##### 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 June 30, 2008
 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
 (Exact name of registrant as specified in its charter)
 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)
 þ 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)Balance Sheets as of June 30, 2008 and December 31, 2007
    
    
    1Statements of Operations:
Three and six months ended June 30, 2008 and 2007
    
    
    2Statements of Cash Flows: 
Six months ended June 30, 2008 and 2007
    
    
    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
    
    
    16Item 4.  Controls and Procedures
    
    
    18PART II Other InformationItem 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults Upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    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
 
 BALANCE SHEETS
 (unaudited, in
thousands, except number of shares)
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    20,056
    
    
    $
    16,014Accounts receivable (less accumulated provision for doubtful accounts:
June 30, 2008- $585; December 31, 2007 - $806)
    
    
    28,589
    
    
    
    18,071Accounts receivable  related party
    
    
    631
    
    
    
    Inventories
    
    
    999
    
    
    
    1,084Deferred income taxes
    
    
    37,440
    
    
    
    17,282Other current assets
    
    
    166
    
    
    
    370Fair value of derivatives
    
    
    
    
    
    
    37Total current assets
    
    
    87,881
    
    
    
    52,858Property and equipment, at costOil and gas properties (successful efforts method)
    
    
    722,292
    
    
    
    713,912Gas gathering systems
    
    
    1,308
    
    
    
    1,308Land, buildings, machinery and equipment
    
    
    2,832
    
    
    
    2,761726,432
    
    
    
    717,981Less accumulated depreciation, depletion and amortization
    
    
    105,930
    
    
    
    88,549Property and equipment, net
    
    
    620,502
    
    
    
    629,432Goodwill
    
    
    90,076
    
    
    
    90,076Fair value of derivatives
    
    
    124
    
    
    
    29Other assets
    
    
    1,540
    
    
    
    1,830$
    800,123
    
    
    $
    774,225LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    1,898
    
    
    $
    1,148Accounts payable  related party
    
    
    
    
    
    
    1,508Accrued expenses
    
    
    25,131
    
    
    
    20,363Current portion of long-term liabilities
    
    
    378
    
    
    
    367Fair value of derivatives
    
    
    94,665
    
    
    
    43,696Total current liabilities
    
    
    122,072
    
    
    
    67,082Long-term liabilitiesBank and other long-term debt
    
    
    99,942
    
    
    
    99,947Senior secured notes
    
    
    163,780
    
    
    
    164,240Subordinated promissory note  related party
    
    
    26,946
    
    
    
    26,931Asset retirement obligations and other long-term liabilities
    
    
    22,714
    
    
    
    22,164Fair value of derivatives
    
    
    254,772
    
    
    
    192,661Deferred income taxes
    
    
    75,063
    
    
    
    98,977Total long-term liabilities
    
    
    643,217
    
    
    
    604,920Shareholders equityCommon stock: without par value; 3,000 shares authorized and 1,534 shares issued
    
    
    
    
    
    
    Paid in capital
    
    
    125,000
    
    
    
    125,000Retained earnings
    
    
    (74,351
    )
    
    
    (3,810
    )Accumulated other comprehensive loss
    
    
    (15,815
    )
    
    
    (18,967
    )Total shareholders equity
    
    
    34,834
    
    
    
    102,223$
    800,123
    
    
    $
    774,225
   1




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##### Table of Contents



BELDEN & BLAKE CORPORATION
 
 STATEMENTS OF OPERATIONS
 (unaudited, in thousands)
 Three months ended
    
    
    Three months ended
    
    
    Six months ended
    
    
    Six months endedJune 30, 2008
    
    
    June 30, 2007
    
    
    June 30, 2008
    
    
    June 30,  2007RevenuesOil and gas sales
    
    $
    46,558
    
    
    $
    32,027
    
    
    $
    77,926
    
    
    $
    58,829Gas gathering and marketing
    
    
    3,528
    
    
    
    2,774
    
    
    
    6,378
    
    
    
    5,394Other
    
    
    216
    
    
    
    386
    
    
    
    305
    
    
    
    44750,302
    
    
    
    35,187
    
    
    
    84,609
    
    
    
    64,670ExpensesProduction expense
    
    
    6,493
    
    
    
    6,456
    
    
    
    12,978
    
    
    
    12,259Production taxes
    
    
    924
    
    
    
    642
    
    
    
    1,596
    
    
    
    1,193Gas gathering and marketing
    
    
    3,064
    
    
    
