##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    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
  Delaware
(State of other jurisdiction 
of incorporation or organization)
    
    1311
(Primary Standard Industrial
Classification Code Number)
    
    75-2692967
(I.R.S. Employer
Identification Number)
 6300 Bridge Point Parkway, Building 2, Suite 500, Austin, Texas 78730
 (512) 427-3300
  þ o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
  o þ
 Class
    
    OutstandingCommon Stock, par value $.01 per
share as of May 7, 2007
    
    45,617,160




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##### 



Brigham Exploration Company
 First Quarter 2007 Form 10-Q Report
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSConsolidated Balance Sheets -- March 31, 2007 and December 31, 2006
    
    
    1Consolidated Statements of Operations -- Three months ended March 31, 2007 and 2006
    
    
    2Consolidated Statement of Stockholders Equity -- Three months ended March 31, 2007
    
    
    3Consolidated Statements of Cash Flows -- Three months ended March 31, 2007 and 2006
    
    
    4Notes to the Consolidated Financial Statements
    
    
    5ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    15ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    31ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    34PART II  OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    34ITEM 1.A.
    
    RISK FACTORS
    
    
    34ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    34ITEM 3.
    
    DEFALTS UPON SENIOR SECURITIES
    
    
    34ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
    
    
    34ITEM 5.
    
    OTHER INFORMATION
    
    
    34ITEM 6.
    
    EXHIBITS
    
    
    34SIGNATURES
    
    
    35Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 March 31,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,151
    
    
    $
    4,300Accounts receivable
    
    
    18,567
    
    
    
    18,352Derivative assets
    
    
    1,018
    
    
    
    5,676Other current assets
    
    
    1,964
    
    
    
    2,390Property held for sale
    
    
    500
    
    
    
    500Total current assets
    
    
    29,200
    
    
    
    31,218Oil and natural gas properties, using the full cost method includingProved, net
    
    
    435,281
    
    
    
    410,474Unproved
    
    
    70,913
    
    
    
    75,051506,194
    
    
    
    485,525Other property and equipment, net
    
    
    1,184
    
    
    
    936Deferred loan fees
    
    
    3,260
    
    
    
    3,420Other noncurrent assets
    
    
    871
    
    
    
    1,488Total assets
    
    $
    540,709
    
    
    $
    522,587LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    11,385
    
    
    $
    19,464Royalties payable
    
    
    5,188
    
    
    
    5,012Accrued drilling costs
    
    
    9,777
    
    
    
    23,310Participant advances received
    
    
    1,603
    
    
    
    3,990Other current liabilities
    
    
    7,305
    
    
    
    5,677Total current liabilities
    
    
    35,258
    
    
    
    57,453Senior Notes
    
    
    123,488
    
    
    
    123,434Senior credit facility
    
    
    61,500
    
    
    
    25,900Series 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, 2007 and
December 31, 2006
    
    
    10,101
    
    
    
    10,101Deferred income taxes
    
    
    34,853
    
    
    
    34,609Other taxes payable
    
    
    2,139
    
    
    
    Other noncurrent liabilities
    
    
    5,534
    
    
    
    5,075Commitments and contingencies (Note 3)Stockholders equity:Common stock, $.01 par value, 90 million shares authorized,
45,150,398 and 45,090,398 shares issued and 45,053,399 and
44,011,362 shares outstanding at March 31, 2007 and December 31,
2006, respectively
    
    
    452
    
    
    
    451Additional paid-in capital
    
    
    204,435
    
    
    
    203,643Treasury stock, at cost; 96,999 and 79,036 shares at March 31,
2007 and December 31, 2006, respectively
    
    
    (796
    )
    
    
    (662
    )Accumulated other comprehensive income (loss)
    
    
    295
    
    
    
    1,006Retained earnings
    
    
    63,450
    
    
    
    61,577Total stockholders equity
    
    
    267,836
    
    
    
    266,015Total liabilities and stockholders equity
    
    $
    540,709
    
    
    $
    522,587
   1




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Revenues:Oil and natural gas sales
    
    $
    28,486
    
    
    $
    25,796Gain (loss) on derivatives, net
    
    
    (3,492
    )
    
    
    (228
    )Other revenue
    
    
    27
    
    
    
    (22
    )25,021
    
    
    
    25,546Costs and expenses:Lease operating
    
    
    2,569
    
    
    
    2,730Production taxes
    
    
    71
    
    
    
    1,144General and administrative
    
    
    2,178
    
    
    
    1,769Depletion of oil and natural gas properties
    
    
    13,959
    
    
    
    10,256Depreciation and amortization
    
    
    163
    
    
    
    115Accretion of discount on asset retirement obligations
    
    
    117
    
    
    
    7019,057
    
    
    
    16,084Operating income
    
    
    5,964
    
    
    
    9,462Other income (expense):Interest income
    
    
    131
    
    
    
    106Interest expense, net
    
    
    (3,417
    )
    
    
    (1,089
    )Other income (expense)
    
    
    190
    
    
    
    907(3,096
    )
    
    
    (76
    )Income before income taxes
    
    
    2,868
    
    
    
    9,386Income tax expense:Current
    
    
    
    
    
    
    Deferred
    
    
    (995
    )
    
    
    (3,511
    )(995
    )
    
    
    (3,511
    )Net income
    
    $
    1,873
    
    
    $
    5,875Net income per share available to common stockholders:Basic
    
    $
    0.04
    
    
    $
    0.13Diluted
    
    $
    0.04
    
    
    $
    0.13Weighted average shares outstanding:Basic
    
    
    45,051
    
    
    
    44,986Diluted
    
    
    45,430
    
    
    
    45,579
   2




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(In thousands)
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid In
    
    
    Treasury
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amounts
    
    
    Capital
    
    
    Stock
    
    
    Income (Loss)
    
    
    Earnings
    
    
    EquityBalance, December 31, 2006
    
    
    45,090
    
    
    $
    451
    
    
    $
    203,643
    
    
    $
    (662
    )
    
    $
    1,006
    
    
    $
    61,577
    
    
    $
    266,015Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,873
    
    
    
    1,873Net (gains) losses included
in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,094
    )
    
    
    
    
    
    
    (1,094
    )Tax benefit (provision)
related to hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    383
    
    
    
    
    
    
    
    383Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,162Exercises of employee stock
options
    
    
    5
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23Vesting of restricted stock
    
    
    55
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    770
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    770Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (134
    )
    
    
    
    
    
    
    
    
    
    
    (134
    )Balance, March 31, 2007
    
    
    45,150
    
    
    $
    452
    
    
    $
    204,435
    
    
    $
    (796
    )
    
