##### 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, 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 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)1001 Fannin Street, Suite 800
Houston, Texas
    
    77002(Address of principal executive offices)
    
    (Zip Code)
  (Registrants telephone number, including area code)
 þ 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 September 30, 2009 and December 31, 2008
    
    
    1Condensed Consolidated Statements of Operations:
Three and nine months ended September 30, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows:
Nine months ended September 30, 2009 and 2008
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    21PART II Other InformationItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    22Signatures
    
    
    23Exhibit 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)
 September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    7,983
    
    
    $
    22,816Accounts receivable (less accumulated provision for doubtful accounts:
September 30, 2009  $353; December 31, 2008  $312)
    
    
    11,188
    
    
    
    19,244Inventories
    
    
    845
    
    
    
    1,004Deferred income taxes
    
    
    7,404
    
    
    
    7,946Other current assets
    
    
    52
    
    
    
    332Derivative asset
    
    
    988
    
    
    
    430Total current assets
    
    
    28,460
    
    
    
    51,772Property and equipment, at costOil and gas properties (successful efforts method)
    
    
    691,334
    
    
    
    735,398Gas gathering systems
    
    
    1,317
    
    
    
    1,413Land, buildings, machinery and equipment
    
    
    2,562
    
    
    
    2,836695,213
    
    
    
    739,647Less accumulated depreciation, depletion and amortization
    
    
    142,569
    
    
    
    124,175Property and equipment, net
    
    
    552,644
    
    
    
    615,472Long-term derivative asset
    
    
    480
    
    
    
    868Other assets
    
    
    2,173
    
    
    
    1,352$
    583,757
    
    
    $
    669,464LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    4,649
    
    
    $
    3,570Accrued expenses
    
    
    12,963
    
    
    
    19,251Current portion of long-term liabilities
    
    
    211
    
    
    
    25,237Derivative liability
    
    
    19,708
    
    
    
    20,520Total current liabilities
    
    
    37,531
    
    
    
    68,578Long-term liabilitiesBank and other long-term debt
    
    
    56,431
    
    
    
    74,938Senior secured notes
    
    
    162,548
    
    
    
    163,302Subordinated promissory note  related party
    
    
    29,741
    
    
    
    27,623Asset retirement obligations and other long-term liabilities
    
    
    22,743
    
    
    
    23,863Long-term derivative liability
    
    
    80,244
    
    
    
    101,570Deferred income taxes
    
    
    123,778
    
    
    
    133,039Total long-term liabilities
    
    
    475,485
    
    
    
    524,335Shareholders equityCommon stock: without par value; 3,000 shares authorized and 1,534 shares issued
    
    
    
    
    
    
    Paid in capital
    
    
    130,000
    
    
    
    122,500Retained deficits
    
    
    (49,494
    )
    
    
    (32,754
    )Accumulated other comprehensive loss
    
    
    (9,765
    )
    
    
    (13,195
    )Total shareholders equity
    
    
    70,741
    
    
    
    76,551$
    583,757
    
    
    $
    669,464
   1




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BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited, in thousands)
 Three months ended
    
    
    Three months ended
    
    
    Nine months ended
    
    
    Nine months endedSeptember 30, 2009
    
    
    September 30, 2008
    
    
    September 30, 2009
    
    
    September 30, 2008RevenuesOil and gas sales
    
    $
    15,336
    
    
    $
    41,765
    
    
    $
    46,198
    
    
    $
    119,691Gas gathering and marketing
    
    
    1,312
    
    
    
    3,571
    
    
    
    4,558
    
    
    
    9,949Other
    
    
    374
    
    
    
    127
    
    
    
    743
    
    
    
    43217,022
    
    
    
    45,463
    
    
    
    51,499
    
    
    
    130,072ExpensesProduction expense
    
    
    5,123
    
    
    
    6,565
    
    
    
    16,342
    
    
    
    19,543Production taxes
    
    
    246
    
    
    
    895
    
    
    
    799
    
    
    
    2,491Gas gathering and marketing
    
    
    1,247
    
    
    
    2,819
    
    
    
    4,196
    
    
    
    8,221Exploration expense
    
    
    849
    
    
    
    1,614
    
    
    
    3,164
    
    
    
    2,173Impairment of oil and gas properties
    
    
    (1,297
    )
    
    
    
    
    
    
    23,933
    
    
    
    2,011General and administrative expense
    
    
    1,631
    
    
    
    2,225
    
    
    
