<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 SEPTEMBER 30, 2004

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
      OF 1934
      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 Securities Exchange Act of 1934 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 November 10, 2004 and 23,300 shares of Series E Preferred Stock as of
November 10, 2004.

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

<PAGE>

<TABLE>
<CAPTION>
                                                      INDEX                                                NUMBER
                                                      -----                                                ------
<S>                                                                                                        <C>
                                                     PART I

                                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

         FINANCIAL STATEMENTS OF REGISTRANT
         Balance Sheets as of September 30, 2004 and December 31, 2003                                          3
         Statements of Operations for the three months and nine months ended September 30, 2004 and 2003        4
         Statements of Cash Flows for the nine months ended September 30, 2004 and 2003                         5
         Notes to Financial Statements                                                                       6-12

ITEM 2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS                                       13-18
ITEM 3.            CONTROLS AND PROCEDURES                                                                     18

                                                     PART II

                                                OTHER INFORMATION

ITEM 1.            LEGAL PROCEEDINGS                                                                           19
ITEM 2.            CHANGES IN SECURITIES                                                                       19
ITEM 3.            DEFAULTS UPON SENIOR SECURITIES                                                             19
ITEM 4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                         19
ITEM 5.            OTHER INFORMATION                                                                           19
ITEM 6.            EXHIBITS AND REPORTS ON FORM 8-K                                                            19
SIGNATURE                                                                                                      19
</TABLE>

