<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                   FORM 10-QSB

(Mark One)
[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT FOR THE
     TRANSITION PERIOD FROM              TO

                             BLUE RIDGE ENERGY, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

                 NEVADA                                 61-1306702
     (State or Other Jurisdiction of                   (IRS Employer
     Incorporation or Organization)                 Identification No.)

                10777 WESTHEIMER RD, SUITE 170, HOUSTON, TX 77042
                    (Address of Principal Executive Offices)

                                 (832) 358-3900
                (Issuer's Telephone Number, Including Area Code)

                                       N/A
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

                                 Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 7,516,094 shares of common stock as
of May 11, 2004 and 23,300 shares of Series E Preferred Stock as of May 11,
2004.

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

<PAGE>

                                     PART I

                              FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                     INDEX                                                                   NUMBER
------------------------------------------------------------------------------------                         ------
<S>                                                                                                          <C>
ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

         FINANCIAL STATEMENTS OF REGISTRANT

         Balance Sheets as of March 31, 2004 and December 31, 2003                                                3
         Statements of Operations for the three months ended March 31, 2004 and 2003                              4
         Statements of Cash Flows for the three months ended March 31, 2004 and 2003                              5
         Notes to Financial Statements                                                                         6-11

ITEM 2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS                                         12-16
ITEM 3.            CONTROLS AND PROCEDURES                                                                       16

                                     PART II

                                OTHER INFORMATION

ITEM 1.            LEGAL PROCEEDINGS                                                                             17
ITEM 2.            CHANGES IN SECURITIES                                                                         17
ITEM 3.            DEFAULTS UPON SENIOR SECURITIES                                                               17
ITEM 4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                           17
ITEM 5.            OTHER INFORMATION                                                                             17
ITEM 6.            EXHIBITS AND REPORTS ON FORM 8-K                                                              17
SIGNATURE                                                                                                        17
</TABLE>

                                       2

<PAGE>

                             BLUE RIDGE ENERGY, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                       MARCH 31,            DECEMBER 31,
                                                                                         2004                   2003
                                                                                      -----------           ------------
                                                                                      (UNAUDITED)
<S>                                                                                   <C>                   <C>
                                                       ASSETS
CURRENT ASSETS:
   Cash                                                                               $    89,645           $    71,256
   Accounts Receivable:
      Managed Limited Partnerships                                                          8,165                17,035
      Trade and Other                                                                      79,600               189,018
   Prepaid Expenses and Other Current Assets                                               12,871                     -
                                                                                      -----------           -----------
        TOTAL CURRENT ASSETS                                                              190,281               277,309
PROPERTY AND EQUIPMENT, NET                                                               752,073               803,285
OTHER NONCURRENT ASSETS                                                                     7,024                 7,024
                                                                                      -----------           -----------
        TOTAL ASSETS                                                                  $   949,378           $ 1,087,618
                                                                                      ===========           ===========
                                        LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts Payable and Accrued Liabilities                                           $   173,448           $   188,126
   Advances from Related Parties                                                          470,343               303,874
   Current Portion Long Term Debt                                                               -                 6,000
                                                                                      -----------           -----------
      TOTAL CURRENT LIABILITIES                                                           643,791               498,000
                                                                                      -----------           -----------
COMMITMENTS AND CONTINGENCIES                                                                   -                     -
STOCKHOLDERS' EQUITY:
   Preferred Stock, $0.001 par value; 5,000,000 shares authorized; 23,300
      shares issued and outstanding at March 31, 2004 and December 31,
      2003 (liquidation preference of $233,000
      at March 31, 2004 and December 31, 2003)                                                 23                    23
   Common Stock, $0.005 par value; 20,000,000 shares authorized; 7,516,094
      shares issued and outstanding at March 31, 2004 and December 31, 2003                37,581                37,581
   Additional Paid-In Capital                                                           6,339,658             6,339,658
   Accumulated Deficit                                                                 (6,071,675)           (5,787,644)
                                                                                      -----------           -----------
      TOTAL STOCKHOLDERS' EQUITY                                                          305,587               589,618
                                                                                      -----------           -----------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $   949,378           $ 1,087,618
                                                                                      ===========           ===========
</TABLE>

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

                                       3

<PAGE>

                             BLUE RIDGE ENERGY, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                                    MARCH 31,
                                                                        ---------------------------------
                                                                           2004                   2003
                                                                        -----------           -----------
<S>                                                                     <C>                   <C>
OPERATING REVENUES:
Oil and Gas Property Sales to Related Parties                           $         -           $   255,000
Oil and Gas Sales                                                           130,148                73,590
                                                                        -----------           -----------
        TOTAL OPERATING REVENUES                                            130,148               328,590
                                                                        -----------           -----------
OPERATING COSTS AND EXPENSES:
   Turnkey Contract Costs                                                         -                 9,457
   Cost of Oil and Gas Property Sales to Related Parties                          -                95,000
   Lease Operating Costs                                                     46,282                12,304
   Depreciation, Depletion and Amortization                                  63,969               178,188
   Dry Hole and Abandonment Costs                                               158                85,173
   Marketing Costs                                                                -                24,804
   General and Administrative Costs                                         292,080               232,130
                                                                        -----------           -----------
        TOTAL OPERATING COSTS AND EXPENSES                                  402,489               637,056
                                                                        -----------           -----------
OPERATING LOSS                                                             (272,341)             (308,466)
                                                                        -----------           -----------
OTHER (EXPENSE) INCOME:
   Interest Income                                                                -                   461
   Other Expense                                                             (4,700)                    -
                                                                        -----------           -----------
        TOTAL OTHER (EXPENSE) INCOME                                         (4,700)                  461
                                                                        -----------           -----------
        LOSS BEFORE INCOME TAXES                                           (277,041)             (308,005)
INCOME TAX PROVISION                                                              -                     -
                                                                        -----------           -----------
       NET LOSS                                                         $  (277,041)          $  (308,005)
                                                                        -----------           -----------
       SERIES E PREFERRED STOCK CASH DIVIDENDS                               (6,990)              (61,022)
                                                                        -----------           -----------
       NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS                     $  (284,031)          $  (369,027)
                                                                        ===========           ===========
       NET LOSS PER COMMON SHARE                                        $     (0.04)          $     (0.05)
                                                                        ===========           ===========
Weighted Average Common Shares Outstanding - Basic and Diluted            7,516,094             7,516,094
                                                                        ===========           ===========
</TABLE>

