<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, 2005

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

     FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                          BAYOU CITY EXPLORATION, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

<TABLE>
<S>                                                          <C>
             NEVADA                                               61-1306702
(State or Other Jurisdiction of                                 (IRS Employer
 Incorporation or Organization)                              Identification No.)
</TABLE>

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

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

                             BLUE RIDGE ENERGY, INC.
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

                                 Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 21,266,094 shares of common stock as
of August 10, 2005 and 23,300 shares of Series E Preferred Stock as of August
10, 2005.

                  TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT

                                 Yes [ ] No [X]

================================================================================
<PAGE>
<TABLE>
<S>       <C>                                                             <C>
                                     PART I

                              FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED)

          FINANCIAL STATEMENTS OF REGISTRANT

          INDEX                                                           NUMBER

          Balance Sheets as of June 30, 2005 and December 31, 2004             3
          Statements of Operations for the three months and six months
             ended June 30, 2005 and 2004                                      4
          Statements of Cash Flows for the six months ended
             June 30, 2005 and 2004                                            5
          Notes to Financial Statements                                     6-12

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

                                     PART II

                                OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS                                                   19
ITEM 2.   CHANGES IN SECURITIES                                               19
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES                                     19
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                 19
ITEM 5.   OTHER INFORMATION                                                   19
ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                                    19
SIGNATURE                                                                     20
</TABLE>


                                        2
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 JUNE 30,    DECEMBER 31,
                                                                                   2005          2004
                                                                               -----------   ------------
                                                                               (UNAUDITED)
<S>                                                                            <C>           <C>
                                     ASSETS

CURRENT ASSETS:
   Cash                                                                        $   358,512    $ 1,465,675
   Accounts Receivable:
      Managed Limited Partnerships                                                  21,505         15,365
      Related party                                                                 10,587         22,354
      Trade and Other                                                              216,157        167,400
   Prepaid Expenses and Other Current Assets                                        26,813          5,693
                                                                               -----------    -----------
      TOTAL CURRENT ASSETS                                                         633,574      1,676,487

PROPERTY AND EQUIPMENT, NET                                                      1,048,291        651,654
OTHER NONCURRENT ASSETS                                                              7,024          7,024
                                                                               -----------    -----------
      TOTAL ASSETS                                                             $ 1,688,889    $ 2,335,165
                                                                               ===========    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts Payable and Accrued Liabilities                                    $   177,137    $   125,545
   Current Portion Long Term Debt                                                   57,273         47,523
                                                                               -----------    -----------
      TOTAL CURRENT LIABILITIES                                                    234,410        173,068

ASSET RETIREMENT LIABILITY                                                          73,292             --
LONG TERM DEBT                                                                     445,413        441,173

COMMITMENTS AND CONTINGENCIES                                                           --             --

STOCKHOLDERS' EQUITY:
   Preferred Stock, $0.001 par value; 5,000,000 shares authorized; Series
      E 23,300 shares issued and outstanding at June 30, 2005 and
      December 31, 2004 (liquidation preference of $233,000 at June 30, 2005
      and December 31, 2004)                                                            23             23
   Common Stock, $0.005 par value; 150,000,000 shares authorized; 21,266,094
      shares issued and outstanding at June 30, 2005 and December 31, 2004         106,331        106,331
   Additional Paid-In Capital                                                    8,745,055      8,745,055
   Accumulated Deficit                                                          (7,915,635)    (7,130,485)
                                                                               -----------    -----------
      TOTAL STOCKHOLDERS' EQUITY                                                   935,774      1,720,924
                                                                               -----------    -----------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $ 1,688,889    $ 2,335,165
                                                                               ===========    ===========
</TABLE>

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


                                        3
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED          SIX MONTHS ENDED
                                                                 JUNE 30,                   JUNE 30,
                                                         ------------------------   ------------------------
                                                             2005         2004          2005         2004
                                                         -----------   ----------   -----------   ----------
<S>                                                      <C>           <C>          <C>           <C>
OPERATING REVENUES:
Management Fees                                          $   120,000   $       --   $   120,000   $       --
Oil and Gas Sales                                             55,455      130,098       180,853      260,246
                                                         -----------   ----------   -----------   ----------
      TOTAL OPERATING REVENUES                               175,455      130,098       300,853      260,246
                                                         -----------   ----------   -----------   ----------

OPERATING COSTS AND EXPENSES:
   Lease Operating Costs                                      10,436       37,801        62,938       84,083
   Dry Hole and Abandonment Costs                              5,110        3,155         5,110        3,313
   Exploration Costs                                         127,529           --       277,034           --
   Depreciation, Depletion and Amortization                   84,804       64,707       140,761      128,676
   Accretion Expense                                          12,500           --        12,500           --
   Marketing Costs                                            11,047           --        11,047           --
   General and Administrative Costs                          374,783      273,403       542,588      565,483
                                                         -----------   ----------   -----------   ----------
      TOTAL OPERATING COSTS AND EXPENSES                     626,209      379,066     1,051,978      781,555
                                                         -----------   ----------   -----------   ----------

OPERATING LOSS                                              (450,754)    (248,968)     (751,125)    (521,309)

OTHER EXPENSE:
   Interest Expense                                           (9,892)          --       (20,045)          --
   Other Expense                                                  --           --            --       (4,700)
                                                         -----------   ----------   -----------   ----------
      TOTAL OTHER EXPENSE                                     (9,892)          --       (20,045)      (4,700)
                                                         -----------   ----------   -----------   ----------
      LOSS BEFORE INCOME TAXES                              (460,646)    (248,968)     (771,170)    (526,009)

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

      NET LOSS                                           $  (460,646)  $ (248,968)  $  (771,170)  $ (526,009)

      SERIES E PREFERRED STOCK CASH DIVIDENDS                 (6,990)      (6,990)      (13,980)     (13,980)
                                                         -----------   ----------   -----------   ----------

      NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS       $  (467,636)  $ (255,958)  $  (785,150)  $ (539,989)
                                                         ===========   ==========   ===========   ==========

      NET LOSS PER COMMON SHARE                          $     (0.02)  $    (0.03)  $     (0.04)  $    (0.07)
                                                         ===========   ==========   ===========   ==========

