##### 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, 2006
 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
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)First City Tower
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)Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005
    
    
    1Consolidated Statements of Operations:Three months ended March 31, 2006 (Successor Company)Three months ended March 31, 2005 (Predecessor I Company)
    
    
    2Consolidated Statements of Cash Flows:Three months ended March 31, 2006 (Successor Company)Three months ended March 31, 2005 (Predecessor I Company)
    
    
    3Notes to Consolidated Financial Statements
    
    
    4Item 2.   Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    7Item 3.   Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4.   Controls and Procedures
    
    
    17PART
II   Other InformationItem 1.   Legal Proceedings
    
    
    17Item 4.   Submission of Matters to a Vote of Security Holders
    
    
    17Item 6.   Exhibits
    
    
    18EX-31.1 302 CEO CertificationEX-31.2 302 CFO CertificationEX-32.1 906 CEO CertificationEX-32.2 906 CFO Certification




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PART
I.   FINANCIAL INFORMATION
 
 Item 1.   Financial Statements
 BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 (unaudited, in thousands, except share data)
 March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assetsCash and cash equivalents
    
    $
    14,459
    
    
    $
    8,172Accounts receivable, net
    
    
    22,253
    
    
    
    25,225Inventories
    
    
    769
    
    
    
    1,085Deferred income taxes
    
    
    9,726
    
    
    
    25,752Other current assets
    
    
    299
    
    
    
    349Fair value of derivatives
    
    
    333
    
    
    
    174Total current assets
    
    
    47,839
    
    
    
    60,757Property and equipment, at costOil and gas properties (successful efforts method)
    
    
    667,463
    
    
    
    661,094Gas gathering systems
    
    
    1,228
    
    
    
    1,593Land, buildings, machinery and equipment
    
    
    6,800
    
    
    
    6,795675,491
    
    
    
    669,482Less accumulated depreciation, depletion and amortization
    
    
    23,840
    
    
    
    14,456Property and equipment, net
    
    
    651,651
    
    
    
    655,026Goodwill
    
    
    91,443
    
    
    
    91,443Fair value of derivatives
    
    
    470
    
    
    
    285Other assets
    
    
    2,519
    
    
    
    2,607$
    793,922
    
    
    $
    810,118LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    6,827
    
    
    $
    5,314Accrued expenses
    
    
    29,635
    
    
    
    28,496Current portion of long-term liabilities
    
    
    776
    
    
    
    776Fair value of derivatives
    
    
    44,263
    
    
    
    65,170Total current liabilities
    
    
    81,501
    
    
    
    99,756Long-term liabilitiesBank and other long-term debt
    
    
    53,083
    
    
    
    52,085Senior secured notes
    
    
    200,108
    
    
    
    200,340Subordinated promissory note  related party
    
    
    25,000
    
    
    
    25,000Asset retirement obligations and other long-term liabilities
    
    
    19,396
    
    
    
    18,919Fair value of derivatives
    
    
    214,057
    
    
    
    240,129Deferred income taxes
    
    
    88,033
    
    
    
    84,490Total long-term liabilities
    
    
    599,677
    
    
    
    620,963Shareholders equityCommon stock: without par value; 3,000 shares authorized and 1,534 shares issued
    
    
    
    
    
    
    Paid in capital
    
    
    125,000
    
    
    
    125,000Retained earnings
    
    
    7,951
    
    
    
    9,063Accumulated other comprehensive loss
    
    
    (20,207
    )
    
    
    (44,664
    )Total shareholders equity
    
    
    112,744
    
    
    
    89,399$
    793,922
    
    
    $
    810,118
  1




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BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited, in thousands)
 Successor
    
    
    
    Predecessor ICompany
    
    
    
    CompanyThree months
    
    
    
    Three monthsended March 31,
    
    
    
    ended March 31,2006
    
    
    
    2005RevenuesOil and gas sales
    
    $
    40,938
    
    
    
    $
    27,921Gas gathering and marketing
    
    
    3,750
    
    
    
    
    2,443Other
    
    
    105
    
    
    
    
    10744,793
    
    
    
    
    30,471ExpensesProduction expense
    
    
    5,588
    
    
    
    
    5,420Production taxes
    
    
    912
    
    
    
    
    734Gas gathering and marketing
    
    
    3,283
    
    
    
    
    2,106Exploration expense
    
    
    174
    
    
    
    
    952General and administrative expense
    
    
    3,196
    
    
    
    
    1,764Franchise, property and other taxes
    
    
    42
    
    
    
    
    54Depreciation, depletion and amortization
    
    
    9,417
    
    
    
    
    8,305Accretion expense
    
    
    292
    
    
    
