                31, 2005**Other
                current liabilities
            
            $
            (200
            )
            $
            (2,112
            )Other
                noncurrent liabilities
            
            
            (61
            )
            
            (61
            )Other
                current assets
            
            
            2,577
            
            
            224Other
                noncurrent assets
            
            
            850
            
            
            654Net
                fair value of derivative contracts designated as cash-flow
                hedges
            
            $
            3,166
            
            $
            (1,295
            )





**6.**
            **Asset
                Retirement Obligations**





Brigham
      has asset retirement obligations associated with the future plugging and
      abandonment of proved properties and related facilities. The fair value of
      a
      liability for an asset retirement obligation is recorded in the period in which
      it is incurred and a corresponding increase in the carrying amount of the
      related long-lived asset. The liability is accreted to its present value each
      period, and the capitalized cost is depreciated over the useful life of the
      related asset. If the liability is settled for an amount other than the recorded
      amount, a gain or loss is recognized.





Brigham
      has no assets that are legally restricted for purposes of settling asset
      retirement obligations. The following table summarizes Brigham's asset
      retirement obligation transactions recorded in accordance with the provisions
      of
      SFAS 143 during the three months ended March 31, 2006 and 2005 (in
      thousands):





**Three
                Months Ended**
              **March
                31,****2006**
            
            **2005**Beginning
                asset retirement obligations
            
            $
            4,389
            
            $
            2,896Liabilities
                incurred for new wells placed on production
            
            
            105
            
            
            26Liabilities
                settled
            
            
            (44
            )
            
            —Accretion
                of discount on asset retirement obligations
            
            
            70
            
            
            39$
            4,520
            
            $
            2,961





**7.**
            **Stock
                Based Compensation**




Effective
      January 1, 2006, Brigham adopted the provisions of SFAS 123R for its stock
      based
      compensation plans. Brigham previously accounted for these plans under the
      recognition and measurement principles of Accounting Principles Board (APB)
      Opinion No. 25, “Accounting for Stock Issued to Employees,” (APB 25) and related
      interpretations and disclosure requirements established by SFAS 123, “Accounting
      for Stock-Based Compensation.”





Under
      APB
      25, Brigham recognized stock based compensation using the intrinsic value method
      and thus, generally no compensation expense was recognized for stock options
      as
      they were generally granted at the market value on the date of grant. The pro
      forma effects on net income due to stock based compensation were disclosed
      in
      the notes to the consolidated financial statements. SFAS 123R eliminates the
      use
      of APB 25 and the intrinsic value method of accounting, and requires companies
      to recognize the cost of employee services received in exchange for awards
      of
      equity instruments, based on the grant date fair value of those awards, in
      the
      financial statements over the requisite service period.


9
 *Table
          of Contents*


**BRIGHAM
        EXPLORATION COMPANY**
 
 **NOTES
        TO THE** **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **(Unaudited)**




Brigham
      adopted SFAS 123R using the modified prospective method. Under this transition
      method, compensation cost recognized in the first quarter 2006 includes the
      cost
      for all stock based compensation granted prior to, but not yet vested, as of
      January 1, 2006. This cost was based on the grant date fair value estimated
      in
      accordance with the original provisions of SFAS 123. The cost for all stock
      based awards granted subsequent to January 1, 2006, was based on the grant
      date
      fair value that was estimated in accordance with the provisions of SFAS 123R.
      The maximum contractual life of stock based awards is seven years and the
      historical forfeiture rate used to estimate forfeitures prospectively is 14.5%.
      At adoption of SFAS 123R, Brigham elected to amortize newly issued and existing
      graded awards on a straight-line basis over the requisite service period
      including estimates of pre-vesting forfeiture rates. If actual forfeitures
      differ from the estimates, additional adjustments to compensation expense may
      be
      required in future periods. Unearned stock compensation recorded under APB
      25 of
      $2.3 million was eliminated and additional paid-in capital was reduced by a
      like
      amount on the consolidated balance sheet and consolidated statements of
      stockholders’ equity, in accordance with SFAS 123R. Results for prior periods
      have not been restated.





The
      estimated fair value of the options granted during 2006 and prior periods was
      calculated using a Black-Scholes Merton option pricing model (Black-Scholes).
      There were no options issued in the first quarter of 2005. The following table
      summarizes the assumptions used in the 2006 Black-Scholes model:





Risk-free
                interest rate
            
            
            4.6
            %Expected
                life (in years)
            
            
            5.0Expected
                volatility
            
            
            74
                - 87
            %Expected
                dividend yield
            
            
            —Weighted
                average fair value per share of stock compensation
            
            $
            6.54





The
      Black-Scholes model incorporates assumptions to value stock based awards. The
      risk-free rate of interest for periods within the contractual life of the option
      is based on a zero-coupon U.S. government instrument over the contractual term
      of the equity instrument. Expected volatility is based on the historical
      volatility of Brigham’s stock for an equal period of the expected term. The
      expected life is determined using the contractual life and vesting term in
      accordance with the guidance in Staff Accounting Bulletin No. 107 for using
      the
“simplified” method for “plain vanilla” options.





In
      November 2005, the Financial Accounting Standards Board (FASB) issued FASB
      Staff
      Position No. FAS 123R-3, “Transition Election Related to Accounting for the Tax
      Effects of Share-Based Payment Awards.” Brigham elected to adopt the alternative
      transition method provided in the FASB Staff Position for calculating the tax
      effects of stock based compensation pursuant to SFAS 123R. The alternative
      transition method includes simplified methods to establish the beginning balance
      of the additional paid-in capital pool (APIC pool) related to the tax effects
      of
      employee stock based compensation, and to determine the subsequent impact on
      the
      APIC pool and Consolidated Statements of Cash Flows of the tax effects of
      employee stock based compensation awards that are outstanding upon adoption
      of
      SFAS 123R.





Prior
      to
      the adoption of SFAS 123R, Brigham presented all tax benefits of deductions
      resulting from the exercise of stock options as operating cash flows in the
      Consolidated Statement of Cash Flows. SFAS 123R requires the cash flow resulting
      from the tax deductions in excess of the compensation cost recognized for those
      options (excess tax benefits) to be classified as financing cash flows. Brigham
      did not have any excess tax benefits during the first quarter 2006.




Had
      compensation cost for Brigham's stock options been determined based on the
      fair
      market value at the grant dates of the awards consistent with the methodology
      prescribed by SFAS 123 as amended by SFAS 148, Brigham's net income
      (loss) and net income (loss) per share for the three month period ended
      March 31, 2005 would have been the pro forma amounts indicated below (in
      thousands, except per share amounts):


10
 *Table
          of Contents*


**BRIGHAM
        EXPLORATION COMPANY**
 
 **NOTES
        TO THE** **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **(Unaudited)**


**Three
                Months Ended**
              **March
                31,2005**Net
                income, as reported
            
            $
            3,048Add
                back: Stock compensation expense previously included in net
                income
            
            
            111Effect
                of total employee stock-based compensation expense, determined under
                fair
                value method for all awards
            
            
            (361
            )Pro
                forma
            
            $
            2,798Net
                income per share:Basic,
                as reported
            
            $
            0.07Basic,
                pro forma
            
            
            0.07Diluted,
                as reported
            
            $
            0.07Diluted,
                pro forma
            
            
            0.06





Prior
      to
      January 1, 2006, Brigham’s stock compensation expense largely consisted of the
      amortization of unearned stock compensation due to unvested (restricted) stock,
      in accordance with APB 25. The following table summarizes the components of
      stock based compensation included in general and administrative expense (in
      thousands):




**Three
                Months Ended**
              **March
                31,****2006**
            
            **2005**Pre-tax
                stock based compensation expense
            
            $
            613
            
            $
            168Capitalized
                stock based compensation
            
            
            (305
            )
            
            (81
            )Tax
                benefit
            
            
            (108
            )
            
            (30
            )Stock
                based compensation expense, net
            
            $
            200
            
            $
            57





The
      adoption of SFAS 123R did not impact basic and diluted net income per share
      for
      the three months ended March 31, 2006.





***Stock
      Based Plan Descriptions and Share Information***





Brigham
      provides an incentive plan for the issuance of stock options, stock appreciation
      rights, stock, restricted stock, cash or any combination of the foregoing.
      The
      objective of this plan is to provide incentive and reward key employees whose
      performance may have a significant impact on the success of Brigham. It is
      Brigham’s policy to use unissued shares of stock when stock options are
      exercised. As amended by stockholder resolution, the number of shares available
      under the plan is equal to the lesser of 5,915,414 or 15% of the total number
      of
      shares of common stock outstanding. At March 31, 2006, approximately 900,000
      shares remain available for grant under the current incentive plan. The
      Compensation Committee of the Board of Directors determines the type of awards
      made to each participant and the terms, conditions and limitations applicable
      to
      each award. Except for one stock option grant, options granted subsequent to
      March 4, 1997 have an exercise price equal to the fair market value of Brigham’s
      common stock on the date of grant, vest over five years and have a contractual
      life of seven years.





Brigham
      also maintains a director stock option plan under which stock options are
      awarded to non-employee directors. Options granted under this plan have an
      exercise price equal to the fair market value of Brigham common stock on the
      date of grant and vest over five years. Stockholders have authorized the
      issuance of 430,000 shares to non-employee directors and approximately 62,000
      remain available for grant under the director stock option
      plan.


11
 *Table
          of Contents*


**BRIGHAM
        EXPLORATION COMPANY**
 
 **NOTES
        TO THE** **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **(Unaudited)**


The
      following table summarizes option activity under the incentive plans for the
      three months ended March 31, 2006:





******Shares**
            
            **Weighted-
                Average Exercise****Price**
            
            **Weighted-
                Average Remaining Contractual****Term**
            
            **Aggregate
                Intrinsic Value****(in thousands)**Options
                outstanding at the beginning of the year
            
            
            2,946,333
            
            $
            6.96Granted
            
            
            20,000
            
            $
            9.73Forfeited
                or cancelled
            
            
            (111,067
            )
            $
            2.46Exercised
            
            
            (24,200
            )
            $
            6.30Options
                outstanding at March 31, 2006
            
            
            2,831,066
            
            $
            7.16
            
            
            4.6
                years
            
            $
            5,761Options
                exercisable at March 31, 2006
            
            
            970,933
            
            $
            5.64
            
            
            3.8
                years
            
            $
            3,041





The
      aggregate intrinsic value in the above table represents the total pre-tax value
      (the difference between Brigham’s closing stock price on the last trading day of
      the first quarter of 2006 and the exercise price, multiplied by the number
      of
      in-the-money options) that would have been received by the option holders had
      all option holders exercised their options on March 31, 2006. The amount of
      aggregate intrinsic value will change based on the fair market value of
      Brigham’s stock.





As
      of
      March 31, 2006 there was approximately $5.6 million of total unrecognized
      compensation expense related to unvested stock based compensation plans. This
      compensation expense is expected to be recognized, net of forfeitures, on a
      straight-line basis over the remaining vesting period, in approximately 4.6
      years.





The
      total
      intrinsic value of options exercised during the three months ended March 31,
      2006 and 2005, was $158,000 and $421,000, respectively.





***Restricted
      Stock***





During
      the three months ended March 31, 2006, Brigham issued 129,095 restricted
      (unvested) shares of common stock as compensation to officers and employees
      of
      Brigham. Restricted shares vest over five years or cliff-vest at the end of
      five
      years. For the three months ended March 31, 2006, Brigham recognized
      approximately $1.4 million of unearned stock compensation and will amortize
      this
      amount to compensation expense over the vesting period of the restricted stock.
      Brigham has assumed a zero percent forfeiture rate for restricted
      stock.





The
      following table reflects the outstanding restricted stock awards and activity
      related thereto for the three months ended March 31:





**Number
                of****Shares**
            
            **Weighted-
                Average****Price**Restricted
                Stock Awards:Restricted
                shares outstanding at the beginning of the year
            
            
            397,650
            
            $
            7.22Shares
                granted
            
            
            129,095
            
            $
            10.85Lapse
                of restrictions
            
            
            (65,000
            )
            $
            5.23Forfeitures
            
            
            (1,000
            )
            $
            12.31Restricted
                shares outstanding at March 31,2006
            
            
            460,745
            
            $
            8.64




12
 *Table
          of Contents*


**BRIGHAM
      EXPLORATION COMPANY**





**NOTES
      TO THE** **CONSOLIDATED
      FINANCIAL STATEMENTS**


**(Unaudited)**





**8.**
            **Comprehensive
                Income**





For
      the
      periods indicated, comprehensive income (loss) consisted of the following (in
      thousands):




**Three
                Months Ended**
              **March
                31,****2006**
            
            **2005**Net
                income
            
            $
            5,875
            
            $
            3,048Unrealized
                gains (losses) on cash flow hedges
            
            
            4,461
            
            
            (609
            )Tax
                benefits (provisions) related to cash flow hedges
            
            
            (1,269
            )
            
            (3
            )Reclassification
                adjustments for settled hedging positions
            
            
            (835
            )
            
            616Stock
                based compensation expense, net
            
            $
            8,232
            
            $
            3,052





**9.**
            **Subsequent
                Events**





During
      April 2006, Brigham sold $125 million of 9 5/8 %
      Senior
      Notes due 2014 in a private placement. The Notes were priced at 98.629% of
      their
      face value to yield 9 7/8 %.
      The
      Notes are fully and unconditionally guaranteed by certain of Brigham’s
      subsidiaries. Brigham used the net proceeds from the Notes offering to repay
      all
      amounts currently outstanding under its senior and subordinated credit
      agreements which totaled $78.4 million at the time the offering closed. The
      remaining funds will be used to fund exploration and development activities
      and
      for general corporate purposes. Subsequent to this repayment, Brigham terminated
      the subordinated credit agreement and the associated interest rate swap
      designated as a cash flow hedge.