                                       2
<PAGE>

                             BLUE RIDGE ENERGY, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    SEPTEMBER 30,  DECEMBER 31,
                                                                                        2004           2003
                                                                                        ----           ----
                                                                                            (UNAUDITED)
<S>                                                                                 <C>            <C>
                                     ASSETS
CURRENT ASSETS:
   Cash                                                                             $   604,677    $    71,256
   Accounts Receivable:
      Managed Limited Partnerships                                                       15,365         17,035
      Trade and Other                                                                   100,500        189,018
   Prepaid Expenses and Other Current Assets                                             22,775              -
                                                                                    -----------    -----------
        TOTAL CURRENT ASSETS                                                            743,317        277,309
PROPERTY AND EQUIPMENT, NET                                                             703,515        803,285
SEISMIC LICENSE                                                                         351,700              -
OTHER NONCURRENT ASSETS                                                                   7,024          7,024
                                                                                    -----------    -----------
        TOTAL ASSETS                                                                $ 1,805,556    $ 1,087,618
                                                                                    ===========    ===========
                 LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
   Accounts Payable and Accrued Liabilities                                         $   136,068    $   188,126
   Advances from Related Party                                                                -        303,874
   Current Portion Long Term Notes                                                       62,500          6,000
                                                                                    -----------    -----------
      TOTAL CURRENT LIABILITIES                                                         198,568        498,000
LONG TERM NOTE PAYABLE TO RELATED PARTY                                                 437,500              -
LONG-TERM ADVANCE                                                                     1,235,900              -
                                                                                    -----------    -----------
      TOTAL LIABILITIES                                                               1,871,968        498,000
                                                                                    -----------    -----------
STOCKHOLDERS' (DEFICIT) EQUITY:
   Series E Preferred Stock, $0.001 par value; 5,000,000 shares
     authorized; 23, 300 shares issued and outstanding at September 30,
     2004 and December 31, 2003, (liquidation preference of $233,000
     at September 30, 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 September 30, 2004 and December 31, 2003          37,581         37,581
   Additional Paid-In Capital                                                         6,339,658      6,339,658
   Accumulated Deficit                                                               (6,443,674)    (5,787,644)
                                                                                    -----------    -----------
      TOTAL STOCKHOLDERS' (DEFICIT) EQUITY                                              (66,412)       589,618
                                                                                    -----------    -----------
      TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY                          $ 1,805,556    $ 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           NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                 SEPTEMBER 30,
                                                              2004           2003           2004           2003
                                                              ----           ----           ----           ----
<S>                                                        <C>            <C>            <C>            <C>
OPERATING REVENUES:
   Turnkey Contract Sales                                  $         -    $   460,627    $         -    $   460,627
   Oil and Gas Property Sales to Related Parties                     -        450,920              -        937,852
   Oil and Gas Sales                                           145,475        137,991        405,721        323,068
                                                           -----------    -----------    -----------    -----------
        TOTAL OPERATING REVENUES                               145,475      1,049,538        405,721      1,721,547
                                                           -----------    -----------    -----------    -----------
OPERATING COSTS AND EXPENSES:
   Turnkey Contract Costs                                            -         47,060              -         47,060
   Cost of Oil and Gas Property Sales to Related Parties             -        165,332              -        438,814
   Lease Operating Costs                                        61,671            367        145,754         42,966
   Dry Hole and Abandonment Costs                                    2              -          3,315         85,172
   Depreciation, Depletion and Amortization                     67,374         44,162        196,050        258,350
   Marketing Costs                                                   -         15,556              -         41,629
   General and Administrative Costs                            125,479        273,038        690,962        759,367
                                                           -----------    -----------    -----------    -----------
        TOTAL OPERATING COSTS AND EXPENSES                     254,526        545,515      1,036,081      1,673,358
                                                           -----------    -----------    -----------    -----------
OPERATING (LOSS) INCOME                                       (109,051)       504,023       (630,360)        48,189
OTHER (EXPENSE) INCOME:
   Interest Income                                                   -             24              -            515
   Other Expense                                                     -              -         (4,700)             -
                                                           -----------    -----------    -----------    -----------
        TOTAL OTHER (EXPENSE) INCOME                                 -             24         (4,700)           515
                                                           -----------    -----------    -----------    -----------
        (LOSS) INCOME BEFORE INCOME TAXES                     (109,051)       504,047       (635,060)        48,704
INCOME TAX PROVISION                                                 -              -              -              -
                                                           -----------    -----------    -----------    -----------
       NET (LOSS) INCOME                                   $  (109,051)   $   504,047    $  (635,060)   $    48,704
       SERIES E PREFERRED STOCK CASH DIVIDENDS                  (6,990)        (6,991)       (20,970)      (108,552)
                                                           -----------    -----------    -----------    -----------
       NET (LOSS) INCOME ATTRIBUTABLE TO
       COMMON STOCKHOLDERS                                 $  (116,041)   $   497,056    $  (656,030)   $   (59,848)
                                                           ===========    ===========    ===========    ===========
       NET (LOSS) INCOME PER COMMON SHARE                  $     (0.02)   $      0.07    $     (0.09)   $     (0.01)
                                                           ===========    ===========    ===========    ===========
Weighted Average Common Shares Outstanding - Basic and
  Diluted                                                    7,516,094      7,516,094      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>
                                                                              NINE MONTHS ENDED
                                                                                 SEPTEMBER 30,
                                                                             2004             2003
                                                                             ----             ----
<S>                                                                       <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net (Loss) Income                                                      $  (635,060)   $    48,704
   Adjustments to Reconcile Net (Loss) Income to Net Cash Flows Used In
   Operating Activities:
         Depreciation, Depletion and Amortization                             196,050        258,350
         Dry Hole and Abandonment Costs                                         3,315         85,172
         Costs Paid by Related Party                                          140,497              -
         Change in Assets from Discontinued Operations                              -        174,700
         Change in Operating Assets and Liabilities:
             Accounts Receivable                                               90,188        (56,432)
             Prepaid Expenses and Other Assets                                (22,775)        71,964
             Seismic Data Costs Payable                                             -       (753,093)
             Accounts Payable and Accrued Liabilities                         (52,058)      (137,612)
                                                                          -----------    -----------
       NET CASH USED IN OPERATING ACTIVITIES                                 (279,843)      (308,247)
                                                                          -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Sale of Oil and Gas Properties                                                   -         32,890
   Purchase of Furniture and Computer Equipment                               (85,997)       (83,609)
   Purchase of Seismic License                                               (351,700)             -
   Purchase of Oil and Gas Properties                                         (13,598)      (432,156)
                                                                          -----------    -----------
       NET CASH USED IN INVESTING ACTIVITIES                                 (451,295)      (482,875)
                                                                          -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on Long Term Debt                                                  (6,000)       (18,000)
   Increase (Decrease) in Advances from Related Party                          55,629        (75,215)
   Series E Preferred Stock Subscription Receivable                                 -        760,000
   Sale of Series E Preferred Stock, Net                                            -        (14,400)
   Long-Term Advance                                                        1,235,900
   Dividends Paid                                                             (20,970)      (108,552)
                                                                          -----------    -----------
       NET CASH PROVIDED BY FINANCING ACTIVITIES                            1,264,559        543,833
                                                                          -----------    -----------
       NET INCREASE (DECREASE) IN CASH                                        533,421       (247,289)
CASH AT BEGINNING OF PERIOD                                                    71,256        335,907
                                                                          -----------    -----------
CASH AT END OF PERIOD                                                     $   604,677    $    88,618
                                                                          ===========    ===========
</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.
BR Energy is engaged in the oil and gas business primarily in the Gulf Coast of
Texas and Louisiana, East Texas, Kentucky, New Mexico and West Virginia.

