<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                   FORM 10-QSB

(Mark One)
[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

[ ]      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.)


              632 ADAMS STREET, SUITE 710, BOWLING GREEN, KY 42101
                    (Address of Principal Executive Offices)

                                 (270) 842-2421
                (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
November 10, 2002.

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


<PAGE>



                                     PART I

                              FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS (UNAUDITED)

         FINANCIAL STATEMENTS OF REGISTRANT

<TABLE>
<CAPTION>
         INDEX                                                                                      NUMBER
         -----                                                                                      ------

<S>                                                                                                   <C>
         Balance Sheets as of September 30, 2002 and December 31, 2001...........................      3-4
         Statements of Operations for the three and nine months ended September 30, 2002 and 2001        5
         Statements of Cash Flows for the nine months ended September 30, 2002 and 2001..........        6
         Notes to Financial Statements...........................................................     7-14
</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, 2001.

         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>                                                                                <C>
ITEM 2.           Management's Discussion and Analysis of Operations.............................    15-21
ITEM 4.           Controls and Procedures........................................................       21

                                                 PART II

                                            OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS (NONE).......................................................       22
ITEM 2.           CHANGES IN SECURITIES (NONE)...................................................       22
ITEM 3.           DEFAULTS UPON SENIOR SECURITIES (NONE).........................................       22
ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (NONE) ....................       22
ITEM 5.           OTHER INFORMATION (NONE).......................................................       22
ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K...............................................       22
SIGNATURES.......................................................................................       22
CERTIFICATIONS...................................................................................    23-24
</TABLE>




                                       2
<PAGE>

                             BLUE RIDGE ENERGY, INC.
                                 BALANCE SHEETS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30,     DECEMBER 31,
                                                                                      2002              2001
                                                                                      ----              ----
                                     ASSETS

<S>                                                                               <C>              <C>
CURRENT ASSETS:
   Cash......................................................................     $     131,461    $   1,081,096
   Accounts Receivable:
      Managed Limited Partnerships...........................................            43,140          426,420
      Trade and Other........................................................            31,814           72,098
   Prepaid Expenses and Other Current Assets.................................               ---          190,053
                                                                                  -------------    -------------

        TOTAL CURRENT ASSETS.................................................           206,415        1,769,667

ASSETS ASSOCIATED WITH DISCONTINUED OPERATIONS, NET..........................         1,032,622        1,541,183

PROPERTY AND EQUIPMENT, NET..................................................         1,640,152        1,814,782

DEFERRED SEISMIC DATA COSTS, NET.............................................         2,003,053               --

OTHER NONCURRENT ASSETS......................................................               490              490
                                                                                  -------------    -------------

        TOTAL ASSETS.........................................................     $   4,882,732    $   5,126,122
                                                                                  =============    =============
</TABLE>

                   The accompanying notes are an integral part
                          of these financial statements



                                       3
<PAGE>


                             BLUE RIDGE ENERGY, INC.
                                 BALANCE SHEETS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30,     DECEMBER 31,
                                                                                      2002              2001
                                                                                      ----              ----

<S>                                                                               <C>              <C>
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts Payable and Accrued Liabilities..................................     $     207,103    $     265,238
   Drilling Advances.........................................................               ---        1,469,811
   Advances from Related Parties.............................................           155,965           83,469
   Seismic Data Costs Payable................................................         1,006,070              ---
   Current Portion Long Term Debt............................................            24,000          169,727
                                                                                  -------------    -------------
      TOTAL CURRENT LIABILITIES..............................................         1,393,138        1,988,245

LONG TERM DEBT...............................................................            10,001           42,500
DEFERRED INCOME TAXES........................................................                --           52,751
                                                                                  -------------    -------------
      TOTAL LIABILITIES......................................................         1,403,139        2,083,496

COMMITMENTS AND CONTINGENCIES (NOTE 5).......................................                --               --

STOCKHOLDERS' EQUITY:
   Preferred Stock, $0.001 par value; 5,000,000 shares authorized; 259,000 and
      60,750 shares issued, subscribed to and outstanding at September 30, 2002
      and December 31, 2001, respectively (liquidation preference of $1,590,000
      at September 30, 2002 and $304,000 at December 31, 2001)...............               259               61
   Common Stock, $0.005 par value; 20,000,000 shares authorized;
      7,516,094 and 7,455,344 shares issued and outstanding at
      September 30, 2002 and December 31, 2001, respectively.................            37,581           37,277
   Additional Paid-In Capital................................................         8,142,070        5,680,284
   Preferred Stock Subscription Receivable...................................        (1,000,000)             ---
   Accumulated Deficit.......................................................        (3,700,317)      (2,674,996)
                                                                                  -------------    -------------
      TOTAL STOCKHOLDERS' EQUITY.............................................         3,479,593        3,042,626
                                                                                  -------------    -------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............................     $   4,882,732    $   5,126,122
                                                                                  =============    =============
</TABLE>


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



                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                                SEPTEMBER 30,                      SEPTEMBER 30,
                                                           2002              2001             2002               2001
                                                           ----              ----             ----               ----
<S>                                                    <C>               <C>               <C>               <C>
OPERATING REVENUES:

Turnkey Contract Sales ..........................      $   401,172       $ 1,552,000       $ 1,490,172       $ 2,020,000
Oil and Gas Sales ...............................           53,439            44,803           125,653           156,463
                                                       -----------       -----------       -----------       -----------
        Total Operating Revenues ................          454,611         1,596,803         1,615,825         2,176,463

