##### 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 March 31, 2009
 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)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report.)
 Yes þ  No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smallere porting company o
 Yes o No þ




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##### 



PagePART I Financial Information
    
    
    1Item 1. Financial Statements (unaudited)
    
    
    1Balance Sheets as of March 31, 2009 and December 31, 2008
    
    
    1Statements of Operations:Three months ended March 31, 2009 and 2008
    
    
    2Statements of Cash Flows:Three months ended March 31, 2009 and 2008
    
    
    3Notes to Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 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
    
    
    19Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (unaudited, in thousands, except share data)
 March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    24,561
    
    
    $
    22,816Accounts receivable
(less accumulated provision for doubtful
accounts: March 31, 2009  $347; December 31, 2008  $312)
    
    
    11,846
    
    
    
    19,244Inventories
    
    
    878
    
    
    
    1,004Deferred income taxes
    
    
    2,758
    
    
    
    7,946Other current assets
    
    
    236
    
    
    
    332Fair value of derivatives
    
    
    2,683
    
    
    
    430Total current assets
    
    
    42,962
    
    
    
    51,772Property and equipment, at costOil and gas properties (successful efforts method)
    
    
    737,784
    
    
    
    735,398Gas gathering systems
    
    
    1,413
    
    
    
    1,413Land, buildings, machinery and equipment
    
    
    2,838
    
    
    
    2,836742,035
    
    
    
    739,647Less accumulated depreciation, depletion and amortization
    
    
    133,506
    
    
    
    124,175Property and equipment, net
    
    
    608,529
    
    
    
    615,472Fair value of derivatives
    
    
    1,507
    
    
    
    868Other assets
    
    
    1,343
    
    
    
    1,352$
    654,341
    
    
    $
    669,464LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    2,180
    
    
    $
    3,570Accrued expenses
    
    
    14,433
    
    
    
    19,251Current portion of long-term liabilities
    
    
    25,231
    
    
    
    25,237Fair value of derivatives
    
    
    9,656
    
    
    
    20,520Total current liabilities
    
    
    51,500
    
    
    
    68,578Long-term liabilitiesBank and other long-term debt
    
    
    74,936
    
    
    
    74,938Senior secured notes
    
    
    163,056
    
    
    
    163,302Subordinated promissory note  related party
    
    
    28,303
    
    
    
    27,623Asset retirement obligations and other long-term liabilities
    
    
    24,035
    
    
    
    23,863Fair value of derivatives
    
    
    82,041
    
    
    
    101,570Deferred income taxes
    
    
    138,168
    
    
    
    133,039Total long-term liabilities
    
    
    510,539
    
    
    
    524,335Shareholders equityCommon stock: without par value; 3,000 shares authorized and 1,534 shares issued
    
    
    
    
    
    
    Paid in capital
    
    
    122,500
    
    
    
    122,500Accumulated deficit
    
    
    (19,512
    )
    
    
    (32,754
    )Accumulated other comprehensive loss
    
    
    (10,686
    )
    
    
    (13,195
    )Total shareholders equity
    
    
    92,302
    
    
    
    76,551$
    654,341
    
    
    $
    669,464
   1




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BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited, in thousands)
 Three months ended
    
    
    Three months endedMarch 31, 2009
    
    
    March 31, 2008RevenuesOil and gas sales
    
    $
    15,016
    
    
    $
    31,368Gas gathering and marketing
    
    
    1,920
    
    
    
    2,850Other
    
    
    174
    
    
    
    8917,110
    
    
    
    34,307ExpensesProduction expense
    
    
    6,230
    
    
    
    6,485Production taxes
    
    
    322
    
    
    
    672Gas gathering and marketing
    
    
    1,686
    
    
    
    2,338Exploration expense
    
    
    1,525
    
    
    
    192General and administrative expense
    
    
    2,180
    
    
    
    1,960Depreciation, depletion and amortization
    
    
    9,375
    
    
    
