##### 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, 2010
 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 800
Houston, 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
    
    Smaller reporting company o
 Yes o No þ




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##### 



PagePART I Financial InformationItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009
    
    
    1Condensed Consolidated Statements of Operations: Three months ended March 31, 2010 and 2009
    
    
    2Condensed Consolidated Statements of Cash Flows: Three months ended March 31, 2010 and 2009
    
    
    3Notes to Condensed Consolidated 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
    
    
    16PART II Other InformationItem 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults upon Senior Securities
    
    
    18Item 4. (Removed and Reserved)
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    19Signatures
    
    
    20Exhibit 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)
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    44,359
    
    
    $
    46,740Accounts receivable (less accumulated provision for doubtful accounts:
March 31, 2010 - $529; December 31, 2009 - $393)
    
    
    11,533
    
    
    
    11,821Inventories
    
    
    881
    
    
    
    828Deferred income taxes
    
    
    3,946
    
    
    
    8,272Assets held for sale
    
    
    2,031
    
    
    
    Other current assets
    
    
    150
    
    
    
    183Fair value of derivatives
    
    
    1,285
    
    
    
    413Total current assets
    
    
    64,185
    
    
    
    68,257Property and equipment, at costOil and gas properties (successful efforts method)
    
    
    682,860
    
    
    
    684,787Gas gathering systems
    
    
    1,245
    
    
    
    1,275Land, buildings, machinery and equipment
    
    
    2,421
    
    
    
    2,566686,526
    
    
    
    688,628Less accumulated depreciation, depletion and amortization
    
    
    158,444
    
    
    
    151,208Property and equipment, net
    
    
    528,082
    
    
    
    537,420Fair value of derivatives
    
    
    787
    
    
    
    478Other assets
    
    
    1,746
    
    
    
    1,923$
    594,800
    
    
    $
    608,078LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    1,252
    
    
    $
    1,696Accounts payable  related party
    
    
    447
    
    
    
    910Accrued expenses
    
    
    12,333
    
    
    
    16,136Current portion of long-term liabilities
    
    
    238
    
    
    
    238Fair value of derivatives
    
    
    11,779
    
    
    
    21,098Total current liabilities
    
    
    26,049
    
    
    
    40,078Long-term liabilitiesBank and other long-term debt
    
    
    43,927
    
    
    
    43,929Senior secured notes
    
    
    162,020
    
    
    
    162,287Subordinated promissory note  related party
    
    
    30,491
    
    
    
    30,491Asset retirement obligations and other long-term liabilities
    
    
    23,277
    
    
    
    22,990Fair value of derivatives
    
    
    48,949
    
    
    
    66,876Deferred income taxes
    
    
    135,048
    
    
    
    137,286Total long-term liabilities
    
    
    443,712
    
    
    
    463,859Shareholders equityCommon stock: without par value; 3,000 shares authorized and 1,534 shares
issued
    
    
    
    
    
    
    Paid in capital
    
    
    142,500
    
    
    
    142,500Accumulated deficit
    
    
    (10,878
    )
    
    
    (29,978
    )Accumulated other comprehensive loss
    
    
    (6,583
    )
    
    
    (8,381
    )Total shareholders equity
    
    
    125,039
    
    
    
    104,141$
    594,800
    
    
    $
    608,078
   1




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##### Table of Contents



BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (unaudited, in thousands)
 Three months ended
    
    
    Three months endedMarch 31, 2010
    
    
    March 31, 2009RevenuesOil and gas sales
    
    $
    15,689
    
    
    $
    15,016Gas gathering and marketing
    
    
    1,590
    
    
    
    1,920Other
    
    
    138
    
    
    
    17417,417
    
    
    
    17,110ExpensesProduction expense
    
    
    4,969
    
    
    
    6,230Production taxes
    
    
    335
    
    
    
    322Gas gathering and marketing
    
    
    1,414
    
    
    
    1,686Exploration expense
    
    
    141
    
    
    
    1,525General and administrative expense
    
    
    1,832
    
    
    