OPERATING COSTS AND OTHER EXPENSES:
   Turnkey Contract Costs .......................          230,228         1,118,525           900,554         1,425,096
   Lease Operating Costs ........................           18,654             1,283            23,106            26,509
   Depreciation, Depletion and Amortization .....          172,188             9,000           374,376            27,000
   Marketing Costs ..............................              ---           121,932           309,179           224,938
   General and Administrative Costs .............          176,139           220,102           739,269           812,032
                                                       -----------       -----------       -----------       -----------
        Total Operating Costs ...................          597,209         1,470,842         2,346,484         2,515,575
                                                       -----------       -----------       -----------       -----------

OPERATING INCOME (LOSS) .........................         (142,598)          125,961          (730,659)         (339,112)

OTHER INCOME (EXPENSE):
   Gain (Loss) on Sale of Oil & Gas Leases ......           (6,000)              ---            72,839               ---
   Interest Expense .............................          (18,146)          (18,541)          (37,174)          (48,862)
                                                       -----------       -----------       -----------       -----------
        Total Other Income (Expense) ............          (24,146)          (18,541)           35,665           (48,862)
                                                       -----------       -----------       -----------       -----------

INCOME (LOSS) FROM CONTINUING OPERATIONS:
   BEFORE INCOME TAXES ..........................         (166,744)          107,420          (694,994)         (387,974)
   Income Tax Benefit (Provision)................              ---           (35,500)           68,650           132,000
                                                       -----------       -----------       -----------       -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS ........         (166,744)           71,920          (626,344)         (255,974)

DISCONTINUED OPERATIONS:
   Income (Loss) from Operations of Discontinued
      Drilling Services .........................          (51,522)            3,103           (38,710)          (97,722)
   Loss on Disposal of Discontinued Operations ..         (303,768)              ---          (351,768)              ---
   Income Tax Provision .........................              ---            (1,000)              ---            30,518
                                                       -----------       -----------       -----------       -----------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS ......         (355,290)            2,103          (390,478)          (67,204)
                                                       -----------       -----------       -----------       -----------
NET INCOME (LOSS) ...............................      $  (522,034)      $    74,023       $(1,016,822)      $  (323,178)
                                                       ===========       ===========       ===========       ===========

INCOME (LOSS) FROM CONTINUING
OPERATIONS PER COMMON SHARE:
   Basic ........................................      $     (0.02)      $      0.01       $     (0.09)      $     (0.07)
                                                       ===========       ===========       ===========       ===========
   Diluted ......................................      $     (0.02)      $      0.01       $     (0.09)      $     (0.07)
                                                       ===========       ===========       ===========       ===========

INCOME (LOSS) FROM DISCONTINUED
OPERATIONS PER COMMON SHARE:
   Basic ........................................      $     (0.05)      $      0.00       $     (0.05)      $     (0.01)
                                                       ===========       ===========       ===========       ===========
   Diluted ......................................      $     (0.05)      $      0.00       $     (0.05)      $     (0.01)
                                                       ===========       ===========       ===========       ===========

NET INCOME (LOSS) PER COMMON SHARE:
   Basic ........................................      $     (0.07)      $      0.01       $     (0.14)      $     (0.08)
                                                       ===========       ===========       ===========       ===========
   Diluted ......................................      $     (0.07)      $      0.01       $     (0.14)      $     (0.08)
                                                       ===========       ===========       ===========       ===========


Weighted Average Common Shares Outstanding ......        7,516,094         7,147,094         7,505,949         6,439,089
                                                       ===========       ===========       ===========       ===========
</TABLE>

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


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                    NINE MONTHS ENDED
                                                                      SEPTEMBER 30,
                                                                  2002              2001
                                                                  ----              ----
<S>                                                           <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Loss ............................................      $(1,016,822)      $  (323,178)
   Adjustments to Reconcile Net Loss to Net Cash used in
      Operating Activities:
      Depreciation, Depletion and Amortization .........          374,376            27,000
      Loss from Disposal of Discontinued Operations.....          351,768                --
      Change in Assets from Discontinued Operations.......        702,562           108,000
      Deferred Taxes ...................................          (68,650)         (169,251)
      Change in Operating Assets and Liabilities:
        Accounts Receivable ............................          423,654           176,678
        Drilling Advances ..............................       (1,469,811)         (560,000)
        Prepaid Expenses ...............................          190,053            33,942
        Accounts Payable and Accrued Liabilities .......          (58,135)          205,966
                                                              -----------       -----------
NET CASH USED IN OPERATING ACTIVITIES ..................         (571,005)         (500,843)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Increase in Advances from Affiliate .................           72,496           113,293
   Sale of Oil and Gas Properties ......................           88,000                --
   Purchase of Seismic Data.............................       (1,281,358)               --
   Purchase of Oil and Gas Properties ..................         (349,353)         (136,759)
                                                              -----------       -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ....       (1,470,215)          (23,466)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from Line of Credit.........................        1,500,000                --
   Payments of Long Term Debt ..........................       (1,989,917)          (76,072)
   Sale of Preferred Stock .............................        1,590,000               ---
   Exercise of Common Stock Warrants ...................               --            50,000
   Dividends Paid ......................................           (8,498)         (177,604)
                                                              -----------       -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ....        1,091,585          (203,676)
                                                              -----------       -----------
NET DECREASE IN CASH ...................................         (949,635)         (727,985)
CASH AT BEGINNING OF PERIOD ............................        1,081,096           918,963
                                                              -----------       -----------
CASH AT END OF PERIOD ..................................      $   131,461       $   190,978
                                                              ===========       ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash Paid for Interest ..............................      $    37,174       $    48,862
                                                              ===========       ===========
   Cash Paid for Income Taxes ..........................      $        --       $     6,733
                                                              ===========       ===========
</TABLE>

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



                                       6
<PAGE>


                             BLUE RIDGE ENERGY, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                           SEPTEMBER 30, 2002 AND 2001


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 its name to Blue Ridge Energy, Inc. in May, 1996. BR Energy
has offices at 11211 Katy Freeway, Suite 505, Houston, Texas 77079 and at 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 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, revenues from oil and gas sales 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 also acquired a 17.5% working interest in a
large ongoing Texas onshore exploration program that could have a significant
impact on BR Energy. 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. We expect that this will be the foundation for our drilling activity
for the next several years. BR Energy has recorded an asset of $2.3 million
which will be amortized on a straight line basis over four years.