Weighted Average Common Shares Outstanding - Basic and
   Diluted                                                21,266,094    7,516,094    21,266,094    7,516,094
                                                         ===========   ==========   ===========   ==========
</TABLE>

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


                                       4
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  SIX MONTHS ENDED
                                                                      JUNE 30,
                                                              -----------------------
                                                                  2005         2004
                                                              -----------   ---------
<S>                                                           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Loss                                                   $  (771,170)  $(526,009)
   Adjustments to Reconcile Net Loss to Net Cash Flows from
      Operating Activities:
      Depreciation, Depletion and Amortization                    140,761     128,676
      Accretion Expense                                            12,500          --
      Dry Hole and Abandonment Costs                                5,110       3,313
      Change in Operating Assets and Liabilities:
         Accounts Receivable-Trade                                (48,757)     98,788
         Accounts Receivable-Related Party                          5,627          --
         Prepaid Expenses and Other Assets                        (21,120)    (22,230)
         Accounts Payable and Accrued Liabilities                  51,592    (101,756)
                                                              -----------   ---------
      NET CASH USED IN OPERATING ACTIVITIES                      (625,457)   (419,218)
                                                              -----------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of Furniture and Computer Equipment                   (53,891)     (8,829)
   Purchase of Oil and Gas Properties                            (427,825)   (103,939)
                                                              -----------   ---------
      NET CASH USED IN INVESTING ACTIVITIES                      (481,716)   (112,768)
                                                              -----------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from Note Payable                                      42,095          --
   Payments on Long Term Debt                                     (28,105)     (6,000)
   Increase in Advances from Affiliate                                 --     285,148
   Long-Term Advance                                                   --     250,000
   Dividends Paid                                                 (13,980)    (13,980)
                                                              -----------   ---------
      NET CASH PROVIDED BY FINANCING ACTIVITIES                        10     515,168
                                                              -----------   ---------
      NET INCREASE (DECREASE) IN CASH                          (1,107,163)    (16,818)
CASH AT BEGINNING OF PERIOD                                     1,465,675      71,256
                                                              -----------   ---------
CASH AT END OF PERIOD                                         $   358,512   $  54,438
                                                              ===========   =========
</TABLE>

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


                                        5
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1.   OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM REPORTING

The financial statements of the Registrant included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Although certain information normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States has been omitted, the Registrant believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these financial statements be read in conjunction with the
financial statements and the notes thereto included in the Form 10-KSB of the
Registrant for its fiscal year ended December 31, 2004 and subsequent filings
with the Securities and Exchange Commission.

The financial statements included herein reflect all adjustments (consisting
only of normal recurring accruals) which, in the opinion of management, are
necessary to present a fair statement of the results for the interim periods.
The results for interim periods are not necessarily indicative of trends or of
results to be expected for a full year.

GENERAL

Bayou City Exploration, Inc. (the Company), a Nevada corporation, was organized
in November, 1994, as Gem Source, Incorporated. The name was subsequently
changed to Blue Ridge Energy, Inc. in May, 1996 and most recently changed to
Bayou City Exploration, Inc. in June 2005. The Company's executive office is
located at 10777 Westheimer Rd., Suite 170, Houston, Texas 77042.

In the second quarter of 2005, the Company began offering a "United States Unit
Private Placement Subscription Agreement" and a "Non-U.S. and Non-Canadian
Private Placement Subscription Agreement" on an exempt private placement basis
to eligible accredited investors. The Subscriptions are of its own issue at the
price of $1.00 for each unit, with each unit consisting of one common share and
one non-transferable share purchase warrant (the Warrants) with an exercisable
price of $1.75. The Warrants are subject to alternation for each alternation of
capital of the Company as to number and price in accordance with industry
practice and expire two years from the date the Warrants are issued. As of June
30, 2005 the Company had not received any subscriptions. As of August 10, 2005,
the Company is in receipt of $360,000 from U.S subscribers.

In 2004, the Company conducted a "Non-U.S." private, restricted stock placement
arrangement on an exempt private placement basis pursuant to Regulation S (the
"Offering"). The Company offered up to an aggregate of 12,500,000 units, with no
minimum subscription, of its own issue to eligible sophisticated investors at a
subscription price of $0.20 per unit (each a Unit), with each such Unit
consisting of one common share, one non-transferable share purchase warrant with
an exercise price of $0.50 expiring on December 31, 2005 and one
non-transferable piggyback warrant with an exercise price of $1.00 expiring on
December 31, 2006. The Company received subscriptions totaling $2,474,000, net
of expenses, for 12,500,000 Units through December 31, 2004 and the Offering was
closed on the same date. Another 1,250,000 Units were issuable as of December
31, 2004 as a finder fee for services in connection with the Offering. Valuing
these shares at the $0.20 offering price equates to a $250,000 fee. On April 28,
2005, the Company and all of the investors in the Offering as well as the two
finders (collectively, the "Investors") entered into a letter agreement (the
"Letter Agreement") having an effective date of December 31, 2004, whereby all
of the Investors agreed to surrender for cancellation all of the piggyback
warrants received in the Offering in order to prevent dilution and to help
attract investors for future possible financings. In addition, the Company and
the Investors agreed to correct a discrepancy between the subscription
agreements and the warrant certificates to confirm that the exercise period of
the warrants is from December 31, 2004 to December 31, 2005, instead of May 17,
2004 to May 17, 2005 as set out in the subscription agreements.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the ordinary course of business. It is
management's opinion that the going concern basis of reporting its financial
position and results of operations is appropriate at this time. The Company has
obtained a resolution from Blue Ridge Group, Inc., a related party and the major
stockholder (see Note 3, Related Party, to financial statements), to provide the
necessary financial support for the Company through at least July 1, 2006.

USE OF ESTIMATES

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


                                        6
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

RECENTLY ISSUED ACCOUNTING STANDARDS

Consolidation of Variable Interest Entities: Financial Accounting Standards
Board Interpretation (FIN) No. 46(R), Consolidation of Variable Interest
Entities, was issued in December 2003. FIN No. 46(R) addresses consolidation by
business enterprises of variable interest entities. It applies to all variable
interest entities by the end of the first report period after December 15, 2004.
The adoption of FIN No. 46(R) had no impact on the financial statements and is
not expected to have a material impact on the financial statements in the
future.