13
 *Table
          of Contents*


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





The
      following updates information as to our financial condition provided in our
      2005
      Annual Report on Form 10-K, and analyzes the changes in the results of
      operations between the three month period ended March 31, 2006, and the
      comparable period of 2005. For definitions of commonly used gas and oil terms
      as
      used in this Form 10-Q, please refer to the "Glossary of Oil and Gas Terms"
      provided in our 2005 Annual Report on Form 10-K.




**Overview
      of First Quarter 2006**





The
      price
      of natural gas during the first three months of 2006 remained relatively high
      compared to historical prices due to forecasts for continued U.S. production
      declines, seasonal weather, increasing natural gas demand and similarly high
      crude oil prices, which limit fuel-switching flexibility. The average sales
      price, excluding hedging results, that we received for our natural gas in the
      first three months of 2006 was $7.33 per Mcf. This represents an increase of
      26%
      over the price we received in first quarter of 2005. Likewise, the average
      sales
      price that we received for oil in the first three months of 2006 was $61.46
      and
      27% higher than the price we received in the first quarter last
      year.




For
      the
      quarter ended March 31, 2006, we spent $40.1 million in net capital expenditures
      on oil and natural gas activities. Our production for the first quarter 2006
      was
      35.9 MMcfe/d compared to 30 MMcfe/d in the first quarter last year. This
      increase was primarily due to production from our new wells that came on line
      during the last three quarters of 2005 and the first quarter of 2006. This
      increase was partially offset by the natural decline in our production from
      wells that began producing prior to the second quarter of 2005.





Net
      income for the first quarter 2006 was $5.9 million, or $0.13 per diluted share,
      on total revenues of $25.8 million. This compares to reported net income of
      $3
      million, or $0.07 per diluted share on revenue of $16.7 million in the first
      quarter last year. An increase in our production combined with an increase
      in
      the average realized price we received for our production were the primary
      reasons for the increase in our net income for the first quarter of 2006. These
      increases were partially offset by increases in our production costs, general
      and administrative expenses, depletion expense, net interest expense and
      deferred income tax expense.





For
      the
      first quarter 2006, net cash provided by operating activities funded
      approximately 78% of our cash used by investing activities and we borrowed
      an
      additional $11.2 million of debt, net of repayments, under our senior credit
      agreement. This compares to net cash provided by operating activities funding
      30% of our cash used by investing activities and borrowing an additional $17.1
      million of debt, net of repayments, under our senior credit agreement in first
      quarter last year.





At
      March
      31, 2006, we had $7.8 million in cash, total assets of $410 million and a debt
      to book capitalization ratio of 25%.




**Subsequent
      Events**





In
      April
      2006, we issued and sold $125 million of 9 5/8 %
      Senior
      Notes due 2014. We used the net proceeds from this offering to repay $48.4
      million in borrowings that were outstanding under our senior credit agreement
      and to repay $30 million in borrowings that were outstanding under our
      subordinated credit agreement. Subsequent to this repayment, we terminated
      our
      subordinated credit agreement and the associated interest rate swap designated
      as a cash flow hedge. The remaining net proceeds will be used to fund our
      exploration and development activities and for general corporate purposes.


14
 *Table
          of Contents*


**Capital
      Commitments**





***Capital
      Expenditures***





The
      timing of most of our capital expenditures is discretionary because we have
      no
      material long-term capital expenditure commitments. Consequently, we have a
      significant degree of flexibility to adjust the level of our capital
      expenditures as circumstances warrant. Our capital expenditure program includes
      the following:





·
            cost
                of acquiring and maintaining our lease acreage position and our seismic
                resources;


·
            cost
                of drilling and completing new oil and natural gas
                wells;


·
            cost
                of installing new production
                infrastructure;


·
            cost
                of maintaining, repairing and enhancing existing oil and natural
                gas
                wells;


·
            cost
                related to plugging and abandoning unproductive or uneconomic wells;
                and


·
            indirect
                costs related to our exploration activities, including payroll and
                other
                expenses attributable our exploration professional
                staff.





The
      table
      below summarizes our budgeted capital expenditures, the amount spent through
      March 31, 2006 and the amount of our 2006 budget that remains to be
      spent .





**2006
                Budget**
            
            **Amount
                Spent Through 03/31/2006**
            
            **Amount
                Remaining (1)****(In
                thousands)**Drilling
            
            $
            120,467
            
            $
            30,807
            
            $
            89,660Net
                land and seismic
            
            
            28,597
            
            
            7,172
            
            
            21,425Capitalized
                costs (2)
            
            
            7,259
            
            
            2,162
            
            
            5,097Other
                assets
            
            
            559
            
            
            142
            
            
            417Total
            
            $
            156,882
            
            $
            40,283
            
            $
            116,599


____________





(1)
            Calculated
                as the amount budgeted for 2006 less amount spent through March 31,
                2006.





(2)
            Capitalized
                costs include capitalized interest expense, general and administrative
                expense, stock compensation expense, and asset retirement
                obligations.





The
      capital that funds our drilling activities is allocated to individual prospects
      based on the value potential of a prospect, as measured by a risked net present
      value analysis. We start each year with a budget and reevaluate this budget
      monthly. The primary factors that impact this value creation measure include
      forecasted commodity prices, drilling and completion costs, and a prospect’s
      risked reserve size and risked initial producing rate. Other factors that are
      also monitored throughout the year that influence the amount and timing of
      all
      our budgeted expenditures include the level of production from our existing
      oil
      and natural gas properties, the availability of drilling and completion
      services, and the success and resulting production of our newly drilled wells.
      The outcome of our monthly analysis results in a reprioritization of our
      exploration and development well drilling schedule to ensure that we are
      optimizing our capital expenditure plan.





For
      2006,
      we currently plan to spend approximately $47 million, or 30% of our total
      planned capital expenditures to drill 21 exploratory wells with an average
      working interest of 61% and to drill and complete exploration wells that were
      in
      progress at December 31, 2005. We believe that we possess a multi-year inventory
      of exploratory drilling prospects, the majority of which have been internally
      generated by our staff. As a consequence and considering the results that we
      have achieved in recent years, we expect that we will continue to emphasize
      our
      prospect generation and drilling strategy as our primary means of creating
      value
      for our stockholders.





Due
      to
      our exploratory drilling success, over the last five years, a growing percentage
      of our capital expenditures have been allocated to the development of past
      field
      discoveries. For 2006, we currently plan to spend approximately $73.4 million,
      or 47% of our total planned capital expenditures on development drilling
      activities, which will include the drilling of 22 development wells with an
      average working interest of 56% and completing development wells that were
      in
      progress at December 31, 2005. We currently plan to allocate approximately
      $56.4
      million of this capital to develop our reserves that were proved undeveloped
      at
      December 31, 2005.


15
 *Table
          of Contents*


To
      support our prospect generation activities, we allocate a portion of our capital
      expenditures to land and seismic. For 2006, we expect to spend approximately
      $28.6 million or 18% of our planned capital expenditures on land and seismic
      activities.





Additionally,
      we currently plan to capitalize approximately $7.3 million of our forecasted
      general and administrative cost and interest expense in 2006.





The
      final
      determination with respect to our 2006 budgeted expenditures will depend on
      a
      number of factors, including:





·
            commodity
                prices;


·
            production
                from our existing producing wells;


·
            the
                results of our current exploration and development drilling
                efforts;


·
            economic
                and industry conditions at the time of drilling, including the
                availability of drilling equipment;
                and


·
            the
                availability of more economically attractive prospects.





There
      can
      be no assurance that the budgeted wells will, if drilled, encounter commercial
      quantities of oil or natural gas.





**9** **5/8** ***%
      Senior Notes due 2014***





In
      April
      2006, we issued and sold $125 million of 9 5/8 %
      Senior
      Notes due 2014 (the “Notes”). The Notes were priced at 98.629% of their face
      value to yield 9 7/8 %,
      and
      are fully and unconditionally guaranteed by us and our wholly-owned
      subsidiaries, Brigham Inc. and Brigham Oil & Gas, L.P.(the “Guarantors”). We
      entered into an Indenture (the “Indenture”), among us, the Guarantors and Wells
      Fargo Bank, N.A., as trustee (the “Trustee”) relating to the Notes.





The
      Notes
      were issued pursuant to the Indenture in a transaction exempt from the
      registration requirements of the Securities Act of 1933 (the “Securities
      Act”). The Notes were sold within the United States only to qualified
      institutional buyers in reliance on Rule 144A under the Securities Act, and
      outside the United States only to non-U.S. persons in reliance on Regulation
      S
      under the Securities Act. The initial purchasers purchased the Notes at a
      discount equal to 1.625% of the principal amount of the Notes.





We
      are
      obligated to pay the $125 million aggregate principal amount of the Notes in
      cash upon maturity in May 2014. Starting in November 2006, we will pay 9 5/8 %
      interest per annum on the principal amount of the Notes, payable semi-annually
      in arrears in May and November of each year.




After
      the
      Notes offering closed, we used $78.4 million of the net proceeds from the
      sale to repay all borrowings outstanding under our senior and subordinated
      credit agreements. Subsequent to this repayment, we terminated our subordinated
      credit agreement and the associated interest rate swap designated as a cash
      flow
      hedge.





The
      Notes
      are our unsecured senior obligations, and will:





·
            rank
                equally in right of payment with all our existing and future senior
                indebtedness;


·
            rank
                senior to all of our future subordinated indebtedness;
                and,


·
            be
                effectively junior in right of payment to all of our and the Gurantors’
                existing and future secured indebtedness, including debt of our senior
                credit agreement.





Except
      as
      set forth below, we will not be entitled to redeem the Notes prior to May 1,
      2010. Starting in May 2010, we will be entitled to redeem all or a portion
      of
      the Notes at the redemption prices, plus accrued interest to the redemption
      date, if redeemed during the 12-month period commencing in May of the years
      set
      forth below:


16
 *Table
          of Contents*




**Period**
              
              **Redemption
                  Price**2010
              
              
              104.813
              %20112011
              
              
              102.406
              %2012
                  and thereafter
              
              
              100.000
              %





At
      any
      time prior to May 2009, we may use the net proceeds from one or more equity
      offerings to redeem up to an aggregate of 35% of the aggregate principal amount
      of the Notes issued under the Indenture (including the principal amount of
      any
      additional Notes issued under the Indenture) at a redemption price of 109.625%
      of the principal amount of the Notes plus any accrued and unpaid interest,
      if
      any, to the redemption date, subject to certain conditions.





If
      we
      experience a change of control, we will be required to make an offer to
      repurchase the Notes at a price equal to 101% of the principal amount thereof,
      plus accrued and unpaid interest to the date of repurchase.





The
      Indenture contains customary events of default. Upon the occurrence of certain
      events of default, the Trustee or the holders of the Notes may declare all
      outstanding Notes to be due and payable immediately. Additionally, the Indenture
      restricts our ability and the ability of our restricted subsidiaries
      to:





·
            incur
                additional debt;


·
            pay
                dividends on, or redeem or repurchase stock;


·
            create
                liens;


·
            make
                specified types of investments;


·
            apply
                net proceeds from certain asset sales;


·
            engage
                in transactions with our
                affiliates;


·
            engage
                in sale and leaseback transactions;


·
            restrict
                dividends or other payment from
                subsidiaries;


·
            merge
                or consolidate;


·
            sell
                equity interests of subsidiaries;
                and


·
            sell,
                assign, transfer, lease, convey or dispose of
                assets.





These
      covenants are subject to a number of important exceptions and
      qualifications.