DISCONTINUED OPERATIONS

         As BR Energy began implementation of its 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 rig and
ancillary drilling equipment. The drilling rig and equipment were sold in
September 2002 and all related income, expense, property and liability accounts
related to these operations have been netted and classified as related to
discontinued operations in the financial statements for all periods presented.

PRINCIPALS 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.

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)--(CONTINUED)
                           SEPTEMBER 30, 2002 AND 2001

RECENTLY ISSUED ACCOUNTING STANDARDS

Goodwill and Other Intangible Assets

         In June, 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards (SFAS) 141, BUSINESS COMBINATIONS,
and SFAS 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS 141 requires business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method of accounting and broadens the criteria for recording intangible
assets separate from goodwill. Under the provisions of SFAS 142, goodwill and
certain other intangible assets, which do not possess finite useful lives, will
no longer be amortized into net income over an estimated life but rather will be
tested at least annually for impairment based on specific guidance provided in
the new standard. Intangible assets determined to have finite lives will
continue to be amortized over their estimated useful lives and also continue to
be subject to impairment testing.

         The adoption of SFAS 141 had no impact on the financial position or
results of operations for BR Energy. BR Energy adopted the provisions of SFAS
142, as required, effective January 1, 2002. SFAS 142, as part of its adoption
provisions, requires a transitional impairment test be applied to all goodwill
and other indefinite-lived intangible assets prior to June 30, 2002 and any
resulting impairment loss be reported as a change in accounting principle. BR
Energy did not have an impairment loss in 2002 as a result of adoption because
BR Energy does not have any goodwill or other indefinite-lived intangible
assets.

         In general, application of the new provisions may result in more income
statement volatility due to potential periodic recognition of impairment losses,
which are likely to vary in amount and regularity, for goodwill and other
indefinite-lived intangible assets, versus reducing those assets through the
recognition of recurring, consistent amortization amounts.

Accounting for Long-Lived Assets

         SFAS 144, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, was issued in October 2001 and addresses
how and when to measure impairment on long-lived assets and how to account for
long-lived assets that an entity plans to dispose of either through sale,
abandonment, exchange, or distribution to owners. The new provisions supersede
SFAS 121, which addressed asset impairment, and certain provisions of APB
Opinion 30 related to reporting the effects of the disposal of a business
segment and requires expected future operating losses from discontinued
operations to be recorded in the period in which the losses are incurred rather
than the measurement date. Under SFAS 144, more dispositions may qualify for
discontinued operations treatment in the income statement. The provisions of
SFAS 144 became effective for BR Energy January 1, 2002.

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 will adopt Statement 143 on January 1, 2003. Due to the number
of operating facilities that BR Energy maintains and the extensive number of
documents that must be reviewed and estimates that must be made to assess the
effects of the Statement, the expected impact of adoption of Statement 143 on BR
Energy's financial position or results of operations has not yet been
determined.


                                       8
<PAGE>


                             BLUE RIDGE ENERGY, INC.
             NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
                           SEPTEMBER 30, 2002 AND 2001

WORKING INTERESTS

         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) consists mainly of
machinery and equipment and is stated at cost. Depreciation is recognized on the
straight line method, after considering salvage value, over the estimated useful
lives of the assets of 10 years.

         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,
         (2)   costs to drill and equip exploratory wells that find proved
               reserves,
         (3)   costs to drill and equip development wells and
         (4)   costs for support equipment and facilities used in oil and gas
               producing activities.

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

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



                                       9
<PAGE>

                             BLUE RIDGE ENERGY, INC.
             NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
                           SEPTEMBER 30, 2002 AND 2001

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 is
recognized.

OTHER DISPOSITIONS

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

IMPAIRMENT OF LONG-LIVED ASSETS

         BR Energy follows the provisions of SFAS 144-ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. 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 (LOSS) PER COMMON SHARE

         BR Energy'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
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 nine months ended September 30, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED
         BASIC EPS COMPUTATION                                         SEPTEMBER 30, 2002
         ---------------------                                         ------------------
<S>                                                                       <C>
         Loss from Continuing Operations...............................   $   (166,744)
         Less: Preferred Stock Dividends...............................            ---
                                                                          ------------
         Loss from Continuing Operations Available to
           Common Stockholders.........................................       (166,744)
         Loss from Discontinued Operations.............................       (355,290)
                                                                          ------------
         Loss Available to Common Stockholders.........................   $   (522,034)
                                                                          ============
</TABLE>

<TABLE>
<CAPTION>
         DATES                                  SHARES      FRACTION        WEIGHTED
         OUTSTANDING                          OUTSTANDING   OF PERIOD    AVERAGE SHARES
         -----------                          -----------   ---------    --------------
<S>                                             <C>            <C>        <C>
         July 1-September 30.................   7,516,094      100.0%        7,516,094

         Weighted Average Shares.............                                7,516,094
                                                                          ============
         Basic EPS (Loss) from Continuing
           Operations........................                             $      (0.02)
         Basic EPS (Loss) from Discontinued
           Operations........................                                    (0.05)
                                                                          ------------
         Basic EPS (Loss)....................                             $      (0.07)
                                                                          ============
</TABLE>