Share-Based Payment: Financial Accounting Standards Board Statement (FASB)
123(R), Share-Based Payment was issued in December 2004. This Statement
eliminates the alternative to use Opinion 25's intrinsic value method of
accounting that was provided in FASB Statement 123 as originally issued. Under
Opinion 25, issuing stock options to employees generally resulted in recognition
of no compensation cost. Statement 123(R) requires entities to recognize the
cost of employee services received in exchange for awards of equity instruments
based on the grant-date fair value of those awards. This statement is effective
for public entities that file as small business issuers as of the beginning of
the first interim or annual reporting period that begins after December 15,
2005. This statement will be adopted for the first quarterly reporting period of
2006 beginning on January 1 using the modified prospective application. Under
this method, only new awards and awards modified, repurchased, or cancelled
after the required effective date will be subject to requirements of FAS 123(R).
No restatement of prior periods will be necessary. The Company currently cannot
reasonably estimate the impact this Statement will have on future income from
continuing operations.

In April 2005, the FASB issued FSP FAS 19-1 Accounting For Suspended Well Costs.
The FASB staff concluded that well costs should continue to be capitalized when
the well has found a sufficient quantity of reserves to justify completion as a
producing well and the company is making progress assessing reserves and the
economic viability of the project. In effect, the Staff concluded that the
1-year period for assessing reserves as proved be waived provided that the two
criteria discussed above are consistently met. The FSP is effective for the
first interim period beginning after April 4, 2005. This FSP is not expected to
have a material impact on the Company's financial statements.

In July 2005, the FASB issued FSP SOP 78-9-1 Interaction of AICPA Statement of
Position 78-9 and EITF Issue No. 04-5. The FASB amended SOP 78-9 so that
guidance in determining when a general partner controls a limited partnership is
consistent with guidance provided in EITF Issue No. 04-5. This FSP is effective
after June 29, 2005 for all newly formed partnerships and the first reporting
period after December 15, 2005 for all other partnerships. This FSP is not
expected to have a material impact on the Company's financial statements.

In May 2005, the FASB issued FASB No. 154 Accounting Changes and Error
Corrections. This statement requires retrospective application to prior periods'
financial statements for changes in accounting principle. Previously, under APB
20, all such changes were record as a line item on the statement of income only
in the period of change. This statement is effective for fiscal years beginning
after December 15, 2005. Future impact of the application of this statement is
unknown.

REVENUE RECOGNITION

Under the sales method, oil and gas revenue is recognized when produced and
sold. Revenues from turnkey contract sales and property sales are recognized
when the contracts and property sales are completed. Management fees are
recognized under the accrual method and recorded when earned.

ACCOUNTS RECEIVABLE

Accounts receivable are from oil and gas sales produced and sold during the
reporting period but awaiting cash payment, from expenditures paid on behalf of
the limited partnership and related party (BR Group) awaiting collection and
from management fees earned and accrued. Management's assessment of the
receivables indicate all will be collected and there is no provision made for
bad debt. Receivables are reviewed quarterly, and if any are deemed
uncollectible, they are written off as bad debt.

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.


                                        7
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

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

The Company maintains its cash balances in two financial institutions located in
Houston, Texas and Bowling Green, Kentucky. The balances are insured by the
Federal Deposit Insurance Corporation for up to $100,000. At June 30, 2005,
there was approximately $234,000 in cash that was uninsured by the FDIC.

ADVERTISING

The Company expenses advertising costs as these are incurred. Costs of $11,000
and $-0- were incurred for the six months ended June 30, 2005 and June 30, 2004,
respectively .

MANAGED LIMITED PARTNERSHIPS

Prior to 2004 the Company sponsored limited partnerships for which it served as
the Managing General Partner. The purpose of these partnerships was to acquire
and develop oil and gas leases. For the existing partnerships, the Company
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>
<S>                              <C>
Computer Equipment and Software   5
Furniture and Fixtures           10
</TABLE>

The Company 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,

     (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 as discussed below. The Company annually assesses its
unproved 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 first charged to the valuation allowance, with any additional
balance expensed to operations.

The costs of drilling exploration wells are capitalized as wells in progress
pending determination of whether the well has proved reserves. Once a
determination is made, the capitalized costs are charged to expense if no
reserves are found or, otherwise reclassified as part of the costs of the
Company'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, and The
Company is unable to determine that proved reserves have been found, the well is
assumed to be impaired, and its costs are charged to expense. At the end of the
reporting periods, the Company had no costs capitalized pending determination,
nor did it expense any costs during the three or six months ended June 30, 2005
or 2004 for costs that had exceeded the one-year determination period.

ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS

The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations. SFAS No.
143 requires legal obligations associated with the retirement of long-lived
assets to be recognized at their fair value at the time that the obligations are
incurred. Upon initial recognition of a liability, that cost is capitalized as
part of the related long-lived asset and allocated to expense over the useful
life of the asset. Prior to 2005, management determined that any


                                       8
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

future costs related to plugging and abandonment of producing wells would be
substantially offset by the value of equipment removed from the well site and
such estimates were immaterial to the financial statements. Therefore, no
liability was recorded prior to 2005. Due to continued rising rig and fuel
costs, a detail estimate was made in the second quarter of 2005 to determine how
these rising service costs would affect future plugging and abandonment costs.
As a result of this analysis, management concluded that this future liability
should now be recorded within the financial statements. In the second quarter of
2005, the following was recorded: 1) an asset of $61,000, 2) accumulated
amortization and amortization expense of $29,000, 3) a long-term liability of
$73,000 and 4) accretion expense of $12,000. These costs will be evaluated
annually and adjusted accordingly under the guidelines of SFAS 143.

SURRENDER OR ABANDONMENT OF DEVELOPED PROPERTIES

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

OTHER DISPOSITIONS

Upon disposition or retirement of property and equipment other than oil and gas
properties, the cost and related accumulated depreciation are removed from the
accounts and the gain or loss thereon, if any, is credited or charged to income.
The Company 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

The Company follows the provisions of SFAS No. 144. Consequently, the Company
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. The Company assesses impairment
of capitalized costs of proved oil and gas properties by comparing net
capitalized costs to undiscounted future net cash flows on a field-by-field
basis using known expected prices, based on set agreements. If an impairment is
indicated based on undiscounted expected future cash flows, then an impairment
is recognizable to the extent that net capitalized costs exceed the estimated
fair value of the property. Fair value of the property is estimated by the
Company using the present value of future cash flows discounted at 10%, in
accordance with SFAS No. 69, Disclosures about Oil and Gas Producing Activities.
No impairment expense was recorded for the six months ended June 30, 2005 or
2004.