      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 stockholders' 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 had a net loss of approximately $635,000 during the nine months
ended September 30, 2004 and had working capital of approximately $545,000 as of
September 30, 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. The infusion of capital, as explained in the following paragraph,
will provide funds for BR Energy to be able to sustain itself in the coming
years.

      Throughout the year, management has been in discussions with an investment
banking group regarding a "Non-U.S." private, restricted stock placement
arrangement. BR Energy is offering, on an exempt private placement basis, up to
an aggregate of 12,500,000 units, with no minimum subscription, of its own issue
to eligible sophisticated investors at a subscription price of $0.20 per unit,
with each such unit consisting of one common share, one non-transferable share
purchase warrant with an exercisable price of $0.50 expiring on May 17, 2005 and
one non-transferable piggyback warrant with an exercisable price of $1.00
expiring on May 17, 2006. BR Energy has received subscriptions totaling
$1,235,900, net of expenses, for 6,225,000 units through September 30, 2004 and
has classified these funds as a long-term liability. Another 1,525,000 units
have been sold as of November 10, 2004, for a net cash receipt of $305,000. BR
Energy anticipates closing this private placement arrangement before year end by
accepting the subscriptions and reclassifying the long-term liability into the
appropriate components of stockholders' equity. BR Energy believes the remaining
$950,000 in subscriptions will be placed. The equity portion of the balance
sheet at September 30, 2004 resulted in a deficit; however, once the
subscriptions are accepted and converted into common stock, the long-term
advance will be reclassified into stockholders' equity, reverting the deficit
into equity.

                                       6
<PAGE>

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

      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, selling the majority of its interest in the 2D
seismic data in May 2003, and by initiating a private, restricted stock offering
to raise additional capital. Also, 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 July 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.

RECLASSIFICATIONS

      Certain reclassifications have been made to the prior years' financial
statements to conform to the 2004 classification, none of which had an effect on
previously reported net loss.

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 September 30, 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.

REVENUE RECOGNITION

      Oil and gas revenue, from working interests BR Energy owns, are recognized
as oil and gas is produced and sold from the wells. 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.

                                       7
<PAGE>

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

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

      BR Energy maintains its cash balances in two 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 September
30, 2004, there was approximately $496,000 balance in cash that was uninsured by
the FDIC.

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 unproved properties to
determine whether they have been impaired using valuations performed by
third-party engineers. Impairment is assessed more frequently if impairment
indicators are present before the annual evaluations. 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.

SEISMIC LICENSE

      BR Energy entered into a "lifetime participation" membership in the Echo
3-D Gulf Coast, Permian Basin, Rocky Mountain and Mid- Continent Programs on
July 1, 2004. There are 56 separate 3-D's available and BR Energy will generate
drilling prospects from this dataset for the purpose of retaining a carried
working interest and possibly participating in these prospects. During the third
quarter of 2004, BR Energy has purchased a seismic software license for
interpreting the Echo data and purchased three 3D computer workstations, along
with office furniture, and expects to have these stations fully staffed by
year-end.

      In order to amortize these costs over the useful life of this license, the
unit of production method will be followed. An estimate of the number of
prospects/wells that is anticipated from the use of this seismic data has been
made by management. The total cost of the seismic license will then be divided
by the total estimated prospects/wells for the amount to be transferred to each
well drilled. A minimum of $25,000 of seismic cost will be transferred if the
calculation previously described is less. The transferred seismic cost will then
become a part of the basis in the capitalized well costs and amortized or
expensed as described above under the successful efforts method of accounting.