    2,270
    
    
    
    5,402
    
    
    
    4,474Exploration expense
    
    
    367
    
    
    
    303
    
    
    
    559
    
    
    
    1,028Impairment of oil and gas properties
    
    
    2,011
    
    
    
    
    
    
    
    2,011
    
    
    
    General and administrative expense
    
    
    2,055
    
    
    
    1,933
    
    
    
    4,015
    
    
    
    3,860Depreciation, depletion and
amortization
    
    
    8,354
    
    
    
    9,454
    
    
    
    17,359
    
    
    
    18,013Accretion expense
    
    
    349
    
    
    
    319
    
    
    
    688
    
    
    
    630Derivative fair value loss
    
    
    118,404
    
    
    
    3,985
    
    
    
    145,226
    
    
    
    46,141142,021
    
    
    
    25,362
    
    
    
    189,834
    
    
    
    87,598Operating (loss) income
    
    
    (91,719
    )
    
    
    9,825
    
    
    
    (105,225
    )
    
    
    (22,928
    )Other (income) expenseInterest expense
    
    
    5,812
    
    
    
    5,938
    
    
    
    11,658
    
    
    
    11,835Other income, net
    
    
    (104
    )
    
    
    (108
    )
    
    
    (230
    )
    
    
    (215
    )(Loss) income before income taxes
    
    
    (97,427
    )
    
    
    3,995
    
    
    
    (116,653
    )
    
    
    (34,548
    )(Benefit) provision for income taxes
    
    
    (38,520
    )
    
    
    1,580
    
    
    
    (46,112
    )
    
    
    (13,664
    )Net (loss) income
    
    $
    (58,907
    )
    
    $
    2,415
    
    
    $
    (70,541
    )
    
    $
    (20,884
    )
   2




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BELDEN & BLAKE CORPORATION
 
 STATEMENTS OF CASH FLOWS
 (unaudited, in thousands)
 Six months ended
    
    
    Six months endedJune 30, 2008
    
    
    June 30, 2007Cash flows from operating activities:Net loss
    
    $
    (70,541
    )
    
    $
    (20,884
    )Adjustments to reconcile net (loss) income
to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    17,359
    
    
    
    18,013Accretion expense
    
    
    688
    
    
    
    630Gain on disposal of property and equipment
    
    
    
    
    
    
    (57
    )Amortization of derivatives and other non-cash hedging activities
    
    
    149,807
    
    
    
    49,108Exploration expense
    
    
    559
    
    
    
    279Deferred income taxes
    
    
    (46,112
    )
    
    
    (13,664
    )Impairment of oil and gas properties
    
    
    2,011
    
    
    
    Other non-cash items
    
    
    (233
    )
    
    
    1,159Change in operating assets and liabilitiesAccounts receivable and other current assets
    
    
    (10,946
    )
    
    
    1,050Inventories
    
    
    107
    
    
    
    (57
    )Accounts payable and accrued expenses
    
    
    2,371
    
    
    
    (167
    )Net cash provided by operating activities
    
    
    45,070
    
    
    
    35,410Cash flows from investing activities:Additions to property and equipment
    
    
    (11,998
    )
    
    
    (11,203
    )Proceeds from property and equipment disposals
    
    
    3,049
    
    
    
    270Exploration expense
    
    
    (559
    )
    
    
    (279
    )Increase in other assets
    
    
    78
    
    
    
    (44
    )Net cash used in investing activities
    
    
    (9,430
    )
    
    
    (11,256
    )Cash flows from financing activities:Proceeds from revolving line of credit
    
    
    
    
    
    
    4,500Repayment of long-term debt and other obligations
    
    
    (5
    )
    
    
    (21
    )Settlement of derivative liabilities recorded in purchase accounting
    
    
    (31,593
    )
    
    
    (14,297
    )Dividends paid
    
    
    
    
    
    
    (6,750
    )Net cash used in financing activities
    
    
    (31,598
    )
    
    
    (16,568
    )Net increase in cash and cash
equivalents
    
    
    4,042
    
    
    
    7,586Cash and cash equivalents at beginning of period
    
    
    16,014
    
    
    
    5,927Cash and cash equivalents at end of period
    
    $
    20,056
    
    
    $
    13,513
   3




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##### Table of Contents



BELDEN & BLAKE CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
 (unaudited)
 June 30, 2008
 (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 EndingSeptember 30, 2008
    
    
    2,532
    
    
    
