<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, 2003

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

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

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

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

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

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

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

                                 Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 7,516,094 shares as of
August 10, 2003.

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



<PAGE>



                                     PART I

                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

         FINANCIAL STATEMENTS OF REGISTRANT

<TABLE>
<CAPTION>
         INDEX                                                                                                             NUMBER
         -----                                                                                                             ------
<S>                                                                                                                          <C>
         Balance Sheets as of June 30, 2003 and December 31, 2002..................................................             3
         Statements of Operations for the six months and three months ended June 30, 2003 and 2002.................             4
         Statements of Cash Flows for the six months ended June 30, 2003 and 2002..................................             5
         Notes to Financial Statements.............................................................................          6-13
</TABLE>

         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, 2002 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.

<TABLE>

<S>                                                                                                                           <C>
ITEM 2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS                                                         14-19
ITEM 4.            CONTROLS AND PROCEDURES                                                                                       19

                                     PART II

                                OTHER INFORMATION

ITEM 1.            LEGAL PROCEEDINGS.....................................................................................        20
ITEM 2.            CHANGES IN SECURITIES.................................................................................        20
ITEM 3.            DEFAULTS UPON SENIOR SECURITIES.......................................................................        20
ITEM 4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................................        20
ITEM 5.            OTHER INFORMATION.....................................................................................        20
ITEM 6.            EXHIBITS AND REPORTS ON FORM 8-K......................................................................        20
SIGNATURES...............................................................................................................        20
</TABLE>




                                       2
<PAGE>

                             BLUE RIDGE ENERGY, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                           JUNE 30,    DECEMBER 31,
                                                                                             2003          2002
                                                                                             ----          ----
                                                                                          (UNAUDITED)
<S>                                                                                   <C>              <C>
                              ASSETS
CURRENT ASSETS:
   Cash............................................................................   $       24,392   $      335,907
   Accounts Receivable:
      Managed Limited Partnerships.................................................           10,780            7,865
      Trade and Other..............................................................           37,017           37,017
   Prepaid Expenses and Other Current Assets.......................................           20,700           87,473
                                                                                      --------------   --------------
        TOTAL CURRENT ASSETS.......................................................           92,889          468,262

ASSETS ASSOCIATED WITH DISCONTINUED OPERATIONS, NET................................           36,000          200,000
PROPERTY AND EQUIPMENT, NET........................................................        1,702,533        1,319,123
DEFERRED SEISMIC DATA COSTS, NET...................................................               --        1,860,865
OTHER NONCURRENT ASSETS............................................................            7,514              490
                                                                                      --------------   --------------
        TOTAL ASSETS...............................................................   $    1,838,936   $    3,848,740
                                                                                      ==============   ==============

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts Payable and Accrued Liabilities........................................   $      120,759   $      299,870
   Advances from Related Parties...................................................          748,100           71,137
   Seismic Data Costs Payable......................................................               --          753,093
   Current Portion Long Term Debt..................................................           16,000           24,000
                                                                                      --------------   --------------
      TOTAL CURRENT LIABILITIES....................................................          884,859        1,148,100

LONG TERM DEBT.....................................................................               --            4,000
                                                                                      --------------   --------------
      TOTAL LIABILITIES............................................................          884,859        1,152,100

STOCKHOLDERS' EQUITY:
   Preferred Stock, $0.001 par value; 5,000,000 shares authorized; 23,300
      and 273,300 shares issued and outstanding at June 30, 2003 and
      December 31, 2002, respectively (liquidation preference of $189,895
      at June 30, 2003 and $1,980,000 at December 31, 2002)........................               23              273
   Common Stock, $0.005 par value; 20,000,000 shares authorized; 7,516,094
      shares issued and outstanding at June 30, 2003 and December 31, 2002,
      respectively.................................................................           37,581           37,581
   Additional Paid-In Capital......................................................        6,339,648        8,285,056
   Preferred Stock Subscription Receivable.........................................               --         (760,000)
   Accumulated Deficit.............................................................       (5,423,175)      (4,866,270)
                                                                                      --------------   --------------
      TOTAL STOCKHOLDERS' EQUITY...................................................          954,077        2,696,640
                                                                                      --------------   --------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................   $    1,838,936   $    3,848,740
                                                                                      ==============   ==============
</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,
                                                                      --------                      --------
                                                                 2003           2002           2003            2002
                                                                 ----           ----           ----            ----
<S>                                                            <C>           <C>            <C>            <C>
OPERATING REVENUES:

Turnkey Contract Sales                                         $       --    $   254,000    $        --    $ 1,089,000
Oil and Gas Property Sales to Related Parties                     231,932             --        486,932             --
Oil and Gas Sales                                                 111,487         26,389        185,077         72,214
                                                              -----------    -----------    -----------    -----------
        Total Operating Revenues                                  343,419        280,389        672,009      1,161,214

OPERATING COSTS AND OTHER EXPENSES:
   Turnkey Contract Costs                                              --        127,321             --        670,326
   Cost of Oil and Gas Property Sales to Related Parties          169,025             --        273,482             --
   Lease Operating Costs                                           30,295         (3,401)        42,599          4,451
   Depreciation, Depletion and Amortization                        36,000        172,188        214,188        202,188
   Dry Hole and Abandonment Costs                                      --             --         85,172             --
   Marketing Costs                                                  1,297         66,479         26,101        262,674
   General and Administrative Costs                               257,772        299,223        489,903        609,636
                                                              -----------    -----------    -----------    -----------
        Total Operating Costs                                     494,389        661,810      1,131,445      1,749,275
                                                              -----------    -----------    -----------    -----------

OPERATING LOSS                                                   (150,970)      (381,421)      (459,436)      (588,061)

OTHER INCOME (EXPENSE):
   Gain on Sale of Oil and Gas Leases                                  --         78,839             --         78,839
   Interest Income (Expense)                                        3,631         (9,889)         4,093        (19,029)
                                                              -----------    -----------    -----------    -----------
        Total Other Income (Expense)                                3,631         68,950          4,093         59,810
                                                              -----------    -----------    -----------    -----------
INCOME (LOSS) FROM CONTINUING
   OPERATIONS BEFORE INCOME TAXES                                (147,339)      (312,471)      (455,343)      (528,251)
   Income Tax Provision                                                --             --             --         68,650
                                                              -----------    -----------    -----------    -----------
INCOME (LOSS) FROM
   CONTINUING OPERATIONS                                         (147,339)      (312,471)      (455,343)      (459,601)
DISCONTINUED OPERATIONS:
   Income (Loss) from  Discontinued Drilling Services                  --        (49,590)            --        (35,187)
   Income Tax Provision                                                --             --             --             --
                                                              -----------    -----------    -----------    -----------
INCOME (LOSS) FROM DISCONTINUED
 OPERATIONS                                                            --        (49,590)            --        (35,187)
                                                              -----------    -----------    -----------    -----------