***Senior
      Credit Agreement***





As
      of
      March 31, 2006, we had $44.3 million in borrowings outstanding under our senior
      credit agreement. Total borrowings under our senior credit agreement increased
      by $11.2 million during the first quarter of 2006. The total borrowing base
      available to us during the first quarter of this year was $90 million compared
      to $68.5 million during the first quarter last year. During the first quarter
      2006, we utilized approximately 46% of our available borrowing base, compared
      to
      47% in the first quarter last year.





Pursuant
      to our senior credit agreement, we are required to maintain a current ratio
      of
      at least 1 to 1 and an interest coverage ratio for the four most recent quarters
      of at least 3 to 1. Our current ratio at March 31, 2006 and interest coverage
      ratio for the twelve-month period ended March 31, 2006, were 1.9 to 1 and 20.6
      to 1, respectively. As of March 31, 2006, and for the twelve-month period then
      ended, we were in compliance with all covenant requirements in connection with
      our senior credit agreement.





In
      April
      2006, in connection with our sale of our 9 5/8 %
      Senior
      Notes due 2014, we amended our senior credit agreement to reset the borrowing
      base to $50 million. We used the net proceeds from this offering to repay $48.4
      million in borrowings that were outstanding under our senior credit agreement
      at
      the close of the Notes offering. At May 3, 2006, we had no borrowings
      outstanding under our senior credit agreement.




***Senior
      Subordinated Notes***





As
      of
      March 31, 2006, we had $30 million outstanding under our subordinated credit
      agreement. Pursuant to our subordinated credit agreement, we were required
      to
      maintain a current ratio of at least 1 to 1, and an interest coverage ratio
      for
      the four most recent quarters of at least 3 to 1. Our current ratio at March
      31,
      2006 and interest coverage ratio for the twelve-month period ended March 31,
      2006 were 1.9 to 1 and 20.6 to 1, respectively. At March 31, 2006 and for the
      twelve-month period then ended, we were in compliance with all covenant
      requirements in connection with our subordinated credit
      agreement.


17
 *Table
          of Contents*





In
      April
      2006, we used a portion of the net proceeds from our sale of our 9 5/8 %
      Senior
      Notes due 2014 to repay the $30 million in borrowings that were outstanding
      under our subordinated credit agreement. Subsequent to this repayment, we
      terminated our subordinated credit agreement and the associated interest rate
      swap designated as a cash flow hedge.





***Mandatorily
      Redeemable Preferred Stock***





As
      of
      March 31, 2006, we had $10.1 million in mandatorily redeemable Series A
      preferred stock outstanding, which is held by DLJ Merchant Banking Partners
      III,
      L.P. and affiliated funds, which are managed by affiliates of Credit Suisse
      Securities (USA), LLC. Our option to pay the dividends on our Series A preferred
      stock in kind expired in October 2005 and we are now required to satisfy all
      dividend obligations related to our Series A preferred stock in cash at a rate
      of 6% per annum until it matures in October 2010 or until it is redeemed. Our
      Series A preferred stock is redeemable at our option at 100% or 101% of the
      stated value per share (depending upon certain conditions) at anytime prior
      to
      maturity.





***Off
      Balance Sheet Arrangements***





We
      currently have operating leases, which are considered off balance sheet
      arrangements. We do not currently have any other off balance sheet arrangements
      or other such unrecorded obligations, and we have not guaranteed the debt of
      any
      other party.




**Capital
      Resources**





In
      2006,
      we intend to fund our capital expenditure program and contractual commitments
      with cash flows from operations, the net proceeds remaining from the sale
      of our 9 5/8 %
      Senior
      Notes due 2014 after repaying the borrowings outstanding under our senior and
      subordinated credit agreements, borrowings under our senior credit agreement,
      and if required, alternative financing sources. Our primary sources of cash
      during the first quarter of 2006 were funds generated by operations and
      borrowings under our senior credit agreement. We made aggregate cash payments
      of
      $1.2 million for interest in the first quarter of 2006.





***Net
      cash provided by operating activities***





Net
      cash
      provided by operating activities is a function of the amount of oil and natural
      gas that we produce, the prices that we receive from the sale of oil and natural
      gas, which are inherently volatile and unpredictable, gains or losses related
      to
      the settlement of derivative contracts, operating cost and our cost of capital.
      Our asset base, as with other extractive industries, is a depleting one in
      which
      each barrel of oil or Mcf of natural gas produced must be replaced or our
      ability to generate cash flow, and thus sustain our exploration and development
      activities, will diminish. Net cash provided by operating activities during
      the
      first quarter 2006 funded 78% of our net cash used by investing activities
      compared to 30% in the first quarter of 2005.





***Senior
      Credit Agreement***





In
      June
      2005, we amended and restated our $100 million senior credit agreement to
      provide for revolving credit borrowings up to $200 million and to extend the
      maturity of the agreement from March 2009 to June 2010. The amount that we
      can
      borrow under our senior credit agreement is limited by a borrowing base, which
      was reset to $50 million in connection with the Notes offering. Our senior
      credit agreement also permits letters of credit up to the lesser of $10 million
      or the unused committed borrowing base. Issuances of letters of credit reduce
      the amount of borrowings available to us under our senior credit agreement.
      As
      of March 31, 2006, we had $45.7 million of unused committed borrowing capacity
      available to us under our senior credit agreement.





In
      April
      2006, $48.4 million of the net proceeds from the Notes offering was used to
      repay all outstanding borrowings under our senior credit agreement. As of May
      3,
      2006, we had $50 million of unused committed borrowing capacity available to
      us
      under our senior credit agreement.


18
 *Table
          of Contents*





Since
      the
      borrowing base for our senior credit agreement is redetermined at least
      semi-annually, the amount of borrowing capacity available to us under our senior
      credit agreement could fluctuate. While we do not expect the amount that we
      have
      borrowed under our senior credit agreement to exceed the borrowing base, in
      the
      event that the borrowing base is adjusted below the amount that we have
      borrowed, our access to further borrowings will be reduced, and we may not
      have
      the resources necessary to carry out our planned spending for exploration and
      development activities.





Our
      senior credit agreement also contains customary restrictions and covenants.
      Should we be unable to comply with these or other covenants, our senior lenders
      may be unwilling to waive compliance or amend the covenants and our liquidity
      may be adversely affected.





The
      future amounts of debt that we borrow under our senior credit agreement will
      depend primarily on net cash provided by operating activities, proceeds from
      other financing activities, reimbursements of prior land and seismic costs
      by
      third party participants in our projects and proceeds generated from asset
      dispositions.





We
      strive
      to manage the amounts we borrow under our senior credit agreement in order
      to
      maintain excess borrowing capacity.





***Senior
      Subordinated Notes***





As
      of
      March 31, 2006, we had $10 million of borrowing capacity available to us under
      our subordinated credit agreement. In
      April
      2006, we used $30 million of the net proceeds from the Notes offering to
      repay all outstanding borrowings under our subordinated credit agreement, which
      was terminated thereafter.





***Access
      to Capital Markets***





We
      currently have an effective universal shelf registration statement covering
      the
      sale, from time to time, of our common stock, preferred stock, depositary
      shares, warrants and debt securities, or a combination of any of these
      securities. In July 2004, we sold 2,598,500 shares of our common stock and
      in
      November and December 2005, we sold 8,625,000 total shares of our common stock
      under this registration statement. With the completion of the November 2005
      equity offering, the existing shelf registration statement had $73.4 million
      available. However, our ability to raise additional capital using our shelf
      registration statement may be limited due to overall conditions of the stock
      market or the oil and natural gas industry.





In
      February 2006, we filed a new universal shelf registration statement allowing
      us
      to issue common stock, preferred stock, depositary shares, warrants, senior
      debt
      and subordinated debt up to an aggregate amount of $300 million. Our new
      universal shelf registration statement has yet to be declared effective by
      the
      SEC.




**Results
      of Operations**





*Comparison
      of the three-month periods ended March 31, 2006 and 2005.*





*Production
      volumes*





**Three
                Months Ended March 31,****2006**
            
            **%
                Change**
            
            **2005**Oil
                (MBbls)
            
            
            115
            
            
            (3%)
            
            
            118Natural
                gas (MMcf)
            
            
            2,545
            
            
            28%
            
            
            1,994Total
                (MMcfe)(1)
            
            
            3,235
            
            
            20%
            
            
            2,700Average
                daily production (MMcfe/d)
            
            
            35.9
            
            
            
            
            
            30.0


____________




(1)
              Mcfe
                  is defined one million cubic feet equivalent of natural gas, determined
                  using the ratio of six Mcf of natural gas to one Bbl of crude oil,
                  condensate or natural gas liquids.


19
 *Table
          of Contents*




Our
      net
      equivalent production volumes for the first quarter of 2006 were 3.2 Bcfe (35.9
      MMcfe/d) compared to 2.7 Bcfe (30 MMcfe/d) in the first quarter of 2005. This
      increase was primarily due to production from our new wells that came on line
      during the last three quarters of 2005 and the first quarter of 2006. This
      increase was partially offset by the natural decline in our production from
      wells that began producing prior to the second quarter of 2005.





Natural
      gas represented 79% of our first quarter 2006 production volumes compared to
      74%
      in the first quarter of last year.





*Hedging,
      commodity prices and revenues*





The
      following table shows our derivative contracts designated as cash flow hedges,
      the type of derivative contracts, the volumes, the weighted average NYMEX
      reference price for those volumes, and the associated gain/ (loss) upon
      settlement of those contracts.





**Three
                Months Ended March 31,****2006**
            
            **%
                Change**
            
            **2005*****Oil
                swaps***Volumes
                (Bbls)
            
            
            —
            
            
            0%
            
            
            —Average
                swap price ($ per Bbl)
            
            $
            —
            
            
            0%
            
            $
            —Gain
                /(loss) upon settlement ($ in thousands)
            
            $
            —
            
            
            0%
            
            $
            —***Oil
                collars***Volumes
                (Bbls)
            
            
            25,500
            
            
            (7%)
            
            
            27,450Average
                floor price ($ per Bbl)
            
            $
            52.12
            
            
            104%
            
            $
            25.56Average
                ceiling price ($ per Bbl)
            
            $
            64.76
            
            
            115%
            
            $
            30.18Gain
                /(loss) upon settlement ($ in thousands)
            
            $
            (50
            )
            
            (91%)
            
            $
            (541
            )***Total
                oil***Volumes
                (Bbls)
            
            
            25,500
            
            
            (7%)
            
            
            27,450Gain
                /(loss) upon settlement ($ in thousands)
            
            $
            (50
            )
            
            (91%)
            
            $
            (541
            )***Natural
                gas swaps***Volumes
                (MMbtu)
            
            
            —
            
            
            0%
            
            
            —Average
                swap price ($ per MMbtu)
            
            $
            —
            
            
            0%
            
            $
            —Gain
                /(loss) upon settlement ($ in thousands)
            
            $
            —
            
            
            0%
            
            $
            —***Natural
                gas collars***Volumes
                (MMbtu)
            
            
            600,000
            
            
            (18%)
            
            
            727,500Average
                floor price ($ per MMbtu)
            
            $
            8.49
            
            
            65%
            
            $
            5.16Average
                ceiling price ($ per MMbtu)
            
            $
            10.84
            
            
            49%
            
            $
            7.26Gain
                /(loss) upon settlement ($ in thousands)
            
            $
            131
            
            
            NM
            
            $
            (10
            )***Total
                natural gas***Volumes
                (MMbtu)
            
            
            600,000
            
            
            (18%)
            
            
            727,500Gain
                /(loss) upon settlement ($ in thousands)
            
            $
            131
            
            
            NM
            
            $
            (10
            )




Reported
      revenues from the sale of oil and natural gas are based on the market price
      we
      received adjusted for marketing charges and the results from the settlement
      of
      our derivative contracts that qualify for cash flow hedge accounting treatment
      under SFAS 133. We utilize swap, collar, three way costless collar and floor
      contracts to (i) reduce the effect of price volatility on the commodities that
      we produce and sell, (ii) reduce commodity price risk and (iii) provide a base
      level of cash flow in order to assure we can execute at least a portion of
      our
      capital spending plans.





The
      effective portions of changes in the fair values of our derivative contracts
      that qualify for cash flow hedge accounting treatment under SFAS 133 are
      reported as increases or decreases to stockholders’ equity until the underlying
      contract is settled. Consequentially, changes in the effective portions of
      these
      contracts add volatility to our reported stockholders’ equity until the contract
      is settled or is terminated





Gains
      or
      losses related to the settlement and the changes in the fair values of our
      derivative contracts that do not qualify for cash flow hedge accounting
      treatment under SFAS 133 are reported in other income (expense).


20
 *Table
          of Contents*





*Commodity
      prices and revenues*





The
      following table shows our revenue from the sale of oil and natural gas for
      the
      periods indicated.