    $
    295
    
    
    $
    63,450
    
    
    $
    267,836
   3




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    1,873
    
    
    $
    5,875Adjustments to reconcile net income to cash provided by operating
activities:Depletion of oil and natural gas properties
    
    
    13,959
    
    
    
    10,256Depreciation and amortization
    
    
    163
    
    
    
    115Stock based compensation
    
    
    421
    
    
    
    491Amortization of deferred loan fees and debt issuance costs
    
    
    214
    
    
    
    119Market value adjustment for derivative instruments
    
    
    4,916
    
    
    
    (715
    )Accretion of discount on asset retirement obligations
    
    
    117
    
    
    
    70Deferred income taxes
    
    
    995
    
    
    
    3,511Other noncash items
    
    
    
    
    
    
    42Changes in operating assets and liabilities:Accounts receivable
    
    
    (215
    )
    
    
    6,111Other current assets
    
    
    426
    
    
    
    (336
    )Accounts payable
    
    
    (8,079
    )
    
    
    1,655Royalties payable
    
    
    176
    
    
    
    (902
    )Participant advances received
    
    
    (2,387
    )
    
    
    (197
    )Other current liabilities
    
    
    2,999
    
    
    
    147Other noncurrent assets and liabilities
    
    
    6
    
    
    
    (54
    )Net cash provided by operating activities
    
    
    15,584
    
    
    
    26,188Cash flows from investing activities:Additions to oil and natural gas properties
    
    
    (47,605
    )
    
    
    (33,674
    )Additions to other property and equipment
    
    
    (411
    )
    
    
    (142
    )Decrease (increase) in drilling advances paid
    
    
    (206
    )
    
    
    324Net cash used by investing activities
    
    
    (48,222
    )
    
    
    (33,492
    )Cash flows from financing activities:Increase in senior credit facility
    
    
    35,600
    
    
    
    14,500Repayment of senior credit facility
    
    
    
    
    
    
    (3,300
    )Repayment of senior subordinated notes
    
    
    
    
    
    
    Deferred loan fees paid and equity costs
    
    
    
    
    
    
    (60
    )Proceeds from issuance of stock, net of issuance costs
    
    
    
    
    
    
    153Proceeds from exercise of employee stock options
    
    
    23
    
    
    
    Repurchases of common stock
    
    
    (134
    )
    
    
    (211
    )Net cash provided by financing activities
    
    
    35,489
    
    
    
    11,082Net increase (decrease) in cash and cash equivalents
    
    
    2,851
    
    
    
    3,778Cash and cash equivalents, beginning of year
    
    
    4,300
    
    
    
    3,975Cash and cash equivalents, end of period
    
    $
    7,151
    
    
    $
    7,753
   4




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization and Nature of Operations
  2. Basis of Presentation
    3. Commitments and Contingencies
   4. Net Income Available Per Common Share
   5




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  Three Months EndedMarch 31,2007
    
    
    2006Weighted average common shares outstanding  basic
    
    
    45,051
    
    
    
    44,986Plus: Potential common shares
Stock options and restricted stock
    
    
    379
    
    
    
    593Weighted average common shares outstanding  diluted
    
    
    45,430
    
    
    
    45,579Stock options excluded from diluted EPS due to the anti-dilutive effect
    
    
    2,550
    
    
    
    1,246
 5. Income Taxes
  March 31,
    
    
    March 31,2007
    
    
    2006Current income taxes:Federal
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    Deferred income taxes:Federal
    
    
    1,179
    
    
    
    3,511State
    
    
    (184
    )
    
    
    $
    995
    
    
    $
    3,511
    6




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  (In thousands)Increases (decreases) resulting from the adoption of FIN 48
    
    $
    2,139Increases (decreases) resulting from tax positions taken in the current period
    
    
    Decreases relating to settlements with taxing authorities
    
    
    Reductions resulting from the lapse of applicable statutes of limitations
    
    
    Unrecognized tax benefits at 03/31/2007
    
    $
    2,139
   6. Derivative Instruments and Hedging Activities
   Three Months EndedMarch 31,2007
    
    
    2006Natural GasAverage price per Mcf realized excluding gas hedging results
    
    $
    7.32
    
    
    $
    7.33Average price per Mcf including gas hedging settlement results
    
    $
    7.76
    
    
    $
    7.34Increase (decrease) in revenue, in thousands
    
    $
    1,311
    
    
    $
    23Average price per Mcf including gas hedging settlement
results and any unrealized gains (losses)
    
    $
    6.23
    
    
    $
    7.28Increase (decrease) in revenue, in thousands
    
    $
    (3,251
    )
    
    $
    (120
    )OilAverage price per Bbl realized excluding oil hedging results
    
    $
    54.75
    
    
    $
    61.40Average price per Bbl including oil hedging settlement results
    
    $
    55.68
    
    
    $
    60.97Increase (decrease) in revenue, in thousands
    
    $
    113
    
    
    $
    (50
    )Average price per Bbl including oil hedging settlement
results and any unrealized gains (losses)
    
    $
    52.78
    
    
    $
    61.17Increase (decrease) in revenue, in thousands
    
    $
    (240
    )
    
    $
    (27
    )
  7




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  Three Months EndedMarch 31,2007
    
    
    2006Increase (decrease) in earnings due to ineffectiveness
    
    $
    
    
    
    $
    835
 Natural Gas and Crude Oil Derivative Contracts
 Cash-flow hedges
    March 31,2007
    
    
    2006Fair value of undesignated written put options
    
    $
    
    
    
    $
    (244
    )
  March 31,2007
    
    
    2006Increase (decrease) in earnings due to changes in fair value of written put options
    
    $
    
    
    
    $
    (120
    )
  8




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  Natural
    
    
    
    
    
    
    Purchased
    
    
    WrittenGas
    
    
    Oil
    
    
    Put
    
    
    CallSettlement Period
    
    (MMBTU)
    
    
    (Barrels)
    
    
    Nymex
    
    
    NymexNatural Gas Costless Collars04/01/07 - 08/31/07
    
    
    520,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    8.0004/01/07 - 10/31/07
    
    
    280,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    15.4504/01/07 - 10/31/07
    
    
    280,000
    
    
    
    
    
    
    $
    7.25
    
    
    $
    15.2504/01/07 - 10/31/07
    
    
    280,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    14.8504/01/07 - 10/31/07
    
    
    700,000
    
    
    
    
    
    
    $
    7.50
    
    
    $
    11.0004/01/07 - 10/31/07
    
    
    350,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    11.6004/01/07 - 10/31/07
    
    
    350,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    9.1004/01/07 - 10/31/07
    