NET INCOME (LOSS)                                             $  (147,339)   $  (362,061)   $  (455,343)   $  (494,788)
                                                              ===========    ===========    ===========    ===========

INCOME (LOSS) FROM CONTINUING
   OPERATIONS PER COMMON SHARE:
   Basic                                                      $     (0.02)   $     (0.05)   $     (0.07)   $     (0.07)
                                                              ===========    ===========    ===========    ===========
   Diluted                                                    $     (0.02)   $     (0.05)   $     (0.07)   $     (0.07)
                                                              ===========    ===========    ===========    ===========

INCOME (LOSS) FROM DISCONTINUED
OPERATIONS PER COMMON SHARE:
   Basic                                                      $      0.00    $     (0.00)   $      0.00    $     (0.00)
                                                              ===========    ===========    ===========    ===========
   Diluted                                                    $      0.00    $     (0.00)   $      0.00    $     (0.00)
                                                              ===========    ===========    ===========    ===========

NET INCOME (LOSS) PER COMMON SHARE:
   Basic                                                      $     (0.02)   $     (0.05)   $     (0.07)   $     (0.07)
                                                              ===========    ===========    ===========    ===========
   Diluted                                                    $     (0.02)   $     (0.05)   $     (0.07)   $     (0.07)
                                                              ===========    ===========    ===========    ===========

Weighted Average Common Shares Outstanding                      7,516,094      7,516,094      7,516,094      7,500,906
                                                              ===========    ===========    ===========    ===========
</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,
                                                                                     --------
                                                                              2003              2002
                                                                              ----              ----
<S>                                                                       <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income (Loss)                                                      $  (455,343)      $  (494,788)
   Adjustments to Reconcile Net (Loss) to Net Cash Flows from
      Operating Activities:
      Depreciation, Depletion and Amortization                                214,188           250,188
      Deferred Taxes                                                               --           (68,650)
      Change in Assets from Discontinued Operations                           164,000                --
      Change in Operating Assets and Liabilities:
        Accounts Receivable                                                    (2,915)          412,734
        Drilling Advances                                                          --        (1,068,609)
        Prepaid Expenses and Other Assets                                      59,749           106,458
        Seismic Data Costs Payable                                           (278,457)               --
        Accounts Payable and Accrued Liabilities                             (179,111)          (65,965)
                                                                          -----------       -----------
NET CASH USED IN OPERATING ACTIVITIES                                        (477,889)         (928,632)

CASH FLOWS FROM INVESTING ACTIVITIES:
   (Decrease) Increase in Advances from Affiliate                             489,755           (25,050)
   Sale of Oil and Gas Equipment and Properties
                                                                                   --           838,000
   Purchase of Seismic Data
                                                                                   --        (1,034,116)
   Purchase of Oil and Gas Properties                                        (469,819)         (362,757)
                                                                          -----------       -----------
NET CASH FROM (USED IN) INVESTING ACTIVITIES                                   19,936          (583,923)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments of Long Term Debt                                                 (12,000)         (217,546)
   Line of Credit from Affiliate                                                   --           750,000
   Preferred Stock Subscription Receivable                                    260,000                --
   Dividends Paid                                                            (101,561)           (8,498)
                                                                          -----------       -----------
NET CASH FROM FINANCING ACTIVITIES                                            146,439           523,956
                                                                          -----------       -----------
NET DECREASE IN CASH                                                         (311,514)         (988,599)
CASH AT BEGINNING OF PERIOD                                                   335,907         1,081,096
                                                                          -----------       -----------
CASH AT END OF PERIOD                                                     $    24,392       $    92,497
                                                                          ===========       ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash Paid for Interest                                                $         --       $    19,029
                                                                          ===========       ===========
   Cash Paid for Income Taxes                                            $         --       $        --
                                                                          ===========       ===========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
   FINANCING ACTIVITIES:
   Sale of Seismic Data                                                   $ 2,287,428       $        --
                                                                          ===========       ===========
   Increase in Advances from Affiliate                                    $   187,208       $        --
                                                                          ===========       ===========

   Retirement of Preferred Stock                                          $(2,000,000)      $        --
                                                                          ===========       ===========
   Elimination of Preferred Stock Subscriptions                           $  (500,000)      $        --
                                                                          ===========       ===========
   Transfer of Seismic Note Payable to
      Related Party                                                       $   474,636       $        --
                                                                          ===========       ===========
   Additional Paid in Capital From Related Party                          $   568,742       $        --
                                                                          ===========       ===========

</TABLE>


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




                                       5
<PAGE>
                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                             JUNE 30, 2003 AND 2002


1.       OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL

         Blue Ridge Energy, Inc. (BR Energy), a Nevada corporation, was
organized in November, 1994, as Gem Source, Incorporated (Gem Source), and
subsequently changed the name of BR Energy 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, Kentucky, 42101. BR Energy
is engaged in the oil and gas business, primarily in Texas, Kentucky, New Mexico
and West Virginia. BR Energy sponsors oil and gas drilling partnerships through
which it raises 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 owned two drilling rigs. These rigs
were used to drill oil and gas wells for the sponsored oil and gas drilling
partnerships and also other non-affiliated oil and gas companies. These
operations were discontinued and the rigs were sold during 2002. 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. These acquisitions are funded by a
combination of the profits earned from sponsoring oil and gas drilling programs,
the profit earned from contract drilling and from the proceeds of private
offerings of preferred stock. 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.

         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 through a private offering under Regulation D of Section 506 of
the Securities Act of 1933. BR Energy 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 March 31, 2003.

         In order to facilitate the purchase of this interest, BR Energy's
majority shareholder, BR Group, committed to extending BR Energy a $1,500,000
line of credit which had a term of one year, bore 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 paid in full on September 30,
2002 via the sale of 150,000 shares of BR Energy's Series E Preferred Stock to
BR Group for $1,500,000 and BR Group 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 thereby bringing BR Group's total
investment in BR Energy's Series E Preferred Stock to $2,000,000.

         During the first half of 2003 it became evident that BR Energy had not
been able to sell the remaining 300,000 shares of Series E Preferred Stock and
did not have the required capital available to acquire and develop the 100+ oil
and gas prospects, identified to date, by the utilization of this data.
Therefore, in May, 2003, BR Group agreed to 1) the retirement of the 200,000
shares of Series E Preferred Stock which it had received for the $2,000,000 paid
to BR Energy to date, 2) assume the remaining $500,000 in BR Energy debt
associated with the acquisition of the seismic information and 3) commit to
providing all funds required by this interest in the acquisition and development
of oil and gas properties identified by the utilization of this data.