    
    255Derivative fair value (gain) loss
    
    
    7,290
    
    
    
    
    6,21730,194
    
    
    
    
    25,807Operating income
    
    
    14,599
    
    
    
    
    4,664Other expenseInterest expense
    
    
    5,668
    
    
    
    
    5,830Income (loss) before income taxes
    
    
    8,931
    
    
    
    
    (1,166
    )Provision (benefit) for income taxes
    
    
    3,543
    
    
    
    
    (530
    )Net income (loss)
    
    $
    5,388
    
    
    
    $
    (636
    )
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BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited, in thousands)
 Successor
    
    
    
    Predecessor ICompany
    
    
    
    CompanyThree months
    
    
    
    Three monthsended March 31,
    
    
    
    ended March 31,2006
    
    
    
    2005Cash flows from operating activities:Net (loss) income
    
    $
    5,388
    
    
    
    $
    (636
    )Adjustments to reconcile net (loss) income
to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    9,417
    
    
    
    
    8,305Accretion expense
    
    
    292
    
    
    
    
    255Loss on disposal of property and equipment
    
    
    
    
    
    
    
    12Amortization of derivatives and other noncash hedging activities
    
    
    3,106
    
    
    
    
    5,807Exploration expense
    
    
    174
    
    
    
    
    952Deferred income taxes
    
    
    3,543
    
    
    
    
    (530
    )Change in operating assets and liabilities, net of
effects of acquisition and disposition of businesses:Accounts receivable and other operating assets
    
    
    3,023
    
    
    
    
    2,787Inventories
    
    
    238
    
    
    
    
    8Accounts payable and accrued expenses
    
    
    1,570
    
    
    
    
    (5,648
    )Net cash provided by operating activities
    
    
    26,751
    
    
    
    
    11,312Cash flows from investing activities:Proceeds from property and equipment disposals
    
    
    3,320
    
    
    
    
    Exploration expense
    
    
    (174
    )
    
    
    
    (952
    )Additions to property and equipment
    
    
    (8,141
    )
    
    
    
    (7,214
    )(Increase) decrease in other assets
    
    
    (18
    )
    
    
    
    (14
    )Net cash used in investing activities
    
    
    (5,013
    )
    
    
    
    (8,180
    )Cash flows from financing activities:Repayment of senior secured facility  term loan
    
    
    
    
    
    
    
    (250
    )Proceeds from revolving line of credit
    
    
    13,000
    
    
    
    
    Repayment of revolving line of credit
    
    
    (12,000
    )
    
    
    
    Repayment of long-term debt and other obligations
    
    
    (4
    )
    
    
    
    (28
    )Settlement of derivative liabilities recorded in purchase accounting
    
    
    (9,947
    )
    
    
    
    (5,873
    )Dividends
    
    
    (6,500
    )
    
    
    
    Net cash used in financing activities
    
    
    (15,451
    )
    
    
    
    (6,151
    )Net (decrease) increase in cash and cash equivalents
    
    
    6,287
    
    
    
    
    (3,019
    )Cash and cash equivalents at beginning of period
    
    
    8,172
    
    
    
    
    18,407Cash and cash equivalents at end of period
    
    $
    14,459
    
    
    
    $
    15,388
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BELDEN & BLAKE CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 March 31, 2006
 (1) Change in Control, Merger and Basis of Presentation
     (2) Derivatives and Hedging
  4




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5




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Natural Gas Swaps
    
    
    Crude Oil SwapsNYMEX
    
    
    
    
    
    
    NYMEXPrice per
    
    
    
    
    
    
    Price perQuarter Ending
    
    Bbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    BblJune 30, 2006
    
    
    2,829
    
    
    
    5.24
    
    
    
    62
    
    
    
    32.35September 30, 2006
    
    
    2,829
    
    
    
    5.22
    
    
    
    62
    
    
    
    32.02December 31, 2006
    
    
    2,829
    
    
    
    5.39
    
    
    
    62
    
    
    
    31.718,487
    
    
    $
    5.28
    
    
    
    186
    
    
    $
    32.03Year EndingDecember 31, 2007
    
    
    10,745
    
    
    $
    4.97
    
    
    
    227
    
    
    $
    30.91December 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
    
    Mmbtu  Million British thermal unitsMbbls  Thousand barrels
    
    Bbtu  Billion British thermal units
  (3) Industry Segment Financial Information
  (4) Supplemental Disclosure of Cash Flow Information
 Successor
    
    
    Predecessor ICompany
    
    
    CompanyThree months
    
    
    Three monthsended March 31,
    
    
    ended March 31,2006
    
    
    2005(in thousands)Cash paid during the period for:Interest
    
    $
    9,822
    
    
    