    
    350,000
    
    
    
    
    
    
    $
    7.25
    
    
    $
    9.6004/01/07 - 08/31/07
    
    
    200,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    10.0005/01/07 - 10/31/07
    
    
    600,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    9.5509/01/07 - 10/31/07
    
    
    70,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    9.3511/01/07 - 03/31/08
    
    
    250,000
    
    
    
    
    
    
    $
    8.00
    
    
    $
    13.4011/01/07 - 03/31/08
    
    
    300,000
    
    
    
    
    
    
    $
    8.85
    
    
    $
    15.0011/01/07 - 03/31/08
    
    
    300,000
    
    
    
    
    
    
    $
    9.30
    
    
    $
    15.0011/01/07 - 03/31/08
    
    
    500,000
    
    
    
    
    
    
    $
    7.50
    
    
    $
    13.3011/01/07 - 03/31/08
    
    
    150,000
    
    
    
    
    
    
    $
    8.00
    
    
    $
    10.2011/01/07 - 03/31/08
    
    
    250,000
    
    
    
    
    
    
    $
    8.00
    
    
    $
    12.6504/01/08 - 09/30/08
    
    
    420,000
    
    
    
    
    
    
    $
    6.75
    
    
    $
    9.7504/01/08 - 09/30/08
    
    
    540,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    9.68Oil Costless Collars04/01/07 - 06/30/07
    
    
    
    
    
    
    12,000
    
    
    $
    59.00
    
    
    $
    90.0004/01/07 - 04/30/08
    
    
    
    
    
    
    27,000
    
    
    $
    60.00
    
    
    $
    74.7504/01/07 - 12/31/07
    
    
    
    
    
    
    9,000
    
    
    $
    55.00
    
    
    $
    79.0004/01/07 - 09/30/07
    
    
    
    
    
    
    30,000
    
    
    $
    50.00
    
    
    $
    81.5004/01/07 - 09/30/07
    
    
    
    
    
    
    12,000
    
    
    $
    56.00
    
    
    $
    92.5004/01/07 - 12/31/07
    
    
    
    
    
    
    23,000
    
    
    $
    60.00
    
    
    $
    76.0004/01/07 - 12/31/07
    
    
    
    
    
    
    33,000
    
    
    $
    55.00
    
    
    $
    80.3006/01/07 - 08/31/07
    
    
    
    
    
    
    6,000
    
    
    $
    65.00
    
    
    $
    80.0007/01/07 - 10/31/07
    
    
    
    
    
    
    10,000
    
    
    $
    58.00
    
    
    $
    90.5010/01/07 - 12/31/07
    
    
    
    
    
    
    9,000
    
    
    $
    59.20
    
    
    $
    90.0010/01/07 - 03/31/08
    
    
    
    
    
    
    18,000
    
    
    $
    56.00
    
    
    $
    89.9510/01/07 - 03/31/08
    
    
    
    
    
    
    6,000
    
    
    $
    65.00
    
    
    $
    80.2511/01/07 - 03/31/08
    
    
    
    
    
    
    10,000
    
    
    $
    68.40
    
    
    $
    90.0001/01/08 - 03/31/08
    
    
    
    
    
    
    7,500
    
    
    $
    57.60
    
    
    $
    90.0001/01/08 - 12/31/08
    
    
    
    
    
    
    24,000
    
    
    $
    57.50
    
    
    $
    75.5004/01/08 - 10/31/08
    
    
    
    
    
    
    21,000
    
    
    $
    65.70
    
    
    $
    90.0004/01/08 - 12/31/08
    
    
    
    
    
    
    18,000
    
    
    $
    57.50
    
    
    $
    76.00
  Natural
    
    
    Purchased
    
    
    WrittenGas
    
    
    Put
    
    
    CallSettlement Period
    
    (MMBTU)
    
    
    Nymex
    
    
    NymexNatural Gas Costless Collars04/01/07 - 08/31/07
    
    
    750,000
    
    
    $
    7.00
    
    
    $
    10.2004/01/08 - 10/31/08
    
    
    350,000
    
    
    $
    7.25
    
    
    $
    10.40
  9




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Interest rate swap
   Fair values
  March 31,
    
    
    December 31,2007
    
    
    2006(In thousands)Other current liabilities
    
    $
    (405
    )
    
    $
    (5
    )Other noncurrent liabilities
    
    
    (129
    )
    
    
    Other current assets
    
    
    1,018
    
    
    
    5,676Other noncurrent assets
    
    
    81
    
    
    
    904$
    565
    
    
    $
    6,575
 7. Senior Notes
  8. Asset Retirement Obligations
   10




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  Three Months EndedMarch 31,2007
    
    
    2006Beginning asset retirement obligations
    
    $
    5,002
    
    
    $
    4,389Liabilities incurred for new wells placed on production
    
    
    208
    
    
    
    105Liabilities settled
    
    
    10
    
    
    
    (44
    )Accretion of discount on asset retirement obligations
    
    
    117
    
    
    
    70$
    5,337
    
    
    $
    4,520
 9. Stock Based Compensation
   2006Risk-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
    11




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
   Three Months EndedMarch 31,2007
    
    
    2006Pre-tax stock based compensation expense
    
    $
    770
    
    
    $
    613Capitalized stock based compensation
    
    
    (349
    )
    
    
    (305
    )Tax benefit
    
    
    (147
    )
    
    
    (108
    )Stock based compensation expense, net
    
    $
    274
    
    
    $
    200
  Stock Based Plan Descriptions and Share Information
    2007
    
    
    2006Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOptions outstanding at the beginning of the
year
    
    
    3,243,566
    
    
    $
    7.08
    
    
    
    2,946,333
    
    
    $
    6.96Granted
    
    
    
    
    
    $
    
    
    
    
    20,000
    
    
    $
    9.73Forfeited or cancelled
    
    
    (86,600
    )
    
    $
    8.14
    
    
    
    (111,067
    )
    
    $
    2.46Exercised
    
    
    (5,000
    )
    
    $
    4.59
    
    
    
    (24,200
    )
    
    $
    6.30Options outstanding at the end of the quarter
    
    
    3,151,966
    
    
    $
    7.05
    
    
    
    2,831,066
    
    
    $
    7.16Options exercisable at the end of the quarter
    
    
    1,468,266
    
    
    $
    6.20
    
    
    
    970,933
    
    
    $
    5.64
  12




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
   Options Outstanding
    
    
    Options ExercisableNumber
    
    
    Weighted-
    
    
    
    
    