INCOME/(LOSS) PER COMMON SHARE

The Company calculates basic earnings per common share ("Basic EPS") using the
weighted average number of common shares outstanding for the period. The income
available to common shareholders is computed after deducting dividends on the
Series E Preferred Stock. The convertible preferred stock and outstanding stock
warrants and options are considered anti-dilutive and therefore, excluded from
the earnings per share calculations. As the Company has recorded losses in 2005
and 2004, common share equivalents outstanding would be anti-dilutive,
therefore, these have not been included in the weighted average shares
outstanding.

Various warrants for the purchase of common stock were outstanding as of June
30, 2005. These warrants were convertible into 13,785,300 shares of common stock
that are exercisable at prices ranging from $0.40 to $4.00 per share. The
13,785,300 takes into consideration the following agreement. On April 28, 2005,
the Company and all of the investors in the 2004 "Non-U.S." private, restricted
stock placement arrangement (the "Offering") as well as the two finders
(collectively, the "Investors") entered into a letter agreement (the "Letter
Agreement") having an effective date of December 31, 2004, whereby all of the
Investors agreed to surrender for cancellation all of the piggyback warrants
received in the Offering in order to prevent dilution and to help attract
investors for future possible financings. In addition, the Company and the
Investors agreed to correct a discrepancy between the subscription agreements
and the warrant certificates to confirm that the exercise period of the warrants
is from December 31, 2004 to December 31, 2005, instead of May 17, 2004 to May
17, 2005 as set out in the subscription agreements.


                                       9
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

STOCK OPTIONS

The Company accounts for employee stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) permitted by SFAS No. 123, "Accounting for Stock-Based Compensation."
Accordingly, the Company has not recognized compensation expense for stock
options granted because all options were issued at fair value. Under the
existing employment agreement with the former CEO and President, the Company
granted 20,000 stock options on March 1, 2005 and 20,000 stock options on March
1, 2004. On February 22, 2005, the Board of Directors adopted the "Blue Ridge
Energy, Inc. 2005 Stock Option and Incentive Plan" (the Plan). The purposes of
the Plan are to (i) attract and retain the best available personnel for
positions of responsibility within the Company, (ii) provide additional
incentives to Employees of the Company, (iii) provide Directors, Consultants and
Advisors of the Company with an opportunity to acquire a proprietary interest in
the Company to encourage their continued provision of services to the Company
and to provide such persons with incentives and rewards for superior performance
more directly linked to the profitability of the Company's business and
increases in shareholder value, and (iv) generally to promote the success of the
Company's business and the interests of the Company and all of its stockholders,
through the grant of options to purchase shares of the Company's Common Stock
and other incentives. Incentive benefits granted hereunder may be either
Incentive Stock Options, Non-qualified Stock Options, stock awards, Restricted
Shares, cash awards or other incentives determined by the board, as such terms
are hereinafter defined. The types of options or other incentives granted shall
be reflected in the terms of written agreements. Subject to adjustments upon
changes in capitalization or merger, the maximum aggregate number of shares
which may be optioned and sold or otherwise awarded under the Plan is seven
million (7,000,000) common shares. Any common shares available for grants and
awards at the end of any calendar year shall be carried over and shall be
available for grants and awards in the subsequent calendar year. The Board of
Directors has all power to administer the Plan and is the body responsible for
the Plan. The Plan will terminate on February 22, 2015. On February 22, 2005,
the Board of Directors authorized to grant stock options to purchase 2,517,500
shares to the directors and officers of the Company with an exercise price of
$0.30 per share and the option period to commence from date of grant and
terminating five years from date of grant. On June 22, 2005, the Board of
Directors authorized the granting of stock options to purchase 100,000 shares to
a director of the Company with an exercise price of $1.13 per share and the
option period to commence from date of grant and terminating five years from
date of grant. Under existing employment contracts, there is a commitment to
grant 280,000 options for common stock within the next one to five years for
completion of services. Had compensation cost for employee stock options been
determined based on the fair value at the grant date consistent with SFAS No.
123, the Company's net loss and loss per share for the six months ended would
have been as follows:

<TABLE>
<CAPTION>
                                                        JUNE 30,    JUNE 30,
                                                          2005        2004
                                                       ----------   --------
<S>                                                    <C>          <C>
Net Loss, as reported ..............................   $  771,170   $526,009
Stock Based Compensation ...........................      589,900      3,844
                                                       ----------   --------
ProForma Net Loss ..................................   $1,361,070   $529,853
                                                       ==========   ========
Net Loss Attributable to Common
   Stockholders, as reported .......................   $  785,150   $539,989
Stock Based Compensation ...........................      589,900      3,844
                                                       ----------   --------
Pro Forma Net Loss .................................   $1,375,050   $543,833
                                                       ==========   ========
Basic and Diluted Income (Loss) per Common
   Share, as reported ..............................   $    (0.04)  $  (0.07)
                                                       ==========   ========
Basic and Diluted  Income (Loss) per Common
   Share, Pro Forma ................................   $    (0.06)  $  (0.07)
                                                       ==========   ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                          JUNE 30,      JUNE 30,
                                                            2005          2004
                                                        ------------   ---------
<S>                                                     <C>            <C>
Risk free interest rate .............................           4.17%       3.86%
Expected option life ................................    3 & 5 years    10 years
Expected dividend yield .............................              0%          0%
Volatility factor ...................................           1.21        1.02
Weighted average grant date fair value of options ...   $       0.22   $    0.31
</TABLE>


                                       10
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SERIES E PREFERRED STOCK DIVIDENDS

The Series E Preferred Stock bears a 12% per annum dividend payable quarterly
and a participating dividend equal to 3% of the net profits from the oil and gas
properties acquired with the proceeds of the offering, also payable quarterly.
The proceeds from the offering, after deducting expenses, were used to drill
three dry holes in September 2002, October 2002 and February 2003; therefore, no
participating dividends will be payable to stockholders.