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

                                       4

<PAGE>

                             BLUE RIDGE ENERGY, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                               MARCH 31,
                                                                     -----------------------------
                                                                       2004                 2003
                                                                     ---------           ---------
<S>                                                                  <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Loss                                                          $(277,041)          $(308,005)
   Adjustments to Reconcile Net Loss to Net Cash Flows from
      Operating Activities:
      Depreciation, Depletion and Amortization                          63,969             178,188
      Dry Hole and Abandonment Costs                                       158              85,173
      Change in Assets from Discontinued Operations                          -             164,000
      Change in Operating Assets and Liabilities:
        Accounts Receivable                                            118,288              (7,255)
        Prepaid Expenses and Other Assets                              (12,871)             47,099
        Seismic Data Costs Payable                                           -            (252,978)
        Accounts Payable and Accrued Liabilities                       (14,678)            (31,582)
                                                                     ---------           ---------
       NET CASH USED IN OPERATING ACTIVITIES                          (122,175)           (125,360)
                                                                     ---------           ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of Furniture and Computer Equipment                         (8,829)                  -
   Purchase of Oil and Gas Properties                                   (4,086)           (247,729)
                                                                     ---------           ---------
       NET CASH USED IN INVESTING ACTIVITIES                           (12,915)           (247,729)
                                                                     ---------           ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on Long Term Debt                                           (6,000)             (6,000)
   Increase (decrease) in Advances from Affiliate                      166,469             (79,935)
   Preferred Stock Subscription Receivable                                   -             260,000
   Cost to Sell Preferred Stock                                              -             (14,400)
   Dividends Paid                                                       (6,990)            (61,022)
                                                                     ---------           ---------
       NET CASH PROVIDED BY FINANCING ACTIVITIES                       153,479              98,643
                                                                     ---------           ---------
       NET INCREASE (DECREASE) IN CASH                                  18,389            (274,446)
CASH AT BEGINNING OF PERIOD                                             71,256             335,907
                                                                     ---------           ---------
CASH AT END OF PERIOD                                                $  89,645           $  61,461
                                                                     =========           =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash Paid for Interest                                            $       -           $       -
                                                                     =========           =========
   Cash Paid for Income Taxes                                        $       -           $       -
                                                                     =========           =========
</TABLE>

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

                                       5

<PAGE>

                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1.    OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM REPORTING

      The financial statements of the Registrant included herein have been
prepared, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Although certain information normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States has been omitted, the Registrant believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these financial statements be read in conjunction with the
financial statements and the notes thereto included in the Form 10-KSB of the
Registrant for its fiscal year ended December 31, 2003 and subsequent filings
with the Securities and Exchange Commission.

      The financial statements included herein reflect all adjustments
(consisting only of normal recurring accruals) which, in the opinion of
management, are necessary to present a fair statement of the results for the
interim periods.

      The results for interim periods are not necessarily indicative of trends
or of results to be expected for a full year.

GENERAL

      Blue Ridge Energy, Inc. (BR Energy), a Nevada corporation, was organized
in November, 1994, as Gem Source, Incorporated, and subsequently changed the
name to Blue Ridge Energy, Inc. in May, 1996. BR Energy has offices at 10777
Westheimer Rd., Suite 170, Houston, Texas 77042 and 632 Adams Street, Suite 710,
Bowling Green, Kentucky, 42101.

      BR Energy sponsors oil and gas drilling partnerships through which it
raises money for the drilling of oil and gas wells and participates for a 1%
partnership interest as the managing general partner of the oil and gas
exploration partnerships. BR Energy also acquires direct working interest
participation in oil and gas properties. The participation includes both
operated and non-operated working interest in exploratory and development wells.

      With a new technical management team, additional directors and
establishing an office in Houston, BR Energy began a new business plan that
focuses on shifting our oil and gas exploration and development activities from
the Appalachian Basin to well-established producing geologic structures in the
onshore Gulf Coast areas of Texas and Louisiana, and East Texas. Our objectives
are to increase our proved reserves, cash flow and stockholder equity through
oil and natural gas drilling projects. BR Energy intends to maintain an active
role in the oil and gas industry as an operator of oil and gas wells, a sponsor
of oil and gas drilling programs, a participant in oil and gas programs and as
an independent producer of oil and natural gas.

BR Energy is engaged in the oil and gas business primarily in Texas, Kentucky,
New Mexico and West Virginia. During March of 2002, BR Energy acquired a 35%
interest in Channel LLC resulting in a 17.5% working interest in a large ongoing
Texas onshore exploration program, consisting of 48,000 miles of seismic data in
the Texas Gulf Coast area and the oil and gas properties acquired through the
utilization of this data. The centerpiece of this program utilizes a large
onshore Texas seismic database comprising approximately 48,000 miles and
covering 100+ counties of the Texas Gulf Coast, East Texas, and South Texas. The
great majority of this data has never been put into the "public domain" and was
acquired by a major oil company thought to be primarily exploring for large deep
targets. The acquisition of this interest and development of the oil and gas
properties acquired through the utilization of this data was to have been funded
with the proceeds from the sale of 500,000 shares of Series E Preferred Stock
for $5,000,000 out of a private offering for 750,000 shares of Series E
Preferred Stock under Regulation D of Section 506 of the Securities Act of 1933.

      In order to facilitate the purchase of this interest, BR Energy's majority
shareholder, Blue Ridge Group, Inc. (BR Group), committed to extending BR Energy
a $1,500,000 line of credit with a term of one year, bearing interest at 9% per
annum on all unpaid balances and was secured by all of BR Energy's interests in
the exploration program. This $1,500,000 balance was satisfied in full on March
31, 2003 via the sale of 150,000 shares of BR Energy's Series E Preferred Stock
to BR Group for $1,500,000. At this time, BR Group also committed to the
purchase of an additional 100,000 shares for $1,000,000 to be paid in four
quarterly installments. Two of these installments were paid by BR Group in
December 2002 and March 2003, thereby bringing BR Group's total investment in BR
Energy's Series E Preferred Stock to $2,000,000 as of March 31, 2003.