      Each year the remaining seismic costs will be analyzed to see if the data
is being actively utilized in the exploration process. If the data has ceased to
be a useful tool, the remaining costs will be fully amortized at that time.

                                       8
<PAGE>

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

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.

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 and options are considered anti-dilutive and therefore, excluded
from the earnings per share calculations. As BR Energy recorded a nine-month
loss in 2004 and twelve-month loss 2003, common share equivalents outstanding
would be anti-dilutive, therefore, these have not been included in the weighted
average shares outstanding.

      Various warrants for the purchase of common stock were outstanding as of
September 30, 2004. These warrants were convertible into 1,082,236 shares of
common stock that are exercisable at prices ranging from $0.40 to $6.00 per
share.

                                       9
<PAGE>

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

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 and 20,000 stock options in the first quarter of 2003. 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 for the six months ended would have been as follows:

<TABLE>
<CAPTION>
                                             SEPT. 30,    SEPT. 30,
                                               2004         2003
                                               ----         ----
<S>                                          <C>          <C>
Net Income (Loss), as reported ...........   $(635,060)   $  48,704
Stock Based Compensation, net of tax .....       3,844        4,356
                                             ---------    ---------
Pro Forma Net Income (Loss) ..............   $(638,904)   $  44,348
                                             =========    =========
Net Loss Attributable to Common
Stockholders, as reported ................   $(656,030)   $ (59,848)
Stock Based Compensation, net of tax .....       3,844        4,356
                                             ---------    ---------
Pro Forma Net Loss .......................   $(659,874)   $ (64,204)
                                             =========    =========
Basic and Diluted Income (Loss) per Common
Share, as reported .......................   $   (0.09)   $    0.01
                                             =========    =========
Basic and Diluted Loss per Common Share,
Pro Forma ................................   $   (0.09)   $   (0.01)
                                             =========    =========
</TABLE>

      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>
                                                    SEPT. 30,    SEPT. 30,
                                                      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>

SERIES E PREFERRED STOCK DIVIDENDS

      The Series E Preferred Stock bears a 12% per annum dividend payable
quarterly and a participating dividend equal to 3% of the net profits from the
oil and gas properties acquired with the proceeds of the offering, also payable
quarterly. The proceeds from the offering, after deducting expenses, were used
to drill three dry holes in September 2002, October 2002 and February 2003;
therefore, no participating dividends will be payable to stockholders. In
conjunction with the purchase and sale agreement entered into with BR Group in
May 2003 related to the previously owned interest in Channel LLC, BR Group
retired its 200,000 shares of Series E Preferred Stock and canceled its
subscription agreement for the remaining 50,000 shares of Series E Preferred
Stock. Subsequently, the Series E Preferred Stock Dividends have decreased
accordingly.

INCOME TAXES

      No income tax provision has been established for the nine months ended
September 30, 2004 and 2003, due to the net losses incurred or available via
federal income tax carry forward provisions. 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, primarily representing net operating loss carry
forward, and therefore for financial reporting purposes, a valuation allowance
of $1,099,000 and $856,000 as of September 30, 2004 and December 31, 2003,
respectively, has been recognized to offset the net deferred tax assets.

                                       10
<PAGE>

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

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 nine months ended September 30, 2004, while $461,000 was earned
during the comparable nine months ended September 30, 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 September 30, 2004, there are 7,516,094 shares of common stock
issued and outstanding. A total of 3,954,075 shares are held by BR Group and the
remaining 3,562,019 shares are held by approximately 520 shareholders.

ADVANCES TO/FROM RELATED PARTIES

      Through September 30, 2004, BR Group provided management, administrative,
accounting and geological services for BR Energy at a rate of $10,000 per month.
The fee amount was determined on a proportional basis based upon employees' time
spent because specific identification of expenses was not practical. BR Energy
believed that this cost allocation method of expenses was reasonable and that
this management fee represented the fair market value of the services rendered.
BR Energy also reimbursed BR Group for direct costs paid on its behalf and the
costs of various drilling services. As of September 30, 2004 and December 31,
2003, net advances from BR Group were approximately $-0- and $304,000,
respectively. During the third quarter of 2004, BR Energy negotiated an
agreement with BR Group whereby BR Group would reimburse BR Energy approximately
$140,000 for costs incurred by BR Energy on behalf of BR Group. Additionally, a
$500,000 promissory note payable was established bearing interest at 7.95% for a
term of eight years, with monthly payments of $7,056 for principal and interest.
This promissory note settled the remaining advance balance due to BR Group after
deducting the $140,000 reimbursement. Effective October 1, 2004, the $10,000
monthly charge by BR Group will cease. Both companies agreed that any costs
incurred on behalf of the other will be billed in the following month with a
cash settlement for the balance due.