INCOME TAXES

No income tax provision has been established for the three and six months ended
June 30, 2005 and 2004, due to the net losses incurred or available via federal
income tax carry forward provisions. Income taxes are provided for under the
liability method in accordance with SFAS No. 109, Accounting for Income Taxes,
which takes into account the differences between financial statement treatment
and tax treatment of certain transactions. It is uncertain as to whether the
Company will generate sufficient future taxable income to utilize the net
deferred tax assets, primarily representing net operating loss carry forward,
and therefore for financial reporting purposes, a valuation allowance of
$1,649,000 and $1,357,000 as of June 30, 2005 and December 31, 2004,
respectively, has been recognized to offset the net deferred tax assets.

2.   AFFILIATED OIL AND GAS PARTNERSHIPS

Included in the financial statements are contributions made to various 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

COMMON STOCK TRANSACTIONS

As of June 30, 2005, there are 21,266,094 shares of common stock issued and
outstanding. A total of 3,954,075 shares are held by BR Group and the remaining
17,312,019 shares are held by approximately 525 shareholders.

ADVANCES TO/FROM RELATED PARTIES

BR Group provided various management, administrative, accounting and geological
services for the Company at a rate of $10,000 per month from January 1, 2004
through September 30, 2004. Effective October 1, 2004, the $10,000 monthly
charge by BR Group ceased. Both companies agreed that any costs incurred on
behalf of the other will be billed in the following month with a cash settlement
for the balance due. Under this arrangement, BR Group owed $11,000 and $22,000
at June 30, 2005 and December 31, 2004, respectively.

At the end of the third quarter of 2004, BR Group had advanced the Company
approximately $640,000 during the previous 18 months to fund the on going
business of the Company. In April 2003, the Company moved into new office space
containing areas for expansion. Pending this expansion, the Company allowed BR
Group to house some of their engineering and landman consultants in the excess
space. During September 2004 the Company reviewed its records over these past 18
months to determine expenditures incurred in the Houston office by the Company
on behalf of BR Group. The analysis showed that for this time period 50% of the
office rent, telephone and office supplies and 100% of a contract administrative
assistant costs were chargeable to BR Group resulting in approximately $140,000
billable to them. Both companies agreed to settle the outstanding cash advances
and the office costs by applying the $140,000 against the $640,000 and
establishing a $500,000 promissory note bearing interest at 7.95% for a term of
eight years, with monthly payments of $7,056 for principal and interest. This
note is secured by any and all oil and gas production income that the Company
holds, now and future until the note has been paid in full.


                                       11
<PAGE>
                          BAYOU CITY EXPLORATION, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

MANAGEMENT FEE ARRANGEMENTS

Morris T. Hewitt, President and CEO, hired on April 25, 2005, receives a 1%
carried working interest on all new oil and gas wells drilled by the Company.
Patrick A. Kelleher, former President and CEO, now vice-president of geology,
receives a 2% carried working interest on all new prospects identified by him.
James M. Stevens, vice-president of exploration, hired on March 28, 2005,
receives a 2% carried working interest on all new prospects identified and a 1%
carried working interest on third party prospects reviewed by him and accepted
by the Company. Robert A. Kelley, vice-president of drilling and production,
hired on April 25, 2005, receives a 1% carried working interest on all new oil
and gas wells drilled by the Company.

4.   COMMITMENTS AND CONTINGENCIES

COMMITMENTS

Neither the Company nor any of its properties is subject to any material pending
legal proceedings. From time to time, the Company 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 the Company.

CONTINGENCIES

The Company's oil and gas exploration and production operations are subject to
inherent risks, including blowouts, fire and explosions which could result in
personal injury or death, suspended drilling operations, damage to or
destruction of equipment, damage to producing formations and pollution or other
environmental hazards. As a protection against these hazards, The Company
maintains general and umbrella liability insurance coverage of approximately $5
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.


                                       12
<PAGE>
                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

GENERAL

Bayou City Exploration, Inc. (the Company), a Nevada corporation, was organized
in November, 1994, as Gem Source, Incorporated. The name was subsequently
changed to Blue Ridge Energy, Inc. in May, 1996 and most recently changed to
Bayou City Exploration, Inc. in June 2005. The Company's executive office is
located at 10777 Westheimer Rd., Suite 170, Houston, Texas 77042.

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

In the second quarter of 2005, the Company began offering a "United States Unit
Private Placement Subscription Agreement" and a "Non-U.S. and Non-Canadian
Private Placement Subscription Agreement" on an exempt private placement basis
to eligible accredited investors. The Subscriptions are of its own issue at the
price of $1.00 for each unit, with each unit consisting of one common share and
one non-transferable share purchase warrant (the Warrants) with an exercisable
price of $1.75. The Warrants are subject to alternation for each alternation of
capital of the Company as to number and price in accordance with industry
practice and expire two years from the date the Warrants are issued. As of June
30, 2005 the Company had not received any subscriptions. As of August 10, 2005
the Company is in receipt of $360,000 from U.S subscribers.

During 2004 the Company began the process that will lead in growing our prospect
inventory and once drilling commences, will give the Company the emphasis needed
to grow exponentially. We should not have to depend on acquisitions to increase
our reserve base, however, if the proper opportunity presents itself we will
evaluate it to see if it fits our growth profile. We do not, however, intend to
make an acquisition as a short term fix that would jeopardize our long term
goals. Our operating strategy should enable us to take advantage of these
fundamentals:

     -    Focus in proven geologic trends throughout the onshore Gulf Coast
          Region of Texas and Louisiana.

     -    Control our geological ideas in both data and land positions that are
          starting to comprise our prospect inventory.

     -    Continuous expansion of our prospect inventory through acquisition of
          3-D seismic data and land as well as constant re-processing and
          re-interpretation through fundamental geologic studies and
          sophisticated geophysical interpretive techniques.

     -    Structure our drilling program (expected to start in the summer of
          2005) to enable management to sell down enough interest in the well to
          mitigate risk and improve economics.

     -    Strive to maintain highest possible ownership of our highest potential
          drilling prospects.

Specific achievements during 2004 and the first quarter of 2005 are as follows:

     -    Raised $2.5 million in equity in 2004.

     -    Purchased license to 6,500 square miles of 3-D seismic data.