    2,180Depreciation, depletion and amortization
    
    
    7,849
    
    
    
    9,375Accretion expense
    
    
    319
    
    
    
    331Derivative fair value gain
    
    
    (24,075
    )
    
    
    (31,227
    )(7,216
    )
    
    
    (9,578
    )Operating income
    
    
    24,633
    
    
    
    26,688Other (income) expenseInterest expense
    
    
    4,974
    
    
    
    4,817Other income, net
    
    
    (18
    )
    
    
    (67
    )4,956
    
    
    
    4,750Income before income taxes
    
    
    19,677
    
    
    
    21,938Provision for income taxes
    
    
    577
    
    
    
    8,696Net income
    
    $
    19,100
    
    
    $
    13,242
   2




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BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited, in thousands)
 Three months ended
    
    
    Three months endedMarch 31, 2010
    
    
    March 31, 2009Cash flows from operating activities:Net income
    
    $
    19,100
    
    
    $
    13,242Adjustments to reconcile net income
to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    7,849
    
    
    
    9,375Accretion expense
    
    
    319
    
    
    
    331Amortization of derivatives and other noncash hedging activities
    
    
    (21,291
    )
    
    
    (28,155
    )Exploration expense
    
    
    141
    
    
    
    625Deferred income taxes
    
    
    577
    
    
    
    8,696Other non-cash items
    
    
    (8
    )
    
    
    1,373Change in operating assets and liabilities, net of
effects of acquisition and disposition of businesses:Accounts receivable and other operating assets
    
    
    321
    
    
    
    7,494Inventories
    
    
    (56
    )
    
    
    82Accounts payable and accrued expenses
    
    
    (4,622
    )
    
    
    (6,433
    )Net cash provided by operating activities
    
    
    2,330
    
    
    
    6,630Cash flows from investing activities:Proceeds from property and equipment disposals
    
    
    
    
    
    
    746Exploration expense
    
    
    (141
    )
    
    
    (625
    )Additions to property and equipment
    
    
    (669
    )
    
    
    (3,838
    )Decrease in other assets
    
    
    (71
    )
    
    
    (97
    )Net cash used in investing activities
    
    
    (881
    )
    
    
    (3,814
    )Cash flows from financing activities:Repayment of long-term debt and other obligations
    
    
    (3
    )
    
    
    (71
    )Settlement of derivative liabilities recorded in purchase accounting
    
    
    (3,827
    )
    
    
    (1,000
    )Net cash used in financing activities
    
    
    (3,830
    )
    
    
    (1,071
    )Net (decrease) increase in cash and cash equivalents
    
    
    (2,381
    )
    
    
    1,745Cash and cash equivalents at beginning of period
    
    
    46,740
    
    
    
    22,816Cash and cash equivalents at end of period
    
    $
    44,359
    
    
    $
    24,561
   3




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BELDEN & BLAKE CORPORATION
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2010
 (1) Basis of Presentation
   (2) Derivatives and Hedging
    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, 2010
    
    
    2,234
    
    
    $
    4.11
    
    
    
    44
    
    
    $
    28.88
    
    
    
    1,911
    
    
    $
    0.243September 30, 2010
    
    
    2,234
    
    
    
    4.12
    
    
    
    44
    
    
    
    28.82
    
    
    
    1,932
    
    
    
    0.243December 31, 2010
    
    
    2,234
    
    
    
    4.31
    
    
    
    44
    
    
    
    28.77
    
    
    
    1,932
    
    
    
    0.2436,702
    
    
    $
    4.18
    
    
    
    132
    
    
    $
    28.82
    
    
    
    5,775
    
    
    $
    0.243Year EndingDecember 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, 2010
    
    
    December 31, 2009
    
    
    March 31, 2010
    
    
    December 31, 2009Oil and natural gas commodity contracts
    
    $
    2,072
    
    
    $
    864
    
    
    $
    (57,986
    )
    
    $
    (85,593
    )Interest rate swaps
    
    
    
    
    
    
    27
    
    
    
    (2,742
    )
    