**Three
                months ended March 31,****2006**
            
            **%
                Change**
            
            **2005****(In
                thousands, except per unit measurements)****Revenue
                from the sale of oil and natural gas:**Oil
                sales
            
            $
            7,068
            
            
            24%
            
            $
            5,689Gain
                (loss) due to hedging
            
            
            (50
            )
            
            (91%)
            
            
            (541
            )Total
                revenue from the sale of oil
            
            $
            7,018
            
            
            36%
            
            $
            5,148Natural
                gas sales
            
            $
            18,647
            
            
            61%
            
            $
            11,565Gain
                (loss) due to hedging
            
            
            131
            
            
            NM
            
            
            (10
            )Total
                revenue from the sale of natural gas
            
            $
            18,778
            
            
            63%
            
            $
            11,555Oil
                and natural gas sales
            
            $
            25,715
            
            
            49%
            
            $
            17,254Gain
                (loss) due to hedging
            
            
            81
            
            
            NM
            
            
            (551
            )Total
                revenue from the sale of oil and natural gas
            
            $
            25,796
            
            
            54%
            
            $
            16,703**Average
                prices:**Oil
                sales price (per Bbl)
            
            $
            61.46
            
            
            27%
            
            $
            48.33Gain
                (loss) due to hedging (per Bbl)
            
            
            (0.43
            )
            
            (91%)
            
            
            (4.59
            )Realized
                oil price (per Bbl)
            
            $
            61.03
            
            
            40%
            
            $
            43.74Natural
                gas sales price (per Mcf)
            
            $
            7.33
            
            
            26%
            
            $
            5.80Gain
                (loss) due to hedging (per Mcf)
            
            
            0.05
            
            
            NM
            
            
            (0.00
            )Realized
                natural gas price (per Mcf)
            
            $
            7.38
            
            
            27%
            
            $
            5.80Natural
                gas equivalent sales price (per Mcfe)
            
            $
            7.95
            
            
            24%
            
            $
            6.39Gain
                (loss) due to hedging (per Mcfe)
            
            
            0.02
            
            
            NM
            
            
            (0.20
            )Realized
                natural gas equivalent (per Mcfe)
            
            $
            7.97
            
            
            29%
            
            $
            6.19








**2006****to
                2005****Change
                in revenue from the sale of oil**Price
                variance impact
            
            $
            1,510Volume
                variance impact
            
            
            (131
            )Cash
                settlement of hedging contracts
            
            
            491Total
                change
            
            $
            1,870**Change
                in revenue from the sale of natural gas**Price
                variance impact
            
            $
            3,886Volume
                variance impact
            
            
            3,196Cash
                settlement of hedging contracts
            
            
            141Total
                change
            
            $
            7,223





Our
      revenues from the sale of oil and natural gas for the first quarter of 2006
      increased by 54% when compared to revenues in first quarter of 2005. The change
      in revenues was due to the following:





·
            An
                increase in production volumes for the quarter resulted in a $3.1
                million
                increase in oil and natural gas
                sales;





·
            A
                24% increase in the sales price we received for our oil and natural
                gas
                resulted in a $5.4 million increase in revenues from oil and natural
                gas
                sales; and,





·
            An
                $81,000 gain from the cash settlement of derivative contracts in
                the first
                quarter of 2006 versus a $551,000 loss last year led to $632,000
                increase
                in our revenue from the sale of oil and natural gas in the first
                quarter
                2006 when compared to 2005.





*Other
      revenue* .
      Other
      revenue relates to fees that we charge other parties who use our gas gathering
      systems that we own to move their production from the wellhead to third party
      gas pipeline systems. Other revenue for the first quarter of 2006 decreased
      by
      $65,000 when compared to the first quarter last year. The primary reason for
      the
      decrease in other income was due to the reprocessing of claims for our gas
      gathering systems in several wells in the Bayou Bengal project. This
      reprocessing had a negative impact on other income of approximately $59,000.
      Costs related to our gas gathering systems are recorded in lease operating
      expenses.


21
 *Table
          of Contents*





**Operating
      costs and expenses**





*Production
      costs.* Production
      costs include lease operating expenses and production taxes.





**Three
                months ended March 31,****2006**
            
            **%
                Change**
            
            **2005****(In
                thousands, except per unit measurements)****Production
                cost:**Operating
                & maintenance
            
            $
            2,098
            
            
            48%
            
            $
            1,422Expensed
                workovers
            
            
            125
            
            
            (76%)
            
            
            524Ad
                valorem taxes
            
            
            507
            
            
            86%
            
            
            272Total
                lease operating expenses
            
            $
            2,730
            
            
            23%
            
            $
            2,218Production
                taxes
            
            
            1,144
            
            
            43%
            
            
            802Production
                costs
            
            $
            3,874
            
            
            28%
            
            $
            3,020**Production
                cost ($ per Mcfe):**Operating
                & maintenance
            
            $
            0.65
            
            
            23%
            
            $
            0.53Expensed
                workovers
            
            
            0.04
            
            
            (79%)
            
            
            0.19Ad
                valorem taxes
            
            
            0.15
            
            
            50%
            
            
            0.10Total
                lease operating expenses
            
            $
            0.84
            
            
            2%
            
            $
            0.82Production
                taxes
            
            
            0.35
            
            
            17%
            
            
            0.30Production
                costs
            
            $
            1.19
            
            
            6%
            
            $
            1.12




Our
      first
      quarter 2006 production costs increased by 28% when compared to production
      costs
      in the first quarter of 2005. One of the reasons for the overall increase in
      our
      period to period production costs has been due to an increase in our number
      of
      producing wells. In the future we anticipate that our production costs will
      continue to increase as we add new wells and production facilities and continue
      to maintain production from existing maturing properties. Changes in commodity
      prices will also have an affect on ad valorem taxes and production
      taxes.





Our
      operating and maintenance (O&M) expenses for first quarter 2006 were up 48%
      when compared to the same period of 2005. The following were the primary reasons
      for the increase in our first quarter 2006 O&M expenses versus those in the
      first quarter of 2005.





·
            O&M
                expenses include $442,000 of costs associated with new wells that
                began
                producing subsequent to the first quarter 2005.





·
            Actual
                O&M expenses recognized in the first quarter 2006 were $319,000higher
                than were originally estimated for the fourth quarter at year end
                2005 and
                represents 32% of the increase from the first quarter 2006 compared
                to
                first quarter 2005.





Our
      higher O&M expenses for the first quarter 2006 were offset by a 76% decline
      in workover cost during the quarter versus the first quarter of
      2005.





Our
      ad
      valorem tax expense for the first quarter 2006 was up 86% when compared to
      the
      first quarter of 2005 due to an estimated increase in property valuations due
      to
      higher commodity prices.





Our
      production tax expenses for the first quarter 2006 were up 43% when compared
      to
      the first quarter last year. The
      following were the primary reasons for the increase in our first quarter 2006
      production tax expense when compared to the first quarter last
      year.





·
            An
                increase in both production and commodity prices both resulted in
                higher
                production taxes.


22
 *Table
          of Contents*





·
            This
                increase was partially offset by tax credits from 16 high cost gas
                wells
                in the first quarter 2006. Our effective production tax rate for
                the first
                quarter 2006 was 4.4% of our pre-hedge revenue from the sale of oil
                and
                natural gas, compared to 4.6% in 2005.





We
      believe that per unit of production measures are the best way to evaluate our
      production costs. We use this information to evaluate our performance relative
      to our peers and to internally evaluate our performance.





For
      the
      first quarter 2006, our unit production cost increased 6% when compared to
      the
      first quarter of last year. The
      following were the primary reasons for the increase in our first quarter 2006
      production costs over the first quarter last year.





·
            Of
                the total $0.65 of per unit O&M expense for the first quarter 2006,
                approximately $0.14 per Mcfe was associated with new wells that began
                producing subsequent to the first quarter of
                2005.





·
            Ad
                valorem taxes increased due to an increase in estimated property
                valuations for our oil and natural gas properties due to higher commodity
                prices.





·
            Production
                taxes were $0.05 higher per Mcfe due to higher commodity prices and
                the
                resulting higher pre-hedge revenue from the sale of oil and natural
                gas.





*General
      and administrative expenses.* We
      capitalize a portion of our general and administrative costs. The costs
      capitalized represent the cost of technical employees, who work directly on
      capital projects. An engineer designing a well is an example of a technical
      employee working on a capital project. The cost of a technical employee includes
      associated technical organization costs such as supervision, telephone and
      postage.





**Three
                months ended March 31,****2006**
            
            **%
                Change**
            
            **2005****(In
                thousands, except per unit measurements)**General
                and administrative cost
            
            $
            3,167
            
            
            38%
            
            $
            2,303Capitalized
                general and administrative cost
            
            
            (1,525
            )
            
            27%
            
            
            (1,205
            )General
                and administrative expense
            
            $
            1,642
            
            
            50%
            
            $
            1,098General
                and administrative expense ($ per Mcfe)
            
            $
            0.51
            
            
            24%
            
            $
            0.41




For
      the
      first quarter of 2006, our general and administrative expenses increased by
      50%.The following were the primary factors that led to the changes in to our
      first quarter 2006 general and administrative expenses:





·
            Increases
                in employee compensation and benefit costs represented approximately
                69%
                of the increase in our general and administrative cost. Our employee
                compensation and benefit cost included a $364,000 non-cash charge
                associated with our adoption of FAS 123R during the first quarter
                of
                2006.





·
            Increases
                in fees paid for contract and professional services, which include
                our
                audit and tax fees, represent approximately 23% of the increase in
                our
                general and administrative costs.




·
            These
                increases were partially offset by decreases in costs for employee
                training and continuing education, employee rental and maintenance
                and an
                increase in the amount of general and administrative cost that we
                capitalized.





*Depletion
      of oil and natural gas properties.* Our
      depletion expense is driven by many factors including certain costs spent in
      the
      exploration and development of producing reserves, production levels, and
      estimates of proved reserve quantities and future developmental costs at the
      end
      of the year.


23
 *Table
          of Contents*





**Three
                months ended March 31,****2006**
            
            **%
                Change**
            
            **2005****(In
                thousands, except per unit measurements)**Depletion
                of oil and natural gas properties
            
            $
            10,256
            
            
            59%
            
            $
            6,453Depletion
                of oil and natural gas properties per Mcfe
            
            $
            3.17
            
            
            33%
            
            $
            2.39




Our
      depletion expense for the first quarter 2006 was 59% higher than 2005.
      Approximately $2.5 million of the increase in our depletion expense was due
      to
      an increase in our depletion rate while the remaining $1.3 million was due
      to an
      increase in production volumes.





*Net
      interest expense.* The
      interest that we pay on outstanding borrowings under both our senior and
      subordinated credit agreements combined with dividends that we pay on our Series
      A mandatorily redeemable preferred stock represent the largest portion of our
      interest costs. Our interest costs also include the commitment fees that we
      pay
      on the unused portion of the borrowing base for our senior credit agreement
      and
      on the unused portion of our subordinated credit agreement. We typically pay
      loan and debt issuance costs when we enter into new lending agreements or amend
      existing agreements. When incurred, these costs are recorded as non-current
      assets and are then amortized over the life of the loan. We capitalize interest
      costs on borrowings associated with our major capital projects prior to their
      completion. This capitalized interest is added to the cost of the underlying
      assets and is amortized over the lives of the assets.




**Three
                months ended March 31,****2006**
            
            **%
                Change**
            
            **2005****(In
                thousands)**Interest
                on senior credit agreement
            
            $
            601
            
            
            86%
            
            $
            323Interest
                on senior subordinated notes (1)
            
            
            578
            
            
            53%
            
            
            378Commitment
                fees
            
            
            48
            
            
            26%
            
            
            38Dividend
                on mandatorily redeemable preferred stock
            
            
            149
            
            
            (21%)
            
            
            188Amortization
                of deferred loan and debt issuance cost
            
            
            119
            
            
            (6%)
            
            
            126Other
                general interest expense
            
            
            3
            
            
            0%
            
            
            3Capitalized
                interest expense
            
            
            (409
            )
            
            30%
            
            
            (315
            )Net
                interest expense
            
            $
            1,089
            
            
            47%
            
            $
            741Weighted
                average debt outstanding
            
            $
            81,594
            
            
            33%
            
            $
            61,505Average
                interest rate on outstanding indebtedness (2)
            
            
            6.8
            %
            
            
            
            
            6.1
            %


__________


(1)
            Includes
                the effects of interest rate swaps.





(2)
            Calculated
                as the sum of the interest expense on our outstanding indebtedness,
                commitment fees that we pay on our unused borrowing capacity and
                the
                dividend on our mandatorily redeemable preferred stock divided by
                our
                weighted average debt and preferred stock outstanding for the
                period.