                                       10
<PAGE>

                             BLUE RIDGE ENERGY, INC.
             NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
                           SEPTEMBER 30, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
         BASIC EPS COMPUTATION                                                            SEPTEMBER 30, 2001
         ---------------------                                                            ------------------
<S>                                                                                          <C>
         Income from Continuing Operations..............................................     $     71,920
         Less: Preferred Stock Dividends................................................          (89,694)
                                                                                             ------------
         Loss from Continuing Operations Available to Common Stockholders...............          (17,774)
         Income from Discontinued Operations............................................            2,103
                                                                                             ------------
         Loss Available to Common Stockholders..........................................     $    (15,671)
                                                                                             ============
</TABLE>

<TABLE>
<CAPTION>
         DATES                                                     SHARES      FRACTION        WEIGHTED
         OUTSTANDING                                             OUTSTANDING   OF PERIOD    AVERAGE SHARES
         -----------                                             -----------   ---------    --------------
<S>                                                                <C>            <C>           <C>
         July 1-September 30..............................         7,147,094      100.0%        7,147,094
         Conversion of Preferred Stock-September 30.......           210,250          0%                0
                                                             ---------------                 ------------
                                                                   7,357,344
         Weighted Average Shares..........................                                      7,147,094
                                                                                             ============

         Basic EPS from Continuing Operations.............                                   $       0.01
         Basic EPS from Discontinued Operations...........                                           0.00
                                                                                             ------------
         Basic EPS........................................                                   $       0.01
                                                                                             ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                           NINE MONTHS ENDED
         BASIC EPS COMPUTATION                                                            SEPTEMBER 30, 2002
         ---------------------                                                            ------------------
<S>                                                                                          <C>
         Loss from Continuing Operations................................................     $   (626,344)
         Less: Preferred Stock Dividends................................................           (8,498)
                                                                                             ------------
         Loss from Continuing Operations Available to Common Stockholders...............         (634,842)
         Loss from Discontinued Operations .............................................         (390,478)
                                                                                             ------------
         Loss Available to Common Stockholders..........................................     $ (1,025,320)
                                                                                             ============
</TABLE>

<TABLE>
<CAPTION>
         DATES                                                     SHARES      FRACTION        WEIGHTED
         OUTSTANDING                                             OUTSTANDING   OF PERIOD    AVERAGE SHARES
         -----------                                             -----------   ---------    --------------
<S>                                                                <C>            <C>           <C>
         January 1-September 30...........................         7,455,344      100.0%        7,455,344
         Conversion of Preferred Stock....................            60,750       83.3%           50,605
                                                             ---------------                 ------------
                                                                   7,516,094
         Weighted Average Shares..........................                                      7,505,949
                                                                                             ============

         Basic EPS (Loss) from Continuing Operations......                                   $      (0.09)
         Basic EPS (Loss) from Discontinued Operations....                                          (0.05)
                                                                                             ------------
         Basic EPS (Loss).................................                                   $      (0.14)
                                                                                             ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                           NINE MONTHS ENDED
         BASIC EPS COMPUTATION                                                            SEPTEMBER 30, 2001
         ---------------------                                                            ------------------
<S>                                                                                          <C>
         Loss from Continuing Operations................................................     $   (255,974)
         Less: Preferred Stock Dividends................................................         (177,604)
                                                                                             ------------
         Loss from Continuing Operations Available to Common Stockholders...............         (433,578)
         Loss from Discontinued Operations..............................................          (67,204)
                                                                                             ------------
         Loss Available to Common Stockholders..........................................     $   (500,782)
                                                                                             ============
</TABLE>

<TABLE>
<CAPTION>
         DATES                                                     SHARES      FRACTION        WEIGHTED
         OUTSTANDING                                             OUTSTANDING   OF PERIOD    AVERAGE SHARES
         -----------                                             -----------   ---------    --------------
<S>                                                                <C>            <C>        <C>
         January 1-September 30...........................         6,084,494      100.0%        6,084,494
         Exercise of Common Stock Warrants-June 29........         1,000,000       33.3%          333,333
         Conversion of Preferred Stock-Feb 28.............               750       88.8%              666
         Conversion of Preferred Stock-June 30............            61,850       33.3%           20,596
                                                             ---------------                 ------------
                                                                   7,147,094
         Weighted Average Shares..........................                                      6,439,089
                                                                                             ============

         Basic EPS (Loss) from Continuing Operations......                                   $      (0.07)
         Basic EPS (Loss) from Discontinued Operations....                                          (0.01)
                                                                                             ------------
         Basic EPS (Loss).................................                                   $      (0.08)
                                                                                             ============
</TABLE>

                                       11
<PAGE>


                             BLUE RIDGE ENERGY, INC.
             NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
                           SEPTEMBER 30, 2002 AND 2001

INCOME TAXES

         Income taxes in the three and nine months ended September 30, 2002 have
been provided for continuing operations at an estimated effective tax rate of 0%
and 9% , respectively. Income taxes in the three and nine months ended September
30, 2001 have been provided for at an estimated effective tax rate of 34% which
approximates the statutory federal tax rate.

         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. BR Energy believes it will generate sufficient future taxable
income to utilize the net deferred tax assets, however, for financial reporting
purposes, a valuation allowance of $300,000 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. BR Energy 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 2001 amounts have been reclassified in the financial statements
to conform with the 2002 presentation.

2.       AFFILIATED OIL AND GAS PARTNERSHIPS

         BR Energy 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 $1,490,172 and
$2,020,000 during the nine months ended September 30, 2002 and 2001,
respectively.

         Included in BR Energy'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 BR Energy's percentage ownership. BR
Energy has allocated, on a pro-rata basis the amounts associated with these
investments to the appropriate asset, liability, income and expense accounts.