    5,925
    
    
    
    6,240Depreciation, depletion and
amortization
    
    
    9,066
    
    
    
    8,517
    
    
    
    28,414
    
    
    
    25,876Accretion expense
    
    
    319
    
    
    
    359
    
    
    
    989
    
    
    
    1,047Derivative fair value loss (gain)
    
    
    539
    
    
    
    (134,829
    )
    
    
    (19,884
    )
    
    
    10,39717,723
    
    
    
    (111,835
    )
    
    
    63,878
    
    
    
    77,999Operating (loss) income
    
    
    (701
    )
    
    
    157,298
    
    
    
    (12,379
    )
    
    
    52,073Other (income) expenseInterest expense
    
    
    5,411
    
    
    
    5,753
    
    
    
    15,543
    
    
    
    17,411Other income, net
    
    
    (155
    )
    
    
    (119
    )
    
    
    (255
    )
    
    
    (349
    )(Loss) income before income taxes
    
    
    (5,957
    )
    
    
    151,664
    
    
    
    (27,667
    )
    
    
    35,011(Benefit) provision for income taxes
    
    
    (2,341
    )
    
    
    59,959
    
    
    
    (10,927
    )
    
    
    13,847Net (loss) income
    
    $
    (3,616
    )
    
    $
    91,705
    
    
    $
    (16,740
    )
    
    $
    21,164
   2




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BELDEN & BLAKE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited, in thousands)
 Nine months ended
    
    
    Nine months endedSeptember 30, 2009
    
    
    September 30, 2008Cash flows from operating activities:Net (loss) income
    
    $
    (16,740
    )
    
    $
    21,164Adjustments to reconcile net (loss) income
to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    28,414
    
    
    
    25,876Accretion expense
    
    
    989
    
    
    
    1,047Amortization of derivatives and other non-cash hedging activities
    
    
    (16,640
    )
    
    
    16,685Exploration expense
    
    
    2,181
    
    
    
    1,788Deferred income taxes
    
    
    (10,927
    )
    
    
    13,847Impairment of oil and gas properties
    
    
    23,933
    
    
    
    2,011Other non-cash items
    
    
    2,704
    
    
    
    21Change in operating assets and liabilitiesAccounts receivable and other current assets
    
    
    8,336
    
    
    
    (2,321
    )Inventories
    
    
    81
    
    
    
    127Accounts payable and accrued expenses
    
    
    (4,048
    )
    
    
    (569
    )Net cash provided by operating activities
    
    
    18,283
    
    
    
    79,676Cash flows from investing activities:Additions to property and equipment
    
    
    (10,707
    )
    
    
    (18,722
    )Proceeds from property and equipment disposals
    
    
    17,403
    
    
    
    3,049Exploration expense
    
    
    (2,181
    )
    
    
    (1,788
    )(Increase) decrease in other assets
    
    
    (54
    )
    
    
    77Net cash provided by (used in) investing activities
    
    
    4,461
    
    
    
    (17,384
    )Cash flows from financing activities:Repayment of long-term debt and other obligations
    
    
    (43,577
    )
    
    
    (7
    )Debt redetermination costs
    
    
    (1,470
    )
    
    
    Settlement of derivative liabilities recorded in purchase accounting
    
    
    (30
    )
    
    
    (51,360
    )Capital contributions
    
    
    7,500
    
    
    
    Dividends paid
    
    
    
    
    
    
    (2,500
    )Net cash used in financing activities
    
    
    (37,577
    )
    
    
    (53,867
    )Net (decrease) increase in cash and cash equivalents
    
    
    (14,833
    )
    
    
    8,425Cash and cash equivalents at beginning of period
    
    
    22,816
    
    
    
    16,014Cash and cash equivalents at end of period
    
    $
    7,983
    
    
    $
    24,439
   3




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BELDEN & BLAKE CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 September 30, 2009
 (1) Basis of Presentation
   Correction of an Error to Previously Issued Condensed Consolidated Financial Statements
  (2) Derivatives and Hedging
    4




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Natural Gas Swaps
    
    
    Crude Oil Swaps
    
    
    Natural Gas Basis SwapsNYMEX
    
    
    
    
    
    
    NYMEX
    
    
    
    
    
    
    BasisBbtu
    
    
    Price per Mmbtu
    
    
    Mbbls
    
    
    Price per Bbl
    
    
    Bbtu
    
    
    DifferentialQuarter EndingDecember 31, 2009
    
    
    2,382
    
    
    $
    4.47
    
    
    