    
    (2,381
    )Total fair value
    
    $
    2,072
    
    
    $
    891
    
    
    $
    (60,728
    )
    
    $
    (87,974
    )Location of derivatives in our consolidated
balance sheet:Derivative asset
    
    $
    1,285
    
    
    $
    413
    
    
    $
    
    
    
    $
    Long-term derivative asset
    
    
    787
    
    
    
    478
    
    
    
    
    
    
    
    Derivative liability
    
    
    
    
    
    
    
    
    
    
    (11,779
    )
    
    
    (21,098
    )Long-term derivative liability
    
    
    
    
    
    
    
    
    
    
    (48,949
    )
    
    
    (66,876
    )$
    2,072
    
    
    $
    891
    
    
    $
    (60,728
    )
    
    $
    (87,974
    )
   5




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Three Months EndedMarch 31,2010
    
    
    2009The following amounts are recorded in Oil and gas sales:Unrealized losses:Oil and natural gas commodity contracts
    
    $
    (3,309
    )
    
    $
    (4,079
    )The following are recorded in Derivative
fair value gain:Unrealized (gains) losses:Oil and natural gas commodity contracts
    
    $
    (28,779
    )
    
    $
    (33,003
    )Interest rate swaps
    
    
    388
    
    
    
    (281
    )Total
    
    
    (28,391
    )
    
    
    (33,284
    )Realized losses:Oil and natural gas commodity contracts
    
    
    3,895
    
    
    
    1,334Interest rate swaps
    
    
    421
    
    
    
    723Total
    
    
    4,316
    
    
    
    2,057Derivative fair value gain
    
    $
    (24,075
    )
    
    $
    (31,227
    )
 (3) Industry Segment Financial Information
  (4) Fair Value of Financial Instruments
  (5) Supplemental Disclosure of Cash Flow Information
 Three months ended
    
    
    Three months ended(in thousands)
    
    March 31, 2010
    
    
    March 31, 2009Cash paid during the period for:Interest
    
    $
    8,494
    
    
    $
    7,776Non-cash investing and financing activities:Non-cash additions to property and equipment
    
    
    185
    
    
    
    1,952Non-cash additions to debt
    
    
    
    
    
    
    679
  6




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(6) Contingencies
  (7) Comprehensive Income
  Three months ended
    
    
    Three months endedMarch 31, 2010
    
    
    March 31, 2009Comprehensive income:Net income
    
    $
    19,100
    
    
    $
    13,242Other comprehensive income, net of tax:Reclassification adjustment for derivative loss
reclassified into earnings, net of tax
    
    
    1,798
    
    
    
    2,509Change in accumulated other comprehensive income
    
    
    1,798
    
    
    
    2,509$
    20,898
    
    
    $
    15,751
 (8) Related Party Transactions
   (9) New Accounting Standards
 Fair Value Measurements and Disclosures (Topic 820
  7




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Accounting for Extractive Activities  Oil &
Gas: Amendments to Paragraph 932-10-S99-1, Modernization of Oil and Gas Reporting
  (10) Fair Value Measurements
  Fair Value Measurements at March 31, 2010 Using:Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    SignificantTotal
    
    
    for Identical
    
    
    Observable
    
    
    UnobservableCarrying
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative assets:Oil and natural gas commodity contracts
    
    $
    2,072
    
    
    $
    
    
    
    $
    2,072
    
    
    $
    Derivative liabilities:Oil and natural gas commodity contracts
    
    $
    (57,986
    )
    
    
    
    
    
    $
    (57,986
    )
    
    
    Interest rate swaps
    
    
    (2,742
    )
    
    
    
    
    
    
    (2,742
    )
    
    
    Total derivative liabilities
    
    $
    (60,728
    )
    
    $
    
    
    
    $
    (60,728
    )
    
    $
    Fair Value Measurements at December 31, 2009 Using:Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    SignificantTotal
    
    
    for Identical
    
    
    Observable
    
    
    UnobservableCarrying
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative assets:Oil and natural gas commodity contracts
    
    $
    864
    
    
    $
    
    
    