    
    Number
    
    
    Weighted-Outstanding at
    
    
    Average
    
    
    Weighted-
    
    
    Exercisable at
    
    
    Average
    
    
    Weighted-March 31,
    
    
    Remaining
    
    
    Average
    
    
    March 31,
    
    
    Remaining
    
    
    AverageExercise Price
    
    2007
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    2007
    
    
    Contractual Life
    
    
    Exercise Price$3.05 to $3.41
    
    
    230,166
    
    
    1.7 years
    
    $
    3.35
    
    
    
    214,866
    
    
    1.6 years
    
    $
    3.343.66 to 5.08
    
    
    486,900
    
    
    2.3 years
    
    $
    4.22
    
    
    
    399,700
    
    
    1.9 years
    
    $
    3.706.14 to 6.73
    
    
    1,237,000
    
    
    4.6 years
    
    $
    6.51
    
    
    
    473,000
    
    
    3.5 years
    
    $
    6.697.09 to 8.84
    
    
    808,900
    
    
    4.7 years
    
    $
    8.51
    
    
    
    283,700
    
    
    4.4 years
    
    $
    8.698.93 to 12.31
    
    
    389,000
    
    
    5.4 years
    
    $
    11.48
    
    
    
    97,000
    
    
    5.3 years
    
    $
    11.11$3.05 to $12.31
    
    
    3,151,966
    
    
    4.1 years
    
    $
    7.05
    
    
    
    1,468,266
    
    
    3.0 years
    
    $
    6.20
   Restricted Stock
   2007
    
    
    2006Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceRestricted shares outstanding at the
beginning of the year
    
    
    391,367
    
    
    $
    8.60
    
    
    
    397,650
    
    
    $
    7.22Shares granted
    
    
    75,000
    
    
    $
    7.43
    
    
    
    129,095
    
    
    $
    10.85Lapse of restrictions
    
    
    (55,000
    )
    
    $
    5.23
    
    
    
    (65,000
    )
    
    $
    5.23Forfeitures
    
    
    (25,160
    )
    
    $
    8.09
    
    
    
    (1,000
    )
    
    $
    12.31Shares outstanding at the end of the quarter
    
    
    386,207
    
    
    $
    8.89
    
    
    
    460,745
    
    
    $
    8.64
  13




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 10. Comprehensive Income
  Three Months EndedMarch 31,2007
    
    
    2006Net income
    
    $
    1,873
    
    
    $
    5,875Unrealized gains (losses) on cash flow hedges
    
    
    
    
    
    
    4,461Net gains (losses) included in net income
    
    
    (1,094
    )
    
    
    Tax benefits (provisions) related to cash flow hedges
    
    
    383
    
    
    
    (1,269
    )Reclassification adjustments for settled hedging positions
    
    
    
    
    
    
    (835
    )Other comprehensive income, net
    
    $
    1,162
    
    
    $
    8,232
 11. New Accounting Pronouncements
   12. Subsequent Events
    14




---



##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  General Overview
    
    
    Focus on Core Provinces and Trends;
    
    Internally Generate Inventory of High Quality Exploratory Prospects;
    
    Leverage Our Operational Expertise;
    
    Evaluate and Selectively Pursue New Potential Plays;
    
    Capitalize on Exploration Successes Through Development of Our Field Discoveries;
    
    Continue to Actively Drill Our Multi-Year Prospect Inventory; and
    
    Enhance Returns Through Operational Control.
 Overview of First Quarter 2007 Financial Results
     15




---



##### Table of Contents



Overview of First Quarter 2007 Operational Results
 Onshore Gulf Coast
 Vicksburg
     Southern Louisiana
      16




---



##### Table of Contents



Anadarko Basin
   Rocky Mountains
 Powder River Basin
   Williston Basin
   Subsequent Events
   17




---



##### Table of Contents



First Quarter 2007 Results
 Comparison of the three-month periods ended March 31, 2007 and 2006.
 Production volumes
 Three Months Ended March 31,2007
    
    
    % Change
    
    
    2006Oil (MBbls)
    
    
    122
    
    
    
    6
    %
    
    
    115Natural gas (MMcf)
    
    
    2,982
    
    
    
    17
    %
    
    
    2,545Total (MMcfe)(1)
    
    
    3,712
    
    
    
    15
    %
    
    
    3,235Average daily production (MMcfe/d) (2)
    
    
    41.2
    
    
    
    
    
    
    
    35.9
 
 (1)
    
    MMcfe is defined as one million cubic feet equivalent of natural gas, determined using
the ratio of six MMcf of natural gas to one MBbl of crude oil, condensate or natural gas
liquids.(2)
    
    Average daily production calculated using 30 days per calendar month.  Revenues, Commodity Prices and Hedging
  Three Months Ended March 31,2007
    
    
    % Change
    
    
    2006(In thousands)Oil revenue:Oil revenue
    
    $
    6,663
    
    
    
    (6
    %)
    
    $
    7,068Oil derivative settlement gains (losses)
    
    
    113
    
    
    
    NM
    
    
    
    (50
    )Oil revenue including oil derivative settlements
    
    $
    6,776
    
    
    
    (3
    %)
    
    $
    7,018Oil derivative unrealized gains (losses)
    
    
    (353
    )
    
    
    NM
    
    
    
    23Oil revenue including derivative settlements and unrealized gains (losses)
    
    $
    6,423
    
    
    
    (9
    %)
    
    
    7,041Natural gas revenue:Natural gas revenue
    
    $
    21,823
    
    
    
    17
    %
    
    $
    18,647Natural gas derivative settlement gains (losses)
    
    
    1,311
    
    
    
    5600
    %
    
    
    23
  18




---



##### Table of Contents



Three Months Ended March 31,2007
    
    
    % Change
    
    
    2006(In thousands)Natural gas revenue including derivative settlements
    
    $
    23,134
    
    
    
    24
    %
    
    $
    18,670Natural gas derivative unrealized gains (losses)
    
    
    (4,563
    )
    
    
    3091
    %
    
    
    (143
    )Natural gas revenue including derivative settlements and unrealized gains (losses)
    
    $
    18,571
    
    
    
    0
    %
    
    
    18,527Oil and natural gas revenue:Oil and natural gas revenue
    
    $
    28,486
    
    
    
    11
    %
    
    $
    25,715Oil and natural gas derivative settlement gains (losses)
    
    
    1,424
    
    
    
    NM
    
    
    
    (27
    )Oil and natural gas revenue including derivative settlement gains (losses)
    
    
    29,910
    
    
    
    16
    %
    
    
    25,688Oil and natural gas derivative unrealized gains (losses)
    
    
    (4,916
    )
    
    
    3997
    %
    
    
    (120
    )Oil and natural gas revenue including derivative settlements and unrealized gains (losses)
    