3.       RELATED PARTY TRANSACTIONS

STOCK TRANSACTIONS

         As of September 30, 2002, there are 7,516,094 shares of common stock
issued and outstanding. A total of 3,126,893 shares are held by Blue Ridge
Group, Inc (BRG) and the remainder of 4,389,201 shares are held by approximately
600 shareholders.

ADVANCES FROM RELATED PARTIES

         BRG provides various management, administrative, accounting and
geological services for BR Energy at a rate of $20,750 per month. BR Energy also
reimburses BRG for direct costs paid on its behalf and the costs of various
drilling services. As of September 30, 2002 and 2001, approximately $155,965 and
$83,469 had been advanced by BRG to BR Energy under these arrangements.



                                       12
<PAGE>


                             BLUE RIDGE ENERGY, INC.
             NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
                           SEPTEMBER 30, 2002 AND 2001

         Additionally, in March, 2002, BRG 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 has a
term of one year, bears interest at 9% per annum on all unpaid balances and is
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. As of September 30,
2002 approximately $1,5000,000 had been advanced by BRG to BR Energy under this
arrangement. This 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 BRG for $1,500,000 and
BRG committed to the purchase of an additional 100,000 shares for $1,000,000 to
be paid in four quarterly installments.

         BR Energy receives advances from its sponsored limited partnerships for
turnkey drilling and completion services prior to completing such activities.
These amounts are recorded as drilling advances and reflected as current
liabilities until such drilling and completion activities have been completed
and such amounts have been earned as income. As of September 30, 2002 and
December 31, 2001, drilling advances received related to future obligations to
be completed were $0 and $1,469,811, respectively.

4.       PROPERTY AND EQUIPMENT

         Property and equipment, stated at cost, consisted of the following at
September 30, 2002 and December 31, 2001:

<TABLE>
<CAPTION>
                                                       SEPTEMBER 30,     DECEMBER 31,
                                                           2002              2001
                                                           ----              ----

<S>                                                    <C>              <C>
Oil and Gas Properties............................     $   1,891,545    $   2,036,851
Furniture and Fixtures............................            25,146            2,173
                                                       -------------    -------------
                                                           1,916,691        2,039,024
Less Accumulated Depreciation.....................          (276,539)        (224,242)
                                                       -------------    -------------
                                                       $   1,640,152    $   1,814,782
                                                       =============    =============
</TABLE>

         Depletion, Depreciation and Amortization expense was $374,376 and
$27,000 for the nine months ended September 30, 2002 and 2001, respectively.

         In March, 2002, Rig #2 and ancillary drilling equipment was sold for
its book value of $612,000 to Double D Drilling in exchange for a short-term
note receivable to be satisfied out of future drilling by Double D Drilling.
During 2002, this receivable was reduced by $110,250 as drilling services were
performed by Double D Drilling.

         In September, 2002 Rig #4 and ancillary drilling equipment was sold for
approximately $850,000 involving the payment of cash of $530,000 and assumption
of debt of $218,000 by the purchaser. $530,000 of the cash was actually paid on
October 4, 2002. The sale of the rig and equipment resulted in a loss of
$280,000 which was recorded as a portion of discontinued operations.

5.       COMMITMENTS AND CONTINGENCIES

COMMITMENTS

         During March, 2002 in conjunction with BR Energy's purchase of an
interest in 48,000 miles of seismic data in the Texas Gulf Coast area, BR Energy
committed to participating in the reprocessing this data. It is estimated



                                       13
<PAGE>

                             BLUE RIDGE ENERGY, INC.
             NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
                           SEPTEMBER 30, 2002 AND 2001

that the reprocessing will be completed at a cost to BR Energy of approximately
$2.3 million. BR Energy has paid $1.3 million of these costs to date and
recorded the remaining $1.0 million as a liability which will be funded by the
sale of $1.0 million of Series E Preferred Stock to BR Group. BR Group has
agreed to pay for the preferred stock in four equal quarterly installments
beginning in December, 2002. Accordingly, BR Energy has recorded a subscription
receivable for this amount.

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, BR Energy maintains general liability insurance coverage of
approximately $10 million per occurrence and in the aggregate. BR Energy
believes it is adequately insured for public liability and property damage to
others with respect to its operations. However, such insurance may not be
sufficient to protect BR Energy against liability for all consequences of well
disasters, extensive fire damage, or damage to the environment. BR Energy has
never been fined or incurred liability for pollution or other environmental
damage in connection with its operations.

6.       STOCKHOLDERS' EQUITY

         BR Energy is authorized to issue two classes of stock that are
designated, respectively, common and preferred stock. As of September 30, 2002,
BR Energy 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 D PREFERRED STOCK

         During 1998, BR Energy authorized the issuance and sale of 1,000,000
shares of Series D Preferred Stock ("Series D Stock") which has a par value of
$0.001 per share at $5.00 per share. The Series D Stock bears a 12% per annum
dividend payable monthly. Each share of the Series D Stock shall be converted
automatically into one (1) share of Common Stock effective when a Securities Act
Registration Statement for the Common Stock is filed with the SEC or two years
from issuance, whichever occurs first.

         In the event of any liquidation, dissolution or winding up of BR
Energy, either voluntary or involuntary, the existing holders of Series D 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 $5.00 per share plus all unpaid dividends on such share of each share of
Series D Stock then held by the shareholder.

         During the first quarter of 2002, the remaining 60,750 shares of Series
D Preferred Stock were converted to common 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 monthly. 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 is
expected to be 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



                                       14
<PAGE>


                             BLUE RIDGE ENERGY, INC.
             NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
                           SEPTEMBER 30, 2002 AND 2001

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 such share of each share of
Series E Stock then held by the shareholder.