Our
      net
      interest expense for the first quarter was 47% higher than the same period
      in
      2005. The following were the primary reasons for the increase in our first
      quarter 2006 net interest expense when compared to the first three months of
      2005.





·
            Interest
                expense and fees related to our senior credit agreement in the first
                quarter 2006 were 64% higher than in the first quarter 2005. During
                the
                first quarter 2006, we paid $278,000 more interest on amounts borrowed
                under our senior credit agreement than we did in the first three
                months of
                2005. The primary reason for this was an increase in the Eurodollar
                rate
                combined with an increase in the weighted average amount we borrowed
                under
                our senior credit agreement during the first quarter 2006. This increase
                was partially offset by a decrease in the commitment fees we paid
                on the
                unused portion of the available borrowing base. Our weighted average
                debt
                outstanding under our senior credit agreement during the first three
                months of 2006 represented approximately 46% of our weighted average
                borrowing base available to us during the period, compared to 47%
                in the
                same period of 2005.





·
            Interest
                expense and fees related to our subordinated credit agreement in
                the first
                quarter 2006 were 48% higher than the first quarter of 2005. During
                the
                first three months of 2006, we paid $200,000 more interest on the
                amounts
                we borrowed under our subordinated credit agreement than we did in
                the
                first three months of 2005. The primary reason for this was an increase
                in
                the weighted average debt outstanding under our subordinated credit
                agreement during the first three months of 2006.


24
 *Table
          of Contents*





·
            Dividends
                that we paid on our mandatorily redeemable preferred stock in the
                first
                quarter 2006 were 21% lower than the first quarter of 2005 due to
                a 2%
                decrease in our dividend rate. Our dividend rate for the first quarter
                of
                2006 was 6% compared to 8% in the last year’s first
                quarter.





*Other
      income (expense* ).
      Other
      income (expense) primarily includes non-cash gains (losses) resulting from
      the
      change in fair market value of oil and natural gas derivative contracts that
      did
      not qualify as cash flow hedges under SFAS 133, cash gains (losses) on the
      settlement of these contracts and non-cash gains (losses) related to charges
      for
      the ineffective portions of cash flow hedges under SFAS 133.





Other
      income (expense) included:





**Three
                months ended March 31,****2006**
            
            **%
                Change**
            
            **2005****(In
                thousands)**Non-cash
                gain (loss) due to change in fair market value of derivative contracts
                not
                designated as cash flow hedges
            
            $
            (120
            )
            
            NM
            
            $
            10Non-cash
                gain (loss) for ineffective portion of cash flow hedges
            
            
            835
            
            
            NM
            
            
            (616
            )Gain
                (loss) on settlement of derivative contracts not designated as cash
                flow
                hedges
            
            
            (108
            )
            
            NM
            
            
            —Gain
                (loss) on disposal of assets
            
            
            (42
            )
            
            250%
            
            
            (12
            )Other
            
            
            114
            
            
            31%
            
            
            87Other
                income (loss)
            
            $
            679
            
            
            NM
            
            $
            (531
            )




The
      following table shows the volumes and the weighted average NYMEX reference
      price
      for those derivative contracts that we did not designate as cash flow hedges
      under SFAS 133 for the periods indicated.





**Three
                months ended March 31,****2006**
            
            **%
                Change**
            
            **2005*****Written
                puts******Oil***Volumes
                (MMbtu)
            
            
            18,000
            
            
            NM
            
            
            —Average
                price ($ per MMbtu)
            
            $
            38.00
            
            
            NM
            
            $
            —Gain
                /(loss) upon settlement ($ in thousands)
            
            $
            —
            
            
            NM
            
            $
            —***Natural
                Gas***Volumes
                (MMbtu)
            
            
            600,000
            
            
            186%
            
            
            210,000Average
                price ($ per MMbtu)
            
            $
            7.05
            
            
            28%
            
            $
            5.50Gain
                /(loss) upon settlement ($ in thousands)
            
            $
            (108
            )
            
            NM
            
            $
            —




*Income
      taxes* .
      A
      deferred tax liability or asset is recognized for the estimated future tax
      effects attributable to (i) NOLs and (ii) existing temporary differences between
      book and taxable income. Realization of net deferred tax assets is dependent
      upon generating sufficient taxable income within the carryforward period
      available under tax law.





In
      the
      first three months of 2006, we recognized a current period net deferred tax
      liability of $4.8 million due to reversals of our existing temporary differences
      between book and taxable income resulting mainly from our capital expenditures.
      The $4.8 million consisted of $3.5 million in deferred income tax expense and
      a
      $1.3 million tax effect of unrealized hedging gains. The primary reason for
      the
      difference between our effective tax rate of 37.4% and the federal statutory
      rate of 35% was due to the effects of nondeductible preferred stock dividends
      and compensation expense associated with unexercised incentive stock
      options.


25
 *Table
          of Contents*


**Analysis
      of Changes In Cash and Cash Equivalents**





The
      table
      below summarizes our sources and uses of cash during the periods
      indicated.





**Three
                months ended March 31,********2006**
            
            **%
                Change**
            
            ******2005****(In
                thousands)**Net
                income
            
            $
            5,875
            
            
            93%
            
            $
            3,048Non-cash
                items
            
            
            13,889
            
            
            50%
            
            
            9,279Changes
                in working capital and other items
            
            
            6,424
            
            
            NM
            
            
            (6,083
            )Cash
                flows provided by operating activities
            
            
            26,188
            
            
            319%
            
            
            6,244Cash
                flows used by investing activities
            
            
            (33,492
            )
            
            62%
            
            
            (20,644
            )Cash
                flows provided by financing activities
            
            
            11,082
            
            
            (34%)
            
            
            16,760Net
                increase in cash and cash equivalents
            
            $
            3,778
            
            
            60%
            
            $
            2,360





***Analysis
      of net cash provided by operating activities***





Cash
      flows provided by operating activities for the first quarter of 2006 were 319%
      higher than net cash provided by operating activities in the same period of
      2005. The following were the primary factors that led to the changes to our
      cash
      flows provided by operating activities during the first three months of 2006.





·
            Our
                total revenues for the first three months of 2006 increased $9.1
                million
                due to an increase in the prices we received for our oil and natural
                gas,
                an increase in our production volumes for the first quarter 2006
                and a
                decrease in losses associated with our derivative contracts.





·
            The
                collection of accounts receivable in excess of the payment of accounts
                payable during the first three months of 2006 increased our cash
                flows
                provided by operating activities by $11.6
                million.





·
            These
                increases were partially offset by higher production costs and higher
                cash
                interest expense that reduced our first quarter 2006 cash provided
                by
                operating activities by $854,000 and $543,000, respectively.




**Working
      Capital**





Working
      capital is the amount by which current assets exceed current liabilities. It
      is
      normal for us to report a working capital deficit at the end of a period. These
      deficits are primarily the result of accounts payable related to lease operating
      expenses, exploration and development costs, and royalties payable. Settlement
      of these payables will be funded by cash flows from operations or, if necessary,
      by additional borrowing under our senior credit agreement.





At
      March
      31, 2006, we had a working capital deficit of $15.1 million compared to a
      working capital deficit of $9.1 million at December 31, 2005. Our working
      capital deficit at March 31, 2006, included a net asset of $2.1 million related
      to the fair value of our derivative contracts compared to a net liability of
      $2
      million at December 31, 2005.





***Analysis
      of changes in cash flows used in investing activities***





Net
      cash
      used by investing activities in the first quarter of 2006 was 62% higher than
      the first quarter of 2005. The following were the primary reasons for the $12.8
      million increase in our net cash used by investing activities for the first
      quarter 2006 when compared to the first quarter of last year.





·
            Our
                additions to oil and natural gas properties for the first three months
                of
                2006 were up 62% when compared to the same period of 2005. The primary
                reasons for this increase were $13.3 million increase in our drilling
                capital expenditures net of changes in accrued drilling costs, a
                $2.4
                million increase in our capital expenditures for land and seismic
                activities and a $414,000 increase in the amount of interest and
                general
                and administrative costs we capitalized. The primary reason for these
                increases was an increase in our budgeted capital expenditures for
                oil and
                natural gas activities in 2006.


26
 *Table
          of Contents*





·
            Our
                capital expenditures for other assets in the first quarter of 2006
                were
                $77,000 higher than the same period in
                2005.





·
            Our
                prepaid drilling cost at March 31, 2006, which is reported as an
                asset on
                our balance sheet was $81,000 compared to $218,000 at March 31,
                2005.





Our
      capital expenditures for oil and natural gas activities for the first quarter
      of
      2006 and 2005 were:





**Three
                months ended March 31,********2006**
            
            **%Change**
            
            ******2005****(In
                thousands)****Capital
                expenditures for oil and natural gas activities:**Drilling
            
            $
            30,807
            
            
            76%
            
            $
            17,458Land
                and seismic
            
            
            7,172
            
            
            49%
            
            
            4,815Capitalized
                cost (1)
            
            
            2,057
            
            
            28%
            
            
            1,601Asset
                retirement obligation
            
            
            105
            
            
            304%
            
            
            26Total
            
            $
            40,141
            
            
            68%
            
            $
            23,900


____________





(1)
            For
                2006, includes $1.5 million in capitalized general and administrative
                cost, $409,000 in capitalized interest cost and $122,000 of capitalized
                stock compensation expense. For 2005, includes $1.2 million in capitalized
                general and administrative cost, $315,000 in capitalized interest
                cost and
                $81,000 of capitalized stock compensation expense.





***Analysis
      of changes in cash flows from financing activities***





**Senior
      Credit Agreement**





During
      first three months of 2006, we borrowed an additional $14.5 million under our
      senior credit agreement and repaid $3.3 million of the amount borrowed under
      our
      senior credit agreement. This compares to our borrowing an additional $17.1
      million and paying $371,000 in fees to amend and restate our senior credit
      agreement during the first three months of 2005.





**Senior
      Subordinated Notes**





During
      the first three months of 2006, we did not borrow any additional amount under
      our subordinated credit agreement. We paid no cash fees during the first quarter
      2006 compared to cash fees of $30,000 to amend our subordinated credit agreement
      during the first quarter 2005.





**Common
      Stock Transactions**





The
      following is a list of common stock transactions that occurred in the first
      quarter of 2006 and 2005.





**Shares
                Issued**
            
            **Net
                Proceeds****(In
                thousands except share data)*****2006
                common stock transactions:***Exercise
                of employee stock options
            
            
            24,200
            
            $
            153***2005
                common stock transactions:***Exercise
                of employee stock options
            
            
            76,700
            
            $
            251




**Other
      Matters**





*Derivative
      Instruments*





Our
      results of operations and operating cash flow are impacted by changes in market
      prices for oil and natural gas. We believe the use of derivative instruments,
      although not free of risk, allows us to reduce our exposure to oil and natural
      gas sales price fluctuations and thereby achieve a more predictable cash flow.
      While the use of derivative instruments limits the downside risk of adverse
      price movements, their use may also limit future revenues from favorable price
      movements. Moreover, our derivative contracts generally do not apply to all
      of
      our production and thus provide only partial price protection against declines
      in commodity prices. We expect that the amount of our derivative contracts
      will
      vary from time to time.


27
 *Table
          of Contents*




*Effects
      of Inflation and Changes in Prices*





Our
      results of operations and cash flows are affected by changing oil and natural
      gas prices. If the price of oil and natural gas increases (decreases), there
      could be a corresponding increase (decrease) in revenues as well as the
      operating costs that we are required to bear for operations. Inflation has
      had a
      minimal effect on us.





*Environmental
      and Other Regulatory Matters*





Our
      operations and properties are, like the oil and natural gas industry in general,
      subject to extensive and changing federal, state and local laws and regulations
      relating to environmental protection, including the generation, storage,
      handling, emission, transportation and discharge of materials into the
      environment, and relating to safety and health. The recent trend in
      environmental legislation and regulation generally is toward stricter standards,
      and this trend will likely continue. These laws and regulations may require
      a
      permit or other authorization before construction or drilling commences and
      for
      certain other activities; limit or prohibit access, seismic acquisition,
      construction, drilling and other activities on certain lands lying within
      wilderness and other protected areas; impose substantial liabilities for
      pollution resulting from our operations; and require the reclamation of certain
      lands. Future regulations may add to the cost of, or significantly limit,
      drilling activity.





*New
      Accounting Pronouncement*





Effective
      January 1, 2006, Brigham adopted the provisions of SFAS 123R for its stock
      based
      compensation plans. Brigham previously accounted for these plans under the
      recognition and measurement principles of APB 25 and related interpretations
      and
      disclosure requirements established by SFAS 123.