    $
    864
    
    
    $
    Interest rate swaps
    
    
    27
    
    
    
    
    
    
    
    27
    
    
    
    Total derivative assets
    
    $
    891
    
    
    $
    
    
    
    $
    891
    
    
    $
    Derivative liabilities:Oil and natural gas commodity contracts
    
    $
    (85,593
    )
    
    
    
    
    
    $
    (85,593
    )
    
    
    Interest rate swaps
    
    
    (2,381
    )
    
    
    
    
    
    
    (2,381
    )
    
    
    Total derivative liabilities
    
    $
    (87,974
    )
    
    $
    
    
    
    $
    (87,974
    )
    
    $
    
  8




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##### Table of Contents



(11) Asset Retirement Obligations
  Balance as of December 31, 2009
    
    $
    23,083Accretion expense
    
    
    319Liabilities incurred
    
    
    Liabilities settled
    
    
    Revisions in estimated cash flows
    
    
    Balance as of March 31, 2010
    
    $
    23,402
  (12) Long-Term Debt
   (13) Asset Dispositions
  (14) Subsequent Events
   9




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Forward-Looking Information
   10




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Results of Operations
  Three months ended March 31,2010
    
    
    2009ProductionGas (Mmcf)
    
    
    2,603
    
    
    
    3,177Oil (Mbbls)
    
    
    67
    
    
    
    82Total production (Mmcfe)
    
    
    3,006
    
    
    
    3,671Average price (1)Gas (per Mcf)
    
    $
    4.13
    
    
    $
    3.71Oil (per Bbl)
    
    
    73.28
    
    
    
    39.20Mcfe
    
    
    5.22
    
    
    
    4.09Average costs (per Mcfe)Production expense
    
    $
    1.65
    
    
    $
    1.70Production taxes
    
    
    0.11
    
    
    
    0.09Depletion
    
    
    2.58
    
    
    
    2.53
 (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 ended March 31,2010
    
    
    2009Gas (per Mcf)
    
    $
    5.41
    
    
    $
    5.00Oil (per Bbl)
    
    
    73.28
    
    
    
    39.20Mcfe
    
    
    6.32
    
    
    
    5.20
 First Quarters of 2010 and 2009 Compared
 Revenues
    11




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Costs and Expenses
        Accounting for Income
Taxes
  12




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Liquidity and Capital Resources
 Cash Flows
      Capital Expenditures
   Financing and Credit Facilities
   13




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14




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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, 2010
    
    
    2,234
    
    
    $
    4.11
    
    
    
    44
    
    
    $
    28.88
    
    
    
    1,911
    
    
    $
    0.243September 30, 2010
    
    
    2,234
    
    
    
    4.12
    
    
    
    44
    
    
    
    28.82
    
    
    
    1,932
    
    
    
    0.243December 31, 2010
    
    
    2,234
    
    
    
    4.31
    
    
    
    44
    
    
    
    28.77
    
    
    
    1,932
    
    
    
    0.2436,702
    
    
    $
    4.18
    
    
    
    132
    
    
    $
    28.82
    
    
    
    5,775
    
    
    $
    0.243Year EndingDecember 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
    
    
    
    
    
    
    
    
   
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Change in Internal Controls Over Financial Reporting
   16




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PART II OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors
   Climate change legislation or regulations restricting emissions of GHGs could result in increased
operating costs and reduced demand for the oil and natural gas we produce.
     17




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Item 2.
    
    Unregistered Sales of Equity Securities and use of Proceeds.
  
 Item 3.
    
    Defaults upon Senior Securities.
  
 Item 4.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information.
   18




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Item 6.
    
    Exhibits.
   +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  19




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BELDEN & BLAKE CORPORATIONDate: May 12, 2010
    By:
    /s/ Mark A. HouserMark A. Houser, Chief Executive Officer,Chairman of the Board of Directors and DirectorDate: May 12, 2010
    By:
    /s/ James M. VanderhiderJames M. Vanderhider, President,Chief Financial Officer and Director (Principal
Financial Officer)  20