    
    24,994
    
    
    
    (2
    %)
    
    
    25,568Other revenue
    
    
    27
    
    
    
    NM
    
    
    
    (22
    )Total revenue
    
    $
    25,021
    
    
    
    (2
    %)
    
    $
    25,546Average oil prices:Oil price (per Bbl)
    
    $
    54.75
    
    
    
    (11
    %)
    
    $
    61.40Oil price including derivative settlement gains (losses) (per Bbl)
    
    
    55.68
    
    
    
    (9
    %)
    
    
    60.97Oil price including derivative settlements and unrealized gains (losses) (per Bbl)
    
    
    52.78
    
    
    
    (14
    %)
    
    
    61.17Average natural gas prices:Natural gas price (per Mcf)
    
    $
    7.32
    
    
    
    0
    %
    
    $
    7.33Natural gas price including derivative settlement gains (losses) (per Mcf)
    
    
    7.76
    
    
    
    6
    %
    
    
    7.34Natural gas price including derivative settlements and unrealized gains (losses) (per Mcf)
    
    $
    6.23
    
    
    
    (14
    %)
    
    $
    7.28Average equivalent prices:Natural gas equivalent price (per Mcfe)
    
    $
    7.67
    
    
    
    (4
    %)
    
    $
    7.95Natural gas equivalent price including derivative settlement gains (losses) (per Mcfe)
    
    
    8.05
    
    
    
    1
    %
    
    
    7.94Natural gas equivalent price including derivative settlements and unrealized gains (losses)
(per Mcfe)
    
    $
    6.73
    
    
    
    (15
    %)
    
    $
    7.90
 For the threemonth periodsended March 31,2007 and 2006(In thousands)Change in revenue from the sale of oil:Price variance impact
    
    $
    (809
    )Volume variance impact
    
    
    404Cash settlement of derivative hedging contracts
    
    
    163Unrealized gains (losses) due to a derivative hedging contracts
    
    
    (376
    )Total change
    
    $
    (618
    )Change in revenue from the sale of natural gas:Price variance impact
    
    $
    (36
    )Volume variance impact
    
    
    3,212Cash settlement of derivative hedging contracts
    
    
    1,288Unrealized gains (losses) due to a derivative hedging contracts
    
    
    (4,420
    )Total change
    
    $
    44Change in revenue from the sale of oil and natural gas:Price variance impact
    
    $
    (846
    )Volume variance impact
    
    
    3,617Cash settlement of derivative hedging contracts
    
    
    1,451Unrealized gains (losses) due to a derivative hedging contracts
    
    
    (4,796
    )Total change
    
    $
    (574
    )
  19




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##### Table of Contents




    
    a $4.9 million unrealized derivative loss in first quarter 2007
versus a $0.1 million unrealized derivative loss in first quarter
2006 decreased revenues by $4.8 million. In October 2006, we
de-designated all derivatives that were previously classified as
cash flow hedges and as such began using mark-to-market accounting
for these derivatives. Subsequent to September 30, 2006, all newly
executed derivatives are undesignated and therefore subject to
mark-to-market accounting. Mark-to-market accounting requires that
we record both derivative settlements and unrealized gains
(losses) to the consolidated statement of operations within a
single income statement line item. On October 1, 2006, we began
including both derivative settlements and unrealized gains
(losses) within revenue. As such, amounts that were previously
recorded in other comprehensive income or other income (expense)
are instead incorporated within revenue.
    
    a 4% decrease in the sales price we received for our oil and
natural gas resulted in a $0.8 million decrease in revenues from
oil and natural gas sales;
    
    a 15% increase in production volumes for the quarter resulted in a
$3.6 million increase in oil and natural gas sales; and
    
    a $1.4 million gain from the settlement of derivative contracts in
the first quarter 2007 versus no gain (loss) in first quarter 2006
increased revenue by $1.4 million.
 Hedging.
  Three months ended March 31,2007
    
    
    % Change
    
    
    2006Oil collarsVolumes (Bbls)
    
    
    76,000
    
    
    
    198
    %
    
    
    25,500Average floor price ($  per Bbl)
    
    $
    55.76
    
    
    
    7
    %
    
    $
    52.12Average ceiling price ($  per Bbl)
    
    $
    79.05
    
    
    
    22
    %
    
    $
    64.76Gain (loss) upon settlement ($ in thousands)
    
    $
    113
    
    
    
    NM
    
    
    $
    (50
    )Oil written putsVolumes (Bbl)
    
    
    
    
    
    
    NM
    
    
    
    18,000Average price ($  per Bbl)
    
    $
    
    
    
    
    NM
    
    
    $
    38.00Gain (loss) upon settlement ($ in thousands)
    
    $
    
    
    
    
    NM
    
    
    $
    Total oilGain (loss) upon settlement ($ in thousands)
    
    $
    113
    
    
    
    NM
    
    
    $
    (50
    )Natural gas collarsVolumes (MMbtu)
    
    
    1,805,000
    
    
    
    201
    %
    
    
    600,000Average floor price ($  per MMbtu)
    
    $
    7.58
    
    
    
    (11
    %)
    
    $
    8.49Average ceiling price ($  per MMbtu)
    
    $
    16.15
    
    
    
    49
    %
    
    $
    10.84Gain (loss) upon settlement ($ in thousands)
    
    $
    1,311
    
    
    
    901
    %
    
    $
    131Natural gas written putsVolumes (MMbtu)
    
    
    
    
    
    
    NM
    
    
    
    600,000Average price ($  per MMbtu)
    
    $
    
    
    
    
    NM
    
    
    $
    7.05Gain (loss) upon settlement ($ in thousands)
    
    $
    
    
    
    
    NM
    
    
    $
    (108
    )Total gasGain (loss) upon settlement ($ in thousands)
    
    $
    1,311
    
    
    
    5600
    %
    
    
    23
  20




---



##### Table of Contents



Other revenue
 Operating costs and expenses
 Production costs.
 Unit-of-Production
    
    
    Amount(Per Mcfe)
    
    
    (In thousands)Three months ended March 31,
    
    
    Three months ended March 31,2007
    
    
    % Change
    
    
    2006
    
    
    2007
    
    
    % Change
    
    
    2006Production costs:Operating & maintenance
    
    $
    0.62
    
    
    
    (5
    %)
    
    $
    0.65
    
    
    $
    2,304
    
    
    
    10
    %
    
    $
    2,098Expensed workovers
    
    
    (0.04
    )
    
    
    NM
    
    
    
    0.04
    
    
    
    (142
    )
    