         In return for this agreement, BR Energy agreed to repay $187,000 of the
funds received from the sale of the Preferred Stock, cancelled the remaining
subscription receivable for 50,000 shares of Preferred Stock and transferred to
BR Group all of its interest in the seismic information, which had a book value
of $1,719,000 as of March 31, 2003, 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 $568,742 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.

         Additionally, 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


                                       6
<PAGE>
                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                             JUNE 30, 2003 AND 2002

operations of the oil and gas wells on said prospects. For these services BR
Energy will receive a prospect fee on the acreage acquired, 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 two prospects under this arrangement were sold to BR Group in March and
June, 2003 for $487,000 less expenses of $273,000 for a net lease bonus of
$214,000 which was included in advances to/from BR Group at June 30, 2003.

         BR Energy had a net loss of approximately $455,000 during the first six
months of 2003 and had a working capital deficit of approximately $792,000 at
June 30, 2003. 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.

         As previously discussed, management has taken significant steps to
address the financial condition of BR Energy, to increase cash flows and to
achieve better operating results; principally by implementing its new business
plan and discontinuing its contract drilling service segment. BR Energy has also
entered certain agreements, including a sales and service agreement with its
majority shareholder, Blue Ridge Group, Inc. ("BR Group") to provide the
necessary financial support for BR Energy through the first quarter of 2004.

DISCONTINUED OPERATIONS

         As BR Energy began implementation of a new business plan, the decision
was made in July 2002 to discontinue the contract drilling service segment of BR
Energy's operations and sell its remaining drilling rigs and ancillary drilling
equipment. The drilling rigs and equipment were sold in the latter half of 2002
and all related income, expense, property and liability accounts related to
these operations have been netted and classified as discontinued operations in
the financial statements for all periods presented.

PRINCIPLES OF CONSOLIDATION

         The accompanying financial statements include the accounts of Blue
Ridge Energy, Inc. and its investment in limited partnerships for which it acts
as managing general partner. As such, BR Energy has the sole and exclusive right
and power to manage and control the partnership. BR Energy accounts for its
investment in limited partnerships under the proportionate consolidation method.
Under this method, BR Energy's financial statements include its pro-rata share
of assets and liabilities and revenues and expenses, respectively, of the
limited partnership in which it participates. All material inter-company
accounts and transactions have been eliminated in consolidation.

         For the interim periods presented, management believes the unaudited
consolidated financial statements reflect all adjustments of a normal recurring
nature and disclosures which are necessary for a fair presentation of the
results for the interim periods presented. The results of operations for the
interim periods are not necessarily indicative of the results that may be
expected for the full year or any other interim period.

         Although the consolidated balance sheet at December 31, 2002 has been
derived from the audited consolidated financial statements at that date, the
accompanying interim consolidated financial statements do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States. These interim financial statements should be read in
conjunction with the BR Energy's 2002 Annual Report on Form 10-K.

USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles 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.



                                       7
<PAGE>
                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                             JUNE 30, 2003 AND 2002


RECENTLY ISSUED ACCOUNTING STANDARDS

Accounting for Asset Retirement Obligations

         In June 2001, the Financial Accounting Standards Board issued SFAS No.
143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS, which is effective for fiscal
years beginning after June 15, 2002. The Statement 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. BR Energy adopted SFAS 143 on January 1, 2003 and determined that it had
no impact on BR Energy.

Consolidation of Variable Interest Entities

         In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities. FIN 46 provides guidance on how to
identify a variable interest entity (VIE) and determine when the assets,
liabilities, noncontrolling interests, and results of operations of a VIE are to
be included in an entity's consolidated financial statements. A VIE exists when
either the total equity investment at risk is not sufficient to permit the
entity to finance its activities by itself, or the equity investors lack one of
three characteristics associated with owning a controlling financial interest.
Those characteristics include the direct or indirect ability to make decisions
about an entity's activities through voting rights or similar rights, the
obligation to absorb the expected losses of an entity if they occur, and the
right to receive the expected residual returns of the entity if they occur.

         FIN 46 was effective immediately for new entities created or acquired
after February 1, 2003 and became effective on July 1, 2003 for entities in
which BR Energy had a variable interest prior to February 1, 2003. The
provisions of FIN 46 have not had an impact on BR Energy's results of
operations, financial position or liquidity through June 30, 2003. BR Energy is
still evaluating the effect of the provisions of FIN 46 which will be beginning
July 1, 2003.

REVENUE RECOGNITION

         Oil and gas revenue, from working interests BR Energy owns, are
recognized at the point of sale.

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.

PROPERTY AND EQUIPMENT

         Property and equipment (other than oil and gas) are stated at cost.
Depreciation is recognized on the straight line method, after considering
salvage value, over the estimated useful lives of the assets as follows:

<TABLE>
<CAPTION>
                         LIVES                           (YEARS)
<S>                                                        <C>
                      Machinery and Equipment.........     10
                      Autos and Trucks................      5
                      Furniture and Fixtures..........     10
</TABLE>

         BR Energy follows the successful efforts method of accounting for oil
and gas 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,

                                       8
<PAGE>
                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                             JUNE 30, 2003 AND 2002


               (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 quarterly assesses its unimproved
properties to determine whether they have been impaired. If the results of this
assessment indicate impairment, a loss is recognized by providing a valuation
allowance. When an unproved property is surrendered, the costs related thereto
are charged to the applicable valuation allowance, if adequate, or charged as a
loss to current operations.

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

SURRENDER OR ABANDONMENT OF DEVELOPED PROPERTIES

         Normally, no 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 Statement of Accounting Standards
(SFAS) No. 144, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." 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 expected prices. 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.