Under
      APB
      25, Brigham recognized stock based compensation using the intrinsic value
      method. The pro forma effects on net income due to stock based compensation
      were
      disclosed in the notes to the consolidated financial statements. SFAS 123R
      eliminates the use of APB 25 and the intrinsic value method of accounting,
      and
      requires companies to recognize the cost of employee services received in
      exchange for awards of equity instruments, based on the grant date fair value
      of
      those awards, in the financial statements over the requisite service
      period.





We
      adopted SFAS 123R using the modified prospective method. Under this transition
      method, compensation cost recognized in the first quarter 2006 includes the
      cost
      for all stock based compensation granted prior to, but not yet vested, as of
      January 1, 2006. This cost was based on the grant date fair value estimated
      in
      accordance with the original provisions of SFAS 123. The cost for all stock
      based awards granted subsequent to January 1, 2006, was based on the grant
      date
      fair value that was estimated in accordance with the provisions of SFAS 123R.
      The maximum contractual life of stock based awards is seven years and the
      historical forfeiture rate used to estimate forfeitures prospectively is 14.5%.
      At adoption of SFAS 123R, Brigham elected to amortize newly issued and existing
      graded awards on a straight-line basis over the requisite service period.
      Unearned stock compensation recorded under APB 25 of $2.3 million was eliminated
      and additional paid-in capital was reduced by a like amount on the consolidated
      balance sheet and consolidated statements of stockholders’ equity, in accordance
      with SFAS 123R. Results for prior periods have not been restated.





The
      estimated fair value of the options granted during 2006 and prior periods was
      calculated using a Black Scholes option pricing model. The Black-Scholes model
      incorporates assumptions to value stock based awards. The risk-free rate of
      interest for periods within the contractual life of the option is based on
      a
      zero-coupon U.S. government instrument over the contractual term of the equity
      instrument. Expected volatility is based on the historical volatility of
      Brigham’s stock for an equal period of the expected term. The expected life is
      determined using the contractual life and vesting term in accordance with the
      guidance in Staff Accounting Bulletin No. 107 for using the “simplified” method
      for “plain vanilla” options.





In
      November 2005, the FASB issued FASB Staff Position No. FAS 123R-3, “Transition
      Election Related to Accounting for the Tax Effects of Share-Based Payment
      Awards.” Brigham elected to adopt the alternative transition method provided in
      the FASB Staff Position for calculating the tax effects of stock based
      compensation pursuant to SFAS 123R. The alternative transition method includes
      simplified methods to establish the beginning balance of the APIC pool related
      to the tax effects of employee stock based compensation, and to determine the
      subsequent impact on the APIC pool and Consolidated Statements of Cash Flows
      of
      the tax effects of employee stock based compensation awards that are outstanding
      upon adoption of SFAS 123R.


28
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          of Contents*





Prior
      to
      the adoption of SFAS 123R, we presented all tax benefits of deductions resulting
      from the exercise of stock options as operating cash flows in the Consolidated
      Statement of Cash Flows. SFAS 123R requires the cash flow resulting from the
      tax
      deductions in excess of the compensation cost recognized for those options
      (excess tax benefits) to be classified as financing cash flows. We did not
      have
      any excess tax benefits during the first quarter 2006.




Total
      compensation cost related to nonvested awards not yet recognized is
      approximately $5.6 million with a weighted average period over which it is
      expected to be recognized. We expect this cost to be recognized over 4.6
      years.





*Forward
      Looking Information*





We
      or our
      representatives may make forward looking statements, oral or written, including
      statements in this report, press releases and filings with the SEC, regarding
      estimated future net revenues from oil and natural gas reserves and the present
      value thereof, planned capital expenditures (including the amount and nature
      thereof), increases in oil and natural gas production, the number of wells
      we
      anticipate drilling during 2006 and our financial position, business strategy
      and other plans and objectives for future operations. Although we believe that
      the expectations reflected in these forward looking statements are reasonable,
      there can be no assurance that the actual results or developments anticipated
      by
      us will be realized or, even if substantially realized, that they will have
      the
      expected effects on our business or operations. Among the factors that could
      cause actual results to differ materially from our expectations are general
      economic conditions, inherent uncertainties in interpreting engineering data,
      operating hazards, delays or cancellations of drilling operations for a variety
      of reasons, competition, fluctuations in oil and natural gas prices,
      availability of sufficient capital resources to us or our project participants,
      government regulations and other factors set forth among the risk factors noted in our Form
      10-K
      report for the year ended December 31, 2005 including, but not limited to,
      the
      Risk Factors identified in Item 1A. of such report. All
      subsequent oral and written forward looking statements attributable to us or
      persons acting on our behalf are expressly qualified in their entirety by these
      factors. We assume no obligation to update any of these
      statements.


29
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          of Contents*


**ITEM
              3.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURE ABOUT MARKET
                RISK**








**Management
      Opinion Concerning Derivative Instruments**





We
      use
      derivative instruments to manage exposure to commodity prices and interest
      rate
      risks. Our objectives for holding derivatives are to achieve a consistent level
      of cash flow to support a portion of our planned capital spending. Our use
      of
      derivative instruments for hedging activities could materially affect our
      results of operations in particular quarterly or annual periods since such
      instruments can limit our ability to benefit from favorable price movements.
      We
      do not enter into derivative instruments for trading purposes.





***Derivative
      Instruments and Hedging Activities***





We
      believe the use of derivative instruments, although not free of risk, enables
      us
      to reduce our exposure to oil and natural gas sales price fluctuations and
      thereby achieve a more predictable cash flow. While the use of derivative
      instruments limits the downside risk of adverse price movements, their use
      may
      also limit future revenues from favorable price movements. Moreover, our
      derivative contracts generally do not apply to all of our production and thus
      provide only partial price protection against declines in commodity prices.
      We
      expect that the amount of our derivative contracts will vary from time to
      time.





Our
      natural gas derivative contracts are generally settled based upon the average
      of
      the reported settlement prices on the NYMEX for the last three trading days
      of a
      particular contract month. Our oil derivative contracts are generally settled
      based on the average reported settlement prices on the NYMEX for each trading
      day of a particular calendar month.





Our
      primary commodity market risk exposure is to changes in the prices related
      to
      the sale of our oil and natural gas production. The market prices for oil and
      natural gas have been volatile and are likely to continue to be volatile in
      the
      future. As such, we employ established policies and procedures to manage our
      exposure to fluctuations in the sales prices we receive for our oil and natural
      gas production using derivative instruments.





***Cash
      Flow Hedges***





Our
      derivative contracts accounted for as cash flow hedges consists of fixed-price
      swaps, costless collars (purchased put options and written call options) and
      the
      costless collar portion of a three-way costless collar (purchased put option,
      written put and written call options).





We
      use
      fixed-price swap contracts to fix the sales price for our anticipated future
      oil
      and natural gas production. Upon settlement, we receive a fixed price for the
      hedged commodity and pay our counterparty a floating market price, as defined
      in
      each instrument. These instruments are settled monthly. When the floating price
      exceeds the fixed price for a contract month, we pay our counterparty. When
      the
      fixed price exceeds the floating price, our counterparty is required to make
      a
      payment to us. We designate these contracts as cash flow hedges designed to
      achieve a more predictable cash flow, as well as reduce our exposure to price
      volatility.





We
      use
      costless collars to establish floor (purchased put option) and ceiling price
      (written call option) on our anticipated future oil and natural gas production.
      We receive no net premiums when we enter into these option arrangements. These
      contracts are settled monthly. When the settlement price for a period is above
      the ceiling price (written call option), we pay our counterparty. When the
      settlement price for a period is below the floor price (purchased put option),
      our counterparty is required to pay us. We designate these collar arrangements
      as cash flow hedges designed to achieve a more predictable cash flow, as well
      as
      reduce our exposure to price volatility.





A
      three-way costless collar consists of a costless collar (purchased put option
      and written call option) plus a put (written put) sold by us with a price below
      the floor price (purchased put option) of the costless collar. We receive no
      net
      premiums when we enter into these option arrangements. These contracts are
      settled monthly. The written put requires us to make a payment to our
      counterparty if the settlement price for a period is below the written put
      price. Combining the costless collar (purchased put option and written call
      option) with the written put results in us being entitled to a net payment
      equal
      to the difference between the floor price (purchased put option) of the costless
      collar and the written put price if the settlement price is equal to or less
      than the written put price. If the settlement price is greater than the written
      put price, the result is the same as it would have been with a costless collar.
      This strategy enables us to increase the floor and the ceiling price of the
      collar beyond the range of a traditional costless collar while offsetting the
      associated cost with the sale of the written put. The put that we sell is not
      designated as a cash flow hedge.


30
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          of Contents*





***Derivatives
      Not Designated as Hedges***





Our
      derivative positions that are not designated as cash flow hedges include written
      put options and are reported at fair value on our balance sheet. These contracts
      are entered into in conjunction with a costless collar to offset the cost of
      other option positions that are designated as hedges.





The
      following table reflects our open derivative contracts at March 31, 2006, the
      associated volumes and the corresponding weighted average NYMEX reference
      price.




**Notional
                Amount****Settlement
                Period**
            
            **Derivative****Instrument**
            
            **Hedge
                Strategy**
            
            **Natural********Gas****(MMBTU)**
            
            **Oil****(Barrels)**
            
            **Nymex
                Reference****Price*****Costless
                Collars***04/01/06
                - 06/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            16,500
            
            $
            54.80Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            16,500
            
            
            75.0004/01/06
                - 07/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            
            15.6004/01/06
                - 07/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            
            17.0004/01/06
                - 09/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            42,000
            
            $
            50.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            42,000
            
            
            75.6004/01/06
                - 10/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            490,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            490,000
            
            
            
            
            
            14.8508/01/06
                - 10/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            360,000
            
            
            
            
            
            16.6510/01/06
                - 12/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            27,000
            
            $
            50.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            27,000
            
            
            77.5011/01/06
                - 01/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            540,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            540,000
            
            
            
            
            
            23.2511/01/06
                - 03/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            450,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            450,000
            
            
            
            
            
            21.2001/01/07
                - 03/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            24,000
            
            $
            50.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            24,000
            
            
            78.2502/01/07
                - 03/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            300,000
            
            
            
            
            $
            8.00Written
                call
            
            
            Cash
                flow
            
            
            300,000
            
            
            
            
            
            25.7504/01/07
                - 09/30/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            30,000
            
            $
            50.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            30,000
            
            
            81.50***Three
                Way Costless Collars***04/01/06
                - 06/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            7,500
            
            $
            63.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            7,500
            
            
            75.25Written
                put
            
            
            Undesignated
            
            
            
            
            
            7,500
            
            
            48.0004/01/06
                - 10/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            420,000
            
            
            
            
            $
            7.50Written
                call
            
            
            Cash
                flow
            
            
            420,000
            
            
            
            
            
            9.15Written
                put
            
            
            Undesignated
            
            
            420,000
            
            
            
            
            
            6.2504/01/06
                - 10/31/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            490,000
            
            
            
            
            $
            8.50Written
                call
            
            
            Cash
                flow
            
            
            490,000
            
            
            
            
            
            9.96Written
                put
            
            
            Undesignated
            
            
            490,000
            
            
            
            
            
            7.0007/01/06
                - 09/30/06
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            15,000
            
            $
            63.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            15,000
            
            
            75.65Written put
            
            
            Undesignated
            
            
            
            
            
            15,000
            
            
            48.00




31
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          of Contents*


The
      following table reflects commodity derivative contracts entered subsequent
      to
      March 31, 2006, the associated volumes and the corresponding weighted average
      NYMEX reference price.





**Notional
                Amount****Settlement
                Period**
            
            **Derivative****Instrument**
            
            **Hedge
                Strategy**
            
            **Natural
                Gas****(MMBTU)**
            
            **Oil****(Barrels)**
            
            **Nymex
                Reference****Price*****Costless
                Collars***04/01/07
                - 09/30/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            12,000
            
            $
            56.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            12,000
            
            
            92.5004/01/07
                - 10/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            280,000
            
            
            
            
            $
            7.00Written
                call
            
            
            Cash
                flow
            
            
            280,000
            
            
            
            
            
            15.4504/01/07
                - 10/31/07
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            280,000
            
            
            
            
            $
            7.25Written
                call
            
            
            Cash
                flow
            
            
            280,000
            
            
            
            
            
            15.2510/01/07
                - 03/31/08
            
            
            Purchased
                put
            
            
            Cash
                flow
            
            
            
            
            
            18,000
            
            $
            56.00Written
                call
            
            
            Cash
                flow
            
            
            
            
            
            18,000
            
            
            89.95




32
 *Table
          of Contents*


**ITEM
              4.**
            **CONTROLS
                AND
                PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





As
      of
      March 31, 2006, our management, including our principal executive officer and
      principal financial officer, has evaluated the effectiveness of the design
      and
      operation of our disclosure controls and procedures pursuant to Rule 13a-15(b)
      under the Securities Exchange Act of 1934. There are inherent limitations to
      the
      effectiveness of any system of disclosure controls and procedures, including
      the
      possibility of human error and the circumvention or overriding of the controls
      and procedures. Accordingly, even effective disclosure controls and procedures
      can only provide reasonable assurance of achieving their control objectives.
      Based upon and as of the date of the evaluation, our principal executive officer
      and our principal financial officer concluded that the design and operation
      of
      our disclosure controls and procedures were effective at a reasonable assurance
      level.





