<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 JUNE 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 August 11, 2004 and 23,300 shares of Series E Preferred Stock as of August
11, 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 June 30, 2004 and December 31, 2003                                                     3
         Statements of Operations for the six months and three months ended June 30, 2004 and 2003                    4
         Statements of Cash Flows for the six months ended June 30, 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>
                                                                               JUNE 30,          DECEMBER 31,
                                                                                 2004                2003
                                                                              -----------        -----------
                                                                              (UNAUDITED)
<S>                                                                           <C>                <C>
                                     ASSETS
CURRENT ASSETS:
  Cash                                                                        $    54,438        $    71,256
  Accounts Receivable:
    Managed Limited Partnerships                                                   15,365             17,035
    Trade and Other                                                                91,900            189,018
  Prepaid Expenses and Other Current Assets                                        22,230                  -
                                                                              -----------        -----------

    TOTAL CURRENT ASSETS                                                          183,933            277,309

PROPERTY AND EQUIPMENT, NET                                                       784,064            803,285
OTHER NONCURRENT ASSETS                                                             7,024              7,024
                                                                              -----------        -----------

     TOTAL ASSETS                                                             $   975,021        $ 1,087,618
                                                                              ===========        ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts Payable and Accrued Liabilities                                    $    86,370        $   188,126
  Advances from Related Parties                                                   589,022            303,874
  Current Portion Long Term Debt                                                        -              6,000
                                                                              -----------        -----------

     TOTAL CURRENT LIABILITIES                                                    675,392            498,000
                                                                              -----------        -----------

COMMITMENTS AND CONTINGENCIES                                                           -                  -

LONG-TERM ADVANCE                                                                 250,000                  -
                                                                              -----------        -----------
STOCKHOLDERS' EQUITY:
  Preferred Stock, $0.001 par value; 5,000,000 shares authorized; 23,300
    shares issued and outstanding at June 30, 2004 and December 31,
    2003, respectively (liquidation preference of $233,000 at June 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 June 30, 2004 and December 31, 2003           37,581             37,581
  Additional Paid-In Capital                                                    6,339,658          6,339,658
  Accumulated Deficit                                                          (6,327,633)        (5,787,644)
                                                                              -----------        -----------

     TOTAL STOCKHOLDERS' EQUITY                                                    49,629            589,618
                                                                              -----------        -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $   975,021        $ 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            SIX MONTHS ENDED
                                                                        JUNE 30,                     JUNE 30,
                                                                    2004         2003           2004            2003
                                                                -----------   -----------   ----------      -----------
<S>                                                             <C>           <C>           <C>             <C>
OPERATING REVENUES:
Oil and Gas Property Sales to Related Parties                   $         -   $   231,932   $        -      $   486,932
Oil and Gas Sales                                                   130,098       111,487      260,246          185,077
                                                                -----------   -----------   ----------      -----------

        TOTAL OPERATING REVENUES                                    130,098       343,419      260,246          672,009
                                                                -----------   -----------   ----------      -----------

OPERATING COSTS AND EXPENSES:
   Cost of Oil and Gas Property Sales to Related Parties                  -       169,025            -          273,482
   Lease Operating Costs                                             37,801        30,295       84,083           42,599
   Dry Hole and Abandonment Costs                                     3,155             -        3,313           85,172
   Depreciation, Depletion and Amortization                          64,707        36,000      128,676          214,188
   Marketing Costs                                                        -         1,297            -           26,101
   General and Administrative Costs                                 273,403       257,772      565,483          489,903
                                                                -----------   -----------   ----------      -----------

        TOTAL OPERATING COSTS AND EXPENSES                          379,066       494,389      781,555        1,131,445
                                                                -----------   -----------   ----------      -----------

OPERATING LOSS                                                     (248,968)     (150,970)    (521,309)        (459,436)

OTHER (EXPENSE) INCOME:
   Interest Income                                                        -         3,631            -            4,093
   Other Expense                                                          -             -       (4,700)               -
                                                                -----------   -----------   ----------      -----------

        TOTAL OTHER (EXPENSE) INCOME                                      -         3,631       (4,700)           4,093
                                                                -----------   -----------   ----------      -----------

        LOSS BEFORE INCOME TAXES                                   (248,968)     (147,339)    (526,009)        (455,343)

INCOME TAX PROVISION                                                      -             -            -                -
                                                                -----------   -----------   ----------      -----------

       NET LOSS                                                  $ (248,968)  $  (147,339)  $ (526,009)     $  (455,343)

       SERIES E PREFERRED STOCK CASH DIVIDENDS                       (6,990)      (40,539)     (13,980)        (101,561)
                                                                ------------  -----------   ----------      -----------

       NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS             $  (255,958)  $  (187,878)  $ (539,989)     $  (556,904)
                                                                ===========   ===========   ==========      ===========

       NET LOSS PER COMMON SHARE                                $     (0.03)  $     (0.02)  $    (0.07)     $     (0.07)
                                                                ===========   ===========   ==========      ===========