EARNINGS PER COMMON SHARE

The Company's basic earnings per common share ("Basic EPS") is based on the
weighted average number of common shares outstanding during the respective
periods. The income available to common shareholders is computed after deducting
dividends on the preferred stock. The convertible preferred stock and
outstanding stock warrants are considered anti-dilutive and therefore, excluded



                                       9
<PAGE>

                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                             JUNE 30, 2003 AND 2002


from the earnings per share calculations. The following is a reconciliation of
the numerators and denominators used in the calculation of Basic EPS for the
three and six months ended June 30, 2003 and 2002:


<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
         BASIC EPS COMPUTATION                                                               JUNE 30, 2003
         ---------------------                                                               -------- ----
<S>                                                                                          <C>
         Net Income.....................................................................     $   (147,339)
         Less: Preferred Stock Dividends................................................          (40,539)
                                                                                             ------------
         Income Available to Common Stockholders........................................     $   (187,878)
                                                                                             ============

<CAPTION>

         DATES                                                     SHARES      FRACTION        WEIGHTED
         OUTSTANDING                                             OUTSTANDING   OF PERIOD    AVERAGE SHARES
         -----------                                             -----------   ---------    --------------
<S>                                                                <C>            <C>           <C>
         April 1-June 30..................................         7,516,094      100.0%        7,516,094
         Weighted Average Shares..........................                                      7,516,094
                                                                                             ============

         Basic EPS........................................                                   $      (0.02)
                                                                                             ============

<CAPTION>

                                                                                           THREE MONTHS ENDED
         BASIC EPS COMPUTATION                                                               JUNE 30, 2002
         ---------------------                                                               -------------
<S>                                                                                          <C>
         Net Loss.......................................................................     $   (362,061)
         Less: Preferred Stock Dividends................................................             (433)
                                                                                             ------------
         Loss Available to Common Stockholders..........................................     $   (362,494)
                                                                                             ============

<CAPTION>

         DATES                                                     SHARES      FRACTION        WEIGHTED
         OUTSTANDING                                             OUTSTANDING   OF PERIOD    AVERAGE SHARES
         -----------                                             -----------   ---------    --------------
<S>                                                                <C>            <C>           <C>
         April 1-June 30..................................         7,516,094      100.0%        7,516,094
         Weighted Average Shares..........................                                      7,516,094
                                                                                             ============

         Basic EPS (Loss).................................                                   $      (0.05)
                                                                                             ============

<CAPTION>

                                                                                           SIX MONTHS ENDED
         BASIC EPS COMPUTATION                                                               JUNE 30, 2003
         ---------------------                                                               -------------
<S>                                                                                          <C>
         Net Income.....................................................................     $   (455,343)
         Less: Preferred Stock Dividends................................................         (101,561)
                                                                                             ------------
         Loss Available to Common Stockholders..........................................     $   (556,904)
                                                                                             ============

<CAPTION>

         DATES                                                     SHARES      FRACTION        WEIGHTED
         OUTSTANDING                                             OUTSTANDING   OF PERIOD    AVERAGE SHARES
         -----------                                             -----------   ---------    --------------
<S>                                                                <C>            <C>           <C>
         January 1-June 30................................         7,516,094      100.0%        7,516,094
         Weighted Average Shares..........................                                      7,516,094
                                                                                             ============

         Basic EPS (Loss).................................                                   $      (0.07)
                                                                                             ============

<CAPTION>

                                                                                            SIX MONTHS ENDED
         BASIC EPS COMPUTATION                                                               JUNE 30, 2002
         ---------------------                                                               -------------
<S>                                                                                          <C>
         Net Loss.......................................................................     $   (494,788)
         Less: Preferred Stock Dividends................................................           (8,498)
                                                                                             ------------
         Loss Available to Common Stockholders..........................................     $   (503,286)
                                                                                             ============

<CAPTION>

         DATES                                                     SHARES      FRACTION        WEIGHTED
         OUTSTANDING                                             OUTSTANDING   OF PERIOD    AVERAGE SHARES
         -----------                                             -----------   ---------    --------------
<S>                                                                <C>            <C>           <C>
         January 1-June 30................................         7,455,344      100.0%        7,455,344
         Conversion of Preferred Stock....................            60,750       75.0%           45,562
                                                             ---------------                 ------------
                                                                   7,516,094
         Weighted Average Shares..........................                                      7,500,906
                                                                                             ============
</TABLE>

                                       10

<PAGE>
                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                             JUNE 30, 2003 AND 2002


<TABLE>

<S>                                                                                          <C>
         Basic EPS (Loss).................................                                   $      (0.07)
                                                                                             ============
</TABLE>

         There also exists various warrants for the purchase of common stock. As
of June 30, 2002, there are warrants outstanding, convertible into 3,177,719
shares of common stock that are exercisable at prices ranging from $0.40 to
$6.00 per share.

         As BR Energy recorded a loss in 2003 and 2002, Common share equivalents
outstanding would be anti-dilutive, and as such, no pro-forma earnings per
share, assuming the preferred stock was converted to Common Stock, information
is required for 2003 or 2002.

INCOME TAXES

         Income taxes in the six months ended June 30, 2003 and 2002 have been
provided for at an estimated effective tax rate of 0% and 2%, respectively.

         Income taxes are provided for under the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes" which takes into account the
differences between financial statement treatment and tax treatment of certain
transactions. It is uncertain as to whether BR Energy will generate sufficient
future taxable income to utilize the net deferred tax assets, therefore for
financial reporting purposes, a valuation allowance of $928,000 and $774,000 as
of June 30, 2003 and December 31, 2002, respectively, has been recognized to
offset the net deferred tax assets.

CASH AND CASH EQUIVALENTS

         For purposes of reporting cash flows, cash and cash equivalents
includes cash on hand and cash on deposit. The Company defines cash equivalents
as short-term and highly liquid investments that are both readily convertible to
known amounts of cash and have an original maturity of less than 90 days.

RECLASSIFICATIONS

         Certain 2002 amounts have been reclassified in the financial statements
to conform with the 2003 presentation.

2.       AFFILIATED OIL AND GAS PARTNERSHIPS

         The Company provides turnkey drilling services for the various oil and
gas partnerships which it sponsors. Fees earned for these drilling services,
including the sale of leases to the partnerships, amounted to $0 and $1,089,000
during the three months ended June 30, 2003 and 2002, respectively.

         Included in the Company's financial statements are contributions made
to the various Company sponsored oil and gas partnerships, less the applicable
loss generated by these partnerships relative to the Company's percentage
ownership. The Company 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, 2003, there are 7,516,094 shares of common stock issued
and outstanding. A total of 4,141,233 shares are held by Blue Ridge Group, Inc
(BR Group) and the remaining 3,374,861 shares are held by approximately 600
shareholders.

ADVANCES TO/FROM RELATED PARTIES

         BR Group provided various management, administrative, accounting and
geological services for BR Energy at a rate of $20,750 per month through March
31, 2003 at which point the monthly rate was adjusted to $10,000 per month. The
fee amount has been determined on a proportional basis 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



                                       11
<PAGE>
                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                             JUNE 30, 2003 AND 2002

matter of ongoing business, BR Group will advance funds to BR Energy against
work in progress. As of June 30, 2003 and December 31, 2002, advances to/from BR
Group was approximately $748,100 and $71,137.