     -    Purchased license to 2,000 miles of 2-D seismic data.

     -    Entered into the Iowa\Woodlawn joint venture with Fairfield Resources
          Corp. which has created several excellent prospects.

     -    Hired several experienced oil and gas finders as well as entered into
          consulting arrangements with other experienced oil and gas
          explorationists.

     -    Began negotiations with several companies to increase our seismic data
          base as well as with companies who will become our drilling partners.

In 2004, the Company conducted a "Non-U.S." private, restricted stock placement
arrangement on an exempt private placement basis pursuant to Regulation S (the
"Offering"). The Company offered up to an aggregate of 12,500,000 units, with no
minimum subscription, of its own issue to eligible sophisticated investors at a
subscription price of $0.20 per unit (each a Unit), with each such Unit
consisting of one common share, one non-transferable share purchase warrant with
an exercise price of $0.50 expiring on December 31, 2005 and one
non-transferable piggyback warrant with an exercise price of $1.00 expiring on
December 31, 2006. The Company received subscriptions totaling $2,474,000, net
of expenses, for 12,500,000 Units through December 31, 2004 and the Offering was
closed on the same date. Another 1,250,000 Units were issuable as of December
31, 2004 as a finder fee for services in connection with the Offering. Valuing
these shares at the $0.20 offering price equates to a $250,000 fee. On April 28,
2005, the Company and all of the investors in the Offering as well as the two
finders (collectively, the "Investors") entered into a letter


                                       13
<PAGE>
                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

agreement (the "Letter Agreement") having an effective date of December 31,
2004, whereby all of the Investors agreed to surrender for cancellation all of
the piggyback warrants received in the Offering in order to prevent dilution and
to help attract investors for future possible financings. In addition, The
Company and the Investors agreed to correct a discrepancy between the
subscription agreements and the warrant certificates to confirm that the
exercise period of the warrants is from December 31, 2004 to December 31, 2005,
instead of May 17, 2004 to May 17, 2005 as set out in the subscription
agreements.

At June 30, 2005, the Company had total assets of $1,689,000, total liabilities
of $753,000 and stockholders' equity of $936,000. The Company had a net loss of
$771,000 during the six months ended June 30, 2005 and net loss of $526,000 for
the same period in 2004. The net loss per common share, which takes into account
cash dividends paid on preferred stock, was $0.04 per share during the six
months ended June 30, 2005 as compared to $0.07 during the same period in 2004.
All per share data in this report has been adjusted to give effect to applicable
stock issues and conversions.

As of June 30, 2005, the Company has participated, either directly or indirectly
through its sponsored limited partnerships, in 108 wells, of which 21 are
presently productive and located in Kentucky, West Virginia and Texas. In
addition to the 21 producing wells, there are 41 producing wells in four
partnerships operated by Eagle Energy, Inc., an unaffiliated entity.

KEY PROPERTIES

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

The following are the primary properties held by the Company as of June 30,
2005:

DEVELOPED PROPERTIES

     Twin Leaf Prospect: The Company owns a 4.25% working interest, with a 3.24%
     net revenue interest, in 1 well located in Polk County, Texas which was
     drilled during the fourth quarter of 2004. The well is producing 300 Mcf
     per day.

     Pepperbush West Prospect: The Company owns a 4.25% working interest, with a
     3.29% net revenue interest, in 1 well located in Polk County, Texas which
     was drilled during the first quarter of 2004. The well is producing 100 Mcf
     per day.

     Hobblebush Prospect: The Company owns a 4.25% working interest, with a
     3.23% net revenue interest, in 1 well located in Polk County, Texas which
     was drilled during the first quarter of 2004. The well is producing 200 Mcf
     per day.

     May Apple Prospect: The Company owns a 4.25% working interest, with a 3.23%
     net revenue interest, in 1 well located in Polk County, Texas which was
     drilled during the first quarter of 2004. The well is producing 100 Mcf per
     day.

     Wolfsbane Prospect: The Company owns a 13.6% working interest, with a
     10.53% net revenue interest, in 1 well located in Walker County, Texas. The
     well ceased production in January 2004. Additional seismic was shot in the
     fourth quarter of 2004 and it is being evaluated to determine if the well
     is to be recompleted or if another well should be drilled.

     Pepperbush Prospect: The Company owns a 13.6% working interest, with a
     10.34% net revenue interest, in 1 well located in Polk County, Texas which
     began producing in the second quarter of 2003. It is currently producing
     150 Mcf per day.

     Yarrow Prospect: The Company owns a 13.6% working interest, with a 10.41%
     net revenue interest, in 1 well located in Polk County, Texas which began
     producing in the fourth quarter of 2002. It is currently producing 450 Mcf
     per day.

     West Pebble Island Prospect: The Company owns a 7.7% working interest, with
     a 5.59% net revenue interest, in the 1 well located in Tyler County, Texas
     which began producing in the first quarter of 2003. It is currently
     producing 30 barrels per day.

     Shelby County, Texas: The Company owns a 0.71% working interest, with a
     0.42% net revenue interest, in the Bridges #1 well in Shelby County, Texas
     which began producing in September 2000. It is currently producing 1,100
     Mcf per day.


                                       14
<PAGE>
                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

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

UNDEVELOPED PROPERTIES

     Webb Prospect: The Company owns a 10% working interest in 1,050 acres of
     oil and gas leases located in Jasper County, Texas. The prospect is a
     seismically well-defined structural four way closure designed to test the
     highly prolific Upper Wilcox Sands as they produce in southeast Texas.
     Drilling on this prospect is anticipated to occur during 2005.

     N. Champions Prospect: The Company owns a 10% working interest in 307 acres
     of oil and gas leases located in Jasper County, Texas. The prospect is a
     seismically well-defined structural four way closure designed to test the
     highly prolific Upper Wilcox Sands as they produce in southeast Texas.
     Drilling on this prospect is anticipated to occur during 2005.

     Iowa Dome 3D Project: The Company owns a 50% working interest in 790 acres
     in three prospects located in Calcasieu and Jefferson Davis Parishes,
     Louisiana. There are two shallow gas prospects and one oil prospect.