    
    NM
    
    
    
    125Ad valorem taxes
    
    
    0.11
    
    
    
    (27
    %)
    
    
    0.15
    
    
    
    407
    
    
    
    (20
    %)
    
    
    507Lease operating expenses
    
    $
    0.69
    
    
    
    (18
    %)
    
    $
    0.84
    
    
    $
    2,569
    
    
    
    (6
    %)
    
    $
    2,730Production taxes
    
    
    0.02
    
    
    
    (94
    %)
    
    
    0.35
    
    
    
    71
    
    
    
    (94
    %)
    
    
    1,144Production costs
    
    $
    0.71
    
    
    
    (40
    %)
    
    $
    1.19
    
    
    $
    2,640
    
    
    
    (32
    %)
    
    $
    3,874
  
    
    production taxes decreased $0.33 per Mcfe, or 94%, due to production tax refunds received on the D.J. Sullivan C-31,
the Dawson State #3, Hobart 60 #4, and the Dawson State #4;
    
    ad valorem taxes decreased $0.04 per Mcfe, or 27%, due to a decrease in estimated property valuations for our oil and
natural gas properties;
    
    O&M expense decreased $0.03 per Mcfe, or 5%, due to lower saltwater disposal and chemical treating costs; and
    
    expense workovers decreased $0.08 per Mcfe as we reversed over-accrued workover expense booked in the fourth quarter
2006.
 General and administrative expenses.
 Three months ended March 31,2007
    
    
    % Change
    
    
    2006(In thousands, except per unit measurements)General and administrative costs
    
    $
    4,229
    
    
    
    28
    %
    
    $
    3,294Capitalized general and administrative costs
    
    
    (2,051
    )
    
    
    34
    %
    
    
    (1,525
    )General and administrative expenses
    
    $
    2,178
    
    
    
    23
    %
    
    $
    1,769General and administrative expense ($  per Mcfe)
    
    $
    0.59
    
    
    
    9
    %
    
    $
    0.54
   21




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##### Table of Contents



Depletion of oil and natural gas properties
 Three months ended March 31,2007
    
    
    % Change
    
    
    2006(In thousands, except per unit measurements)Depletion of oil and natural gas properties
    
    $
    13,959
    
    
    
    36
    %
    
    $
    10,256Depletion of oil and natural gas
properties ($  per Mcfe)
    
    $
    3.76
    
    
    
    19
    %
    
    $
    3.17
  Net interest expense.
 Three months ended March 31,2007
    
    
    % Change
    
    
    2006(In thousands)Interest on Senior Notes
    
    $
    3,008
    
    
    
    NM
    
    
    $
    Interest on senior credit facility
    
    $
    763
    
    
    
    27
    %
    
    
    601Interest on senior subordinated notes (a)
    
    
    
    
    
    
    NM
    
    
    
    578Commitment fees
    
    
    48
    
    
    
    0
    %
    
    
    48Dividend on mandatorily redeemable preferred stock
    
    
    149
    
    
    
    0
    %
    
    
    149Amortization of deferred loan and debt issuance cost
    
    
    205
    
    
    
    72
    %
    
    
    119Other general interest expense
    
    
    1
    
    
    
    (67
    %)
    
    
    3Capitalized interest expense
    
    
    (757
    )
    
    
    85
    %
    
    
    (409
    )Net interest expense
    
    $
    3,417
    
    
    
    214
    %
    
    $
    1,089Weighted average debt outstanding
    
    $
    171,733
    
    
    
    110
    %
    
    $
    81,594Average interest rate on outstanding indebtedness (b)
    
    
    9.4
    %
    
    
    
    
    
    
    6.8
    %
 
 a)
    
    Includes the effects of interest rate swaps.b)
    
    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.  Other income (expense).
  22




---



##### Table of Contents



Three months ended March 31,2007
    
    
    % Change
    
    
    2006(In thousands)Other income (expense):Non-cash gain (loss) for ineffective portion of cash flow hedges
    
    $
    
    
    
    
    (100
    %)
    
    $
    835Non-cash gain (loss)
    
    
    40
    
    
    
    NM
    
    
    
    (42
    )Cash income (expense)
    
    
    150
    
    
    
    32
    %
    
    
    114Total other income (loss)
    
    $
    190
    
    
    
    (79
    %)
    
    $
    907
  Income taxes.
   Three months endedMarch 31, 2007
    
    
    Tax Rate(In thousands)Reconciliation to effective tax rate:Tax at the statutory rate
    
    $
    1,004
    
    
    
    35.00
    %Add the effect of:Non-deductible expenses
    
    
    1
    
    
    
    0.01
    %Preferred stock dividends
    
    
    52
    
    
    
    1.82
    %Incentive stock options not exercised
    
    
    68
    
    
    
    2.37
    %Margin Tax and other state taxes (after-tax)
    
    
    (120
    )
    
    
    (4.17
    %)Other
    
    
    (10
    )
    
    
    (0.36
    %)Total
    
    $
    995
    
    
    
    34.67
    %
 Capital Expenditures
  
    
    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.
  23




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##### Table of Contents



AmountSpent Through
    
    
    Amount2007 Budget
    
    
    March 31, 2007
    
    
    Remaining (a)(In millions)Drilling
    
    $
    91.2
    
    
    $
    28.7
    
    
    $
    62.5Net land and seismic
    
    
    11.2
    
    
    
    2.9
    
    
    
    8.3Capitalized costs (b)
    
    
    11.5
    
    
    
    2.8
    
    
    
    8.7Asset retirement obligation
    
    
    1.0
    
    
    
    0.2
    
    
    
    0.8Total oil and gas capital expenditures (c)
    
    $
    114.9
    
    
    $
    34.6
    
    
    $
    80.3
 
 (a)
    
    Calculated based on the 2007 capital expenditure budget announced in February 2007
less amount spent through March 31, 2007.(b)
    
    Capitalized costs include capitalized interest expense, general and
administrative expense and stock compensation expense.(c)
    
    Excludes other property capital expenditures. Determination of Capital Expenditure Budget
   
    
    Changes in commodity prices;
    
    Variances in forecasted production and the resulting production of our newly drilled wells;
    
    Variances in our production levels from our existing oil and gas properties;
    
    Variances in a prospects risked reserve size;
    
    Variances in drilling and completion costs, service costs and the availability of drilling equipment;
    
    Variances in the availability and timing of drilling and completion services;
    
    Economic and industry conditions at the time of drilling; and
    
    The availability of more economically attractive prospects.
  Liquidity and Capital Resources
 Sources of Capital
   24