         Additionally, in March, 2002, BR Group committed to extending BR Energy
a $1,500,000 line of credit to facilitate the purchase of an interest in 48,000
miles of seismic data in the Texas Gulf Coast area. This line of credit had a
term of one year, bore interest at 9% per annum on all unpaid balances and was
secured by all of BR Energy's interests in the seismic data and any oil and gas
properties acquired through the implementation of this data. This $1,500,000
balance was paid in full on September 30, 2002 via the sale of 150,000 shares of
BR Energy's Series E Preferred Stock to BR Group for $1,500,000 and BR Group
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 thereby bringing BR Group's total investment in BR Energy's Series E
Preferred Stock to $2,000,000.

         During the first half of 2003 it became evident that BR Energy had not
been able to sell the remaining 300,000 shares of Series E Preferred Stock and
did not have the required capital available to acquire and develop the 100+ oil
and gas prospects, identified to date, by the utilization of this data.
Therefore, in May, 2003, BR Group agreed to 1) the retirement of the 200,000
shares of Series E Preferred Stock which it had received for the $2,000,000 paid
to BR Energy to date, 2) assume the remaining $500,000 in BR Energy debt
associated with the acquisition of the seismic information and 3) commit to
providing all funds required by this interest in the acquisition and development
of oil and gas properties identified by the utilization of this data.

         In return for this agreement, BR Energy agreed to repay $187,000 of the
funds received from the sale of the Preferred Stock, cancelled the remaining
subscription receivable for 50,000 shares of Preferred Stock and transferred to
BR Group all of its interest in the seismic information and any future oil and
gas properties identified by this information to be acquired and developed. The
net effect of this transaction was BR Energy recorded $568,742 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.

         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, 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 two prospects under this arrangement were sold to BR Group in March
and June, 2003 for $487,000 less expenses of $264,000 for a net lease bonus of
$223,000 which was included in advances to/from BR Group at June 30, 2003.

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

4.       PROPERTY AND EQUIPMENT

 Property and equipment, stated at cost, consisted of the following at June 30,
2003 and December 31, 2002:


<TABLE>
<CAPTION>
                                                                                                         JUNE 30,      DECEMBER 31,
                                                                                                           2003            2002
                                                                                                           ----            ----
                                                                                                                (UNAUDITED)
<S>                                                                                                   <C>              <C>
Oil and Gas Properties...........................................................................     $    2,245,341   $  1,855,992
Seismic License and Data.........................................................................                 --      2,287,429
Furniture and Fixtures...........................................................................             86,690         24,782
                                                                                                      --------------   ------------
                                                                                                           2,332,031      4,168,203
Less Accumulated Depreciation....................................................................           (629,498)      (988,215)
                                                                                                      --------------   ------------
                                                                                                      $    1,702,533   $  3,179,988
                                                                                                      ==============   ============
</TABLE>

         Depletion, Depreciation and Amortization expense was $214,188 and
$202,188 for the six months ended June 30, 2003 and 2002, respectively.



                                       12
<PAGE>
                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                             JUNE 30, 2003 AND 2002

5.       COMMITMENTS AND CONTINGENCIES

COMMITMENTS

         Neither BR Energy nor any of its properties is subject to any material
pending legal proceedings. From time to time, BR Energy may be a party to
litigation in the ordinary course of business, none of which is expected to have
a material adverse effect on the financial condition of BR Energy.

CONTINGENCIES

         BR Energy's drilling and 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, the Company maintains general liability insurance coverage of
approximately $10 million per occurrence and in the aggregate. The Company
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 the Company against liability for all consequences of well
disasters, extensive fire damage, or damage to the environment. The Company has
never been fined or incurred liability for pollution or other environmental
damage in connection with its operations.

6.       STOCKHOLDERS' EQUITY

         The Company is authorized to issue two classes of stock that are
designated, respectively, common and preferred stock. As of June 30, 2003, the
Company was authorized to issue 25,000,000 shares of stock, 20,000,000 being
designated as common stock and 5,000,000 shares designated as preferred stock.

SERIES E PREFERRED STOCK

         In June, 2002, BR Energy authorized the issuance and sale of 750,000
shares of Series E Preferred Stock ("Series E Stock") which has a par value of
$0.001 per share at $10.00 per share. The Series E 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. Each share of the Series E Stock shall be
converted automatically into five (5) shares of Common Stock five years after
the closing of the offering or at such time as BR Energy's registered common
stock has traded at $12.50 per share average for a 30 day period, but in any
event no earlier than three years after the final closing of the offering which
was December 31, 2002.

         In the event of any liquidation, dissolution or winding up of BR
Energy, either voluntary or involuntary, the existing holders of Series E Stock
shall be entitled to receive, prior and in preference to any distribution of any
assets or surplus funds of BR Energy to the holders of Common Stock the amount
of $10.00 per share plus all unpaid dividends on of each share of Series E Stock
then held by the shareholder.

         In May, 2003, BR Group agreed to the retirement of the 200,000 shares
of Series E Preferred Stock which it had received for the $2,000,000 paid to BR
Energy to date. As of June 30, 2003, there are 23,300 shares of Series E Stock
issued and outstanding.

COMMON STOCK WARRANTS

         As of June 30, 2003, BR Energy had warrants and options outstanding to
purchase 3,177,719 shares of Common Stock at prices ranging from $0.40 to $6.00
per share. There were 0 warrants issued or exercised during the first half of
2003. See the Company's Form 10-KSB for December 31, 2002 for additional
details.




                                       13
<PAGE>

FINANCIAL OVERVIEW:

         Blue Ridge Energy, Inc. ("BR Energy"), a Nevada corporation, was
organized in November, 1994, as Gem Source, Incorporated ("Gem Source"), 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.

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

         With the establishment in 2002 of a new technical management team,
additional directors, and an office in Houston, we have begun 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
shareholder 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 through a private offering under Regulation D of Section 506 of
the Securities Act of 1933. BR Energy originally recorded an asset of $2.3
million, which was being amortized over four years and had a balance of $1.7 as
of March 31, 2003.

         In order to facilitate the purchase of this interest, BR Energy's
majority shareholder, BR Group, committed to extending BR Energy a $1,500,000
line of credit which had a term of one year, bore 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 paid in full on September 30,
2002 via the sale of 150,000 shares of BR Energy's Series E Preferred Stock to
BR Group for $1,500,000 and BR Group 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 thereby bringing BR Group's total
investment in BR Energy's Series E Preferred Stock to $2,000,000.

