##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2007
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition
period from  to
 Commission File Number: 0-20100
 BELDEN & BLAKE CORPORATION
 
  Ohio
    
    34-1686642(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1001 Fannin Street, Suite 800Houston, Texas
    
    77002(Address of principal executive offices)
    
    (Zip Code)
  
  þ o
  o o þ
 o þ




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##### 



PagePART I Financial InformationItem 1. Financial Statements (unaudited)Balance Sheets as of September 30, 2007 and December 31, 2006
    
    
    1Statements of Operations: Three and nine months ended September 30, 2007 and September 30, 2006
    
    
    2Statements of Cash Flows: Nine months ended September 30, 2007 and September 30, 2006
    
    
    3Notes to Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    8Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4. Controls and Procedures
    
    
    17PART II Other InformationItem 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3. Defaults Upon Senior Securities
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    18Signatures
    
    
    19EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 BELDEN & BLAKE CORPORATION
 
 BALANCE SHEETS
 (unaudited)
 (in thousands, except share data)
 September 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    13,490
    
    
    $
    5,927Accounts receivable (less accumulated provision for doubtful accounts:
    
    
    14,946
    
    
    
    19,855September 30, 2007- $522; December 31, 2006 - $1,271)Inventories
    
    
    812
    
    
    
    885Deferred income taxes
    
    
    15,135
    
    
    
    12,607Other current assets
    
    
    229
    
    
    
    510Fair value of derivatives
    
    
    193
    
    
    
    378Total current assets
    
    
    44,805
    
    
    
    40,162Property and equipment, at costOil and gas properties
(successful efforts method)
    
    
    710,334
    
    
    
    692,576Gas gathering systems
    
    
    1,305
    
    
    
    1,305Land, buildings, machinery and
equipment
    
    
    2,761
    
    
    
    3,031714,400
    
    
    
    696,912Less accumulated depreciation, depletion and amortization
    
    
    79,654
    
    
    
    52,564Property and equipment, net
    
    
    634,746
    
    
    
    644,348Goodwill
    
    
    90,076
    
    
    
    90,076Fair value of derivatives
    
    
    
    
    
    
    193Other assets
    
    
    1,970
    
    
    
    2,244$
    771,597
    
    
    $
    777,023LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    4,588
    
    
    $
    2,259Accrued expenses
    
    
    16,580
    
    
    
    21,554Current
portion of long-term liabilities
    
    
    276
    
    
    
    408Fair value of derivatives
    
    
    38,268
    
    
    
    27,576Total current liabilities
    
    
    59,712
    
    
    
    51,797Long-term liabilitiesBank and other long-term debt
    
    
    99,949
    
    
    
    95,454Senior secured notes
    
    
    164,463
    
    
    
    165,106Subordinated
promissory note - related party
    
    
    26,269
    
    
    
    25,000Asset retirement obligations and other long-term liabilities
    
    
    21,473
    
    
    
    20,627Fair value of derivatives
    
    
    166,143
    
    
    
    160,011Deferred income taxes
    
    
    111,008
    
    
    
    115,325Total long-term liabilities
    
    
    589,305
    
    
    
    581,523Shareholders equityCommon stock: without par value; 3,000 shares authorized and 1,534 shares
issued and outstanding
    
    
    
    
    
    
    Paid in capital
    
    
    125,000
    
    
    
    125,000Retained earnings
    
    
    17,896
    
    
    
    41,262Accumulated other comprehensive
loss
    
    
    (20,316
    )
    
    
    (22,559
    )Total shareholders equity
    
    
    122,580
    
    
    
    143,703$
    771,597
    
    
    $
    777,023
  1




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BELDEN & BLAKE CORPORATION
 
 STATEMENTS OF OPERATIONS
 (unaudited, in thousands)
 Three months ended
    
    
    Three months ended
    
    
    Nine months ended
    
    
    Nine months endedSeptember 30, 2007
    
    
    September 30, 2006
    
    
    September 30, 2007
    
    
    September 30, 2006RevenuesOil and gas sales
    
    $
    27,086
    
    
    $
    38,559
    
    
    $
    85,915
    
    
    $
    115,709Gas gathering and marketing
    
    
    2,334
    
    
    
    2,474
    
    
    
    7,728
    
    
    
    8,478Other
    
    
    10
    
    
    
    196
    
    
    
    672
    
    
    
    49429,430
    
    
    
    41,229
    
    
    