**Changes
      in Internal Control over Financial Reporting**





There
      has
      been no change in our internal control over financial reporting during the
      first
      quarter of 2006 that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.





**PART
      II - OTHER INFORMATION**





**ITEM
              1.**
            **LEGAL
                PROCEEDINGS**





As
      discussed in Note 3 of Notes to the Consolidated Financial Statements included
      in Part I. Financial Information, Brigham is party to various legal actions
      arising in the ordinary course of business and does not expect these matters
      to
      have a material adverse effect on its consolidated financial condition, results
      of operations or cash flows.




**ITEM
                1A.**
              **RISK
                  FACTORS**
 
 Our
        2005
        Annual Report on Form 10-K includes a detailed discussion of our risk factors.
         There have been no material changes to the risk factors previously
        disclosed in our 2005 Annual Report on Form 10-K, except for the following
        related to the offering of our 9 5/8 %
        Senior
        Notes due 2014 which was completed April 20, 2006.  The information
        presented below updates and should be read in conjunction with the risk factors
        and information disclosed in our 2005 Annual Report on Form 10-K.
 
 **Risks
        Relating to the Notes and Our Indebtedness**
 
 ***Our
        level of indebtedness may adversely affect our cash***  ***available
        for operations, which would limit our growth, our***  ***ability
        to make interest and principal payments on our***  ***indebtedness
        as they become due and our flexibility to respond***  ***to
        market changes.***
 
 At
        March 31, 2006, we had indebtedness of $44.3 million outstanding under
        our senior credit agreement and $30 million outstanding under our
        subordinated credit agreement. After we used the net proceeds from the Notes
        offering to repay the amounts outstanding under our senior and subordinated
        credit agreements, we had $125 million in outstanding indebtedness, as well
        as $50 million of borrowing capacity available to us for
        borrowing under our $200 million senior credit agreement. Our level of
        indebtedness has several important effects on our operations, including those
        listed below.
 
 ·
              It
                  may make it more difficult for us to satisfy our obligations with
                  respect
                  to the Notes.
 
 ·
              We
                  have dedicated a portion of our cash flow from operations to the
                  payment
                  of interest on our indebtedness and to the payment of our other
                  current
                  obligations and we no longer have these cash flows available for
                  other
                  purposes.
 
 ·
              Our
                  senior credit agreement and the indenture governing the Notes may
                  limit
                  our ability to borrow additional funds or dispose of assets and
                  may affect
                  our flexibility in planning for, and reacting to, changes in business
                  conditions.
 
 ·
              Our
                  ability to obtain additional financing in the future for working
                  capital,
                  capital expenditures, acquisitions, general corporate purposes
                  or other
                  purposes may be impaired.
 
 ·
              We
                  may be more vulnerable to economic downturns and our ability to
                  withstand
                  sustained declines in oil and natural gas prices may be
                  impaired.
 
 ·
              Our
                  flexibility in planning for or reacting to changes in market conditions
                  may be limited.
 
 ·
              It
                  may place us at a competitive disadvantage compared to our competitors
                  that have less debt.
 
 We
        may
        incur additional debt in order to fund our exploration and development
        activities. A higher level of indebtedness increases the risk that we may
        default on our debt obligations. Our ability to meet our debt obligations
        and
        reduce our level of indebtedness depends on future performance. General economic
        conditions, oil and natural gas prices and financial, business and other
        factors
        will affect our operations and our future performance. Many of these factors
        are
        beyond our control and we may not be able to generate sufficient cash flow
        to
        pay the interest on our debt, and future working capital, borrowings and
        equity
        financing may not be available to pay or refinance such debt.
 
 In
        addition, under the terms of our senior credit agreement, the borrowing base
        is
        subject to at least semi-annual redeterminations based in part on prevailing
        oil
        and natural gas prices. In the event the amount that we have borrowed under
        our
        senior credit agreement exceeds the redetermined borrowing base, we could
        be
        forced to repay a portion of our borrowings. We may not have sufficient funds
        to
        make such payments. If we do not have sufficient funds and are otherwise
        unable
        to negotiate renewals of our borrowings or arrange new financing, we may
        have to
        sell assets at unfavorable prices.
  33
 
 ***Despite
        current indebtedness levels, we and our subsidiaries***  ***may
        still be able to incur substantially more debt,
        including***  ***secured
        debt. This could further exacerbate the risks
        associated***  ***with
        our substantial leverage.***
 
 We
        and
        our subsidiaries may be able to incur substantial additional indebtedness
        in the
        future. The terms of the indenture governing the Notes and our senior credit
        agreement do not, prohibit us or our subsidiaries from doing so. In addition
        to
        the liens granted under our senior credit agreement, the indenture governing
        the
        Notes allows us to grant liens on all of our other assets to secure indebtedness
        outstanding under the senior secured credit agreement and certain additional
        other debt without ratably securing the Notes. Our senior credit agreement
        provides for total revolving credit borrowings up to $200 million (which
        borrowings are limited by a borrowing base that is subject to re-determination
        at least semi-annually and that was reset to $50 million in connection
        with the Notes offering) and all of those borrowings would be effectively
        senior
        to the Notes and to the subsidiary guarantees thereof to the extent of the
        value
        of the assets securing such indebtedness. If new indebtedness is added to
        our
        and our subsidiaries’ current debt levels, the related risks that we and they
        now face could intensify and we may not be able to meet all our debt
        obligations, including the repayment of the Notes, in whole or in
        part.
 
 ***To
        service our indebtedness, we will require a
        significant***  ***amount
        of cash. Our ability to generate cash depends on many***  ***factors
        beyond our control.***
 
 Our
        ability to make payments on and to refinance our indebtedness, including
        the
        Notes, and to fund planned capital expenditures and development efforts will
        depend on our ability to generate cash in the future. This, to a certain
        extent,
        is subject to general economic, financial, competitive, legislative, regulatory
        and other factors that are beyond our control.
 
 We
        cannot
        assure you that our business will generate sufficient cash flow from operations
        or that future borrowings will be available to us under our senior credit
        agreement or otherwise in an amount sufficient to enable us to pay our
        indebtedness, including the Notes, or to fund our other liquidity needs.
        We may
        need to refinance all or a portion of our indebtedness, including the Notes,
        on
        or before the maturity thereof. Any future borrowings under our senior credit
        agreement will mature in June 2010. As a result, we may be required to refinance
        any indebtedness then outstanding under our senior credit agreement prior
        to the
        maturity of the Notes. We may not be able to obtain such financing on
        commercially reasonable terms or at all. If we are unable to generate
        sufficiently material cash flow to refinance our debt obligations, including
        the
        Notes, on favorable terms, it could have a significant adverse effect on
        our
        financial condition and on our ability to pay principal and interest on the
        Notes.
 
 In
        addition, if for any reason we are unable to meet our debt service obligations,
        we would be in default under the terms of our agreements governing our
        outstanding debt. If such a default were to occur, the lenders under our
        senior
        credit agreement could elect to declare all amounts then outstanding under
        the
        senior credit agreement immediately due and payable, and the lenders would
        not
        be obligated to continue to advance funds under our senior credit agreement.
        In
        addition, if such a default were to occur, the Notes would become immediately
        due and payable. If the amounts outstanding under these debt agreements are
        accelerated, we cannot assure you that our assets will be sufficient to repay
        in
        full the money owed to the banks or to our debt holders, including holders
        of
        Notes.
 
 ***A noteholder’s
        right to receive payments on the Notes is effectively***  ***subordinated
        to the rights of our and the guarantors’ existing***  ***and
        future secured creditors.***
 
 Holders
        of our secured indebtedness and the secured indebtedness of the guarantors
        have
        claims that are prior to a noteholder’s claims as a holder of the Notes to
        the extent of the value of the assets securing that other indebtedness. Notably,
        we and the guarantors are parties to our senior credit agreement, which is
        secured by liens on substantially all of our assets and the assets of the
        guarantors. The Notes are effectively subordinated to any secured indebtedness
        incurred under the senior credit agreement. In the event of any distribution
        or
        payment of our or any guarantor’s assets in any foreclosure, dissolution,
        winding-up, liquidation, reorganization or other bankruptcy proceeding, holders
        of secured indebtedness will have prior claim to those of our or the guarantor’s
        assets that constitute their collateral. Holders of Notes will participate
        ratably with all holders of our unsecured indebtedness that is deemed to
        be of
        the same class as such Notes, and potentially with all of our or any guarantor’s
        other general creditors, based upon the respective amounts owed to each holder
        or creditor, in our remaining assets. In any of the foregoing events, we
        cannot
        assure you that there will be sufficient assets to pay amounts due on the
        Notes.
        As a result, holders of Notes may receive less, ratably, than holders of
        secured
        indebtedness.
  34
 
 Upon
        completion of the Notes offering, up to $50 million of secured indebtedness
        is available for borrowing under the borrowing base of our
        $200 million senior credit agreement. In addition, we are permitted to
        borrow secured indebtedness in the future under the terms of the
        indenture.
 
 ***The
        Notes are effectively subordinated to the debt of
        our***  ***non-guarantor
        subsidiaries, if any.***
 
 The
        Notes
        are fully and unconditionally guaranteed on a senior unsecured basis by our
        existing operating subsidiaries, as well as all of our future domestic
        subsidiaries. However, they are not guaranteed by any of our future subsidiaries
        outside the United States unless, subject to certain limited exceptions,
        these
        subsidiaries guarantee our other domestic indebtedness. In addition, on the
        issue date of the Notes, two of our wholly owned subsidiaries (referred to
        herein as the “limited partners”), which together own approximately 99% limited
        partnership interests in Brigham Oil & Gas, L.P., our primary operating
        subsidiary, were not guarantors of the Notes. As of the issee date of the
        notes, the limited partners did not conduct any business or operations and
        held no properties other than the limited partnership interests in Brigham
        Oil & Gas, L.P. and other minor miscellaneous assets. Under the
        indenture governing the Notes, the limited partners are required to guarantee
        the Notes if they ever (i) hold properties in excess of
        $1 million, (ii) incur debt in excess of $1 million, or
        (iii) guarantee any of our or our subsidiaries’ indebtedness. The indenture
        also provides that the Notes may not be guaranteed by certain subsidiaries
        with
        minimal net worth. The Notes are effectively subordinated to all debt and
        other
        liabilities, including trade payables of any subsidiaries that do not guarantee
        the Notes.
 
 ***If
        we default on our obligations to pay our other***  ***indebtedness,
        we may not be able to make payments on the Notes.***
 
 Any
        default under the agreements governing our indebtedness, including a default
        under our senior credit agreement that is not waived by the required lenders,
        and the remedies sought by the holders of any such indebtedness, could make
        us
        unable to pay principal, premium, if any, and interest on the Notes and
        substantially decrease the market value of the Notes. If we are unable to
        generate sufficient cash flow and are otherwise unable to obtain funds necessary
        to meet required payments of principal, premium, if any, and interest on
        our
        indebtedness, or if we otherwise fail to comply with the various covenants,
        including financial and operating covenants, in the instruments governing
        our
        indebtedness (including our senior credit agreement), we could be in default
        under the terms of the agreements governing such indebtedness. In the event
        of
        such default, the holders of such indebtedness could elect to declare all
        the
        funds borrowed thereunder to be due and payable, together with accrued and
        unpaid interest, the lenders under our senior credit agreement could elect
        to
        terminate their commitments, cease making further loans and institute
        foreclosure proceedings against our assets, and we could be forced into
        bankruptcy or liquidation. If our operating performance declines, we may
        in the
        future need to seek to obtain waivers from the required lenders under our
        senior
        credit agreement to avoid being in default. If we breach our covenants under
        our
        senior credit agreement and seek a waiver, we may not be able to obtain a
        waiver
        from the required lenders. If this occurs, we would be in default under our
        senior credit agreement, the lenders could exercise their rights as described
        above, and we could be forced into bankruptcy or liquidation. See “Management
        Discussion and Analysis — Capital Resources — Senior
        Credit Agreement.”
  35
  ***The
        indenture governing the Notes and our senior credit agreement impose
        significant operating and financial restrictions, which may prevent us from
        capitalizing on business opportunities and taking some
        actions.***
  The
        indenture governing the Notes and our senior credit agreement contain, customary
        restrictions on our activities, including covenants that restrict our and
        our
        subsidiaries’ ability to:
 
 ·
              incur
                  additional debt;
 
 ·
              pay
                  dividends on, or redeem or repurchase stock;
 
 ·
              create
                  liens;
 
 ·
              make
                  specified types of investments;
 
 ·
              apply
                  net proceeds from certain asset sales;
 
 ·
              engage
                  in transactions with our affiliates;
 
 ·
              engage
                  in sale and leaseback transactions;
 
 ·
              merge
                  or consolidate;
 
 ·
              restrict
                  dividends or other payments from subsidiaries;
 
 ·
              sell
                  equity interests of subsidiaries; and
 
 ·
              sell,
                  assign, transfer, lease, convey or dispose of assets.
 