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##### Table of Contents



9 5/8% Senior Notes Due 2014
     
    
    rank equally in right of payment with all our existing and future senior indebtedness;
    
    rank senior to all of our future subordinated indebtedness; and
    
    are effectively junior in right of payment to all of our and the Guarantors
existing and future secured indebtedness, including debt of our senior credit
agreement.
   Senior Credit Agreement
     25




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##### Table of Contents



Percent of
    
    EurodollarBorrowing Base
    
    Rate
    
    Base RateUtilized
    
    Advances
    
    Advances(1)<50%
    
    1.250%
    
    0.000%50% and < 75%
    
    1.500%
    
    0.000%75% and < 90%
    
    1.750%
    
    0.250%90%
    
    2.000%
    
    0.500%
 
 (1)
    
    Base rate is defined as for any day a fluctuating rate per annum equal to the higher of:
(a) the Federal Funds Rate plus 1/2 of 1% or (b) the rate of interest in effect for such day
as publicly announced from time to time by Bank of America as its prime rate. The prime
rate is a rate set by Bank of America based upon various factors including Bank of Americas
costs and desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below such announced
rate. Any change in such rate announced by Bank of America shall take effect at the opening of
business on the day specified in the public announcement of such change.  Percent ofBorrowing Base
    
    QuarterlyUtilized
    
    Commitment Fee<50%
    
    
    0.250
    %50% and < 75%
    
    
    0.250
    %75% and < 90%
    
    
    0.375
    %90%
    
    
    0.375
    %
   Mandatorily Redeemable Preferred Stock
   26




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##### Table of Contents



Access to Capital Markets
    Off Balance Sheet Arrangements
  Analysis of Changes In Cash and Cash Equivalents
  Three months ended March 31,2007
    
    
    %Change
    
    
    2006(In thousands)Net income
    
    $
    1,873
    
    
    
    (68
    %)
    
    $
    5,875Non-cash items
    
    
    20,785
    
    
    
    50
    %
    
    
    13,889Changes in working capital and other items
    
    
    (7,074
    )
    
    
    NM
    
    
    
    6,424Cash flows provided by operating activities
    
    $
    15,584
    
    
    
    (40
    %)
    
    
    26,188Cash flows used by investing activities
    
    
    (48,222
    )
    
    
    44
    %
    
    
    (33,492
    )Cash flows provided by financing activities
    
    
    35,489
    
    
    
    220
    %
    
    
    11,082Net increase in cash and cash equivalents
    
    $
    2,851
    
    
    
    (25
    %)
    
    $
    3,778
 Analysis of net cash provided by operating activities
    27




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##### Table of Contents



Analysis of changes in cash flows used in investing activities
 Three months ended March 31,2007
    
    
    %Change
    
    
    2006(In thousands)Capital expenditures for oil and natural gas activities:Drilling
    
    $
    28,677
    
    
    
    (7
    %)
    
    $
    30,807Land and seismic
    
    
    2,936
    
    
    
    (59
    %)
    
    
    7,172Capitalized cost
    
    
    2,808
    
    
    
    37
    %
    
    
    2,057Capitalized asset retirement obligation
    
    
    207
    
    
    
    97
    %
    
    
    105Total
    
    $
    34,628
    
    
    
    (14
    %)
    
    $
    40,141Reconciling Items:Change in accrued drilling costs
    
    $
    13,533
    
    
    
    NM
    
    
    $
    (6,240
    )Other
    
    
    61
    
    
    
    NM
    
    
    
    (409
    )Total Reconciling Items
    
    
    13,594
    
    
    
    NM
    
    
    
    (6,649
    )Net cash used in investing activities
    
    $
    48,222
    
    
    
    44
    %
    
    $
    33,492
  
    
    a decrease in accrued drilling cost changed cash used by investing activities by $19.8 million;
    
    capitalized costs increased by $0.8 million;
    
    drilling capital expenditures decreased by $2.1 million; and
    
    land and seismic expenditures decreased by $4.2 million.
 Analysis of changes in cash flows from financing activities
  Common Stock Transactions
  Shares Issued
    
    
    Net Proceeds(In thousands, except share data)2007 common stock transactions:Exercise of employee stock options
    
    
    5,000
    
    
    $
    232006 common stock transactions:Exercise of employee stock options
    
    
    24,200
    
    
    $
    153
  28




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##### Table of Contents



Other Matters
 Derivative Instruments
   Effects of Inflation and Changes in Prices
  Environmental and Other Regulatory Matters
  New Accounting Pronouncements
    29




---



##### Table of Contents



Forward Looking Information
   30




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Management Opinion Concerning Derivative Instruments
  Derivative Instruments and Hedging Activities
         31




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##### Table of Contents



Natural
    
    
    Purchased
    
    
    WrittenGas
    
    
    Put
    
    
    CallSettlement Period
    
    (MMbtu)
    
    
    (Nymex)
    