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>
                                                                                SIX MONTHS ENDED
                                                                                    JUNE 30,
                                                                             2004             2003
                                                                        ------------    -------------
<S>                                                                     <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Loss                                                             $   (526,009)   $    (455,343)
   Adjustments to Reconcile Net Loss to Net Cash Flows from
      Operating Activities:
      Depreciation, Depletion and Amortization                               128,676          214,188
      Dry Hole and Abandonment Costs                                           3,313           85,172
      Change in Assets from Discontinued Operations                                -          164,000
      Change in Operating Assets and Liabilities:
        Accounts Receivable                                                   98,788           (2,915)
        Prepaid Expenses and Other Assets                                    (22,230)          59,749
        Seismic Data Costs Payable                                                 -         (278,457)
        Accounts Payable and Accrued Liabilities                            (101,756)        (179,111)
                                                                        ------------    -------------

       NET CASH USED IN OPERATING ACTIVITIES                                (419,218)        (392,717)
                                                                        ------------    -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of Furniture and Computer Equipment                               (8,829)         (66,070)
   Purchase of Oil and Gas Properties                                       (103,939)        (488,922)
                                                                        ------------    -------------

       NET CASH USED IN INVESTING ACTIVITIES                                (112,768)        (554,992)
                                                                        ------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on Long Term Debt                                                 (6,000)         (12,000)
   Increase in Advances from Affiliate                                       285,148          489,755
   Preferred Stock Subscription Receivable                                         -          260,000
   Long-Term Advance                                                         250,000                -
   Dividends Paid                                                            (13,980)        (101,561)
                                                                        ------------    -------------

       NET CASH PROVIDED BY FINANCING ACTIVITIES                             515,168          636,194
                                                                        ------------    -------------

       NET DECREASE IN CASH                                                  (16,818)        (311,515)

CASH AT BEGINNING OF PERIOD                                                   71,256          335,907
                                                                        ------------    -------------

CASH AT END OF PERIOD                                                   $     54,438    $      24,392
                                                                        ============    =============
</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 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 had a net loss of approximately $526,000 during the six months
ended June 30, 2004 and had a working capital deficit of approximately $491,000
as of June 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.

      Throughout the first half of 2004, 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. Although no signed
subscriptions have been received, BR Energy received a $250,000 advance in June
2004, which has been classified as a long-term liability. BR Energy anticipates
closing this private placement arrangement in the third quarter and received a
second advance for another $250,000 in July 2004. Once the subscriptions are
finalized by written agreements, the long-term liability will be reclassified
into the appropriate components of stockholders' equity.

      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.

                                       6

<PAGE>

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

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 June 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
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 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 June 30,
2004, there were no cash balances that were uninsured.

                                       7

<PAGE>

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

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.

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

                                       8

<PAGE>

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

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
June 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.

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>
                                              JUNE 30,       JUNE 30,
                                                2004          2003
                                             ----------    -----------
<S>                                          <C>           <C>
Net Loss, as reported...................     $  526,009    $   455,343
Stock Based Compensation, net of tax....          3,844          4,356
                                             ----------    -----------
Pro Forma Net Loss......................     $  529,853    $   459,699
                                             ==========    ===========
Net Loss Attributable to Common
Stockholders, as reported...............     $  539,989    $   556,904
Stock Based Compensation, net of tax....          3,844          4,356
                                             ----------    -----------
Pro Forma Net Loss......................     $  543,833    $   561,260
                                             ==========    ===========
Basic and Diluted Loss per Common
Share, as reported......................     $    (0.07)   $     (0.07)
                                             ==========    ===========
Basic and Diluted Loss per Common
Share, Pro Forma........................     $    (0.07)   $     (0.07)
                                             ==========    ===========
</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>
                                                             JUNE 30,      JUNE 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. 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 Preferred Stock Dividends have decreased accordingly.

                                       9

<PAGE>

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

INCOME TAXES

      Income taxes in the six months ended June 30, 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, primarily
representing net operating loss carry forward, and therefore for financial
reporting purposes, a valuation allowance of $1,055,000 and $856,000 as of June
30, 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 six months ended June 30, 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 June 30, 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 June 30, 2004 and December 31, 2003, net advances
from BR Group were approximately $589,000 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 June 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.

                                       10

<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 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 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 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 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.

      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. Currently, only one new prospect will be drilled on this AMI
acreage, and it is anticipated this will occur in the third quarter of 2004.

At June 30, 2004, BR Energy had total assets of $975,000, total liabilities of
$925,000 and stockholders' equity of $50,000. BR Energy had a net loss of
$526,000 during the six months ended June 30, 2004 as compared to a net loss of
$455,000 for the same period in 2003. The net loss per common share, which takes
into account cash dividends paid on preferred stock, was $0.07 per share during
the six months ended June 30, 2004 as compared to $0.07 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 June 30, 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 June 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.

                                       13

<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.

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 June 30, 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. 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 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 JUNE 30, 2004 AND 2003:

BR Energy had a net loss of $249,000 during the second quarter of 2004, as
compared to a net loss of $147,000 for the same period in 2003. The loss per
common share, which takes into account cash dividends paid on preferred stock,
was $0.03 per share during the second quarter of 2004 and $0.02 per share
during the second quarter of 2003.