     Lewisville Project: The Company owns a 75% working interest in 800 acres
     (Shallow Prospects) in South Texas with an option to acquire a 75% working
     interest in another 2,500 acres (Deep Prospects). There are potentially
     three or more Shallow Prospects and three or more Deep prospects.

     East Texas Project: Seven prospects have been identified in East Texas and
     leasing of oil and gas rights began in late June 2005. This project is
     estimated to contain about 4,000 acres with the Company owning 100% of the
     leasehold. The Company is in negotiation to sell all of its interest in one
     of the prospects and retain an 8% carried working interest and to sell all
     of its interest in the other six prospects and retain a 25% carried
     working. Under the current negotiations, the Company will be reimbursed for
     all of the actual third party costs incurred and will also receive a
     prospect fee for assembling the prospect. The Company hopes to have the
     final agreements executed by the end of August and commence drilling later
     in the year.

     McAllen Project: The Company has identified a prospect in South Texas
     containing approximately 600 acres. The Company is in the process of
     checking mineral ownership after which leasing activity will begin.

     The Company will follow its 2005 business plan strategy in developing these
     prospects. The Company intends to fund the lease acquisition and any
     additional seismic costs needed to further define the prospects from
     existing working capital. For each prospect, the Company will sell all of
     its working interest in the prospect to outside or related parties, on the
     same terms, whereby 1) it retains a certain carried working interest in the
     initial well drilled, 2) it recoups 100% of the actual leasehold costs and
     any additional seismic costs incurred and 3) it is paid a prospect fee for
     identifying the prospect and bringing it to a drillable state. The
     reimbursement of costs, the payment of the prospect fee and the future
     benefit of oil and gas revenue from the carried working interest will
     provide the generation of cash needed to operate the Company and fund
     additional projects.

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


                                       15
<PAGE>
                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2005 AND 2004

The Company had a net loss of $461,000 during the second quarter of 2005
compared to net loss of $249,000 for the same period in 2004. 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 2005 and $0.03 per share during
the second quarter of 2004. The major reasons, more fully explained below, for
the $212,000 increase in loss are due to decrease in oil and gas revenue,
increase in general and administrative expenses and increase in exploration
costs.

OPERATING REVENUES

Operating revenues totaled $175,000 during the three months ended June 30, 2005,
as compared to $130,000 during the three months ended June 30, 2004. During the
second quarter of 2005, the Company entered into an agreement to act as operator
of a well to be drilled in Louisiana and receives a management fee for these
services and accordingly recorded $120,000 in fees. Revenue from oil and gas
sales decreased by $75,000 due to production declines on several of the wells
and due to the Company's decision not to accrue revenue sales on two wells. The
operator of these wells has not remitted payment in over six months and the
Company has not been able to establish contact with this operator. In past
periods, the revenue sales approximated $60,000 a quarter on these two wells.

DIRECT OPERATING COSTS

Direct operating costs totaled $16,000 during the three months ended June 30,
2005, as compared to $41,000 during the same period in 2004. The $25,000
decrease is due to lower severance taxes directly related to the decrease in oil
and gas sales and to lower lease operating expenses.

EXPLORATION COSTS

As a result of the prospecting for oil and gas which began after the acquisition
of the Echo 3D seismic data in July of 2004, exploration costs during the second
quarter of 2005 was $128,000. There were no such costs incurred during the
comparable period in 2004.

OTHER OPERATING EXPENSES

General and administrative expenses increased by $102,000 to $375,000 during the
second quarter of 2005, as compared to $273,000 during the same period in 2004.
The major reason for the increase was that during the second quarter of 2005 the
Company hired three additional professional people and recorded a $27,000 bad
debt expense due to the write off of receivables and related lease operating
expenses on two wells operated by an outside party. Depreciation, depletion and
amortization increased $20,000 mainly due to the recording of depreciation
expense on capitalized retirement costs.

OTHER EXPENSE

Interest expense increased to $10,000 during second quarter of 2005 as compared
to $-0- during the second quarter of 2004 due to the note with BR Group and a
promissory note entered into in January 2005 to acquire computer software for a
land/lease system.

INCOME TAX PROVISION

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


                                       16
<PAGE>
                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

SIX MONTHS ENDED JUNE 30, 2005 AND 2004

The Company had a net loss of $771,000 during the six months ended June 30,
2005, as compared to a net loss of $526,000 for the same period in 2004. The
loss per common share, which takes into account cash dividends paid on preferred
stock, was $0.04 and $0.07 per share during the six months ended June 30, 2005
and 2004, respectively. The major reasons, more fully explained below, for the
$245,000 increase in loss are due to decrease in oil and gas revenue, increase
in general and administrative expenses and increase in exploration costs.

OPERATING REVENUES

Operating revenues totaled $301,000 during the six months ended June 30, 2005,
as compared to $260,000 during the six months ended June 30, 2004. During the
second quarter of 2005, the Company entered into an agreement to act as operator
of a well to be drilled in Louisiana and receives a management fee for these
services and accordingly recorded $120,000 in fees. Revenue from oil and gas
sales decreased by $79,000 due to production declines in the second quarter of
2005 on several of the wells and due to the Company's decision not to accrue
revenue sales in the second quarter of 2005 on two wells. The operator of these
wells has not remitted payment in over six months and the Company has not been
able to establish contact with this operator. In past periods, the revenue sales
approximated $60,000 a quarter on these two wells.

DIRECT OPERATING COSTS

Direct operating costs totaled $68,000 during the six months ended June 30,
2005, as compared to $87,000 during the same period in 2004. The $19,000
decrease is due to lower severance taxes directly related to the decrease in oil
and gas sales and to lower lease operating expenses.

EXPLORATION COSTS

As a result of the prospecting for oil and gas which began after the acquisition
of the Echo 3D seismic data in July of 2004, exploration costs for the six
months ended June 30, 2005 was $277,000. There were no such costs incurred
during the comparable period in 2004.

OTHER OPERATING EXPENSES

Marketing expenses increased to $11,000 during the six months ended June 30,
2005 as compared to $-0- during this period in 2004. General and Administrative
expenses decreased by $22,000 to $543,000 during the six months ended June 30,
2005 as compared to $565,000 during the same period in 2004. The decrease is due
to charging Blue Ridge Group Inc., a related party, for G&A costs incurred on
their behalf during the first six months of 2005 offset by the hiring of three
additional professional people during the second quarter of 2005 and by
recording a $27,000 bad debt expense due to the write off of receivables and
related lease operating expenses on two wells operated by an outside party. None
of these events occurred in the first six months of 2004. Depreciation,
depletion and amortization increased $12,000 to $141,000 in 2005 from $129,000
in 2004. This change is mainly due to the recording of depreciation expense on
capitalized retirement costs.