    $
    10,398Income taxes
    
    
    
    
    
    
    
    500Non-cash investing and financing activities:Non-cash additions to property and equipment
    
    
    954
    
    
    
    
    1,021
 (5) Contingencies
  (6) Dispositions
  6




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(7) Comprehensive Income
  Successor
    
    
    
    Predecessor ICompany
    
    
    
    CompanyThree months
    
    
    
    Three monthsended March 31,
    
    
    
    ended March 31,2006
    
    
    
    2005Comprehensive income (loss):Net income (loss)
    
    $
    5,389
    
    
    
    $
    (636
    )Other comprehensive income (loss), net of tax:Unrealized
gain (loss) in derivative fair value
    
    
    18,460
    
    
    
    
    (58,146
    )Reclassification adjustment for derivative loss
reclassified into earnings
    
    
    5,997
    
    
    
    
    2,920Change in accumulated other comprehensive income (loss)
    
    
    24,457
    
    
    
    
    (55,226
    )Comprehensive income (loss)
    
    $
    29,846
    
    
    
    $
    (55,862
    )
 (8) Related Party Transactions
    
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 Forward-Looking Information
  7




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CRITICAL ACCOUNTING POLICIES
  Successful Efforts Method of Accounting
    Oil and Gas Reserves
  8




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
    
    the quality and quantity of available data;
    
    the interpretation of that data;
    
    the accuracy of various mandated economic assumptions; and
    
    the judgment of the persons preparing the estimate.
 Capitalization, Depreciation, Depletion and Impairment of Long-Lived Assets
      Derivatives and Hedging
  9




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Revenue Recognition
  Asset Retirement Obligations
  10




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Results of Operations
    Three months ended March 31,2006
    
    2005ProductionGas (Mmcf)
    
    
    3,537
    
    
    
    3,563Oil (Mbbls)
    
    
    98
    
    
    
    83Total production (Mmcfe)
    
    
    4,126
    
    
    
    4,059Average priceGas (per Mcf)
    
    $
    9.92
    
    
    $
    7.00Oil (per Bbl)
    
    
    59.48
    
    
    
    36.12Mcfe
    
    
    9.92
    
    
    
    6.88Average costs (per Mcfe)Production expense
    
    $
    1.35
    
    
    $
    1.34Production taxes
    
    
    0.22
    
    
    
    0.18Depletion
    
    
    2.22
    
    
    
    1.89Operating margin (per Mcfe)
    
    
    8.35
    
    
    
    5.36
 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 equivalentOperating margin (per Mcfe)  average price less production expense and production taxes
 First Quarters of 2006 and 2005 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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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  14




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15




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Natural Gas Swaps
    
    
    Crude Oil SwapsNYMEX
    
    
    
    
    
    
    NYMEXPrice per
    
    
    
    
    
    
    Price perQuarter Ending
    
    Bbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    BblJune 30, 2006
    
    
    2,829
    
    
    
    5.24
    
    
    
    62
    
    
    
    32.35September 30, 2006
    
    
    2,829
    
    
    
    5.22
    
    
    
    62
    
    
    
    32.02December 31, 2006
    
    
    2,829
    
    
    
    5.39
    
    
    
    62
    
    
    
    31.718,487
    
    
    $
    5.28
    
    
    
    186
    
    
    $
    32.03Year EndingDecember 31, 2007
    
    
    10,745
    
    
    $
    4.97
    
    
    
    227
    
    
    $
    30.91December 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
    
    Mmbtu  Million British thermal unitsMbbls  Thousand barrels
    
    Bbtu  Billion British thermal units
  16




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Item 4. Controls and Procedures
  
    
    our disclosure controls and procedures were effective in ensuring that information
required to be disclosed by us in the reports we file or submit under the Securities
Exchange Act of 1934 was recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms; and
 
    
    our disclosure controls and procedures were effective in ensuring that material
information required to be disclosed by us in the report we file or submit under the
Securities Exchange Act of 1934 was accumulated and communicated to our management,
including the Chief Executive Officer and the Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.
 Internal Controls Over Financial Reporting
  
 PART II            OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  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 193431.2*
    
    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 193432.1*
    
    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.
  18




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BELDEN & BLAKE CORPORATIONDate:May 17, 2006
    By:
    /s/ Mark A. HouserMark A. Houser, Chief Executive Officer, Chairman of the Board of Directors and DirectorDate:May 17, 2006
    By:
    /s/ James M. VanderhiderJames M. Vanderhider, President, Chief Financial Officer and Director (Principal
Financial Officer) 19