    9,005Accretion expense
    
    
    331
    
    
    
    339Derivative fair value (gain) loss
    
    
    (31,227
    )
    
    
    26,822(9,578
    )
    
    
    47,813Operating income (loss)
    
    
    26,688
    
    
    
    (13,506
    )Other (income) expenseInterest expense
    
    
    4,817
    
    
    
    5,846Other income, net
    
    
    (67
    )
    
    
    (126
    )4,750
    
    
    
    5,720Income (loss) before income taxes
    
    
    21,938
    
    
    
    (19,226
    )Provision (benefit) from income taxes
    
    
    8,696
    
    
    
    (7,592
    )Net income (loss)
    
    $
    13,242
    
    
    $
    (11,634
    )
   2




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##### Table of Contents



BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited, in thousands)
 Three months ended
    
    
    Three months endedMarch 31, 2009
    
    
    March 31, 2008Cash flows from operating activities:Net income (loss)
    
    $
    13,242
    
    
    $
    (11,634
    )Adjustments to reconcile net income (loss)
to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    9,375
    
    
    
    9,005Accretion expense
    
    
    331
    
    
    
    339Amortization of derivatives and other noncash hedging activities
    
    
    (28,155
    )
    
    
    31,238Exploration expense
    
    
    625
    
    
    
    192Deferred income taxes
    
    
    8,696
    
    
    
    (7,592
    )Other non-cash items
    
    
    1,373
    
    
    
    (107
    )Change in operating assets and liabilities, net of
effects of acquisition and disposition of businesses:Accounts receivable and other operating assets
    
    
    7,494
    
    
    
    (4,823
    )Inventories
    
    
    82
    
    
    
    60Accounts payable and accrued expenses
    
    
    (6,433
    )
    
    
    (4,646
    )Net cash provided by operating activities
    
    
    6,630
    
    
    
    12,032Cash flows from investing activities:Proceeds from property and equipment disposals
    
    
    746
    
    
    
    1,821Exploration expense
    
    
    (625
    )
    
    
    (192
    )Additions to property and equipment
    
    
    (3,838
    )
    
    
    (6,020
    )(Decrease) increase in other assets
    
    
    (97
    )
    
    
    78Net cash used in investing activities
    
    
    (3,814
    )
    
    
    (4,313
    )Cash flows from financing activities:Repayment of long-term debt and other obligations
    
    
    (71
    )
    
    
    (2
    )Settlement of derivative liabilities recorded in purchase accounting
    
    
    (1,000
    )
    
    
    (10,955
    )Net cash used in financing activities
    
    
    (1,071
    )
    
    
    (10,957
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,745
    
    
    
    (3,238
    )Cash and cash equivalents at beginning of period
    
    
    22,816
    
    
    
    16,014Cash and cash equivalents at end of period
    
    $
    24,561
    
    
    $
    12,776
   3




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##### Table of Contents



BELDEN & BLAKE CORPORATION
 
 NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2009
 (1) Basis of Presentation
   (2) Derivatives and Hedging
 Disclosures about Derivative Instruments
and Hedging Activitiesan amendment of FASB Statement No. 133.
    4




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Natural Gas Swaps
    
    
    Crude Oil Swaps
    
    
    Natural Gas Basis SwapsNYMEX
    
    
    
    
    
    
    NYMEXPrice per
    
    
    
    
    
    
    Price per
    
    
    
    
    
    
    BasisBbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    Bbl
    
    
    Bbtu
    
    
    DifferentialQuarter EndingJune 30, 2009
    
    
    2,382
    
    
    $
    4.25
    
    
    
    48
    
    
    $
    29.42
    
    
    
    2,093
    
    
    $
    0.337September 30, 2009
    
    
    2,382
    
    
    
    4.28
    
    
    
    48
    
    
    
    29.24
    
    
    
    2,116
    
    
    