         During the first half of 2003 it became evident that BR Energy had not
been able to sell the remaining 300,000 shares of Series E Preferred Stock and
did not have the required capital available to acquire and develop the 100+ oil
and gas prospects, identified to date, by the utilization of this data.
Therefore, in May, 2003, BR Group agreed to 1) the retirement of the 200,000
shares of Series E Preferred Stock which it had received for the $2,000,000 paid
to BR Energy to date, 2) assume the remaining $500,000 in BR Energy debt
associated with the acquisition of the seismic information and 3) commit to
providing all funds required by this interest in the acquisition and development
of oil and gas properties identified by the utilization of this data.

         In return for this agreement, BR Energy agreed to repay $187,000 of the
funds received from the sale of the Preferred Stock, cancelled the remaining
subscription receivable for 50,000 shares of Preferred Stock and transferred to
BR Group all of its interest in the seismic information and any future oil and
gas properties identified by this information to be acquired and developed. The
net effect of this transaction was BR Energy recorded $568,742 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.

         Additionally, 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


                                       14
<PAGE>
operations of the oil and gas wells on said prospects. For these services BR
Energy will receive a prospect fee on the acreage acquired, 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 two prospects under this arrangement were sold to BR Group in March and
June, 2003 for $487,000 less expenses of $264,000 for a net lease bonus of
$223,000 which was included in advances to/from BR Group at June 30, 2003.

         At June 30, 2003, BR Energy had total assets of $1.8 million, total
liabilities of $885 thousand and shareholders' equity of $954 thousand. BR
Energy had a net loss of $455,000 during the first six months of 2003 as
compared to a net loss of $495,000 for the same period in 2002. The loss per
common share, which takes into account cash dividends paid on preferred stock
was $(0.07) per share during the first six months of 2003 as compared to $(0.07)
during the same period in 2002. All per share data in this report has been
adjusted to give effect to applicable stock issues and conversions.

         As of June 30, 2003, BR Energy has participated, either directly or
indirectly through its sponsored limited partnerships, in 101 wells, of which
seventy-six (76) are presently productive and located in Kentucky, Texas, West
Virginia and New Mexico.

         The following tables summarize by geographic area BR Energy's developed
and undeveloped acreage, oil and gas reserves and gross and net interests in
producing oil and gas wells as of June 30, 2003. Productive wells are producing
wells and wells capable of production, including gas wells awaiting pipeline
connections and oil wells awaiting connection to production facilities. Wells
that are completed in more than one producing horizon are counted as one well.

     DEVELOPED AND UNDEVELOPED ACREAGE

<TABLE>
<CAPTION>
     GEOGRAPHIC AREA                                                   DEVELOPED ACREAGE             UNDEVELOPED ACREAGE
     ---------------                                             ----------------------------     ----------------------------
                                                                 GROSS ACRES        NET ACRES     GROSS ACRES        NET ACRES
                                                                 -----------        ---------     -----------        ---------

<S>                                                                <C>                <C>            <C>                <C>
     New Mexico.........................................              80.00            53.60             0.00             0.00
     Texas..............................................           1,743.78           181.03         4,460.00           457.00
     Kentucky...........................................             780.00            99.40             0.00             0.00
     West Virginia......................................             135.00             8.24             0.00             0.00
                                                                   --------           ------         --------           ------
     Totals.............................................           2,738.78           342.27         4,460.00           457.00
                                                                   ========           ======         ========           ======
</TABLE>

         PRODUCTIVE WELLS

<TABLE>
<CAPTION>
                                                                                                                   12/31/02
                                                                                                                   --------
                                                                GROSS WELLS               NET WELLS                RESERVES
GEOGRAPHIC AREA                                               OIL         GAS          OIL         GAS          OIL          GAS
---------------                                            --------- ----------- ------------ ----------- ------------ -----------
                                                           (BBLS)       (MCF)       (BBLS)       (MCF)       (BBLS)        (MCF)
                                                           --------- ----------- ------------ ----------- ------------ -----------
<S>                                                          <C>        <C>           <C>        <C>         <C>           <C>
New Mexico..............................................     1.00        0.00         0.67        0.00        4,960          7,000
Texas...................................................     2.00        6.00         0.84        0.83       44,556        102,000
Kentucky................................................     0.00       55.00         0.00        7.53            0         82,967
West Virginia...........................................     0.00       12.00         0.00        1.99            0         47,032
                                                             ----       -----         ----        ----    ---------     ----------
         Totals.........................................     3.00       73.00         1.51       10.35       49,516        238,999
                                                             ====       =====         ====       =====    =========     ==========
</TABLE>

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, 2003:

DEVELOPED PROPERTIES

         Toadflax Prospect: BR Energy owns 4.25% of the working interest, with a
3.20% net revenue interest in 1 well located in Polk County, Texas which was
drilled during the third quarter of 2003 and is being completed as a natural gas
well.


                                       15
<PAGE>

         Lopseed Prospect: BR Energy owns 4.25% of the working interest, with a
3.20% net revenue interest in 1 well located in Polk County, Texas which was
drilled during the third quarter of 2003 and is being completed as a natural gas
well.

         Wolfsbane Prospect: BR Energy owns 17.0% of the working interest, with
a 13.30% net revenue interest in 1 well located in Walker County, Texas which
began producing in the second quarter of 2003 and is producing 500 MCFPD.

         Agrimony Prospect: BR Energy owns 17.0% of the working interest, with a
13.14% net revenue interest in 1 well located in Polk County, Texas which began
producing in the second quarter of 2003 and is producing 300 MCFPD.

         Pepperbush Prospect: BR Energy owns 17.0% of the working interest, with
a 12.89% net revenue interest in 1 well located in Polk County, Texas which
began producing in the second quarter of 2003 and is producing 770 MCFPD.

         Yarrow Prospect: BR Energy owns 17.0% of the working interest, with a
12.96% net revenue interest in 1 well located in Tyler County, Texas which began
producing in the fourth quarter of 2002 and is producing 500 MCFPD.

         West Pebble Island Prospect: BR Energy owns 10% of the working
interest, with a 7.3% net revenue interest in 2 wells located in Tyler County,
Texas which began producing in early 2003 and are producing 90 BOPD and 170
MCFPD.

         Keegan Gibson #1: BR Energy owns 74% of the working interest, with a
63% net revenue interest in this well located in Smith County, Texas which is
producing approximately 10 BOPD.

         Shelby County, Texas: BR Energy owns a 0.5% 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 2.5 MMCF per day.

         Homestake #1: The Homestake #1 oil well is a development well located
in Lea County, New Mexico. BR Energy owns 66.9% of the Working Interest in the
Homestake #1 with a 50.2% Net Revenue Interest.