      As a result of BR Energy not selling the remaining shares of Series E
Preferred Stock by the closing of the offering on December 31, 2002 to achieve
the $5,000,000 needed, and not having the required capital available to acquire
and develop the 100+ oil and gas prospects, identified to date, BR Energy
entered into a purchase and sale agreement with BR Group in May 2003. BR Group
agreed to 1) retire its 200,000 shares of Series E Preferred Stock which it had
received for the $2,000,000 paid to BR Energy to date, 2) cancel its
subscription agreement for the remaining 50,000 shares of Series E Preferred
Stock, 3) assume the remaining

                                       6

<PAGE>

                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

$474,636 in BR Energy debt associated with the acquisition of the seismic
information and 4) commit to provide all funds required by this interest in the
acquisition and development of oil and gas properties identified. BR Energy had
originally recorded an asset of $2.3 million, which was being amortized over
four years and had a balance of $1.7 million as of May 2003 when this agreement
with BR Group was reached.

      In return for this agreement, BR Energy agreed to repay $187,000 of the
funds received from the sale of the Series E Preferred Stock, cancelled the
remaining subscription receivable for 50,000 shares of Series E Preferred Stock
and transferred to BR Group all of its interest in the seismic information,
which had a book value of $1,719,000 when this new agreement was reached with BR
Group, and any future oil and gas properties identified by this information to
be acquired and developed. The net effect of the transaction was BR Energy
recorded $568,752 in Additional Paid-In-Capital from BR Group. BR Energy
retained all of its interest in any oil and gas properties previously acquired
and developed under this arrangement. Additionally, BR Energy will be carried at
no cost for 25% of any future interests acquired and developed by BR Group
through the utilization of this data. When BR Group has recouped 100% of all
monies expended for the initial seismic acquisition, as well as the subsequent
acquisition and development of oil and gas properties under this arrangement, BR
Energy shall have the right, but not the obligation, to reverse its position
with BR Group whereby BR Energy would receive 75% of the interest in future oil
and gas properties and "carry" BR Group for 25% of the interest.

      BR Energy had a net loss of approximately $277,000 during the first three
months of 2004 and had a working capital deficit of approximately $454,000 at
March 31, 2004. The accompanying financial statements have been prepared
assuming that BR Energy will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the ordinary course
of business. It is management's opinion that the going concern basis of
reporting its financial position and results of operations is appropriate at
this time.

      Management has taken significant steps to address the financial condition
of BR Energy, to increase cash flows and to achieve better operating results,
principally by implementing its new business plan and discontinuing its contract
drilling service segment in 2002. BR Energy has extended the March 3, 2003 sales
and service agreement with BR Group until March 3, 2005 and has obtained a
resolution from BR Group to provide the necessary financial support for BR
Energy through at least April 1, 2005.

USE OF ESTIMATES

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.

ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS

      BR Energy follows the provisions of SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires legal obligations associated with
the retirement of long-lived assets to be recognized at their fair value at the
time that the obligations are incurred. Upon initial recognition of a liability,
that cost should be capitalized as part of the related long-lived asset and
allocated to expense over the useful life of the asset. Management has
determined that any future costs related to plugging and abandonment of
producing wells will be offset by the value of equipment removed from the well
site. Therefore, no liability has been recorded as of March 31, 2004. These
costs will be evaluated quarterly and, if circumstances dictate a liability is
necessary, an amount will be recorded and subsequently amortized over the life
of the well.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

      Financial Accounting Standards Board Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities, was issued in January 2003. FIN No.
46 addresses consolidation by business enterprises of variable interest
entities. It applied immediately to variable interest entities created after
January 2003. For entities created prior to this date, FIN No. 46 was to be
effective in the fourth quarter 2003; however, FIN No. 46 (revised December
2003) delayed the effective date to the first quarter of 2004. The adoption of
FIN No. 46 had no impact on BR Energy's financial statements. The adoption of
FIN No. 46 (revised) had no impact on the interim financial statements and is
not expected to have a material impact on the financial statements in the
future.

                                       7

<PAGE>

                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

REVENUE RECOGNITION

      Oil and gas revenue, from working interests BR Energy owns, are recognized
at the point of sale. Revenues from Turnkey contract sales and property sales
are recognized when the contracts and property sales are completed.

MANAGED LIMITED PARTNERSHIPS

      BR Energy sponsors limited partnerships for which it serves as the
Managing General Partner. The purpose of these partnerships is to acquire and
develop oil and gas leases. The partnerships enter into turnkey drilling
contracts with BR Energy to drill, complete and equip, if warranted, the oil and
gas wells of the partnerships. BR Energy receives direct compensation,
reimbursement of costs and expenses, and revenues related to turnkey drilling
contracts. BR Energy normally participates for 1% of the Limited Partnerships as
the Managing General Partner. BR Energy follows the industry practice of pro
rata consolidation of its investments in these partnerships. Accordingly, BR
Energy records on its financial statements its pro rata share of the assets,
liabilities, revenues and expenses of each partnership.

CONCENTRATIONS OF CREDIT RISK ARISING FROM CASH DEPOSITS IN EXCESS OF INSURED
LIMITS

      BR Energy maintains its cash balances in three financial institutions
located in Houston, Texas and Bowling Green Kentucky. The balances are insured
by the Federal Deposit Insurance Corporation for up to $100,000. At March 31,
2004, there were no cash balances that were uninsured.

PROPERTY AND EQUIPMENT

      BR Energy follows the successful efforts method of accounting for oil and
gas properties and producing activities. Under the successful efforts method of
accounting, costs, which relate directly to the discovery of oil and gas
reserves are capitalized. These capitalized costs include;

            (1) the costs of acquiring mineral interest in properties,

            (2) costs to drill and equip exploratory wells that find proved
            reserves,

            (3) costs to drill and equip development wells, and

            (4) costs for support equipment and facilities used in oil and gas
            producing activities.