    94,315
    
    
    
    124,681Costs and ExpensesProduction expense
    
    
    5,994
    
    
    
    6,247
    
    
    
    18,253
    
    
    
    16,975Production taxes
    
    
    494
    
    
    
    589
    
    
    
    1,687
    
    
    
    1,877Gas gathering and marketing
    
    
    1,957
    
    
    
    1,946
    
    
    
    6,431
    
    
    
    6,892Exploration expense
    
    
    264
    
    
    
    148
    
    
    
    1,292
    
    
    
    697General and administrative expense
    
    
    1,675
    
    
    
    2,318
    
    
    
    5,535
    
    
    
    7,760Depreciation, depletion and amortization
    
    
    9,156
    
    
    
    10,211
    
    
    
    27,169
    
    
    
    28,724Accretion expense
    
    
    328
    
    
    
    314
    
    
    
    958
    
    
    
    910Derivative fair value (gain) loss
    
    
    (8,695
    )
    
    
    (43,235
    )
    
    
    37,446
    
    
    
    (29,759
    )11,173
    
    
    
    (21,462
    )
    
    
    98,771
    
    
    
    34,076Operating income (loss)
    
    
    18,257
    
    
    
    62,691
    
    
    
    (4,456
    )
    
    
    90,605Other expenseInterest expense
    
    
    6,002
    
    
    
    6,091
    
    
    
    17,837
    
    
    
    17,670Gain on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (436
    )Income (loss) before income taxes
    
    
    12,255
    
    
    
    56,600
    
    
    
    (22,293
    )
    
    
    73,371Provision (benefit) for income taxes
    
    
    4,987
    
    
    
    22,405
    
    
    
    (8,677
    )
    
    
    29,044Net income (loss)
    
    $
    7,268
    
    
    $
    34,195
    
    
    $
    (13,616
    )
    
    $
    44,327
  2




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BELDEN & BLAKE CORPORATION
 
 STATEMENTS OF CASH FLOWS
 (unaudited)
 (in thousands)
 Nine months ended
    
    
    Nine months endedSeptember 30, 2007
    
    
    September 30, 2006Cash flows from operating activities:Net (loss) income
    
    $
    (13,616
    )
    
    $
    44,327Adjustments to reconcile net (loss) income
to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    27,169
    
    
    
    28,724Accretion expense
    
    
    958
    
    
    
    910Gain on disposal of property and equipment and debt extinguishment
    
    
    (57
    )
    
    
    (472
    )Non-cash hedging activities
    
    
    41,652
    
    
    
    (46,144
    )Exploration expense
    
    
    571
    
    
    
    697Deferred income taxes
    
    
    (8,854
    )
    
    
    29,044Other non-cash expense
    
    
    1,665
    
    
    
    315Change in operating assets and liabilitiesAccounts receivable and other current assets
    
    
    5,000
    
    
    
    6,854Inventories
    
    
    6
    
    
    
    238Accounts payable and accrued expenses
    
    
    (3,326
    )
    
    
    (12,792
    )Net cash provided by operating activities
    
    
    51,168
    
    
    
    51,701Cash flows from investing activities:Additions to property and equipment
    
    
    (17,265
    )
    
    
    (30,164
    )Proceeds from property and equipment disposals
    
    
    270
    
    
    
    6,891Exploration expense
    
    
    (571
    )
    
    
    (697
    )Increase in other assets
    
    
    (44
    )
    
    
    (18
    )Net cash used in investing activities
    
    
    (17,610
    )
    
    
    (23,988
    )Cash flows from financing activities:Proceeds from revolving line of credit
    
    
    6,500
    
    
    
    55,376Repayment of revolving line of credit
    
    
    (2,000
    )
    
    
    (12,000
    )Repayment of secured notes
    
    
    
    
    
    
    (33,933
    )Repayment of long-term debt and other obligations
    
    
    (22
    )
    
    
    (23
    )Settlement of derivative liabilities recorded in purchase accounting
    
    
    (20,723
    )
    
    
    (22,961
    )Dividends paid
    
    
    (9,750
    )
    
    
    (17,250
    )Net cash used in financing activities
    
    
    (25,995
    )
    
    
    (30,791
    )Net increase (decrease) in cash and cash equivalents
    
    
    7,563
    
    
    
    (3,078
    )Cash and cash equivalents at beginning of period
    
    
    5,927
    
    
    