    4.44
    
    
    
    52
    
    
    
    29.86
    
    
    
    
    
    
    
    December 31, 2008
    
    
    2,532
    
    
    
    4.59
    
    
    
    52
    
    
    
    29.68
    
    
    
    
    
    
    
    5,064
    
    
    $
    4.52
    
    
    
    104
    
    
    $
    29.77
    
    
    
    
    
    
    $
    Year EndingDecember 31, 2009
    
    
    9,529
    
    
    
    4.43
    
    
    
    191
    
    
    
    29.34
    
    
    
    3,650
    
    
    
    0.345December 31, 2010
    
    
    8,938
    
    
    
    4.28
    
    
    
    175
    
    
    
    28.86
    
    
    
    3,650
    
    
    
    0.325December 31, 2011
    
    
    8,231
    
    
    
    4.19
    
    
    
    157
    
    
    
    28.77
    
    
    
    3,285
    
    
    
    0.325December 31, 2012
    
    
    7,005
    
    
    
    4.09
    
    
    
    138
    
    
    
    28.70
    
    
    
    
    
    
    
    December 31, 2013
    
    
    6,528
    
    
    
    4.04
    
    
    
    127
    
    
    
    28.70
    
    
    
    
    
    
    
    
  (3) Industry Segment Financial Information
  (4) Supplemental Disclosure of Cash Flow Information
 Six months ended
    
    
    Six months ended(in thousands)
    
    June 30, 2008
    
    
    June 30, 2007Cash paid during the period for:Interest
    
    $
    11,865
    
    
    $
    11,710Income taxes
    
    
    
    
    
    
    Non-cash investing and financing activities:Non-cash additions to property and equipment
    
    
    1,639
    
    
    
    754Non-cash additions to debt
    
    
    (15
    )
    
    
    (623
    )
 (5) Contingencies
   5




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##### Table of Contents



(6)
    
    Comprehensive Income
  Six months ended
    
    
    Six months endedJune 30, 2008
    
    
    June 30, 2007Comprehensive income (loss):Net loss
    
    $
    (70,541
    )
    
    $
    (20,884
    )Other comprehensive income (loss), net of tax:Unrealized (loss) gain in derivative fair value
    
    
    391
    
    
    
    (14
    )Reclassification adjustment for derivative (loss) gain
reclassified into earnings
    
    
    (3,543
    )
    
    
    (1,778
    )Change in accumulated other comprehensive (loss) income
    
    
    (3,152
    )
    
    
    (1,792
    )$
    (73,693
    )
    
    $
    (22,676
    )
 (7) Related Party Transactions
  (8) Impairment of Oil and Gas Properties
  (9) New Accounting Standards
   
    
    Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities.
 
    
    Level 2 inputs are quoted prices for similar assets and liabilities in active markets or
inputs that are observable for the asset or liability, either directly or indirectly through market
corroboration.
 
    
    Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets
and liabilities at fair value.
  6




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##### Table of Contents



Fair
Value Measurements at June 30, 2008Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal Carrying Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative instruments
    
    $
    (349,314
    )
    
    $
    
    
    
    $
    (349,314
    )
    
    $
    
      
    
    acquisition costs will generally be expensed as incurred;
 
    
    noncontrolling interests will be valued at fair value at the date of acquisition; and
 
    
    liabilities related to contingent consideration will be recorded at fair value at the date
of acquisition and subsequently remeasured each subsequent reporting period.
  7




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##### Table of Contents



Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133.
 The Hierarchy of Generally Accepted Accounting
Principles. The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 Forward-Looking Information
   8




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##### Table of Contents



Results of Operations
  Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007ProductionGas (Mmcf)
    
    
    3,282
    
    
    
    3,437
    
    
    
    6,594
    
    
    
    6,732Oil (Mbbls)
    
    
    83
    
    
    
    90
    
    
    
    166
    
    
    
    182Total production (Mmcfe)
    
    
    3,780
    
    
    
    3,979
    
    
    
    7,588
    
    
    
    7,822Average price (1)Gas (per Mcf)
    
    $
    11.22
    
    
    $
    7.71
    
    
    $
    9.18
    
    
    $
    7.17Oil (per Bbl)
    
    
    117.08
    
    
    
    61.31
    
    
    
    104.84
    
    
    
    58.22Mcfe
    
    
    12.32
    
    
    
    8.05
    
    
    
    10.27
    
    
    