      These costs are depreciated, depleted or amortized on the unit of
productions method, based on estimates of recoverable proved developed oil and
gas reserves. Costs to drill exploratory wells that do not find proved reserves,
geological and geophysical costs, and costs of carrying and retaining unproved
properties are expensed.

      The costs of acquiring unproved properties are capitalized as incurred and
carried until the property is reclassified as a producing oil and gas property,
or considered impaired. BR Energy annually assesses its unimproved properties to
determine whether they have been impaired. If the results of this assessment
indicate impairment, a loss is recognized by providing a valuation allowance.
When an unproved property is surrendered, the costs related thereto are charged
to the applicable valuation allowance, if adequate, or charged as a loss to
current operations.

      The costs of drilling exploration wells are capitalized as wells in
progress pending determination of whether the well has found proved reserves.
Once a determination is made, the capitalized costs are either charged to
expense or reclassified as part of the costs of BR Energy's wells and related
equipment. In the absence of a determination as to whether the reserves that
have been found can be classified as proved, the costs of drilling such an
exploratory well are not carried as an asset for more than one year following
completion of drilling. If after a year has passed, BR Energy is unable to
determine that proved reserves have been found, the well is assumed to be
impaired, and its costs are charged to expense.

SURRENDER OR ABANDONMENT OF DEVELOPED PROPERTIES

      Normally, no separate gain or loss is recognized if only an individual
well or individual item of equipment is abandoned or retired or if only a single
lease or other part of a group of proved properties constituting the
amortization base is abandoned or retired as long as the remainder of the
property or group of properties continues to produce oil or gas. The asset being
abandoned or retired is deemed to be fully amortized, and its cost is charged to
accumulated depreciation, depletion or amortization. When the last well on an
individual property or group of properties with common geological structures
ceases to produce and the entire property or property group is abandoned, gain
or loss, if any, is recognized.

                                       8

<PAGE>

                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

OTHER DISPOSITIONS

      Upon disposition or retirement of property and equipment other than oil
and gas properties, the cost and related accumulated depreciation are removed
from the accounts and the gain or loss thereon, if any, is credited or charged
to income. BR Energy recognizes the gain or loss on the sale of either a part of
a proved oil and gas property or of an entire proved oil and gas property
constituting a part of a field upon the sale or other disposition of such. The
unamortized cost of the property or group of properties, a part of which was
sold or otherwise disposed of, is apportioned to the interest sold and interest
retained on the basis of the fair value of those interests.

IMPAIRMENT OF LONG-LIVED ASSETS

      BR Energy follows the provisions of SFAS No. 144. Consequently, BR Energy
reviews its long-lived assets to be held and used, including oil and gas
properties accounted for under the successful efforts method of accounting.
Whenever events or circumstances indicate the carrying value of those assets may
not be recoverable, an impairment loss for proved properties and capitalized
exploration and development costs is recognized. BR Energy assesses impairment
of capitalized costs of proved oil and gas properties by comparing net
capitalized costs to undiscounted future net cash flows on a field-by-field
basis using known expected prices, based on set agreements. If an impairment is
indicated based on undiscounted expected future cash flows, then an impairment
is recognizable to the extent that net capitalized costs exceed the estimated
fair value of the property. Fair value of the property is estimated by BR Energy
using the present value of future cash flows discounted at 10%, in accordance
with SFAS No. 69, Disclosures about Oil and Gas Producing Activities.

INCOME/(LOSS) PER COMMON SHARE

      BR Energy calculates basic earnings per common share ("Basic EPS") using
the weighted average number of common shares outstanding for the period. The
income available to common shareholders is computed after deducting dividends on
the Series E Preferred Stock. The convertible preferred stock and outstanding
stock warrants are considered anti-dilutive and therefore, excluded from the
earnings per share calculations. As BR Energy recorded a loss in 2004 and 2003,
common share equivalents outstanding would be anti-dilutive, therefore, have not
been included in the weighted average shares outstanding.

      Various warrants for the purchase of common stock were outstanding as of
March 31, 2004. These warrants were convertible into 1,512,136 shares of common
stock that are exercisable at prices ranging from $0.40 to $6.00 per share.

STOCK OPTIONS

      BR Energy accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation." Accordingly, BR Energy has not recognized compensation expense
for stock options granted. BR Energy granted 20,000 stock options in the first
quarter of 2004. Had compensation cost for employee stock options been
determined based on the fair value at the grant date consistent with SFAS No.
123, BR Energy's net loss and loss per share would have been as follows:

<TABLE>
<CAPTION>
                                         MARCH 31,      MARCH 31,
                                           2004           2003
                                       -----------    -----------
<S>                                    <C>            <C>
Net Loss, as reported...............   $   277,041    $   308,005
Stock Based Compensation............         3,844          4,356
                                       -----------    -----------
Pro Forma Net Loss..................   $   280,885    $   312,361
                                       ===========    ===========
Net Loss Attributable to Common
Stockholders, as reported...........   $   284,031    $   369,027
Stock Based Compensation............         3,844          4,356
                                       -----------    -----------
Pro Forma Net Loss..................   $   287,875    $   373,383
                                       ===========    ===========
Basic and Diluted Loss per Common
Share, as reported..................   $     (0.04)   $     (0.04)
                                       ===========    ===========
Basic and Diluted Loss per Common
Share, Pro Forma....................   $     (0.04)   $     (0.05)
                                       ===========    ===========
</TABLE>

                                       9

<PAGE>

                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

      The fair value of each option grant to employees was estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions:

<TABLE>
<CAPTION>
                                                           MARCH 31,   MARCH 31,
                                                             2004         2003
                                                          ----------   ---------
<S>                                                       <C>          <C>
Risk free interest rate....................                    3.86%        4.26%
Expected option life.......................                10 years     10 years
Expected dividend yield....................                       0%           0%
Volatility factor..........................                    1.02         1.20
Weighted average grant date fair value of options         $    0.31    $    0.33
</TABLE>

INCOME TAXES

      Income taxes in the three months ended March 31, 2004 and 2003 have been
provided for at an estimated effective tax rate of 0%.