    8,172Cash and cash equivalents at end of period
    
    $
    13,490
    
    
    $
    5,094See accompanying notes.
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BELDEN & BLAKE CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
 (unaudited)
 September 30, 2007
 (1)
    
    Basis of Presentation
   (2)
    
    Derivatives and Hedging
   4




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Natural Gas Swaps
    
    Crude Oil SwapsNYMEX
    
    
    
    
    
    NYMEXPrice per
    
    
    
    
    
    Price perBbtu
    
    Mmbtu
    
    Mbbls
    
    BblQuarter EndingDecember 31, 2007
    
    
    2,686
    
    
    $
    4.91
    
    
    
    56
    
    
    $
    30.44Year EndingDecember 31, 2008
    
    
    10,126
    
    
    $
    4.64
    
    
    
    208
    
    
    $
    29.96December 31, 2009
    
    
    9,529
    
    
    
    4.43
    
    
    
    191
    
    
    
    29.34December 31, 2010
    
    
    8,938
    
    
    
    4.28
    
    
    
    175
    
    
    
    28.86December 31, 2011
    
    
    8,231
    
    
    
    4.19
    
    
    
    157
    
    
    
    28.77December 31, 2012
    
    
    7,005
    
    
    
    4.09
    
    
    
    138
    
    
    
    28.70December 31, 2013
    
    
    6,528
    
    
    
    4.04
    
    
    
    127
    
    
    
    28.70Bbl  Barrel
    
    Mmbtu  Million British thermal unitsMbbls  Thousand barrels
    
    Bbtu  Billion British thermal units
  (3)
    
    Industry Segment Financial Information
  (4)
    
    Supplemental Disclosure of Cash Flow Information
 Nine months
    
    Nine monthsended
    
    endedSeptember 30,
    
    September 30,(in thousands)
    
    2007
    
    2006Cash paid during the period for:Interest
    
    $
    15,951
    
    
    $
    22,721Income taxes
    
    
    177
    
    
    
    Non-cash investing and financing activities:Non-cash additions to property and equipment
    
    
    1,206
    
    
    
    1,481Non-cash additions to debt
    
    
    (1,269
    )
    
    
    
 (5)
    
    Contingencies
  5




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(6)
    
    Comprehensive Income
  Nine months ended
    
    
    Nine months endedSeptember 30, 2007
    
    
    September 30, 2006Comprehensive (loss) income:Net (loss) income
    
    $
    (13,616
    )
    
    $
    44,327Other comprehensive (loss) income, net of tax:Unrealized gain in derivative fair value
    
    
    289
    
    
    
    19,690Reclassification adjustment for derivative (loss) gain
reclassified into earnings
    
    
    (2,532
    )
    
    
    3,774Change in accumulated other comprehensive (loss) income
    
    
    (2,243
    )
    
    
    23,464Comprehensive (loss) income
    
    $
    (15,859
    )
    
    $
    67,791
 (7)
    
    Long-Term Debt
  September 30, 2007
    
    
    December 31, 2006Senior secured notes
    
    $
    159,475
    
    
    $
    159,475Bank revolving credit facility
    
    
    99,876
    
    
    
    95,376Subordinated promissory note (related party)
    
    
    26,269
    
    
    
    25,000Other
    
    
    82
    
    
    
    85285,702
    
    
    
    279,936Less current portion
    
    
    9
    
    
    
    7Long-term debt
    
    
    285,693
    
    
    
    279,929Fair value adjustment  senior secured notes
    
    
    4,988
    
    
    
    5,631$
    290,681
    
    
    $
    285,560
 Amended Credit Agreement
   6




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(8)
    
    Related Party Transactions
  (9)
    
    New Accounting Standards
   7




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Fair Value Measurements,
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB Statement No. 115
 (10)
    
    Subsequent Event
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 Forward-Looking Information
  8




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Results of Operations
  Three months ended September 30,
    
    
    Nine months ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006ProductionGas (Mmcf)
    
    
    3,310
    
    
    
    3,582
    
    
    
    10,042
    
    
    
    10,606Oil (Mbbls)
    
    
    91
    
    
    
    96
    
    
    
    272
    
    
    
    285Total production (Mmcfe)
    
    
    3,854
    
    
    
    4,157
    
    
    
    11,676
    
    
    
    12,317Average price (1)Gas (per Mcf)
    
    $
    6.25
    
    
    $
    8.93
    
    
    $
    6.86
    
    
    $
    9.17Oil (per Bbl)
    