    7.52Average costs (per Mcfe)Production expense
    
    $
    1.72
    
    
    $
    1.62
    
    
    $
    1.71
    
    
    $
    1.57Production taxes
    
    
    0.24
    
    
    
    0.16
    
    
    
    0.21
    
    
    
    0.15Depletion
    
    
    2.18
    
    
    
    2.35
    
    
    
    2.26
    
    
    
    2.27
 (1)
    
    The average prices presented above include non-cash amounts related to purchase accounting for
the Transaction. Excluding these non-cash amounts from oil and gas sales revenues would result in
the following average prices: Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Gas (per Mcf)
    
    $
    11.47
    
    
    $
    7.93
    
    
    $
    9.97
    
    
    $
    7.61Oil (per Bbl)
    
    
    117.08
    
    
    
    61.31
    
    
    
    104.84
    
    
    
    58.22Mcfe
    
    
    12.53
    
    
    
    8.24
    
    
    
    10.95
    
    
    
    7.90
 Results of Operations  Second Quarters of 2008 and 2007 Compared Revenues
    9




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Costs and Expenses
         10




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##### Table of Contents



Results of Operations  Six Months of 2008 and 2007 Compared Revenues
     Costs and Expenses
   11




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows
    12




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##### Table of Contents



Capital Expenditures
   Financing and Credit Facilities
     13




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##### Table of Contents



New Accounting Standards
   
    
    Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities.
    
    Level 2 inputs are quoted prices for similar assets and liabilities in active markets or
inputs that are observable for the asset or liability, either directly or indirectly through market
corroboration.
    
    Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets
and liabilities at fair value.
   Fair
Value Measurements at June 30, 2008Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal Carrying Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative instruments
    
    $
    (349,314
    )
    
    $
    
    
    
    $
    (349,314
    )
    
    $
    
  14




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##### Table of Contents




    
    acquisition costs will generally be expensed as incurred;
 
    
    noncontrolling interests will be valued at fair value at the date of acquisition; and
 
    
    liabilities related to contingent consideration will be recorded at fair value at the date
of acquisition and subsequently remeasured each subsequent reporting period.
    15




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##### Table of Contents



Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133.
 The Hierarchy of Generally Accepted Accounting
Principles. The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
      16




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##### Table of Contents



Natural Gas Swaps
    
    
    Crude Oil Swaps
    
    
    Natural Gas Basis SwapsNYMEX
    
    
    
    
    
    
    NYMEXPrice per
    
    
    
    
    
    
    Price per
    
    
    
    
    
    
    BasisBbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    Bbl
    
    
    Bbtu
    
    
    DifferentialQuarter EndingSeptember 30, 2008
    
    
    2,532
    
    
    
    4.44
    
    
    
    52
    
    
    
    29.86
    
    
    
    
    
    
    
    December 31, 2008
    
    
    2,532
    
    
    
    4.59
    
    
    
    52
    
    
    
    29.68
    
    
    
    
    
    
    
    5,064
    
    
    $
    4.52
    
    
    
    104
    
    
    $
    29.77
    
    
    
    
    
    
    $
    Year EndingDecember 31, 2009
    
    
    9,529
    
    
    
    4.43
    
    
    
    191
    
    
    
    29.34
    
    
    
    3,650
    
    
    
    0.345December 31, 2010
    
    
    8,938
    
    
    
    4.28
    
    
    
    175
    
    
    
    28.86
    
    
    
    3,650
    
    
    
    0.325December 31, 2011
    
    
    8,231
    
    
    
    4.19
    
    
    
    157
    
    
    
    28.77
    
    
    
    3,285
    
    
    
    0.325December 31, 2012
    
    
    7,005
    
    
    
    4.09
    
    
    
    138
    
    
    
    28.70
    
    
    
    
    
    
    
    December 31, 2013
    
    
    6,528
    
    
    
    4.04
    
    
    
    127
    
    
    
    28.70
    
    
    
    
    
    
    
    
    17




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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
   18




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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.  19




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##### Table of Contents



BELDEN & BLAKE CORPORATIONDate: August 11, 2008
    By:
    /s/ Mark A. HouserMark A. Houser, Chief Executive Officer,Chairman of the Board of Directors and Director
(Principal Executive Officer)Date: August 11, 2008
    By:
    /s/ James M. VanderhiderJames M. Vanderhider, President,Chief Financial Officer and Director
(Principal Financial Officer)  20




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##### Table of Contents



Exhibit No.
    
    Description31.1*
    
    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.  21