    
    (Nymex)Natural Gas Costless Collars04/01/07 - 04/30/07
    
    
    150,000
    
    
    $
    7.00
    
    
    $
    8.0004/01/07 - 04/30/07
    
    
    60,000
    
    
    $
    7.00
    
    
    $
    10.0004/01/07 - 10/31/07
    
    
    280,000
    
    
    $
    7.00
    
    
    $
    15.4504/01/07 - 10/31/07
    
    
    280,000
    
    
    $
    7.25
    
    
    $
    15.2504/01/07 - 10/31/07
    
    
    280,000
    
    
    $
    7.00
    
    
    $
    14.8504/01/07 - 10/31/07
    
    
    700,000
    
    
    $
    7.50
    
    
    $
    11.0004/01/07 - 10/31/07
    
    
    350,000
    
    
    $
    7.00
    
    
    $
    11.6004/01/07 - 10/31/07
    
    
    350,000
    
    
    $
    7.00
    
    
    $
    9.1004/01/07 - 10/31/07
    
    
    350,000
    
    
    $
    7.25
    
    
    $
    9.6005/01/07 - 05/31/07
    
    
    50,000
    
    
    $
    7.00
    
    
    $
    10.0006/01/07 - 06/30/07
    
    
    40,000
    
    
    $
    7.00
    
    
    $
    10.0005/01/07 - 05/31/07
    
    
    130,000
    
    
    $
    7.00
    
    
    $
    8.0005/01/07 - 10/31/07
    
    
    600,000
    
    
    $
    7.00
    
    
    $
    9.5506/01/07 - 06/30/07
    
    
    100,000
    
    
    $
    7.00
    
    
    $
    8.0007/01/07 - 07/31/07
    
    
    30,000
    
    
    $
    7.00
    
    
    $
    10.0008/01/07 - 08/31/07
    
    
    20,000
    
    
    $
    7.00
    
    
    $
    10.0007/01/07 - 07/31/07
    
    
    80,000
    
    
    $
    7.00
    
    
    $
    8.0008/01/07 - 08/31/07
    
    
    60,000
    
    
    $
    7.00
    
    
    $
    8.0009/01/07 - 09/30/07
    
    
    40,000
    
    
    $
    7.00
    
    
    $
    9.3510/01/07 - 10/31/07
    
    
    30,000
    
    
    $
    7.00
    
    
    $
    9.3511/01/07 - 11/30/07
    
    
    50,000
    
    
    $
    8.00
    
    
    $
    10.2011/01/07 - 03/31/08
    
    
    250,000
    
    
    $
    8.00
    
    
    $
    13.4011/01/07 - 03/31/08
    
    
    300,000
    
    
    $
    8.85
    
    
    $
    15.0011/01/07 - 03/31/08
    
    
    300,000
    
    
    $
    9.30
    
    
    $
    15.0011/01/07 - 03/31/08
    
    
    500,000
    
    
    $
    7.50
    
    
    $
    13.3011/01/07 - 03/31/08
    
    
    250,000
    
    
    $
    8.00
    
    
    $
    12.6512/01/07 - 12/31/07
    
    
    40,000
    
    
    $
    8.00
    
    
    $
    10.2001/01/08 - 01/31/08
    
    
    30,000
    
    
    $
    8.00
    
    
    $
    10.2002/01/08 - 02/29/08
    
    
    20,000
    
    
    $
    8.00
    
    
    $
    10.2003/01/08 - 03/31/08
    
    
    10,000
    
    
    $
    8.00
    
    
    $
    10.2004/01/08 - 09/30/08
    
    
    420,000
    
    
    $
    6.75
    
    
    $
    9.7504/01/08 - 09/30/08
    
    
    540,000
    
    
    $
    7.00
    
    
    $
    9.68
 Crude
    
    
    Purchased
    
    
    WrittenOil
    
    
    Put
    
    
    CallSettlement Period
    
    (Bbls)
    
    
    (Nymex)
    
    
    (Nymex)Oil Costless Collars04/01/07 - 06/30/07
    
    
    12,000
    
    
    $
    59.00
    
    
    $
    90.0004/01/07 - 12/31/07
    
    
    9,000
    
    
    $
    55.00
    
    
    $
    79.0004/01/07 - 04/30/07
    
    
    3,000
    
    
    $
    60.00
    
    
    $
    74.7504/01/07 - 04/30/07
    
    
    5,000
    
    
    $
    60.00
    
    
    $
    76.0004/01/07 - 05/31/07
    
    
    12,000
    
    
    $
    55.00
    
    
    $
    80.3004/01/07 - 09/30/07
    
    
    30,000
    
    
    $
    50.00
    
    
    $
    81.5004/01/07 - 09/30/07
    
    
    12,000
    
    
    $
    56.00
    
    
    $
    92.5005/01/07 - 05/31/07
    
    
    4,000
    
    
    $
    60.00
    
    
    $
    76.0005/01/07 - 04/30/08
    
    
    24,000
    
    
    $
    60.00
    
    
    $
    74.7506/01/07 - 06/30/07
    
    
    3,000
    
    
    $
    60.00
    
    
    $
    76.0006/01/07 - 07/31/07
    
    
    8,000
    
    
    $
    55.00
    
    
    $
    80.3006/01/07 - 08/31/07
    
    
    6,000
    
    
    $
    65.00
    
    
    $
    80.0007/01/07 - 08/31/07
    
    
    4,000
    
    
    $
    60.00
    
    
    $
    76.00
  32




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##### Table of Contents



Crude
    
    
    Purchased
    
    
    WrittenOil
    
    
    Put
    
    
    CallSettlement Period
    
    (Bbls)
    
    
    (Nymex)
    
    
    (Nymex)07/01/07 - 10/31/07
    
    
    10,000
    
    
    $
    58.00
    
    
    $
    90.5008/01/07 - 10/31/07
    
    
    9,000
    
    
    $
    55.00
    
    
    $
    80.3009/01/07 - 09/30/07
    
    
    3,000
    
    
    $
    60.00
    
    
    $
    76.0010/01/07 - 10/31/07
    
    
    2,000
    
    
    $
    60.00
    
    
    $
    76.0010/01/07 - 12/31/07
    
    
    9,000
    
    
    $
    59.20
    
    
    $
    90.0010/01/07 - 03/31/08
    
    
    18,000
    
    
    $
    56.00
    
    
    $
    89.9510/01/07 - 03/31/08
    
    
    6,000
    
    
    $
    65.00
    
    
    $
    80.2511/01/07 - 12/31/07
    
    
    4,000
    
    
    $
    55.00
    
    
    $
    80.3011/01/07 - 12/31/07
    
    
    2,000
    
    
    $
    60.00
    
    
    $
    76.0011/01/07 - 03/31/08
    
    
    10,000
    
    
    $
    68.40
    
    
    $
    90.0001/01/08 - 03/31/08
    
    
    7,500
    
    
    $
    57.60
    
    
    $
    90.0001/01/08 - 12/31/08
    
    
    24,000
    
    
    $
    57.50
    
    
    $
    75.5004/01/08 - 10/31/08
    
    
    21,000
    
    
    $
    65.70
    
    
    $
    90.0004/01/08 - 12/31/08
    
    
    18,000
    
    
    $
    57.50
    
    
    $
    76.00
  Natural
    
    
    Purchased
    
    
    WrittenGas
    
    
    Put
    
    
    CallSettlement Period
    
    (MMbtu)
    
    
    (Nymex)
    
    
    (Nymex)Natural Gas Costless Collars06/01/07 - 10/31/07
    
    
    750,000
    
    
    $
    7.00
    
    
    $
    10.2004/01/08 - 10/31/08
    
    
    350,000
    
    
    $
    7.25
    
    
    $
    10.40
   33




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSON OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 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 193431.2
    
    Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 193432.1
    
    Certification of Chief Executive Officer of the Company pursuant to 18 U.S.C. § 135032.2
    
    Certification of Chief Financial Officer of the Company pursuant to 18 U.S.C. § 1350
  34




---



##### Table of Contents



SIGNATURES
  BRIGHAM EXPLORATION COMPANYBy:
    /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  35




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 193431.2
    
    Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 193432.1
    
    Certification of Chief Executive Officer of the Company pursuant to 18 U.S.C. § 135032.2
    
    Certification of Chief Financial Officer of the Company pursuant to 18 U.S.C. § 1350
  36