      Income taxes are provided for under the liability method in accordance
with SFAS No. 109, Accounting for Income Taxes, which takes into account the
differences between financial statement treatment and tax treatment of certain
transactions. It is uncertain as to whether BR Energy will generate sufficient
future taxable income to utilize the net deferred tax assets, therefore for
financial reporting purposes, a valuation allowance of $961,000 and $856,000 as
of March 31, 2004 and December 31, 2003, respectively, has been recognized to
offset the net deferred tax assets.

2.    AFFILIATED OIL AND GAS PARTNERSHIPS

      BR Energy, from time to time, provides turnkey drilling services for the
various oil and gas partnerships which it sponsors. No fees were earned for
these drilling services, including the sale of leases to the partnerships,
during the three months ended March 31, 2004 and 2003.

      Included in the financial statements are contributions made to the various
sponsored oil and gas partnerships, less the applicable loss generated by these
partnerships relative to BR Energy's percentage ownership. BR Energy has
allocated, on a pro-rata basis, the amounts associated with these investments to
the appropriate asset, liability, income and expense accounts.

3.    RELATED PARTY TRANSACTIONS

STOCK TRANSACTIONS

      As of March 31, 2004, there are 7,516,094 shares of common stock issued
and outstanding. A total of 4,141,233 shares are held by BR Group and the
remaining 3,374,861 shares are held by approximately 520 shareholders.

ADVANCES TO/FROM RELATED PARTIES

      BR Group provides management, administrative, accounting and geological
services for BR Energy at a rate of $10,000 per month. The fee amount has been
determined on a proportional basis based upon employees' time spent because
specific identification of expenses is not practical. BR Energy believes that
this cost allocation method of expenses is reasonable and that this management
fee represents the fair market value of the services rendered. BR Energy also
reimburses BR Group for direct costs paid on its behalf and the costs of various
drilling services. Additionally, as a matter of ongoing business, BR Group will
advance funds to BR Energy against work in progress with no interest being
charged on the balance. As of March 31, 2004 and December 31, 2003, net advances
from BR Group were approximately $470,000 and $304,000, respectively.

      During the first quarter of 2003, BR Energy entered into a sales and
service agreement with BR Group whereby BR Energy will assemble oil and gas
prospects, if requested by BR Group, and conduct the drilling, completion and
production operations of the oil and gas wells on said prospects. For these
services BR Energy will receive a prospect fee on the acreage acquired ($250 per
acre), a 10% Carried Working Interest in the acreage acquired, a 7.5% management
fee on all monies expended in drilling and completing the wells and various
overhead fees. The first three prospects under this arrangement were sold to BR
Group during 2003 for $938,000 less expenses of $429,000 for a net prospect fee
of $509,000 which was included in advances to/from BR Group at March 31, 2004.

                                       10

<PAGE>

                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

      BR Energy's President, Patrick A. Kelleher will receive a 2% Carried
Working Interest on all new oil and gas prospects developed by him for BR Energy
and he will receive a 0.5% Carried Working Interest on all oil and gas prospects
developed from the seismic acquisition previously mentioned.

4.    COMMITMENTS AND CONTINGENCIES

COMMITMENTS

      BR Energy nor any of its properties are subject to any material pending
legal proceedings. From time to time, BR Energy may be a party to litigation in
the ordinary course of business, none of which is expected to have a material
adverse effect on the financial condition of BR Energy.

CONTINGENCIES

      BR Energy's oil and gas exploration and production operations are subject
to inherent risks, including blowouts, fire and explosions which could result in
personal injury or death, suspended drilling operations, damage to or
destruction of equipment, damage to producing formations and pollution or other
environmental hazards. As a protection against these hazards, BR Energy
maintains general liability insurance coverage of approximately $10 million per
occurrence and in the aggregate. BR Energy believes it is adequately insured for
public liability and property damage to others with respect to its operations.
However, such insurance may not be sufficient to protect BR Energy against
liability for all consequences of well disasters, extensive fire damage, or
damage to the environment. BR Energy has never been fined or incurred liability
for pollution or other environmental damage in connection with its operations.

                                       11

<PAGE>


                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

GENERAL:

Blue Ridge Energy, Inc. ("BR Energy"), a Nevada corporation, was organized in
November, 1994, as Gem Source, Incorporated, and subsequently changed the name
to Blue Ridge Energy, Inc. in May 1996. BR Energy has offices at 10777
Westheimer Rd., Suite 170, Houston, TX 77042 and 632 Adams Street, Suite 710,
Bowling Green, KY 42101.

All of the periodic report filings with the Securities and Exchange Commission
("SEC") pursuant to Section 13 or 15(d) of the Securities and Exchange Act of
1934, as amended, are available through the SEC web site located at www.sec.gov,
including the annual report on Form 10-KSB, quarterly reports on Form 10-QSB,
current reports on Form 8-K and any amendments to those reports. BR Energy will
also make available to any stockholder, without charge, copies of its Annual
Report on Form 10-KSB as filed with the SEC. For copies of this, or any other
filings, please contact: Norman Haisler at Blue Ridge Energy, Inc. 10777
Westheimer, Suite 170 Houston, Texas 77042 or call (832) 358-3900.

BR Energy is engaged in the oil and gas business primarily in Texas, Kentucky,
New Mexico and West Virginia. BR Energy sponsors oil and gas drilling
partnerships through which it raises funds for the drilling of oil and gas wells
and usually participates for a 1% partnership interest as the managing general
partner of the partnerships. BR Energy also acquires direct working interest
participation in oil and gas properties. The working interest participation
includes exploratory and development wells and both operated and non-operated
working interest participation. BR Energy intends to maintain an active role in
the oil and gas industry as an operator of oil and gas wells, a sponsor of oil
and gas drilling programs, a participant in oil and gas programs and as an
independent producer of oil and gas.

With the establishment of a new technical management team, additional directors
and an office in Houston, BR Energy began a new business plan that focuses on
shifting our oil and gas exploration and development activities from the
Appalachian Basin to well-established producing geologic structures in the
onshore Gulf Coast areas of Texas and Louisiana, and East Texas. Our objectives
are to increase our proved reserves, cash flow and stockholder equity through
oil and natural gas drilling projects.