         As of September 30, 2002, 259,000 shares of Series E Stock had been
subscribed to or issued.



COMMON STOCK WARRANTS

         As of September 30, 2002, BR Energy had warrants outstanding to
purchase 3,865,731 shares of Common Stock at prices ranging from $1.00 to $6.00
per share. These warrants expire from October 31, 2002 until March 27, 2005. See
BR Energy's Form 10-KSB for December 31, 2001 for additional details.

         In April, 2002, under the terms of its employee stock option plan BR
Energy granted options to purchase 843,750 shares of common stock at $0.40 per
share for ten years to various directors and employees of BR Energy.

         In June, 2002 in conjunction with the offering of Series E Preferred
Stock, BR Energy authorized the issuance of 750,000 Warrants to purchase one (1)
share of BR Energy's Common Stock at $4.00 per share. One Warrant will be issued
with each share of Series E Preferred Stock sold and may be exercised at any
time during the first 36 months after the final closing of the Series E.
Preferred Stock offering.



                                       15
<PAGE>


               MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS


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 of BR Energy to Blue Ridge Energy, Inc. in May
1996. BR Energy has offices at 632 Adams Street, Suite 710, Bowling Green, KY
42101 and at11211 Katy Freeway, Suite 505, Houston, Texas 77079..

         BR Energy is engaged in the oil and gas business primarily in Texas,
Kentucky, New Mexico and West Virginia. BR Energy sponsors oil & gas drilling
partnerships through which it raises funds for the drilling of oil and gas wells
and normally participates for a 1% partnership interest as the managing general
partner of the partnerships.

         Mr. Edward L. Stillie resigned as President and CEO on March 1, 2002
and BR Energy appointed Mr. Patrick A. Kelleher as its new President and CEO on
March 1, 2002. Mr. Kelleher brings over 23 years of industry experience, as a
disciplined Geologist and major company trained Geophysicist. Starting out his
career with Exxon, Mr. Kelleher has found oil and gas reserves for Edge
Petroleum, Cockrell Oil, and most recently as co-owner of Pecos Petroleum
Company, a privately held oil and gas exploration company. Mr. Kelleher will
replace Mr. Ed Stillie, who has resigned to pursue other business interests.

         As BR Energy began implementation of its 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 rig and
ancillary drilling equipment. The drilling rig and equipment were sold in
September 2002 and all related income, expense, property and liability accounts
related to these operations have been netted and classified as related to
discontinued operations in the financial statements for all periods presented.

         With a new technical management team, additional outside directors, and
establishing 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 which are based on our 17.5% ownership of
a 49-year license to approximately 48,000 miles of 2 dimensional seismic data in
the Texas Gulf Coast and East Texas areas which was previously conducted by a
major oil and gas company.

         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.

         At September 30, 2002, BR Energy had total assets of $4.9 million,
total liabilities of $1.4 million and shareholders' equity of $3.5 million. BR
Energy's net loss increased to $1,016,000 during the first nine months of 2002
as compared to $323,000 for the same period in 2001. The loss per common share,
which takes into account cash dividends paid on preferred stock was $(0.14) per
share during the first nine months of 2002 as compared to $(0.08) during the
same period in 2001. All per share data in this report has been adjusted to give
effect to applicable stock issues and conversions.

         As of September 30, 2002, BR Energy has participated, either directly
or indirectly through its sponsored limited partnerships, in eighty-nine (89)
wells, of which sixty-three (63) are presently productive and eight (8) are in
the completion process, located in Kentucky, Texas, West Virginia and New
Mexico.


                                       16
<PAGE>



         MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS (CONTINUED)

         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 September 30, 2002. 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...................................            863.78             33.03           332.00           133.00
Kentucky ...............................            700.00             99.40             0.00             0.00
West Virginia...........................            120.00              8.24         2,520.00         2,142.00
                                            --------------   ---------------   --------------     ------------
         Totals.........................          1,763.78            194.27         2,852.00         2,275.00
                                            ==============   ===============   ==============     ============
</TABLE>

PRODUCTIVE WELLS

<TABLE>
<CAPTION>
                                          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        7,361         19,000
Texas..........................         2.00          0.00         0.83         0.00        2,440         21,000
Kentucky ......................         0.00         56.00         0.00         7.53            0        152,054
West Virginia..................         0.00         10.00         0.00         1.99            0         63,597
                                    --------     ---------   ----------     --------    ---------    -----------
         Totals................         3.00         68.00         1.50         9.52        9,801        255,651
                                    ========     =========   ==========     ========    =========    ===========
</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
September 30, 2002:

DEVELOPED PROPERTIES

         Boon's Camp Prospect: As of September 30, 2002, nine (9) gas wells are
producing a total of approximately 550 - 650 MCF per day in eastern Kentucky.
Five (5) wells are still in the completion phase and one (1) well has been
determined to be a dry hole. 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.

         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 which is a 50.2% Net Revenue Interest.

         Big Sandy Prospect: As of September 30, 2002 ten (10) gas wells in the
Big Sandy Prospect located in eastern Kentucky are currently in production and
selling gas on a curtailed basis. BR Energy owns varying working 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.

         Contrary Creek Prospect: Drilling in this prospect located in Lawrence
County, Kentucky began during the fourth quarter of 2000 with all 11 gas wells
having been drilled and determined as commercially productive as of



                                       17
<PAGE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS (CONTINUED)

September 30, 2002. 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 determined as commercially productive as of September 30, 2002.

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

         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.