      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 September 30,
2004.

      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 oil and gas prospects
developed from a 2D seismic program.

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.

                                       11
<PAGE>

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

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 and umbrella liability insurance coverage of approximately $5
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.

5.    SUBSEQUENT EVENTS

      On October 8, 2004, a Special Meeting of Stockholders was held requesting
the approval of an Amendment to BR Energy's Articles of Incorporation to
increase the authorized shares of Common Stock from 20,000,000 shares to
150,000,000 shares. The amendment was approved at the Special Meeting of
Stockholders. This increase was necessary for BR Energy to have a sufficient
number of shares for its private placement stock subscription as discussed in
Note 1.

                                       12
<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 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 Rd., Suite 170 Houston, Texas 77042 or call (832) 358-3900.

BR Energy is engaged in the oil and gas business primarily in the Gulf Coast of
Texas and Louisiana, East 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 stockholders' 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.



                                       13
<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.

      In July 2004, BR Group sold, with no reported gain, its 35% interest in
Channel LLC and no longer has any rights to use the 2D seismic data or
participate in any new prospects generated from this data. BR Energy and BR
Group did reserve the right to develop any prospects within the existing Area of
Mutual Interest (AMI) around the twenty prospects that have been drilled over
the past two years. One new well was drilled in September 2004 on this AMI
acreage and is currently being completed as a gas well. No other drilling
activity is anticipated at this time.

At September 30, 2004, BR Energy had total assets of $1,806,000, total
liabilities of $1,872,000 and a stockholders' deficit of $66,000. BR Energy had
a net loss of $635,000 during the nine months ended September 30, 2004 as
compared to a net income of $49,000 for the same period in 2003. The net loss
per common share, which takes into account cash dividends paid on preferred
stock, was $0.09 per share during the nine months ended September 30, 2004 as
compared to $0.01 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 September 30, 2004, BR Energy has participated, either directly or
indirectly through its sponsored limited partnerships, in 108 wells, of which 27
are presently productive and located in Kentucky, Texas, West Virginia and New
Mexico. One well is in the process of being completed. In addition to the 27
producing wells, there are 41 producing 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 other ownerships 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 September 30,
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 1,900
MCFPD. BR Energy owns 4.25% of the working interest, with a 3.22% net revenue
interest in each well.

Toadflax Prospect: BR Energy owns 4.25% of the working interest, with a 3.22%
net revenue interest in 1 well located in Polk County, Texas which was drilled
during the third quarter of 2003. In July 2004, the well began producing 140
MCFPD.

Lopseed Prospect: BR Energy owns 4.25% of the working interest, with a 3.22% 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. The well is
undergoing a work over in July 2004.

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. The well underwent
a work over in June 2004 and is producing 160 MCFPD.

                                       14
<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

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.

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.

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.

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. The quarterly cash
flow from these four partnerships averages $3,300. As noted above, there are 41
gas wells producing in these four partnerships.

UNDEVELOPED PROPERTIES

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. Due to allocation of
resources, drilling on this prospect has been delayed until 2005.

N. Champions Prospect: BR Energy owns a 10% working interest in 307 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. Due to allocation of
resources, drilling on this prospect has been delayed until 2005.

We also intend to continue reviewing other undeveloped acreage in East Texas and
the Texas Gulf Coast 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. Other areas of interest for acquiring
prospects and drilling wells are South Louisiana and West Texas.

RESULTS OF OPERATIONS:

THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003:

BR Energy had a net loss of $109,000 during the third quarter of 2004, as
compared to net income of $504,000 for the same period in 2003. The (loss)
income per common share, which takes into account cash dividends paid on
preferred stock, was ($0.02) per share during the third quarter of 2004 and
$0.07 per share during the third quarter of 2003. The decrease in net income
from 2003 to a net loss in 2004 is mainly attributable to the decrease in
revenue from sales of oil and gas properties and the decrease in turnkey sales
as explained below.