         Big Sandy Prospect: As of June 30, 2003 ten (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
25% to 30.25% of the working interest with net revenue interests ranging from
18.75% to 22.69% in each well.

         Boon's Camp Prospect: As of June 30, 2003, fourteen (14) gas wells are
producing 550 - 650 MCF per day in eastern Kentucky. In June 2002, BR Energy
sold the remaining undeveloped acreage in this prospect to a former executive of
BR Energy for a gain of approximately $25,000.

         Contrary Creek Prospect: As of June 30, 2003, eleven (11) gas wells are
producing approximately 350 MCFPD of gas. In June 2002, BR Energy sold the
remaining undeveloped acreage in this prospect to a former executive of BR
Energy for a gain of approximately $25,000.

         McDonald Prospect: Drilling in this prospect located in Logan County,
West Virginia began during the fourth quarter of 2000 with 5 gas wells having
been drilled and producing approximately 300 MCFPD of gas as of June 30, 2003.

         Mingo And Wyoming Counties, West Virginia: BR Energy owns an 8.0%
working interest in five (5) gas development wells in Mingo and Wyoming
Counties, West Virginia. These wells are presently producing a total of 200-250
MCF per day.

UNDEVELOPED PROPERTIES

         Texas Onshore Seismic Acquisition: During March of 2002, BR Energy
acquired a 35% interest in Channel LLC resulting in a 17.5% working interest in
a large ongoing Texas onshore exploration program, consisting of 48,000 miles of
seismic data in the Texas Gulf Coast area and the oil and gas properties
acquired through the utilization of this data. In May of 2003, BR Energy agreed
to transfer to BR Group all of its interest in the seismic information and any
future oil and gas properties identified by this information to be acquired and
developed. BR Energy retained all of its interest in any oil and gas properties
previously acquired and developed under this arrangement. Additionally, BR
Energy will be carried at no cost for 25% of any future interests acquired and
developed by BR Group through the utilization of this data. When BR Group has
recouped 100% of all monies expended for the initial seismic acquisition, as
well as the subsequent acquisition and development of oil and gas properties
under this arrangement, BR Energy shall


                                       16
<PAGE>

have the right, but not the obligation, to reverse its position with BR Group
whereby BR Energy would receive 75% of the interest in future oil and gas
properties and "carry" BR Group for 25% of the interest.

         The centerpiece of this program will utilize a large onshore Texas
seismic database comprising approximately 48,000 miles and covering 100+
counties of the Texas Gulf Coast, East Texas, and South Texas. The great
majority of this data has never been put into the "public domain" and was
acquired by a major oil company thought to be primarily exploring for large deep
targets. This data is being reprocessed in order to find additional drilling
prospects analogous to nearby known producing fields in the same producing
trend. Approximately ninety percent of the seismic mileage has been reprocessed
as of June 30, 2003 and over 100 prospects have been identified.

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

         Once a prospect has been identified and additional geologic and
geophysical work performed, we and our working interest parties have independent
elections to participate as to our respective interests in the wells. These
prospects range from 3,000 feet to 13,000 feet in depth and will be the
prospects on which we intend to drill both exploratory and development wells. We
estimate the cost to drill and complete a well for 100% of the working interest
in these prospects will range from $150,000 for the shallower wells to
$2,100,000 for the deeper wells. As of June 30, 2003, 9 wells had been drilled
under this arrangement resulting in three dry holes, four natural gas producers
and two wells are in the completion process.

         Brown Prospect: BR Energy owns a 10% working interest in 930 acres of
oil and gas leases located in Jasper and Tyler Counties, Texas. The prospect is
a seismically well defined structural four way closure designed to test the
highly prolific Upper Wilcox Sands as they produce in southeast Texas. The first
well was drilled in July 2003 and is presently being evaluated for reentry for
sidetrack drilling.

         Neches River Prospect: BR Energy owns a 10% working interest in 1,460
acres of oil and gas leases located in Jasper and Tyler Counties, Texas. The
prospect is a seismically well-defined structural four way closure designed to
test the highly prolific Upper Wilcox Sands as they produce in southeast Texas.
The first well was drilled in July 2003 and is presently being completed as a
gas well.

         Webb Prospect: BR Energy owns a 10% working interest in 1,020 acres of
oil and gas leases located in Jasper County, Texas. The prospect is a
seismically well-defined structural four way closure designed to test the highly
prolific Upper Wilcox Sands as they produce in southeast Texas. Drilling in this
prospect is anticipated to begin during the fourth quarter of 2003.

         N. Champions Prospect: BR Energy owns a 10% working interest in 810
acres of oil and gas leases located in Jasper County, Texas. The prospect is a
seismically well-defined structural four way closure designed to test the highly
prolific Upper Wilcox Sands as they produce in southeast Texas. Drilling in this
prospect is anticipated to begin during the fourth quarter of 2003.

         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.

INCOME STATEMENT REVIEW:

THREE MONTHS ENDED JUNE 30, 2003 AND 2002:

         BR Energy had a net loss of $(147,000) during the second quarter
of 2003 as compared to a net loss of $(362,000) for the same period in 2002, The
(loss) per common share, which takes into account cash dividends paid on
preferred stock was $(0.02) per share during the second quarter of 2003 as
compared to $(0.05) in the same period of 2002.



                                       17
<PAGE>

OPERATING REVENUES:

         Operating revenues totaled $343,000 during the three months ended June
30, 2003 as compared to the $280,000 recorded during the three months ended June
30, 2002, This decrease was primarily related to the lack of activity in BR
Energy's sponsorship of Limited Partnerships for the drilling and development of
oil and gas properties during 2003. This was offset by the sale of oil and gas
properties to BR Group of $232,000 and by a 326% increase in oil and gas sales
to $111,000 during the second quarter of 2003 as compared to $26,000 during the
same period of 2002.

DIRECT OPERATING COSTS:

         Direct operating costs totaled $235,000 during the three months ended
June 30, 2003, as compared to the $296,000 experienced during the same period in
2002. The changes in direct operating costs are directly and proportionally
related to the changes in operating revenues previously discussed.

OTHER OPERATING EXPENSES:

         Marketing expenses decreased 98% to $1,000 during the first quarter of
2003 from the $66,000 experienced during this period in 2002 due to the lack of
activity in sponsoring Limited Partnerships as previously discussed. General and
Administrative expenses decreased 14% to $258,000 during the second quarter of
2003 as compared to $299,000 during the same period in 2002, primarily as a
result of decreased costs associated with changes in management personnel.