 Our
        senior credit agreement also requires us to meet a minimum current ratio
        and a
        minimum interest coverage ratio. We may not be able to maintain these ratios,
        and if we fail to be in compliance with these tests, we will not be able
        to
        borrow funds under our senior credit agreement which would make it difficult
        for
        us to operate our business.
 
 The
        restrictions in the indenture governing the Notes and our senior credit
        agreement may prevent us from taking actions that we believe would be in
        the
        best interest of our business, and may make it difficult for us to successfully
        execute our business strategy or effectively compete with companies that
        are not
        similarly restricted. We may also incur future debt obligations that might
        subject us to additional restrictive covenants that could affect our financial
        and operational flexibility. We cannot assure that we will be granted waivers
        or
        amendments to these agreements if for any reason we are unable to comply
        with
        these agreements, or that we will be able to refinance our debt on terms
        acceptable to us, or at all.
 
 The
        breach of any of these covenants and restrictions could result in a default
        under the indenture governing the Notes or under our senior credit agreement.
        An
        event of default under our debt agreements would permit some of our lenders
        to
        declare all amounts borrowed from them to be due and payable. If we are unable
        to repay debt, lenders having secured obligations, such as the lenders under
        our
        senior credit agreement, could proceed against the collateral securing the
        debt.
        Because the indenture governing the Notes and our senior credit agreement
        have
        customary cross-default provisions, if the indebtedness under the Notes or
        under
        our senior credit agreements or any of our other facilities is accelerated,
        we
        may be unable to repay or finance the amounts due.
 
 ***We
        may not have the ability to raise the funds necessary
        to***  ***finance
        the change of control offer required by the indenture***  ***governing
        the Notes.***
 
 Upon
        the
        occurrence of certain kinds of change of control events, we will be required
        to
        offer to repurchase all outstanding Notes at 101% of the principal amount
        thereof plus accrued and unpaid interest, if any, to the date of repurchase,
        unless all Notes have been previously called for redemption. The holders
        of
        other debt securities that we may issue in the future, which rank equally
        in
        right of payment with the Notes, may also have this right. Our failure to
        purchase tendered Notes would constitute an event of default under the indenture
        governing the Notes, which in turn, would constitute a default under our
        senior
        credit agreement. In addition, the occurrence of a change of control would
        also
        constitute an event of default under our senior credit agreement. A default
        under our senior credit agreement would result in a default under the indenture
        if the lenders accelerate the debt under our senior credit
        agreement.
  36
 
 Therefore,
        it is possible that we may not have sufficient funds at the time of the change
        of control to make the required repurchase of Notes. Moreover, our senior
        credit
        agreement restricts, and any future indebtedness we incur may restrict, our
        ability to repurchase the Notes, including following a change of control
        event.
        As a result, following a change of control event, we would not be able to
        repurchase Notes unless we first repay all indebtedness outstanding under
        our
        senior credit agreement and any of our other indebtedness that contains similar
        provisions, or obtain a waiver from the holders of such indebtedness to permit
        us to repurchase the Notes. We may be unable to repay all of that indebtedness
        or obtain a waiver of that type. Any requirement to offer to repurchase
        outstanding Notes may therefore require us to refinance our other outstanding
        debt, which we may not be able to do on commercially reasonable terms, if
        at
        all. These repurchase requirements may also delay or make it more difficult
        for
        others to obtain control of us.
  In
          addition, certain important corporate events, such as leveraged
          recapitalizations that would increase the level of our indebtedness, would
          not
          constitute a “Change of Control” under the Indenture.
  ***There
        are restrictions on a noteholder’s ability to transfer or
        resell***  ***the
        Notes.***
 
 The
        Notes
        were issued and sold pursuant to an exemption from registration under the
        Securities Act and applicable state securities laws. Accordingly, a
        noteholder may transfer or resell the Notes only in a transaction registered
        under, or exempt from, the registration requirements of the Securities Act
        and
        applicable state securities laws, and the noteholder may be required to bear
        the
        risk of the investment for an indefinite period of time.
 
 We
        intend
        to file a registration statement with the SEC and seek to cause the registration
        statement to become effective with respect to the exchange notes. The SEC
        has
        broad discretion to declare any registration statement effective and may
        delay
        or deny the effectiveness of any registration statement for a variety of
        reasons.
 
 If
        issued
        under an effective registration statement, the exchange notes generally may
        be
        resold or otherwise transferred with no need for further registration.
        However,
 
 ·
              the
                  exchange notes will constitute a new issue of securities with no
                  established trading
                  market; and
 
 ·
              the
                  offer to exchange the Notes for the exchange notes will not depend
                  upon
                  the amount of notes tendered for
                  exchange.
 
 ***A noteholder’s
        ability to transfer the Notes may be limited by the***  ***absence
        of an active trading market and there is no assurance***  ***that
        any active trading market will develop for the Notes.***
 
 The
        Notes
        are a new issue of securities for which there is no established public market.
        The Notes are not listed on a national securities exchange or included on
        any automated dealer quotation system, although they are eligible for
        trading in The PORTAL Market.
 
 The
        initial purchasers are not obligated to make a market in the Notes or the
        exchange notes, and they may discontinue their market-making activities at
        any
        time without notice. Therefore, we cannot assure you that an active market
        for
        the Notes or exchange notes will develop or, if developed, that it will
        continue. Credit Suisse Securities (USA) LLC (“Credit Suisse”), one of the
        initial purchasers of the notes, is an affiliate of DLJ Merchant Banking
        Partners III, L.P. and its affiliated funds, that are investors in our
        company. Accordingly, Credit Suisse is required to deliver a current “market
        maker” prospectus and otherwise comply with the registration requirements of the
        Securities Act in connection with any secondary market sale of the Notes,
        which
        may affect its ability to continue market making activities. We have agreed
        to
        make a “market maker” prospectus generally available to Credit Suisse to permit
        it to engage in market making transactions. However, the registration rights
        agreement also provides that we may, for valid business reasons, allow the
        market maker prospectus to cease to be effective and usable for a period
        of time
        set forth in the registration rights agreement or as otherwise acceptable
        to the
        market maker. As a result, the liquidity of the secondary market for the
        Notes
        may be materially adversely affected by the unavailability of a current “market
        maker” prospectus.
  37
  Even
        if a
        trading market for the Notes does develop, a noteholder may not be able to
        sell the Notes at a particular time, if at all, or a noteholder may not be
        able to obtain the price desired for the Notes. Historically, the market
        for
        non-investment grade debt has been subject to disruptions that have caused
        substantial volatility in the prices of securities similar to the Notes.
        We
        cannot assure you that the market, if any, for the Notes or exchange notes
        will
        be free from similar disruptions or that any such disruptions may not adversely
        affect the prices at which a noteholder may sell the Notes. In addition,
        the Notes may trade at a discount from their initial offering price, depending
        upon prevailing interest rates, our ability to effect the exchange offer,
        the
        market for similar notes, our credit rating, the interest of securities dealers
        in making a market for the Notes, the price of any other securities we may
        issue, our performance, prospects, operating results, financial condition
        and
        other factors.
 
 ***Federal
        and state statutes allow courts, under specific***  ***circumstances,
        to void the guarantees and require noteholders to***  ***return
        payments received from the guarantors.***
 
 Creditors
        are protected by fraudulent conveyance laws which differ among various
        jurisdictions, and these laws may apply to the issuance of the guarantees
        by our
        subsidiary guarantors. Under federal bankruptcy law and comparable provisions
        of
        state fraudulent transfer laws, a guarantee may be voided by a court, or
        subordinated to the claims of other creditors, if, among other
        things:
 
 ·
              the
                  indebtedness evidenced by such guarantee was incurred by a subsidiary
                  guarantor with actual intent to hinder, delay or defraud any present
                  or
                  future creditor of such subsidiary
                  guarantor; or
 
 ·
              such
                  subsidiary guarantor did not receive fair consideration or reasonably
                  equivalent value for issuing the guarantee, and the applicable
                  subsidiary
                  guarantor
 
 ·
              was
                  insolvent, or were rendered insolvent by reason of issuing the
                  applicable
                  guarantee;
 
 ·
              was
                  engaged or about to engage in a business or transaction for which
                  the
                  remaining assets of the applicable subsidiary guarantor constituted
                  unreasonably small capital; or
 
 ·
              intended
                  to incur, or believed that we or it would incur, indebtedness beyond
                  our
                  or its ability to pay such debts as they
                  matured.
 
 In
        addition, any payment by such subsidiary guarantor pursuant to any guarantee
        could be voided and required to be returned to such subsidiary guarantor,
        or to
        a fund for the benefit of creditors of such subsidiary guarantor. A legal
        challenge to a guarantee on fraudulent conveyance grounds may focus on the
        benefits, if any, realized by us or the subsidiary guarantors as a result
        of our
        issuance of the guarantees. To the extent a subsidiary’s guarantee of the Notes
        is avoided as a result of fraudulent conveyance or held unenforceable for
        any
        other reason, a noteholder would cease to have any claim in respect of that
        guarantee and would be creditors solely of ours.
 
 Because
        all of our significant assets are held by our guarantor subsidiaries, the
        stake
        of a guarantee being voided under fraudulent transfer laws is higher. In
        addition, any future guarantees provided under the indenture governing the
        Notes
        have a greater risk of being voided. Moreover, the borrower under our senior
        credit agreement is Brigham Oil & Gas, L.P., our primary operating
        subsidiary and guarantor of the Notes. In the event Brigham Oil & Gas,
        L.P.’s guarantee of the Notes is avoided or held unenforceable, the Notes would
        be effectively subordinated to any then outstanding borrowings under our
        senior
        credit agreement, which would be paid in full prior to amounts due on the
        Notes
        in the event of any foreclosure, dissolution, winding-up, liquidation,
        reorganization or other bankruptcy proceeding with respect to Brigham
        Oil & Gas, L.P.
  38
 
 The
        measures of insolvency for purposes of these fraudulent transfer laws will
        vary
        depending upon the law applied in any proceeding to determine whether a
        fraudulent transfer has occurred. Generally, however, a guarantor would be
        considered insolvent if:
 
 ·
              the
                  sum of its debts, including contingent liabilities, was greater
                  than the
                  fair saleable value of all of its
                  assets; or
 
 ·
              the
                  present fair saleable value of its assets was less than the amount
                  that
                  would be required to pay its probable liability on its existing
                  debts,
                  including contingent liabilities, as they become absolute and
                  mature; or
 
 ·
              it
                  could not pay its debts as they become due.


**ITEM
              2.**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS**





Issuer
      Purchases of Equity Securities


**Period**
            
            **Total
                Number of Shares Purchased**
            
            **Average
                Price Paid per Share**January
                1, 2006 - January 31, 2006
            
            
            17,968
            
            $
            11.74





No
      purchases were made under a publicly announced plan.





**ITEM
              3.**
            **DEFAULTS
                UPON SENIOR
                SECURITIES**





None.





**ITEM
              4.**
            **SUBMISSON
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**





None.





**ITEM
              5.**
            **OTHER
                INFORMATION**





None.




**ITEM
              6.**
            **EXHIBITS**




31.1
            Certification
                of Chief Executive Officer of the Company pursuant to Rule 13a-14(a)
                of
                the Securities Exchange Act of 1934


39
 *Table
          of Contents*





31.2
            Certification
                of Chief Financial Officer of the Company pursuant to Rule 13a-14(a)
                of
                the Securities Exchange Act of 1934





32.1
            Certification
                of Chief Executive Officer of the Company pursuant to 18 U.S.C. §
                1350





32.2
            Certification
                of Chief Financial Officer of the Company pursuant to 18 U.S.C. §
                1350




40
 *Table
          of Contents*


**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 on May 8, 2006.





**BRIGHAM
                EXPLORATION COMPANY**By:
            /s/
                BEN M. BRIGHAMBen
                M. BrighamChief
                Executive Officer, President and Chairman of the BoardBy:
            /s/
                EUGENE B. SHEPHERD, JR.Eugene
                B. Shepherd, Jr.Executive
                Vice President and Chief Financial
                Officer






41