    0.337December 31, 2009
    
    
    2,382
    
    
    
    4.47
    
    
    
    48
    
    
    
    29.09
    
    
    
    2,116
    
    
    
    0.3377,146
    
    
    $
    4.33
    
    
    
    144
    
    
    $
    29.25
    
    
    
    6,325
    
    
    $
    0.337Year EndingDecember 31, 2010
    
    
    8,938
    
    
    $
    4.28
    
    
    
    175
    
    
    $
    28.86
    
    
    
    7,666
    
    
    $
    0.243December 31, 2011
    
    
    8,231
    
    
    
    4.19
    
    
    
    157
    
    
    
    28.77
    
    
    
    5,110
    
    
    
    0.252December 31, 2012
    
    
    7,005
    
    
    
    4.09
    
    
    
    138
    
    
    
    28.70
    
    
    
    3,660
    
    
    
    0.110December 31, 2013
    
    
    6,528
    
    
    
    4.04
    
    
    
    127
    
    
    
    28.70
    
    
    
    
    
    
    
    
   Asset Derivatives
    
    
    Liability DerivativesMarch 31,
    
    
    December 31,
    
    
    March 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Oil and natural gas commodity contracts
    
    $
    4,190
    
    
    $
    1,298
    
    
    $
    (88,435
    )
    
    $
    (118,547
    )Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    (3,262
    )
    
    
    (3,543
    )Total fair value
    
    $
    4,190
    
    
    $
    1,298
    
    
    $
    (91,697
    )
    
    $
    (122,090
    )Location of derivatives on our consolidated balance
sheet:Derivative asset
    
    $
    2,683
    
    
    $
    430
    
    
    $
    
    
    
    $
    Longterm derivative asset
    
    
    1,507
    
    
    
    868
    
    
    
    
    
    
    
    Derivative liability
    
    
    
    
    
    
    
    
    
    
    (9,656
    )
    
    
    (20,520
    )Longterm derivative liability
    
    
    
    
    
    
    
    
    
    
    (82,041
    )
    
    
    (101,570
    )$
    4,190
    
    
    $
    1,298
    
    
    $
    (91,697
    )
    
    $
    (122,090
    )
  5




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##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2008The following amounts are recorded in Oil and gas sales:Unrealized gains (losses):Oil and natural gas commodity contracts
    
    $
    (4,079
    )
    
    $
    (4,358
    )The following amounts are recorded in Interest expense:Realized
(gains) losses:Interest rate swaps
    
    $
    
    
    
    $
    197The following are recorded in Derivative fair value (gain) loss:Unrealized
(gains) losses:Oil and natural gas commodity contracts
    
    $
    (33,003
    )
    
    $
    14,390Interest rate swaps
    
    
    (281
    )
    
    
    1,477Total
    
    
    (33,284
    )
    
    
    15,867Realized
(gains) losses:Oil and natural gas commodity contracts
    
    
    1,334
    
    
    
    10,955Interest rate swaps
    
    
    723
    
    
    
    Total
    
    
    2,057
    
    
    
    10,955Derivative fair value (gain) loss
    
    $
    (31,227
    )
    
    $
    26,822
 (3) Industry Segment Financial Information
  (4) Supplemental Disclosure of Cash Flow Information
 Three months ended
    
    
    Three months ended(in thousands)
    
    March 31, 2009
    
    
    March 31, 2008Cash paid during the period for:Interest
    
    $
    7,776
    
    
    $
    9,433Income taxes
    
    
    
    
    
    
    Non-cash investing and financing activities:Non-cash additions to property and equipment
    
    
    1,952
    
    
    
    2,771Interest
paid in-kind on subordinated promissory note
    
    
    679
    
    
    
    
 (5) Contingencies
   6




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##### Table of Contents



(6) Comprehensive Income
  Three months ended
    
    
    Three months endedMarch 31, 2009
    
    
    March 31, 2008Comprehensive income (loss):Net income (loss)
    
