##### 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, 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
 
  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)
  
  
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PagePART I Financial InformationItem 1. Financial Statements (unaudited)Balance Sheets as of March 31, 2008 and December 31, 2007
    
    1Statements of Operations:Three months ended March 31, 2008 and 2007
    
    2Statements of Cash Flows:Three months ended March 31, 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
    
    14Item 4. Controls and Procedures
    
    16PART II Other InformationItem 1. Legal Proceedings
    
    16Item 1A. Risk Factors
    
    16Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    16Item 3. Defaults upon Senior Securities
    
    16Item 4. Submission of Matters to a Vote of Security Holders
    
    16Item 5. Other Information
    
    16Item 6. Exhibits
    
    17Signatures
    
    18EX-31.1EX-31.2EX-32.1EX-32.2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 BELDEN & BLAKE CORPORATION
 
 BALANCE SHEETS
(unaudited, in thousands, except share data)
 March 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    12,776
    
    
    $
    16,014Accounts receivable (less accumulated provision for doubtful accounts:
    
    
    22,971
    
    
    
    18,071March 31, 2008 - $681; December 31, 2007 - $806)Inventories
    
    
    1,049
    
    
    
    1,084Deferred income taxes
    
    
    25,770
    
    
    
    17,282Other current assets
    
    
    293
    
    
    
    370Fair value of derivatives
    
    
    
    
    
    
    37Total current assets
    
    
    62,859
    
    
    
    52,858Property and equipment, at costOil and gas properties (successful efforts method)
    
    
    719,525
    
    
    
    713,912Gas gathering systems
    
    
    1,308
    
    
    
    1,308Land, buildings, machinery and equipment
    
    
    2,826
    
    
    
    2,761723,659
    
    
    
    717,981Less accumulated depreciation, depletion and amortization
    
    
    97,578
    
    
    
    88,549Property and equipment, net
    
    
    626,081
    
    
    
    629,432Goodwill
    
    
    90,076
    
    
    
    90,076Fair value of derivatives
    
    
    90
    
    
    
    29Other assets
    
    
    1,646
    
    
    
    1,830$
    780,752
    
    
    $
    774,225LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    1,429
    
    
    $
    1,148Accounts payable  related party
    
    
    291
    
    
    
    1,508Accrued expenses
    
    
    18,129
    
    
    
    20,363Current portion of long-term liabilities
    
    
    372
    
    
    
    367Fair value of derivatives
    
    
    65,159
    
    
    
    43,696Total current liabilities
    
    
    85,380
    
    
    
    67,082Long-term liabilitiesBank and other long-term debt
    
    
    99,945
    
    
    
    99,947Senior secured notes
    
    
    164,012
    
    
    
    164,240Subordinated promissory note  related party
    
    
    26,946
    
    
    
    26,931Asset retirement obligations and other long-term liabilities
    
    
    22,502
    
    
    
    22,164Fair value of derivatives
    
    
    187,556
    
    
    
    192,661Deferred income taxes
    
    
    101,429
    
    
    
    98,977Total long-term liabilities
    
    
    602,390
    
    
    
    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
    
    
    (15,444
    )
    
    
    (3,810
    )Accumulated other comprehensive loss
    
    
    (16,574
    )
    
    
    (18,967
    )Total shareholders equity
    
    
    92,982
    
    
    
    102,223$
    780,752
    
    
    $
    774,225
  1




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BELDEN & BLAKE CORPORATION
 
 STATEMENTS OF OPERATIONS
(unaudited, in thousands)
 Three months
    
    
    Three monthsended March 31,
    
    
    ended March 31,2008
    
    
    2007RevenuesOil and gas sales
    
    $
    31,368
    
    
    $
    26,802Gas gathering and marketing
    
    
    2,850
    
    
    
    2,620Other
    
    
    89
    
    
    
    6134,307
    
    
    
    29,483ExpensesProduction expense
    
    
    6,485
    
    
    
    5,803Production taxes
    
    
    672
    
    
    
    551Gas gathering and marketing
    
    
    2,338
    
    
    
    2,204Exploration expense
    
    
    192
    
    
    
    725General and administrative expense
    
    
    1,960
    
    
    
    1,927Depreciation, depletion and amortization
    
    
    9,005
    
    
    
    8,559Accretion expense
    
    
    339
    
    
    
    311Derivative fair value loss
    
    
    26,822
    
    
    
    42,15647,813
    
    
    
    62,236Operating loss
    
    
    (13,506
    )
    