During March of 2002, BR Energy acquired a 35% interest in Channel LLC resulting
in a 17.5% working interest in a large ongoing Texas onshore exploration
program, consisting of 48,000 miles of seismic data in the Texas Gulf Coast area
and the oil and gas properties acquired through the utilization of this data.
The centerpiece of this program utilizes a large onshore Texas seismic database
comprising approximately 48,000 miles and covering 100+ counties of the Texas
Gulf Coast, East Texas, and South Texas. The great majority of this data has
never been put into the "public domain" and was acquired by a major oil company
thought to be primarily exploring for large deep targets. The acquisition of
this interest and development of the oil and gas properties acquired through the
utilization of this data was to have been funded with the proceeds from the sale
of 500,000 shares of Series E Preferred Stock for $5,000,000 out of a private
offering for 750,000 shares of Series E Preferred Stock under Regulation D of
Section 506 of the Securities Act of 1933.

In order to facilitate the purchase of this interest, BR Energy's majority
shareholder, Blue Ridge Group, Inc. (BR Group), committed to extending BR Energy
a $1,500,000 line of credit with a term of one year, bearing interest at 9% per
annum on all unpaid balances and was secured by all of BR Energy's interests in
the exploration program. This $1,500,000 balance was satisfied in full on March
31, 2003 via the sale of 150,000 shares of BR Energy's Series E Preferred Stock
to BR Group for $1,500,000. At this time, BR Group also committed to the
purchase of an additional 100,000 shares for $1,000,000 to be paid in four
quarterly installments. Two of these installments were paid by BR Group in
December 2002 and March 2003, thereby bringing BR Group's total investment in BR
Energy's Series E Preferred Stock to $2,000,000 as of March 31, 2003.

As a result of BR Energy not selling the remaining shares of Series E Preferred
Stock by the closing of the offering on December 31, 2002 to achieve the
$5,000,000 needed, and not having the required capital available to acquire and
develop the 100+ oil and gas prospects, identified to date, BR Energy entered
into a purchase and sale agreement with BR Group in May 2003. BR Group agreed to
1) retire its 200,000 shares of Series E Preferred Stock which it had received
for the $2,000,000 paid to BR Energy to date, 2) cancel its subscription
agreement for the remaining 50,000 shares of Series E Preferred Stock, 3) assume
the remaining $474,636 in BR Energy debt associated with the acquisition of the
seismic information and 4) commit to provide all funds required by this interest
in the acquisition and development of oil and gas properties identified. BR
Energy had originally recorded an asset of $2.3 million, which was being
amortized over four years and had a balance of $1.7 million as of May 2003 when
this agreement with BR Group was reached.

                                       12

<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

In return for this agreement, BR Energy agreed to repay $187,000 of the funds
received from the sale of the Series E Preferred Stock, cancelled the remaining
subscription receivable for 50,000 shares of Series E Preferred Stock and
transferred to BR Group all of its interest in the seismic information, which
had a book value of $1,719,000 when this new agreement was reached, and any
future oil and gas properties identified by this information to be acquired and
developed. The net effect of the transaction was BR Energy recorded $568,752 in
Additional Paid-In-Capital from BR Group. BR Energy retained all of its interest
in any oil and gas properties previously acquired and developed under this
arrangement. Additionally, BR Energy will be carried at no cost for 25% of any
future interests acquired and developed by BR Group through the utilization of
this data. When BR Group has recouped 100% of all monies expended for the
initial seismic acquisition, as well as the subsequent acquisition and
development of oil and gas properties under this arrangement, BR Energy shall
have the right, but not the obligation, to reverse its position with BR Group
whereby BR Energy would receive 75% of the interest in future oil and gas
properties and "carry" BR Group for 25% of the interest.

At March 31, 2004, BR Energy had total assets of $949,000, total liabilities of
$644,000 and stockholders' equity of $306,000. BR Energy had a net loss of
$277,000 during the first three months of 2004 as compared to a net loss of
$308,000 for the same period in 2003. The net loss per common share, which takes
into account cash dividends paid on preferred stock decreased to $0.04 per share
during the first three months of 2004 as compared to $0.05 during the same
period in 2003. All per share data in this report has been adjusted to give
effect to applicable stock issues and conversions.

As of March 31, 2004, BR Energy has participated, either directly or indirectly
through its sponsored limited partnerships, in 107 wells, of which 27 are
presently productive and located in Kentucky, Texas, West Virginia and New
Mexico. In addition to the 27 wells, there are 41 wells in four partnerships
operated by Eagle Energy, Inc. See further discussion below in the "Developed
Properties" section.

KEY PROPERTIES

The working interest owned by BR Energy, either directly or indirectly through
the oil and gas partnerships, is owned jointly with other working interest
partners. Management does not believe any of these burdens materially detract
from the value of the properties or materially interfere with their use.

The following are the primary properties held by BR Energy as of March 31, 2004:

DEVELOPED PROPERTIES

Pepperbush 3D Area: Three wells were drilled in Polk County, Texas during the
first quarter of 2004 and are currently producing a combined rate of 1,700
MCFPD. BR Energy owns 4.25% of the working interest, with a 3.20% net revenue
interest in each well.

Toadflax Prospect: BR Energy owns 4.25% of the working interest, with a 3.20%
net revenue interest in 1 well located in Polk County, Texas which was drilled
during the third quarter of 2003 and is awaiting pipeline connection in 2004.

Lopseed Prospect: BR Energy owns 4.25% of the working interest, with a 3.20% net
revenue interest in 1 well located in Polk County, Texas which was drilled
during the third quarter of 2003 and is awaiting pipeline connection in 2004.

Wolfsbane Prospect: BR Energy owns 13.6% of the working interest, with a 10.53%
net revenue interest in 1 well located in Walker County, Texas which began
producing in the second quarter of 2003. The well is currently shut in awaiting
recompletion.

Agrimony Prospect: BR Energy owns 13.6% of the working interest, with a 10.59%
net revenue interest in 1 well located in Polk County, Texas which began
producing in the second quarter of 2003. The well is currently shut in awaiting
recompletion.