    48
    
    
    $
    29.09
    
    
    
    2,116
    
    
    $
    0.34Year EndingDecember 31, 2010
    
    
    8,938
    
    
    $
    4.28
    
    
    
    175
    
    
    $
    28.86
    
    
    
    7,665
    
    
    $
    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
    
    
    
    
    
    
    
    
   5




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##### Table of Contents



Asset Derivatives
    
    
    Liability DerivativesSeptember 30, 2009
    
    
    December 31, 2008
    
    
    September 30, 2009
    
    
    December 31, 2008Oil and natural gas commodity contracts
    
    $
    1,468
    
    
    $
    1,298
    
    
    $
    (97,151
    )
    
    $
    (118,547
    )Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    (2,801
    )
    
    
    (3,543
    )Total fair value
    
    $
    1,468
    
    
    $
    1,298
    
    
    $
    (99,952
    )
    
    $
    (122,090
    )Location of derivatives in our consolidated balance
sheets:Derivative asset
    
    $
    988
    
    
    $
    430
    
    
    $
    
    
    
    $
    Long-term derivative asset
    
    
    480
    
    
    
    868
    
    
    
    
    
    
    
    Derivative liability
    
    
    
    
    
    
    
    
    
    
    (19,708
    )
    
    
    (20,520
    )Long-term derivative liability
    
    
    
    
    
    
    
    
    
    
    (80,244
    )
    
    
    (101,570
    )$
    1,468
    
    
    $
    1,298
    
    
    $
    (99,952
    )
    
    $
    (122,090
    )
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008The following amounts are recorded in Oil and gas sales:Unrealized losses:Oil and natural gas commodity contracts
    
    $
    (921
    )
    
    $
    (1,163
    )
    
    $
    (5,603
    )
    
    $
    (6,340
    )The following amounts are recorded in Interest expense:Realized losses:Interest rate swaps
    
    $
    
    
    
    $
    391
    
    
    $
    
    
    
    $
    1,009The following are recorded in Derivative fair value loss (gain):Unrealized (gains) losses:Oil and natural gas commodity contracts
    
    $
    647
    
    
    $
    (154,479
    )
    
    $
    (21,569
    )
    
    $
    (41,405
    )Interest rate swaps
    
    
    (171
    )
    
    
    403
    
    
    
    (740
    )
    
    
    323Total
    
    
    476
    
    
    
    (154,076
    )
    
    
    (22,309
    )
    
    
    (41,082
    )Realized (gains) losses:Oil and natural gas commodity contracts
    
    
    (600
    )
    
    
    19,247
    
    
    
    293
    
    
    
    51,479Interest rate swaps
    
    
    663
    
    
    
    
    
    
    
    2,132
    
    
    
    Total
    
    
    63
    
    
    
    19,247
    
    
    
    2,425
    
    
    
    51,479Derivative fair value loss (gain)
    
    $
    539
    
    
    $
    (134,829
    )
    
    $
    (19,884
    )
    
    $
    10,397
 (3) Industry Segment Financial Information
   6




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(4) Fair Value of Financial Instruments
  (5) Supplemental Disclosure of Cash Flow Information
 Nine months ended
    
    
    Nine months ended(in thousands)
    
    September 30, 2009
    
    
    September 30, 2008Cash paid during the period for:Interest
    
    $
    18,182
    
    
    $
    21,372Income taxes
    
    
    
    
    
    
    Non-cash investing and financing activities:Accrued additions to property and equipment
    
    
    566
    
    
    
    2,392Non-cash additions to debt
    
    
    (2,118
    )
    
    
    (15
    )
 (6) Contingencies
  (7) Comprehensive Income
  Three months ended
    
    
    Three months ended
    
    
    Nine months ended
    
    
    Nine months endedSeptember 30, 2009
    
    
    September 30, 2008
    
    
    September 30, 2009
    
    
    September 30, 2008Comprehensive (loss) income:Net (loss) income
    
    $
    (3,616
    )
    
    $
    91,705
    
    
    $
    (16,740
    )
    
    $
    21,164Other comprehensive income (loss), net of tax:Unrealized gain in derivative fair value
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    409Reclassification adjustment for derivative loss
reclassified into earnings
    
    
    (556
    )
    
    
    (939
    )
    
    
    (3,429
    )
    
    
    (4,482
    )Change in accumulated other comprehensive loss
    
    
    (556
    )
    
    
    (921
    )
    