         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

         Redwine Prospect: In September 2001, BR Energy entered into a joint
venture agreement with Hay Exploration, Inc. of Ashland, Kentucky to evaluate,
explore and develop an 18,000 acre leasehold area of mutual interest ("AMI") in
eastern Kentucky. The purchase price for BR Energy's 50% share was $850,000 and
the AMI will be developed on a 50/50 basis and the two companies will equally
share future lease acquisition, drilling and operating costs as well as the
proceeds from sale of production. In June, 2002, BR Energy sold this prospect to
a former executive of BR Energy and recouped all costs expended to date.

         West Pebble Island Prospect: During the third quarter of 2000, BR
Energy committed to the acquisition and development of undeveloped and
non-producing oil and gas leases consisting of a 40% Working Interest in 2 wells
to be drilled in the West Pebble Island Prospect in Tyler County, Texas. During
the fourth quarter of 2000, BR Energy sold this Working Interest to a limited
partnership sponsored by BR Energy, thereby retaining varying Working Interests.
Drilling in this prospect began during the first quarter of 2001 and mechanical
difficulties were encountered. The drilling contractor has refunded the funds
paid for the drilling of this well. BR Energy has sold the majority of the
Working Interests in this prospect and retained a 12.5% Working Interest.
Drilling of the next well is expected to commence during the fourth quarter of
2002.

         Licking River Prospect: During the fourth quarter of 2000, BR Energy
committed to the acquisition and development of undeveloped and non-producing
oil and gas leases consisting of a 50% Working Interest in approximately 18,000
acres in the Licking River Prospect in Morgan County, Kentucky. In June, 2002,
BR Energy sold this prospect to a former executive of BR Energy for a gain of
approximately $28,000.

         Texas Onshore Seismic Acquisition: During March of 2002, BR Energy also
acquired a 17.5% working interest in a large ongoing Texas onshore exploration
program that could have a significant impact on BR Energy. 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. We expect that this will be the
foundation for our drilling activity for the next several years.

          In this regard, we have paid approximately $1.3 million as of
September 30, 2002 and are committed to pay approximately $1.0 million more for
our portion of the costs to reprocess this seismic data to look for shallow
"bright spot" prospects, primarily in the Miocene, Frio, Yegua and Wilcox
formations. 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.


                                       18
<PAGE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS (CONTINUED)

 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 net interests in the wells.
Approximately ten percent of the seismic mileage has been reprocessed as of
September 30, 2002 and 30 prospects have been identified. 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.

         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 (farmouts 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.

DRILLING RIGS

         During the first quarter of 2002, Rig #2 was sold for its book value of
$612,000 to Double D Drilling in exchange for a short-term note receivable to be
satisfied out of future drilling by Double D Drilling. During the third quarter
of 2002, the decision was made to discontinue our contract drilling services,
and the remaining drilling rig and equipment were sold to an unaffiliated third
party for cash of $620,000 and the assumption of debt of $218,000. $530,000 of
the cash was actually received on October 4, 2002.

INCOME STATEMENT REVIEW:

THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001:

         BR Energy incurred a net loss of $522,000 during the third quarter of
2002 as compared to net income of $74,000 primarily due to a reduction in its
turnkey contract operations for the same period in 2001. The loss per common
share, which takes into account cash dividends paid on preferred stock was
$(0.07) per share during the first quarter of 2002 as compared to net income of
$0.01 per share during the same period in 2001.

         OPERATING REVENUES:

         Operating revenues totaled $454,000 during the three months ended
September 30, 2002 as compared to the $1,597,000 recorded during the three
months ended September 30, 2001, This decrease was primarily related to reduced
turnkey contract sales as a result of BR Energy beginning the implementation of
its new business plan.

         DIRECT OPERATING COSTS:

         Direct operating costs totaled $421,000 during the three months ended
September 30, 2002, as compared to the $1,129,000 experienced during the same
period in 2001. The changes in direct operating costs are directly and
proportionally related to the changes in operating revenues previously
discussed, along with the addition of $142,000 in amortization expense related
to the seismic data acquisition.


                                       19
<PAGE>


         MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS (CONTINUED)

         OTHER OPERATING EXPENSES:

         Marketing expenses decreased to $0 during the third quarter of 2002
from the $122,000 experienced during this period in 2001 due to the change in
direction of BR Energy's activities as previously discussed. General and
Administrative expenses decreased 20% to $176,000 during the third quarter of
2002 as compared to $220,000 during the same period in 2001, primarily as a
result of decreased costs associated with changes in management personnel.

         OTHER EXPENSE:

         Interest expense remained essentially the same during the third quarter
of 2002 as compared to the third quarter of 2001. During the third quarter of
2002 BR Energy recognized a $355,000 loss from the discontinuation of its
drilling operations as previously discussed.

NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001:

         BR Energy's net loss increased to $1,016,000 during the first nine
months of 2002 as compared to $323,000 for the same period in 2001 000 primarily
due to the discontinuation of its contract drilling service operations and a
reduction in its turnkey contract operations for the same period in 2001. The
loss per common share, which takes into account cash dividends paid on preferred
stock was $(0.14) per share during the first nine months of 2002 as compared to
$(0.08) during the same period in 2001.

         OPERATING REVENUES:

         Operating revenues totaled $1,616,000 during the nine months ended
September 30, 2002 as compared to the $2,176,000 recorded during the nine months
ended September 30, 2001, This decrease was primarily related to reduced turnkey
contract sales as a result of BR Energy beginning the implementation of its new
business plan.

         DIRECT OPERATING COSTS:

         Direct operating costs totaled $1,298,000 during the nine months ended
September 30, 2002, as compared to the $1,479,000 experienced during the same
period in 2001. The changes in direct operating costs are directly and
proportionally related to the changes in operating revenues previously
discussed, along with the addition of $284,000 in amortization expense related
to the seismic data acquisition.