OPERATING REVENUES:

Operating revenues totaled $145,000 during the three months ended September 30,
2004, as compared to $1,050,000 during the three months ended September 30,
2003. This decrease was primarily related to the sale of oil and gas properties
to BR Group of $451,000 and turnkey sales of $461,000 in 2003, offset by a 5%
increase in oil and gas sales to $145,000 during the third quarter of 2004, as
compared to $138,000 during the same period of 2003.

                                       15
<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

DIRECT OPERATING COSTS:

Direct operating costs totaled $62,000 during the three months ended September
30, 2004, as compared to $213,000 during the same period in 2003. Workover
expense of $19,000 on two wells in Polk County, Texas occurred in 2004 , while
2003 had $47,000 in turnkey contract costs and $165,000 in costs for prospect
sales to related parties.

OTHER OPERATING EXPENSES:

General and administrative expenses decreased by $148,000 to $125,000 during the
third quarter of 2004, as compared to $273,000 during the same period in 2003.
During the third quarter of 2004, BR Energy negotiated an agreement with BR
Group whereby BR Group would reimburse BR Energy $140,000 for costs incurred by
BR Energy on behalf of BR Group. Depreciation, depletion and amortization
increased $23,000 due to higher depletion rates on oil and gas properties in
2004.

INCOME TAX PROVISION:

Consistent with prior quarters, BR Energy did not record a provision for income
taxes due to the continued net losses incurred or available via the federal
income tax carry forward provisions. A valuation allowance continues to be
recognized due to the uncertainty regarding recognition of the deferred tax
assets.

NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003:

BR Energy had a net loss of $635,000 during the nine months ended September 30,
2004, as compared to net income of $49,000 for the same period in 2003. The loss
per common share, which takes into account cash dividends paid on preferred
stock, was $0.09 per share during the nine months ended September 30, 2004 and
$0.01 per share for the same period in 2003. The decrease in net income from
2003 to a net loss in 2004 is mainly attributable to the decrease in revenue
from sales of oil and gas properties and the decrease in turnkey sales as
explained below.

OPERATING REVENUES:

Operating revenues totaled $406,000 during the nine months ended September 30,
2004, as compared to $1,722,000 during the nine months ended September 30, 2003.
This decrease was primarily related to the sale of oil and gas properties to BR
Group of $938,000 in 2003 and turnkey sales of $461,000 in 2003, offset by a 26%
increase in oil and gas sales to $406,000 during the nine months ended September
30, 2004 as compared to $323,000 during the same period of 2003.

DIRECT OPERATING COSTS:

Direct operating costs totaled $149,000 during the nine months ended September
30, 2004, as compared to $614,000 during the same period in 2003. Costs for
turnkey sales decreased to $-0- from $47,000 in 2003 and costs associated with
sales to related parties decreased to $-0- during 2004 as compared to $439,000
for the same period in 2003. This decrease was also attributable to dry hole
cost of $85,000 recognized in the nine months ended September 30, 2003, with
only $3,000 incurred during the same period in 2004. These decreases from 2003
are offset by a $103,000 increase in lease operating expenses (LOE) due to
workover expense of $19,000 on two wells in Polk County, Texas during 2004. A
reversal of $22,000 in LOE accruals during 2003 also contributes to the
decrease.

OTHER OPERATING EXPENSES:

Marketing costs decreased to $-0- during the nine months ended September 30,
2004 from the $42,000 during this period in 2003 due to the sponsorship of a
Limited Partnership during 2003. General and Administrative expenses decreased
by $68,000 to $691,000 during the nine months ended September 30, 2004 as
compared to $759,000 during the same period in 2003. During the third quarter of
2004, BR Energy negotiated an agreement with BR Group whereby, BR Group would
reimburse BR Energy $140,000 for costs incurred by BR Energy on behalf of BR
Group. This decrease is offset by additional costs associated with changes in
management personnel. Depreciation, depletion and amortization decreased $62,000
from $258,000 in 2003 to $196,000 in 2004. There was a decrease of $142,000 in
seismic data amortization for 2003 offset by an $80,000 increase in depletion on
oil and gas properties in 2004.