    
    (3,429
    )
    
    
    (4,073
    )$
    (4,172
    )
    
    $
    90,784
    
    
    $
    (20,169
    )
    
    $
    17,091
  7




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(8) Related Party Transactions
    (9) Impairment of Oil and Gas Properties
  (10) New Accounting Standards
   Modernization of Oil and Gas Reporting
  8




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The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principle
  (11) Fair Value Measurements
  
 
 
   Fair Value Measurements at September 30, 2009 Using:Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal Carrying Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative instruments
    
    $
    (98,484
    )
    
    $
    
    
    
    $
    (98,484
    )
    
    $
    
  9




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(12) Asset Retirement Obligations
  Balance as of December 31, 2008
    
    $
    23,885Accretion expense
    
    
    989Liabilities incurred
    
    
    13Liabilities settled
    
    
    (2,077
    )Revisions in estimated cash flows
    
    
    Balance as of September 30, 2009
    
    $
    22,810
  (13) Subsequent Event
     10




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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
      11




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Results of Operations
  Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008ProductionGas (Mmcf)
    
    
    2,941
    
    
    
    3,308
    
    
    
    9,288
    
    
    
    9,902Oil (Mbbls)
    
    
    83
    
    
    
    80
    
    
    
    246
    
    
    
    246Total production (Mmcfe)
    
    
    3,440
    
    
    
    3,789
    
    
    
    10,762
    
    
    
    11,377Average price (1)Gas (per Mcf)
    
    $
    3.39
    
    
    $
    9.83
    
    
    $
    3.58
    
    
    $
    9.40Oil (per Bbl)
    
    
    64.51
    
    
    
    115.10
    
    
    
    52.61
    
    
    
    108.19Mcfe
    
    
    4.46
    
    
    
    11.02
    
    
    
    4.29
    
    
    
    10.52Average costs (per Mcfe)Production expense
    
    $
    1.49
    
    
    $
    1.73
    
    
    $
    1.52
    
    
    $
    1.72Production taxes
    
    
    0.07
    
    
    
    0.24
    
    
    
    0.07
    
    
    
    0.22Depletion
    
    
    2.61
    
    
    
    2.22
    
    
    
    2.61
    
    
    
    2.25
 (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 September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gas (per Mcf)
    
    $
    3.70
    
    
    $
    10.18
    
    
    $
    4.19
    
    
    $
    10.04Oil (per Bbl)
    
    
    64.51
    
    
    
    115.10
    
    
    
    52.61
    
    
    
    108.19Mcfe
    
    
    4.73
    
    
    
    11.33
    
    
    
    4.81
    
    
    
    11.08
 Results of Operations  Third Quarters of 2009 and 2008 Compared
 Revenues
    12




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Costs and Expenses
          13




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Results of Operations  Nine Months of 2009 and 2008 Compared
 Revenues
     Costs and Expenses
    14




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Liquidity and Capital Resources
 Cash Flows
   15




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Capital Expenditures
   Financing and Credit Facilities
    16




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New Accounting Standards
   17




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Modernization of Oil and Gas Reporting
   The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principle
   18




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
      19




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Natural Gas Swaps
    
    
    Crude Oil Swaps
    
    
    Natural Gas Basis SwapsNYMEX
    
    
    
    
    
    
    NYMEX
    
    
    
    
    
    
    BasisBbtu
    
    
    Price per Mmbtu
    
    
    Mbbls
    
    
    Price per Bbl
    
    
    Bbtu
    
    
    DifferentialQuarter EndingDecember 31, 2009
    
    
    2,382
    
    
    $
    4.47
    
    
    
    48
    
    
    $
    29.09
    
    
    
    2,116
    
    
    $
    0.34Year EndingDecember 31, 2010
    
    
    8,938
    
    
    $
    4.28
    
    
    
    175
    
    
    $
    28.86
    
    
    
    7,665
    
    
    $
    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
    
    
    
    
    
    
    
    
    20




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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
   21




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##### Table of Contents



Item 6. 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.
 *
    
    Filed herewith.  22




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##### Table of Contents



BELDEN & BLAKE CORPORATIONDate:  November 12, 2009
    By:

/s/ Mark A. HouserMark A. Houser, Chief Executive Officer,Chairman of the Board of Directors and Director
(Principal Executive Officer)Date:  November 12, 2009
    By:

/s/ James M. VanderhiderJames M. Vanderhider, President,Chief Financial Officer and Director 
(Principal
Financial Officer)  23