    $
    13,242
    
    
    $
    (11,634
    )Other comprehensive income (loss), net of tax:Unrealized gain in derivative fair value
    
    
    
    
    
    
    (402
    )Reclassification adjustment for derivative (loss) gain
reclassified into earnings
    
    
    2,509
    
    
    
    2,795Change in accumulated other comprehensive income (loss)
    
    
    2,509
    
    
    
    2,393$
    15,751
    
    
    $
    (9,241
    )
 (7) Related Party Transactions
   (8) New Accounting Standards
 Business Combinations Business
Combinations.
 Noncontrolling Interests in Consolidated
Financial Statements  An Amendment of ARB No. 51
  7




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(9) Fair Value Measurements
  
 
 
   Fair Value Measurements at March 31, 2009 Using:Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal Carrying Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative
instruments
    
    $
    (87,507
    )
    
    $
    
    
    
    $
    (87,507
    )
    
    $
    
    8




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##### Table of Contents



(10) Asset Retirement Obligations
  Balance as of December 31, 2008
    
    $
    23,885Accretion expense
    
    
    331Liabilities incurred
    
    
    6Liabilities settled
    
    
    (99
    )Revisions in estimated cash flows
    
    
    Balance as of March 31, 2009
    
    $
    24,123
  (11) Long-Term Debt and Subsequent Event
    
    
    Set the Borrowing Base at $100 million.
 
    
    Set the Borrowing Base redetermination dates to March 15th and September
15theach year.
 
    
    Prohibit payment of dividends to our shareholder.
 
    
    Prohibit Senior Secured Note repurchases by the Company.
  9




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##### Table of Contents




    
    Prohibit principal or cash interest payments on the Capital C Subordinated Note.
 
    
    Prohibit borrowings to fund restructuring of the hedge agreements.
 
    
    Require the pay down of the Amended Credit Agreement with certain proceeds of asset
sales and equity contributions, of which $20 million is required to be paid by July 15,
2009.
 
    
    Reduce the Borrowing Base by the amount of each repayment until the aggregate amount
of such repayments is equal to $30 million.
 
    
    Increase the percentage of the value of total proved reserves that is required to be
mortgaged from 75% to 80% effective May 31, 2009.
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 Forward-Looking Information
  Impact of the Current Financial and Credit Markets
     10




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Results of Operations
  Three months endedMarch 31,2009
    
    
    2008ProductionGas (Mmcf)
    
    
    3,177
    
    
    
    3,311Oil (Mbbls)
    
    
    82
    
    
    
    83Total production (Mmcfe)
    
    
    3,671
    
    
    
    3,808Average price (1)Gas (per Mcf)
    
    $
    3.71
    
    
    $
    7.16Oil (per Bbl)
    
    
    39.20
    
    
    
    92.56Mcfe
    
    
    4.09
    
    
    
    8.24Average costs (per Mcfe)Production expense
    
    $
    1.70
    
    
    $
    1.70Production taxes
    
    
    0.09
    
    
    
    0.18Depletion
    
    
    2.53
    
    
    
    2.34
 (1)
    
    The average prices presented above include non-cash amounts related to derivative contracts.
Excluding these non-cash amounts from oil and gas sales revenues would result in the following
average prices: Three months endedMarch 31,2009
    
    
    2008Gas (per Mcf)
    
    $
    5.00
    
    
    $
    8.48Oil (per Bbl)
    
    
    39.20
    
    
    
    92.56Mcfe
    
    
    5.20
    
    
    
    9.38
 First Quarters of 2009 and 2008 Compared
 Revenues
   11




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Costs and Expenses
       12




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Liquidity and Capital Resources
 Cash Flows
      Capital Expenditures
    13




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##### Table of Contents



Financing and Credit Facilities
    
    
    Set the Borrowing Base at $100 million.
 