    
    70.75
    
    
    
    68.63
    
    
    
    62.39
    
    
    
    64.76Mcfe
    
    
    7.03
    
    
    
    9.28
    
    
    
    7.36
    
    
    
    9.39Average costs (per Mcfe)Production expense
    
    $
    1.56
    
    
    $
    1.50
    
    
    $
    1.56
    
    
    $
    1.38Production taxes
    
    
    0.13
    
    
    
    0.14
    
    
    
    0.14
    
    
    
    0.15Depletion
    
    
    2.35
    
    
    
    2.42
    
    
    
    2.30
    
    
    
    2.30Oil and Gas operating
margin (per Mcfe)
    
    
    5.34
    
    
    
    7.64
    
    
    
    5.66
    
    
    
    7.86
  Three months ended September 30,
    
    
    Nine months ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Gas (per Mcf)
    
    $
    6.62
    
    
    $
    6.98
    
    
    $
    7.28
    
    
    $
    6.45Oil (per Bbl)
    
    
    70.75
    
    
    
    68.63
    
    
    
    62.39
    
    
    
    64.76Mcfe
    
    
    7.35
    
    
    
    7.60
    
    
    
    7.72
    
    
    
    7.06
 Mmcf  Million cubic feet
    
    Mbbls  Thousand barrels
    
    Mmcfe  Million cubic feet of natural gas equivalentMcf  Thousand cubic feet
    
    Bbl  Barrel
    
    Mcfe  Thousand cubic feet of natural gas equivalentOil and Gas operating margin (per Mcfe)  average price less production expense and production taxes
 Results of Operations  Third Quarters of 2007 and 2006 Compared
Revenues
   9




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Costs and Expenses
      10




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Results of Operations  Nine Months of 2007 and 2006 Compared
Revenues
      11




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Costs and Expenses
         Liquidity and Capital Resources
 Cash Flows
  12




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Capital Expenditures
   Financing and Credit Facilities
   13




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New Accounting Standards
     14




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Fair Value Measurements,
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB Statement No. 115
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    15




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Natural Gas Swaps
    
    Crude Oil SwapsNYMEX Price per
    
    
    
    
    
    NYMEX Price perBbtu
    
    Mmbtu
    
    Mbbls
    
    BblQuarter EndingDecember 31, 2007
    
    
    2,686
    
    
    $
    4.91
    
    
    
    56
    
    
    $
    30.44Year EndingDecember 31, 2008
    
    
    10,126
    
    
    $
    4.64
    
    
    
    208
    
    
    $
    29.96December 31, 2009
    
    
    9,529
    
    
    
    4.43
    
    
    
    191
    
    
    
    29.34December 31, 2010
    
    
    8,938
    
    
    
    4.28
    
    
    
    175
    
    
    
    28.86December 31, 2011
    
    
    8,231
    
    
    
    4.19
    
    
    
    157
    
    
    
    28.77December 31, 2012
    
    
    7,005
    
    
    
    4.09
    
    
    
    138
    
    
    
    28.70December 31, 2013
    
    
    6,528
    
    
    
    4.04
    
    
    
    127
    
    
    
    28.70
 Bbl  Barrel
Mbbls  Thousand barrels
    
    Mmbtu  Million British thermal units
Bbtu  Billion British thermal units
   16




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Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Change in Internal Controls Over Financial Reporting
  
 PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  17




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Item 6. Exhibits
 (a) Exhibits
 31.1*
    
    Certification of Principal Executive Officer of Belden & Blake Corporation as required by
Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
 31.2*
    
    Certification of Principal Financial Officer of Belden & Blake Corporation as required by
Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
 32.1*
    
    Certification of Chief Executive Officer of Belden & Blake Corporation pursuant to 18 U.S.C.
Section 1350.
 32.2*
    
    Certification of Chief Financial Officer of Belden & Blake Corporation pursuant to 18 U.S.C.
Section 1350.
 
 *
    
    Filed herewith. 18




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BELDEN & BLAKE CORPORATIONDate:November 14, 2007
    
    By:
    
    /s/ Mark A. HouserMark A. Houser, Chief Executive Officer,
Chairman of the Board of Directors and DirectorDate:November 14, 2007
    
    By:
    
    /s/ James M. VanderhinderJames M. Vanderhider, President, Chief
Financial Officer and Director (Principal Financial
Officer)
 19