    
    (32,753
    )Other (income) expenseInterest expense
    
    
    5,846
    
    
    
    5,897Other income, net
    
    
    (126
    )
    
    
    (107
    )5,720
    
    
    
    5,790Loss before income taxes
    
    
    (19,226
    )
    
    
    (38,543
    )Benefit from income taxes
    
    
    (7,592
    )
    
    
    (15,244
    )Net loss
    
    $
    (11,634
    )
    
    $
    (23,299
    )
  2




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BELDEN & BLAKE CORPORATION
 
 STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 Three months
    
    
    Three monthsended March 31,
    
    
    ended March 31,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (11,634
    )
    
    $
    (23,299
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    9,005
    
    
    
    8,559Accretion expense
    
    
    339
    
    
    
    311Amortization of derivatives and other noncash hedging activities
    
    
    31,238
    
    
    
    44,434Exploration expense
    
    
    192
    
    
    
    161Deferred income taxes
    
    
    (7,592
    )
    
    
    (15,244
    )Other non-cash expense
    
    
    (107
    )
    
    
    354Change in operating assets and liabilities, net of
effects of acquisition and disposition of businesses:Accounts receivable and other operating assets
    
    
    (4,823
    )
    
    
    1,515Inventories
    
    
    60
    
    
    
    (155
    )Accounts payable and accrued expenses
    
    
    (4,646
    )
    
    
    (4,448
    )Net cash provided by operating activities
    
    
    12,032
    
    
    
    12,188Cash flows from investing activities:Proceeds from property and equipment disposals
    
    
    1,821
    
    
    
    Exploration expense
    
    
    (192
    )
    
    
    (161
    )Additions to property and equipment
    
    
    (6,020
    )
    
    
    (6,234
    )Decrease
(increase) in other assets
    
    
    78
    
    
    
    (57
    )Net cash used in investing activities
    
    
    (4,313
    )
    
    
    (6,452
    )Cash flows from financing activities:Proceeds from revolving line of credit
    
    
    
    
    
    
    4,500Repayment of long-term debt and other obligations
    
    
    (2
    )
    
    
    (2
    )Settlement of derivative liabilities recorded in purchase accounting
    
    
    (10,955
    )
    
    
    (4,924
    )Dividends
    
    
    
    
    
    
    (5,250
    )Net cash used in financing activities
    
    
    (10,957
    )
    
    
    (5,676
    )Net (decrease) increase in cash and cash equivalents
    
    
    (3,238
    )
    
    
    60Cash and cash equivalents at beginning of period
    
    
    16,014
    
    
    
    5,927Cash and cash equivalents at end of period
    
    $
    12,776
    
    
    $
    5,987
  3




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BELDEN & BLAKE CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
(unaudited)
 March 31, 2008
 (1)
    
    Basis of Presentation
   (2)
    
    Derivatives and Hedging
   4




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Natural Gas Swaps
    
    Crude Oil Swaps
    
    Natural Gas Basis SwapsNYMEXPrice per
    
    
    
    
    
    NYMEX
    
    
    
    
    
    BasisQuarter Ending
    
    Bbtu
    
    Mmbtu
    
    Mbbls
    
    Price per Bbl
    
    Bbtu
    
    DifferentialJune 30, 2008
    
    
    2,531
    
    
    $
    4.45
    
    
    
    52
    
    
    $
    30.04
    
    
    
    
    
    
    $
    September 30, 2008
    
    
    2,532
    
    
    
    4.44
    
    
    
    52
    
    
    
    29.86
    
    
    
    
    
    
    
    December 31, 2008
    
    
    2,532
    
    
    
    4.59
    
    
    
    52
    
    
    
    29.68
    
    
    
    
    
    
    
    7,595
    
    
    $
    4.49
    
    
    
    156
    
    
    $
    29.86
    
    
    
    
    
    
    $
    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
 Three months
    
    Three monthsended March 31,
    
    ended March 31,2008
    
    2007(in thousands)Cash paid during the period for:Interest
    
    $
    9,433
    
    
    $
    9,628Income taxes
    
    
    
    
    
    
    Non-cash investing and financing activities:Non-cash additions to property and equipment
    
    
    1,476
    
    
    
    (286
    )
 (5)
    
    Contingencies
  (6)
    
    Comprehensive IncomeComprehensive income includes net income and certain items recorded directly to shareholders
equity and classified as other comprehensive income. The table below summarizes comprehensive
income and provides the components of the change in accumulated other comprehensive income (loss)
for the three-month periods ended March 31, 2008 and 2007.
 5