Pepperbush Prospect: BR Energy owns 13.6% of the working interest, with a 10.41%
net revenue interest in 1 well located in Polk County, Texas which began
producing in the second quarter of 2003 and is producing 500 MCFPD.

Yarrow Prospect: BR Energy owns 13.6% of the working interest, with a 10.41% net
revenue interest in 1 well located in Tyler County, Texas which began producing
in the fourth quarter of 2002 and is producing 400 MCFPD.

                                       13

<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

West Pebble Island Prospect: BR Energy owns 7.7% of the working interest, with a
5.59% net revenue interest in the Arco Fee #1-R located in Tyler County, Texas
which began producing in early 2003 and is producing 50 BOPD.

Keegan Gibson #1: BR Energy owns 72.45% of the working interest, with a 50% net
revenue interest in this well located in Smith County, Texas which is producing
approximately 10 BOPD.

Shelby County, Texas: BR Energy owns a 0.4% Net Revenue Interest in the Hailey
Bridges #1 well in Shelby County, Texas, which began producing gas in September,
2000 and continues to produce approximately 1,100 MCFPD.

Homestake #1: The Homestake #1 oil well is a well located in Lea County, New
Mexico. BR Energy owns 66.9% of the Working Interest in the Homestake #1 with a
49.7% Net Revenue Interest. It is producing 10 MCFPD and 4 BOPD.

Big Sandy Prospect: As of March 31, 2004 10 gas wells in the Big Sandy Prospect
located in eastern Kentucky are currently producing approximately 200 MCFPD of
gas. BR Energy owns varying interests in these wells ranging from 0.45% to 27.6%
of the working interest with net revenue interests ranging from 0.34% to 20.5%
in each well.

In March 2003, BR Energy transferred all of its rights and interest in the
Boon's Camp Partnership, the BR Development 2001-II Partnership, the BR
Development Plus 2000 Partnership and the BR Private Development 2001-A
Partnership to Eagle Energy, Inc. (a company formed by BR Energy's former
president) in exchange for a 1% interest in these four partnerships. In
addition, BR Energy still retains its 25% ownership as a limited partner through
its direct investment in the BR Development 2000 Partnership. For the three
months ended March 31, 2004, the total cash flow from the four partnerships was
$3,300. As noted above, there are 41 gas wells producing in these four
partnerships.

UNDEVELOPED PROPERTIES

Texas Onshore Seismic Acquisition: During March of 2002, BR Energy acquired a
35% interest in Channel LLC resulting in a 17.5% working interest in a large
ongoing Texas onshore exploration program, consisting of 48,000 miles of seismic
data in the Texas Gulf Coast area and the oil and gas properties acquired
through the utilization of this data. In May of 2003, BR Energy agreed to
transfer to BR Group all of its interest in the seismic information and any
future oil and gas properties identified by this information to be acquired and
developed. BR Energy retained all of its interest in any oil and gas properties
previously acquired and developed under this arrangement. Additionally, BR
Energy will be carried at no cost for 25% of any future interests acquired and
developed by BR Group through the utilization of this data. When BR Group has
recouped 100% of all monies expended for the initial seismic acquisition, as
well as the subsequent acquisition and development of oil and gas properties
under this arrangement, BR Energy shall have the right, but not the obligation,
to reverse its position with BR Group whereby BR Energy would receive 75% of the
interest in future oil and gas properties and "carry" BR Group for 25% of the
interest.

The centerpiece of this program will utilize a large onshore Texas seismic
database comprising approximately 48,000 miles and covering 100+ counties of the
Texas Gulf Coast, East Texas, and South Texas. The great majority of this data
has never been put into the "public domain" and was acquired by a major oil
company thought to be primarily exploring for large deep targets. This data has
been reprocessed in order to find additional drilling prospects analogous to
nearby known producing fields in the same producing trend and over 100 prospects
have been identified.

The validity of using advanced technology to reprocess data and find additional
drilling prospects analogous to nearby known producing fields in the same
producing trend is well accepted by the oil and gas industry. It is management's
understanding that the major oil and gas company that generated this seismic
data did not perform this type of reprocessing. Instead, its objective in the
area was to explore for deeper and bigger reserves, and it processed the seismic
data in a way that masked potential shallower natural gas prospects.

Once a prospect has been identified and additional geologic and geophysical work
performed we, and our working interest parties, independently decide to
participate in the wells. These prospects range from 3,000 feet to 13,000 feet
in depth and will be the prospects on which we intend to drill both exploratory
and development wells. We estimate the cost to drill and complete a well for
100% of the working interest in these prospects will range from $150,000 for the
shallower wells to $2,100,000 for the deeper wells. As of March 31, 2004, 19
wells had been drilled under this arrangement resulting in ten dry holes, seven
natural gas producers and two wells are awaiting pipeline connection. For two of
the dry holes, BR Energy went non-consent, therefore incurring no costs.

                                       14

<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

Brown Prospect: BR Energy owns a 10% working interest in 930 acres of oil and
gas leases located in Jasper and Tyler Counties, Texas. The prospect is a
seismically well-defined structural four way closure designed to test the highly
prolific Upper Wilcox Sands as they produce in southeast Texas. The first well
was drilled in July 2003, was determined to be non-productive and has been
plugged.

Neches River Prospect: BR Energy owns a 10% working interest in 774 acres of oil
and gas leases located in Jasper and Tyler Counties, Texas. The prospect is a
seismically well-defined structural four way closure designed to test the highly
prolific Upper Wilcox Sands as they produce in southeast Texas. The first well
was drilled in July 2003 and, after completion failure, has been plugged and
abandoned.

Webb Prospect: BR Energy owns a 10% working interest in 1,050 acres of oil and
gas leases located in Jasper County, Texas. The prospect is a seismically
well-defined structural four way closure designed to test the highly prolific
Upper Wilcox Sands as they produce in southeast Texas. Drilling on this prospect
is anticipated to occur during 2004.

N. Champions Prospect: BR Energy owns a 10% working interest in 807 acres of oil
and gas leases located in Jasper County, Texas. The prospect is a seismically
well-defined structural four way closure designed to test the highly prolific
Upper Wilcox Sands as they produce in southeast Texas. Drilling on this prospect
is anticipated to occur during 2004.