         OTHER OPERATING EXPENSES:

         Marketing expenses increased 37% to $309,000 during the first nine
months of 2002 from the $225,000 experienced during this period in 2001 due to
preparations to market BR Energy's Series E Preferred Stock offering. General
and Administrative expenses decreased 9% to $739,000 during the first nine
months of 2002 as compared to $812,000 during the same period in 2001, primarily
as a result of decreases associated with changes in management personnel.

         OTHER EXPENSE:

         Interest expense decreased 24% to $37,000 during the first nine months
of 2002 as compared to $49,000 during the first nine months of 2001 due to
reduced average debt levels. During the first nine months of 2002 BR Energy
recognized a $79,000 gain from the sale of undeveloped oil and gas leases in
Kentucky and a loss of $390,000 from the discontinuation of its drilling service
operations.



                                       20
<PAGE>


         MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS (CONTINUED)

BALANCE SHEET REVIEW:

         ASSETS:

         BR Energy's current assets decrease of 82% to $206,000 at September 30,
2002 as compared to $1,770,000 at December 31, 2001 was primarily due to the use
of cash and advances in fulfillment of drilling commitments that existed at
December 31, 2001. An investment of approximately $2,132,000 in the seismic
information previously discussed was recorded during the first nine months of
2002. The sale of the drilling rigs, equipment and various oil and gas
properties previously discussed resulted in a 55% net decrease to $1,640,000 in
property and equipment at September 30, 2002 as compared to $3,668,000 at
December 31, 2001.

         LIABILITIES:

         BR Energy's current liabilities decreased 30% to $1,393,000 at
September 30, 2002 from $1,988,000 at December 31, 2001 primarily due to the
elimination of $1,470,000 in drilling advances at September 30, 2002 as the
required services were performed by BR Energy. This reduction of current
liabilities was partially offset by the addition of $1,006,000 in seismic costs
payable resulting from the seismic data acquisition, as previously discussed.

         At September 30, 2002 and December 31, 2001 BR Energy had recognized
net deferred income tax assets (liabilities) of $0 and $(53,000), respectively.

         STOCKHOLDERS' EQUITY:

         Total capital invested in BR Energy for Common and Preferred Stock
increased 14% to $3,480,000 at September 30, 2002 from $3,042,000 at December
31, 2001. This increase resulted from the sale of 159,000 shares of Series E
Preferred Stock primarily to BR Energy's majority shareholder, BR Group. 64% of
this $1,590,000 increase in equity was offset by BR Energy's nine month loss of
$1,016,000.

         CAPITAL RESOURCES AND LIQUIDITY:

         As a result of BR Energy's discontinuation of its drilling service
operations, and the seismic data acquisition as previously discussed, the
current ratio at September 30, 2002 decreased to 0.15, a decrease of 82% from
0.83 to 1 at December 31, 2001. BR Energy did receive $530,000 of cash on
October 4, 2002 from the sale of a drilling rig and equipment which was
classified as an Asset Associated With Discontinued Operations at September 30,
2002.

         During the two periods ended September 30, 2002 and December 31, 2001,
BR Energy has relied upon net inflows of cash from equity and debt transactions,
supplemented by net inflows of cash generated by its operating activities to
fund the purchase of assets and its expansion. Generally speaking, management
expects to finance further growth with similar equity transactions and improved
cash flow from operations. It is anticipated that BR Energy will continue to
raise funds from the issuance of Series E Preferred Stock in order to fund its
commitment resulting from the acquisition of seismic information in the Texas
Gulf Coast region. It is also possible that further expansion will be aided
through the use of long-term debt transactions, both secured and unsecured.

ITEM 4. CONTROLS AND PROCEDURES

         BR Energy's Chief Executive Officer and Chief Financial Officer have
evaluated BR Energy's disclosure controls and procedures within 90 days of the
filing of this report. 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 were functioning effectively to
provide reasonable assurance that BR Energy can meet its disclosure obligations.
There have been no significant changes in BR Energy's internal controls or in
other factors that could significantly affect internal controls subsequent to
this review.


                                       21
<PAGE>


                                     PART II
                                OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS

         There are no material 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

         None

ITEM 5.           OTHER INFORMATION

         None

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

         Form 8-K was filed on September 13, 2002.

         Exhibit 99.1    Chief Executive Officer's Certification Pursuant to 18
                         U.S.C. Section 1350
         Exhibit 99.2    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 November 14, 2002                     By   /s/ FORREST E. EBBS
                                             -----------------------------------
                                                Forrest E. Ebbs
                                                Sr. Vice President-Finance & CFO





                                       22


<PAGE>



                                 CERTIFICATIONS

I, Patrick A. Kelleher, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Blue Ridge Energy,
     Inc.:

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)  designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         quarterly report (the "Evaluation Date"); and

     c)  presented in this quarterly report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors:

     a)  all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weakness in
         internal controls; and

     b)  any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

6.       The registrant's other certifying officers and I have indicated in this
         quarterly report whether there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation including
         any corrective actions with regard to significant deficiencies and
         material weakness.


Date:    November 14, 2002           /s/  Patrick A. Kelleher
                                          Chief Executive Officer


                                       23
<PAGE>


                                 CERTIFICATIONS

I, Forrest E. Ebbs, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Blue Ridge Energy,
     Inc..;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)  designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         quarterly report (the "Evaluation Date"); and

     c)  presented in this quarterly report our conclusions about he
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors:

     a)  all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weakness in
         internal controls; and

     b)  any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation including any
     corrective actions with regard to significant deficiencies and material
     weakness.


Date:    November 14, 2002              /s/  Forrest E. Ebbs
         -----------------              ----------------------------
                                             Chief Financial Officer



                                       24