OTHER EXPENSE

Interest expense increased to $20,000 during the six months ended June 30, 2005
due to the note with BR Group and a promissory note entered into in January 2005
to acquire computer software for a land/lease system. There was no interest
expense incurred during the first six months of 2004. The 2004 other expense of
$4,700 is related to unrecovered costs on the four partnerships transferred to
Eagle Energy, Inc., as previously discussed.

INCOME TAX PROVISION

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


                                       17
<PAGE>
                 MANAGEMENTS' DISCUSSION AND FINANCIAL ANALYSIS

CAPITAL RESOURCES AND FINANCIAL CONDITION

The Company's current ratio (current assets / current liabilities) was 2.7 to 1
at June 30, 2005 compared to 9.7 to 1 at December 31, 2004. The change in the
current ratio from June 30, 2005 to December 31, 2004 was due primarily to
expenditures for exploration (G&G) costs, the acquisition of oil and gas leases
and for general and administrative costs.

The Company's primary source of cash during the first six months of 2005 was oil
and gas sales while the primary sources of cash in 2004 were $2,474,000, net of
expenses, received from the private placement stock offering as well as the sale
of oil and gas production and short term advances from BR Group.

During the past two quarters and year-end, the Company has relied upon net
inflows of cash generated by its operating activities, equity offerings and
short term advances from BR Group to fund the purchase of assets and its
expansion. Management intends to fund further growth with current cash reserves,
equity transactions and improved cash flows from operations.

As discussed above under the 2005 private placement offering, the Company is
seeking additional funding from investors. During the month of July 2005, a
total of $232,000 in cash was received and during the first part of August 2005
a total of $128,000 has been received. These funds will continue to provide
sources of cash for the Company to continue with its current business plan.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the ordinary course of business. It is
management's opinion that the going concern basis of reporting its financial
position and results of operations is appropriate at this time. The Company has
obtained a resolution from Blue Ridge Group, Inc., a related party and the major
stockholder (see Note 3, Related Party, to financial statements), to provide the
necessary financial support for the Company through at least July 1, 2006.

Management has taken significant steps designed to address the financial
condition of the Company, to increase cash flows and to achieve improved
operating results, principally by implementing its new business plan, having a
successful completion of the 2004 private stock offering and initiating the 2005
private stock offering.

ITEM 3. CONTROLS AND PROCEDURES

As of the end of the period covered by this quarterly report, an evaluation was
performed under the supervision and with the participation of the Company's
management, including the Chief Executive Officer (the "CEO") and the Chief
Financial Officer (the "CFO"), of the effectiveness of the design and operation
of the disclosure controls and procedures. Based on that evaluation, The
Company's management, including the CEO and CFO, concluded that the disclosure
controls and procedures were effective. There have been no changes in these
internal controls over financial reporting that occurred during the quarter
ended June 30, 2005, that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.


                                       18
<PAGE>
                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     There are no legal proceedings pending against the Company.

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) The Company's annual meeting of stockholders scheduled for May 31, 2005
was adjourned to June 7, 2005.

     (B) The directors elected at the meeting were:

<TABLE>
<CAPTION>
                        FOR      WITHHELD   ABSTAIN
                    ----------   --------   -------
<S>                 <C>          <C>        <C>
Robert D. Burr      10,966,465    36,340       --
Forrest E. Ebbs     10,966,465    36,340       --
Gregory B. Shea     10,966,465    36,340       --
Harry J. Peters     10,966,465    36,340       --
Richard M. Hewitt   10,966,465    36,340       --
</TABLE>

ITEM 5. OTHER INFORMATION

On June 22, 2005 at a meeting of the Board of Directors, Ronald E. Mitchell of
Vero Beach, Florida was elected as a director of the Company. Under the 2005
Stock Option and Incentive Plan, Mr. Mitchell was granted an option to purchase
100,000 shares of common stock with an exercise price of $1.13 per share, the
market price of the stock on date of grant. The option expires five years from
the date of grant. As a member of the Board, Mr. Mitchell will serve on the
Compensation Committee.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

An 8-K report was filed on May 5, 2005 announcing that on April 25, 2005, Mr.
Patrick A. Kelleher resigned as President, CEO and a Director of Company without
having any disagreement with the Company on any matter relating to the Company's
operations, policies or practices. On the same day, Mr. Kelleher was appointed
as Vice President of Geology. In addition on April 25, 2005, Mr. Morris T.
Hewitt was appointed as the new President and CEO of the Company.

An 8-K report was filed on May 12, 2005 reporting that on April 28, 2005, the
Company and all of the investors in the 2004 "Non-U.S." private, restricted
stock placement (the Offering) as well as the two finders (the "Investors")
entered into a letter agreement (the "Letter Agreement") having an effective
date of December 31, 2004, whereby all of the Investors agreed to surrender for
cancellation all of the Piggyback Warrants received in the Offering in order to
prevent dilution and to help attract investors for future possible financings.
In addition, the Company and Investors agreed to correct a discrepancy between
the subscription agreements and the warrant certificates to confirm that the
exercise period of the Warrants is from December 31, 2004 to December 31, 2005,
instead of May 17, 2004 to May 17, 2005 as set out in the subscription
agreements.

<TABLE>
<S>            <C>
Exhibit 31.1   Chief Executive Officer's 302 Certification
Exhibit 31.2   Chief Financial Officer's 302 Certification
Exhibit 32.1   Chief Executive Officer's 906 Certification
Exhibit 32.2   Chief Financial Officer's 906 Certification
Exhibit 99.1   Press Release Dated August 15, 2005
</TABLE>


                                       19
<PAGE>
                                   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.

                                        BAYOU CITY EXPLORATION, INC.


Date: August 12, 2005                   By /s/ Norman G. Haisler
                                           -------------------------------------
                                           Norman G. Haisler
                                           Senior Vice President-Finance &
                                           Chief Financial Officer


                                       20