                                       16
<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

OTHER INCOME:

Other expense increased to $4,700 during the nine months ended September 30,
2004 as compared to interest income of $500 during the same period of 2003. The
2004 expense is related to costs on the four partnerships transferred to Eagle
Energy, Inc., as previously discussed.

INCOME TAX PROVISION:

Consistent with prior quarters, BR Energy did not record a provision for income
taxes due to the continued net losses incurred or available via the federal
income tax carry forward provisions. A valuation allowance continues to be
recognized due to the uncertainty regarding recognition of the deferred tax
assets.

CAPITAL RESOURCES AND FINANCIAL CONDITION:

BR Energy's current ratio (current assets / current liabilities) was 3.74 to 1
at September 30, 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 increase in the current ratio for
2004 from 2003 was due to funds being received on the private placement stock
offering as discussed in the following paragraphs, the elimination of the
advance from a related party as the result of the reimbursement of costs by BR
Group and the promissory note entered into with BR Group.

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. During the second and third quarters of 2004 funds of
$1,235,900, net of expenses, have been received on the private placement stock
offering as discussed in the following paragraphs. Without these sources of
cash, BR Energy would not have adequate sources of cash for its operations. BR
Energy does not expect its revenue from oil and gas production to change
significantly in 2004 from 2003.

During the periods ended September 30, 2004 and December 31, 2003, BR Energy has
relied upon net inflows of cash generated by its operating activities, equity
offerings and short term advances from BR Group to fund the purchase of assets
and its expansion. Management intends to fund further growth with equity
transactions and improved cash flows from operations.

Throughout the year, management has been in discussions with an investment
banking group regarding a "Non-U.S." private, restricted stock placement
arrangement. BR Energy is offering, on an exempt private placement basis, up to
an aggregate of 12,500,000 units, with no minimum subscription, of its own issue
to eligible sophisticated investors at a subscription price of $0.20 per unit,
with each such unit consisting of one common share, one non-transferable share
purchase warrant with an exercisable price of $0.50 expiring on May 17, 2005 and
one non-transferable piggyback warrant with an exercisable price of $1.00
expiring on May 17, 2006. BR Energy has received subscriptions totaling
$1,235,900, net of expenses, for 6,225,000 units through September 30, 2004 and
has classified these funds as a long-term liability. Another 1,525,000 units
have been sold as of November 10, 2004, for a net cash receipt of $305,000. BR
Energy anticipates closing this private placement arrangement before year end by
accepting the subscriptions and reclassifying the long-term liability into the
appropriate components of stockholders' equity. BR Energy believes the remaining
$950,000 in subscriptions will be placed. The equity portion of the balance
sheet at September 30, 2004 resulted in a deficit; however, once the
subscriptions are accepted and converted into common stock, the long-term
advance will be reclassified into stockholders' equity, reverting the deficit
into equity.

BR Energy entered into a "lifetime participation" membership in the Echo 3-D
Gulf Coast, Permian Basin, Rocky Mountain and Mid- Continent Programs on July 1,
2004. There are 56 separate 3-D's available and BR Energy will generate drilling
prospects from this dataset for the purpose of retaining a carried working
interest and possibly participating in these prospects. Funds provided by the
private, restricted stock offering will allow BR Energy to add geoscientists,
either as consultants or employees, to fully exploit this dataset and develop
drilling opportunities. The number of prospects to be generated over time is
unknown; however, BR Energy plans to generate a minimum of six drilling
prospects in 2005. During the third quarter of 2004, BR Energy has purchased a
seismic software license for interpreting the Echo data and purchased three 3D
computer workstations, along with office furniture, and expects to have these
stations fully staffed by year-end.

                                       17
<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

BR Energy had a net loss of approximately $635,000 during the first nine months
of 2004 and had working capital of approximately $545,000 at September 30, 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, selling the majority of its interest in the
seismic data previously discussed, and by initiating a private, restricted stock
offering to raise additional capital. Also, 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 July 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 September 30, 2004, that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.

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<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

      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: November 12, 2004                 By      /s/ Norman G. Haisler
                                          --------------------------------------
                                                Norman G. Haisler
                                                Senior Vice President-Finance &
                                                Chief Financial Officer

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