    
    Set the Borrowing Base redetermination dates to March 15th and September
15theach year.
 
    
    Prohibit payment of dividends to our shareholder.
 
    
    Prohibit Senior Secured Note repurchases by the Company.
 
    
    Prohibit principal or cash interest payments on the Capital C Subordinated Note.
 
    
    Prohibit borrowings to fund restructuring of the hedge agreements.
 
    
    Require the pay down of the Amended Credit Agreement with certain proceeds of asset
sales and equity contributions, of which $20 million is required to be paid by July 15,
2009.
 
    
    Reduce the Borrowing Base by the amount of each repayment until the aggregate amount
of such repayments is equal to $30 million.
 
    
    Increase the percentage of the value of total proved reserves that is required to be
mortgaged from 75% to 80% effective May 31, 2009.
    14




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New Accounting Standards
 Business Combinations Business
Combinations.
 Noncontrolling Interests in Consolidated
Financial Statements  An Amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    15




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Natural Gas Swaps
    
    
    Crude Oil Swaps
    
    
    Natural Gas Basis SwapsNYMEX
    
    
    
    
    
    
    NYMEXPrice per
    
    
    
    
    
    
    Price per
    
    
    
    
    
    
    BasisBbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    Bbl
    
    
    Bbtu
    
    
    DifferentialQuarter EndingJune 30, 2009
    
    
    2,382
    
    
    $
    4.25
    
    
    
    48
    
    
    $
    29.42
    
    
    
    2,093
    
    
    $
    0.337September 30, 2009
    
    
    2,382
    
    
    
    4.28
    
    
    
    48
    
    
    
    29.24
    
    
    
    2,116
    
    
    
    0.337December 31, 2009
    
    
    2,382
    
    
    
    4.47
    
    
    
    48
    
    
    
    29.09
    
    
    
    2,116
    
    
    
    0.3377,146
    
    
    $
    4.33
    
    
    
    144
    
    
    $
    29.25
    
    
    
    6,325
    
    
    $
    0.337Year EndingDecember 31, 2010
    
    
    8,938
    
    
    $
    4.28
    
    
    
    175
    
    
    $
    28.86
    
    
    
    7,666
    
    
    $
    0.243December 31, 2011
    
    
    8,231
    
    
    
    4.19
    
    
    
    157
    
    
    
    28.77
    
    
    
    5,110
    
    
    
    0.252December 31, 2012
    
    
    7,005
    
    
    
    4.09
    
    
    
    138
    
    
    
    28.70
    
    
    
    3,660
    
    
    
    0.110December 31, 2013
    
    
    6,528
    
    
    
    4.04
    
    
    
    127
    
    
    
    28.70
    
    
    
    
    
    
    
    
    16




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##### Table of Contents



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.
   10.1
    
    
    Fourth Amendment, Waiver and Agreement to the First Amended and Restated Credit and Guaranty
Agreement dated as of August 16, 2005 (incorporated by reference from Exhibit 10.9 to our
annual report on Form 10-K for the year ended December 31, 2008).+31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.+31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.+32.1
    
    
    Section 1350 Certification of Chief Executive Officer.+32.2
    
    
    Section 1350 Certification of Chief Financial Officer.
 
 +
    
    Filed herewith  18




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BELDEN & BLAKE CORPORATIONDate:  May 13, 2009
    By:
    /s/ Mark A. HouserMark A. HouserChief Executive Officer,
Chairman of the Board of Directors and DirectorDate:  May 13, 2009
    By:
    /s/ James M. VanderhiderJames M. VanderhiderPresident, Chief Financial Officer and Director
(Principal Financial Officer)  19




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##### Table of Contents



ExhibitNo.
    
    Description+31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.+31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.+32 .1
    
    
    Section 1350 Certification of Chief Executive Officer.+32.2
    
    
    Section 1350 Certification of Chief Financial Officer.
  20