We also intend to continue reviewing other undrilled acreage in these areas,
which are currently controlled by the major oil and gas companies, for potential
drilling prospects. We believe this acreage has not yet been drilled because of
a shift of funding by the larger companies towards larger international
projects. The major oil and gas companies are actively encouraging joint
ventures (farm-outs of their leases and/or direct leasing of their mineral
ownership) in these areas with other oil and gas companies, including smaller
companies such as us. With respect to these prospects, the major oil and gas
companies generally allow us to use their proprietary geologic and seismic
databases at no cost to us to evaluate the prospect before our risk capital is
committed to drilling the well.

RESULTS OF OPERATIONS:

THREE MONTHS ENDED MARCH 31, 2004 AND 2003:

BR Energy had a net loss of $277,000 during the first quarter of 2004, as
compared to a net loss of $308,000 for the same period in 2003. The loss per
common share, which takes into account cash dividends paid on preferred stock
was $0.04 per share during the first quarter of 2004 as compared to $0.05 in the
same period of 2003.

OPERATING REVENUES:

Operating revenues totaled $130,000 during the three months ended March 31,
2004, as compared to the $329,000 recorded during the three months ended March
31, 2003. This decrease was primarily related to the sale of oil and gas
properties to BR Group of $255,000 in 2003, offset by a 77% increase in oil and
gas sales to $130,000 during the first quarter of 2004, as compared to $74,000
during the same period of 2003.

DIRECT OPERATING COSTS:

Direct operating costs totaled $46,000 during the three months ended March 31,
2004, as compared to the $202,000 experienced during the same period in 2003.
Costs associated with the oil and gas property sales decreased to $-0- during
2004, as compared to $95,000 for the same period in 2003. This decrease was also
attributable to a dry hole and abandonment cost of $85,000 recognized in the
first quarter of 2003, with no such cost incurred during the first quarter of
2004.

OTHER OPERATING EXPENSES:

Marketing expenses decreased to $-0- during the first quarter of 2004 from the
$25,000 experienced during this period in 2003 due to the sponsorship of a
Limited Partnership during 2003. General and Administrative expenses increased
by $60,000 to $292,000 during the first quarter of 2004, as compared to $232,000
during the same period in 2003, primarily as a result of increased costs
associated with changes in management personnel. Depreciation, depletion and
amortization decreased $114,000 as a direct result of the transfer of the
Seismic data in the second quarter of 2003, as previously discussed.

                                       15

<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

OTHER INCOME:

Other expense increased to $4,700 during the first quarter of 2004, as compared
to income of $500 during the first quarter of 2003. The 2004 expense is related
to unrecovered costs on the four partnerships transferred to Eagle Energy, Inc.,
as previously discussed.

CAPITAL RESOURCES AND FINANCIAL CONDITION:

BR Energy's current ratio (current assets / current liabilities) was 0.30 to 1
at March 31, 2004 and 0.56 to 1 at December 31, 2003. Such calculations include
the accounts receivable from managed oil and gas drilling partnerships and
advances to (from) related parties. The change in the current ratio for 2004
from 2003 was due primarily to the use of funds in continuing operations.

BR Energy's primary source of cash in 2004 and 2003 has been derived from the
sale of oil and gas production and short term advances from BR Group, with 2003
including sale of oil and gas limited partnerships and the sale of oil and gas
properties to BR Group. Without these sources of cash, BR Energy would not have
adequate sources of cash for its operations. While BR Energy expects that its
revenue sources will not significantly change in 2004, BR Energy will be
increasing its emphasis on drilling and developing oil and gas properties in
order to increase its revenue from oil and gas production.

During the periods ended March 31, 2004 and December 31, 2003, BR Energy has
relied upon net inflows of cash generated by its operating activities and equity
offerings to fund the purchase of assets and its expansion. Management intends
to fund further growth with equity transactions and improved cash flows from
operations.

BR Energy had a net loss of approximately $277,000 during the first three months
of 2004 and had a working capital deficit of approximately $454,000 at March 31,
2004. The accompanying financial statements have been prepared assuming that BR
Energy will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the ordinary course of business.
It is management's opinion that the going concern basis of reporting its
financial position and results of operations is appropriate at this time.

Management has taken significant steps to address the financial condition of BR
Energy, to increase cash flows and to achieve better operating results;
principally by implementing its new business plan, discontinuing its contract
drilling service segment in 2002 and selling the majority of its interest in the
seismic data previously discussed. BR Energy has extended the March 3, 2003
sales and service agreement with BR Group until March 3, 2005 and has obtained a
resolution from BR Group to provide the necessary financial support for BR
Energy through at least April 1, 2005.

ITEM 3.  CONTROLS AND PROCEDURES

As of the end of the period covered by this quarterly report, an evaluation was
performed under the supervision and with the participation of BR Energy's
management, including the Chief Executive Officer (the "CEO") and the Chief
Financial Officer (the "CFO"), of the effectiveness of the design and operation
of the disclosure controls and procedures. Based on that evaluation, BR Energy's
management, including the CEO and CFO, concluded that the disclosure controls
and procedures were effective. There have been no significant changes in these
internal controls over financial reporting that occurred during the quarter
ended March 31, 2004, that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.

                                       16

<PAGE>

                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      There are no legal proceedings pending against BR Energy

ITEM 2. CHANGES IN SECURITIES

      None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

      Not Applicable

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

      None

ITEM 5. OTHER INFORMATION

      None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      Form 8-K was filed on March 26, 2004

      Exhibit 31.1 Chief Executive Officer's 302 Certification
      Exhibit 31.2 Chief Financial Officer's 302 Certification
      Exhibit 32.1 Chief Executive Officer's 906 Certification
      Exhibit 32.2 Chief Financial Officer's 906 Certification

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       BLUE RIDGE ENERGY, INC.

Date May 13, 2004                      By      /s/ Norman G. Haisler
                                          -------------------------------------
                                               Norman G. Haisler
                                               Senior Vice President-Finance &
                                               Chief Financial Officer

                                       17