OTHER INCOME:

         Other Income decreased 94% to $4,000 during the second quarter of 2003
as compared to $69,000 during the second quarter of 2002 due to the lack of oil
and gas property sales to third parties.

SIX MONTHS ENDED JUNE 30, 2003 AND 2002:

         BR Energy had a net loss of $(455,000) during the first half of 2003 as
compared to a net loss of $(495,000) for the same period in 2002, The income
(loss) per common share, which takes into account cash dividends paid on
preferred stock was $(0.07) per share during the first half of 2003 and 2002.

OPERATING REVENUES:

         Operating revenues totaled $672,000 during the six months ended June
30, 2003 as compared to the $1,161,000 recorded during the six months ended June
30, 2002, This decrease was primarily related to the lack of activity in BR
Energy's sponsorship of Limited Partnerships for the drilling and development of
oil and gas properties during 2003. This was offset by the sale of oil and gas
properties to BR Group of $487,000 and by a 157% increase in oil and gas sales
to $185,000 during the first half of 2003 as compared to $72,000 during the same
period of 2002.

DIRECT OPERATING COSTS:

         Direct operating costs totaled $615,000 during the six months ended
June 30, 2003, as compared to the $877,000 experienced during the same period in
2002. The changes in direct operating costs are directly and proportionally
related to the changes in operating revenues previously discussed.

OTHER OPERATING EXPENSES:

         Marketing expenses decreased 90% to $26,000 during the first half of
2003 from the $263,000 experienced during this period in 2002 due to the lack of
activity in sponsoring Limited Partnerships as previously discussed. General and
Administrative expenses decreased 20% to $490,000 during the first half of 2003
as compared to $610,000 during the same period in 2002, primarily as a result of
decreased costs associated with changes in management personnel.

OTHER INCOME:

         Other Income decreased 93% to $4,000 during the first half
of 2003 as compared to $60,000 during the first half of 2002 due to
the lack of oil and gas property sales to third parties.



                                       18
<PAGE>


BALANCE SHEET REVIEW:

ASSETS:

         BR Energy's current assets decrease of 80% to $93,000 at June 30, 2003
as compared to $469,000 at December 31, 2002 was primarily due to the use of
cash and advances for operations and the development of oil and gas properties.
The decrease in Deferred Seismic Costs resulted from their sale to BR Group.

LIABILITIES:

         BR Energy's current liabilities decreased 23% to $885,000 at June 30,
2003 from $1,148,000 at December 31, 2002 despite the $677,000 increase in
Advances from Affiliates primarily due to the sale of seismic data costs
previously mentioned and the concurrent disposal of the Seismic Data Costs
Payable.

STOCKHOLDERS' EQUITY:

         Total capital invested in BR Energy for Common and Preferred Stock
decreased $1,186,000 to $6,377,000 as of June 30, 2003 as compared to $7,563,000
at December 31, 2002 due to the retirement of Series E Preferred Stock
previously discussed. The Retained Deficit increased to $5,423,000 at June 30,
2003 due to having a net loss of $455,000 and the payment of $102,000 in Series
E Preferred Stock dividends.

CAPITAL RESOURCES AND LIQUIDITY:

         BR Energy's current ratio (current assets / current liabilities) was
0.10 to 1 at June 30, 2003 and 0.41 to 1 at June 30, 2002. 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 2003
from 2002 was due primarily to the use of funds in the acquisition of seismic
data, development of oil and gas properties and continuing operations.

         BR Energy's primary source of cash in 2002 and 2003 has been derived
from the sale of oil and gas limited partnerships, the sale of oil and gas
properties to an affiliated party, oil and gas production and short term
borrowings. Without these sources of cash, BR Energy would not have adequate
sources of cash for its operations. While BR Energy expects that its revenue
sources will not significantly change in 2003, BR Energy will be increasing its
emphasis on drilling and developing oil and gas properties in order to increase
its revenue from oil and gas production.

         During the periods ended June 30, 2003 and December 31, 2002, BR Energy
has relied upon net inflows of cash generated by its operating activities and
equity offerings to fund the purchase of assets and its expansion. Generally
speaking, management intends to fund further growth with equity transactions and
improved cash flows from operations.

         BR Energy had a net loss of approximately $455,000 during the first
half of 2003 and had a working capital deficit of approximately $792,000 at June
30, 2003. 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 and selling the majority of its interest in
seismic data. BR Energy has also entered certain agreements, including a sales
and service agreement with BR Group to provide the necessary financial support
for BR Energy through the first quarter of 2004.

         As of June 30, 2003, BR Energy had sufficient cash to satisfy its
operating needs for a period of 90 days or longer. BR Energy plans to continue
funding its operating needs by sponsoring 1 to 2 limited partnership oil and gas
drilling programs a year.


ITEM 4.  CONTROLS AND PROCEDURES

         As of June 30, 2003 BR Energy's Chief Executive Officer and Chief
Financial Officer have evaluated BR Energy's disclosure controls and procedures.
Based on that evaluation, BR Energy's management, including the Chief Executive
Officer and Chief Financial Officer concluded that BR Energy's disclosure
controls and procedures, as of June 30, 2003, were functioning effectively to
provide reasonable assurance that BR Energy can meet its disclosure obligations.
There have been no significant


                                       19
<PAGE>

changes in BR Energy's internal controls over financial reporting or in other
factors during the quarter ended June 30, 2003, that could significantly affect
internal controls over financial reporting subsequent to this review.

                                     PART II

                                OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

         There are no legal proceedings pending against BR Energy, Inc.

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 21,
2003.

         (B) The directors elected at the meeting were:

<TABLE>
<CAPTION>
                                                                FOR             WITHHELD         ABSTAIN
<S>                                                           <C>                <C>             <C>
           Robert D. Burr                                     4,835,043                0         2,681,051
           Patrick A Kelleher                                 4,835,043                0         2,681,051
           Forrest E. Ebbs                                    4,835,043                0         2,681,051
           Gregory B. Shea                                    4,834,043            1,000         2,681,051
           Harry J. Peters                                    4,835,043                0         2,681,051
           Richard M. Hewitt                                  4,835,043                0         2,681,051
</TABLE>

ITEM 5.        OTHER INFORMATION

         None

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

         No reports on Form 8-K were filed during the quarter ended June 30,
2003.

         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 Certification Pursuant to
                           18 U.S C Section 1350
         Exhibit 32.2      Chief Financial Officer's Certification Pursuant to
                           18 U.S C Section 1350

                                   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 14, 2003               By     /s/ Norman G. Haisler
                                     ---------------------------------------
                                          Norman G. Haisler
                                          Sr. Vice President-Finance & CFO



                                       20