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Three months
    
    
    Three monthsended March
    
    
    ended March31, 2008
    
    
    31, 2007Comprehensive income (loss):Net loss
    
    $
    (11,634
    )
    
    $
    (23,299
    )Other comprehensive income (loss), net of tax:Unrealized gain in derivative fair value
    
    
    (402
    )
    
    
    117Reclassification adjustment for derivative (loss) gain
reclassified into earnings
    
    
    2,795
    
    
    
    (1,315
    )Change in accumulated other comprehensive (loss) income
    
    
    2,393
    
    
    
    (1,198
    )$
    (9,241
    )
    
    $
    (24,497
    )
 (7)
    
    Related Party Transactions
  (8)
    
    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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Fair Value Measurements at March 31, 2008Quoted Prices in
    
    Significant
    
    SignificantActive Markets
    
    Other
    
    Unobservablefor Identical
    
    Observable
    
    InputsAssets
    
    InputsTotal Carrying Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Derivative instruments
    
    $
    (252,625
    )
    
    $
    
    
    
    $
    (252,625
    )
    
    $
    
      o
    
    acquisition costs will generally be expensed as incurred;o
    
    noncontrolling interests will be valued at fair value at the date of acquisition; ando
    
    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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Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 Forward-Looking Information
  8




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Results of Operations
  Three months ended March 31,2008
    
    2007ProductionGas (Mmcf)
    
    
    3,311
    
    
    
    3,295Oil (Mbbls)
    
    
    83
    
    
    
    91Total production (Mmcfe)
    
    
    3,808
    
    
    
    3,843Average price (1)Gas (per Mcf)
    
    $
    7.16
    
    
    $
    6.61Oil (per Bbl)
    
    
    92.56
    
    
    
    55.16Mcfe
    
    
    8.24
    
    
    
    6.97Average costs (per Mcfe)Production expense
    
    $
    1.70
    
    
    $
    1.51Production taxes
    
    
    0.18
    
    
    
    0.14Depletion
    
    
    2.34
    
    
    
    2.21
 
 (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 March 31,2008
    
    2007Gas (per Mcf)
    
    $
    8.48
    
    
    $
    7.27Oil (per Bbl)
    
    
    92.56
    
    
    
    55.16Mcfe
    
    
    9.38
    
    
    
    7.55
 First Quarters of 2008 and 2007 Compared
 Revenues
    9




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Costs and Expenses
         10




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Liquidity and Capital Resources
 Cash Flows
      Capital Expenditures
   Financing and Credit Facilities
  11




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New Accounting Standards
   
    
    Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities.
 12




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
 
   Fair Value Measurements at March 31, 2008Quoted Prices in
    
    SignificantActive Markets
    
    Other
    
    Significantfor Identical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsTotal Carrying Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Derivative
instruments
    
    $
    (252,625
    )
    
    $
    
    
    
    $
    (252,625
    )
    
    $
    
        13




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Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    14




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.
   Natural Gas Swaps
    
    
    Crude Oil Swaps
    
    
    Natural Gas Basis SwapsNYMEXPrice per
    
    
    
    
    
    
    NYMEXQuarter Ending
    
    Bbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    Price per Bbl
    
    
    Bbtu
    
    
    Basis DifferentialJune 30, 2008
    
    
    2,531
    
    
    $
    4.45
    
    
    
    52
    
    
    $
    30.04
    
    
    
    
    
    
    $
    September 30, 2008
    
    
    2,532
    
    
    
    4.44
    
    
    
    52
    
    
    
    29.86
    
    
    
    
    
    
    
    December 31, 2008
    
    
    2,532
    
    
    
    4.59
    
    
    
    52
    
    
    
    29.68
    
    
    
    
    
    
    
    7,595
    
    
    $
    4.49
    
    
    
    156
    
    
    $
    29.86
    
    
    
    
    
    
    $
    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
    
    
    
    
    
    
    
    
 Bbl  Barrel
    
    Mmbtu  Million British thermal unitsMbbls  Thousand barrels
    
    Bbtu  Billion British thermal units
   15




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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.
  16




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Item 6. Exhibits
       
 +
    
    Filed herewith 17




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BELDEN & BLAKE CORPORATIONDate: May 14, 2008
    By:
    /s/ Mark A. HouserMark A. Houser, Chief Executive Officer,Chairman of the Board of Directors and DirectorDate: May 14, 2008
    By:
    /s/ James M. VanderhiderJames M. Vanderhider, President, ChiefFinancial Officer and Director (Principal
Financial Officer) 18