                                       14

<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

OPERATING REVENUES:

Operating revenues totaled $130,000 during the three months ended June 30, 2004,
as compared to $343,000 during the three months ended June 30, 2003. This
decrease was primarily related to the sale of oil and gas properties to BR Group
of $232,000 in 2003, offset by a 17% increase in oil and gas sales to $130,000
during the second quarter of 2004, as compared to $111,000 during the same
period of 2003.

DIRECT OPERATING COSTS:

Direct operating costs totaled $41,000 during the three months ended June 30,
2004, as compared to $199,000 during the same period in 2003. Costs associated
with the oil and gas property sales decreased to $-0- during 2004, as compared
to $169,000 for the same period in 2003.

OTHER OPERATING EXPENSES:

General and administrative expenses increased by $16,000 to $273,000 during the
second quarter of 2004, as compared to $258,000 during the same period in 2003,
primarily as a result of increased costs associated with changes in management
personnel. Depreciation, depletion and amortization increased $29,000 due to
higher depletion rates on oil and gas properties in 2004.

SIX MONTHS ENDED JUNE 30, 2004 AND 2003:

BR Energy had a net loss of $526,000 during the six months ended June 30, 2004,
as compared to a net loss of $455,000 for the same period in 2003. The loss per
common share, which takes into account cash dividends paid on preferred stock,
was $0.07 per share during the six months ended June 30, 2004 and 2003.

OPERATING REVENUES:

Operating revenues totaled $260,000 during the six months ended June 30, 2004,
as compared to $672,000 during the six months ended June 30, 2003. This decrease
was primarily related to the sale of oil and gas properties to BR Group of
$487,000 in 2003, offset by a 41% increase in oil and gas sales to $260,000
during the six months ended June 30, 2004 as compared to $185,000 during the
same period of 2003.

DIRECT OPERATING COSTS:

Direct operating costs totaled $87,000 during the six months ended June 30,
2004, as compared to $401,000 during the same period in 2003. Costs associated
with the oil and gas property sales decreased to $-0- during 2004, as compared
to $273,000 for the same period in 2003. This decrease was also attributable to
dry hole and abandonment cost of $85,000 recognized in the six months ended June
30, 2003, with only $3,000 incurred during the same period in 2004. These
decreases from 2003 are offset by a $21,000 increase in production taxes during
2004 as a result of higher oil and gas revenue and a $21,000 increase in lease
operating expenses.

OTHER OPERATING EXPENSES:

Marketing expenses decreased to $-0- during the six months ended June 30, 2004
from the $26,000 during this period in 2003 due to the sponsorship of a Limited
Partnership during 2003. General and Administrative expenses increased by
$76,000 to $565,000 during the six months ended June 30, 2004 as compared to
$490,000 during the same period in 2003, primarily as a result of increased
costs associated with changes in management personnel. Depreciation, depletion
and amortization decreased $86,000 from $214,000 in 2003 to $129,000 in 2004.
There was a decrease of $142,000 in seismic data amortization for 2003 offset by
a $56,000 increase in depletion on oil and gas properties in 2004.

OTHER INCOME:

Other expense increased to $4,700 during the six months ended June 30, 2004 as
compared to interest income of $4,000 during the same period of 2003. The 2004
expense is related to unrecovered costs on the four partnerships transferred to
Eagle Energy, Inc., as previously discussed.

                                       15

<PAGE>

                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

CAPITAL RESOURCES AND FINANCIAL CONDITION:

BR Energy's current ratio (current assets / current liabilities) was 0.27 to 1
at June 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 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. BR Energy does not expect its
revenue from oil and gas production to change significantly in 2004 from 2003.

During the periods ended June 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 first half of 2004, 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. Although no signed
subscriptions have been received, BR Energy received a $250,000 advance in June
2004, which has been classified as a long-term liability. BR Energy anticipates
closing this private placement arrangement in the third quarter and received a
second advance for another $250,000 in July 2004. Once the subscriptions are
finalized by written agreements, the long-term liability will be reclassified
into the appropriate components of stockholders' equity. Funds provided by this
offering will provide the resources over the next two years to expand BR
Energy's exploration operations.

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.

BR Energy had a net loss of approximately $526,000 during the first six months
of 2004 and had a working capital deficit of approximately $491,000 at June 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 June 30, 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

      (A) BR Energy's annual meeting of stockholders was held on May 27, 2004.

      (B) The directors elected at the meeting were:

<TABLE>
<CAPTION>
                                                     FOR       WITHHELD       ABSTAIN
<S>                                               <C>          <C>           <C>
Robert D. Burr                                    4,839,344     7,500        2,669,250
Patrick A Kelleher                                4,839,344     7,500        2,669,250
Forrest E. Ebbs                                   4,839,344     7,500        2,669,250
Gregory B. Shea                                   4,839,344     7,500        2,669,250
Harry J. Peters                                   4,839,344     7,500        2,669,250
Richard M. Hewitt                                 4,839,344     7,500        2,669,250
</TABLE>

ITEM 5. OTHER INFORMATION

      None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<S>               <C>
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
</TABLE>

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

                                       17