##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 0-20100
 BELDEN & BLAKE CORPORATION
  Ohio
(State or other jurisdiction of incorporation or organization)
    
    34-1686642
(I.R.S. Employer Identification Number)
 1001 Fannin Street, Suite 800
Houston, Texas 77002
 (713) 659-3500   None   None
 o þ
 þ o
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 o þ




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##### Table of Contents



None.
  Forward-Looking Statements
   1




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##### Table of Contents



GLOSSARY OF OIL AND NATURAL GAS TERMS
 Bbl.
 Bcf.
 Bcfe.
 Btu
 Completion
 Condensate.
 Developed oil and gas reserves.
 
    
    through existing wells with existing equipment and operating methods or in which the cost
of the required equipment is relatively minor compared with the cost of a new well, and
 
    
    through installed extraction equipment and infrastructure operational at the time of the
reserves estimate if the extraction is by means not involving a well.
 Development costs.
 
    
    gain access to and prepare well locations for drilling, including surveying well
locations for the purpose of determining specific development drilling sites, clearing
ground, draining, road building, and relocating public roads, gas lines, and power lines, to
the extent necessary in developing the proved reserves;
 
    
    drill and equip development wells, development-type stratigraphic test wells, and service
wells, including the costs of platforms and of well equipment such as casing, tubing,
pumping equipment, and the wellhead assembly;
 
    
    acquire, construct, and install production facilities such as lease flow lines,
separators, treaters, heaters, manifolds, measuring devices, and production storage tanks,
natural gas cycling and processing plants, and central utility and waste disposal systems;
and
 
    
    provide improved recovery systems.
 Development well.
 Developed acres.
 Dry hole well.
 Exploratory well.
  2




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##### Table of Contents



Field.
 Gross acres gross wells.
 MBbl.
 Mcf.
 Mcfe.
 MMBbl.
 MMBtu
 MMcf.
 MMcfe.
 Natural gas liquids.
 Net acres net wells.
 NYMEX.
 Oil.
 Production costs.
 
    
    costs of labor to operate the wells and related equipment and facilities;
 
    
    repairs and maintenance;
 
    
    materials, supplies, and fuel consumed and supplies utilized in operating the wells and
related equipment and facilities;
 
    
    property taxes and insurance applicable to proved properties and wells and related
equipment and facilities; and
 
    
    severance taxes.
 Productive well.
 Proved reserves.
  3




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Recompletion.
 Reserves.
 Reservoir.
 Standardized measure.
 Successful well.
 Undeveloped acreage.
 Working interest.
 Workover.
  4




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TABLE OF CONTENTS  PART IItems 1 and 2. BUSINESS AND PROPERTIESItem 1A. RISK FACTORSItem 1B. UNRESOLVED STAFF COMMENTSItem 3. LEGAL PROCEEDINGSItem 4. (Removed and Reserved)PART IIItem 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATEDItem 6. SELECTED FINANCIAL DATAItem 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAItem 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREItem 9A. CONTROLS AND PROCEDURESItem 9B. OTHER INFORMATIONPART IIIItem 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCEItem 11. EXECUTIVE COMPENSATIONItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND RELATED STOCKHOLDER MATTERSItem 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSItem 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESItem 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESExhibit 10.11Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 99.1    Table of Contents  
 PART I
 
 Items 1 and 2. BUSINESS AND PROPERTIES
 GENERAL
    SIGNIFICANT EVENTS
 Credit Agreement
       5




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DESCRIPTION OF BUSINESS
 Overview
     6




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Oil and Gas Reserves
  
    
    economic producibility of reserves and discounted cash flows are now based on a 12 month
average commodity price unless contractual arrangements designate the price to be used;
 
    
    probable and possible reserves may be disclosed separately on a voluntary basis;
 
    
    reserves may be classified as proved undeveloped if there is a high degree of confidence
that the quantities will be recovered and they are scheduled to be drilled within the next
five years, unless the specific circumstances justify a longer time;
 
    
    reserves may be estimated through the use of reliable technology in addition to flow test
and production history;
 
    
    we are now required to provide disclosures about the qualifications of the chief
technical person who oversees the reserves estimation process and a general discussion of
our internal controls used to assure the objectivity of the reserves estimate; and
 
    
    the definition of oil and natural gas producing activities has expanded and now focuses
on the marketable product rather than the method of extraction.
   Oil and Gas ReservesOil (MMbbl)
    
    
    Gas (Bcf)
    
    
    BcfeProvedDeveloped
    
    
    3.4
    
    
    
    152.0
    
    
    
    172.6Undeveloped
    
    
    1.0
    
    
    
    11.0
    
    
    
    17.0Total
    
    
    4.4
    
    
    
    163.0
    
    
    
    189.6
   7




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December 31,2009Gas (per Mcf)
    
    $
    4.34Oil (per Bbl)
    
    
    56.33
     Controls Over Reserve Estimates
     8




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Appalachian Basin  Conventional Properties
    Michigan Basin Properties
    Oil and Gas Operations and Production
 Operations .
   9




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Production, Sales Prices and Costs .
 Year Ended December 31,2009
    
    
    2008
    
    
    2007ProductionGas (MMcf)
    
    
    12,034
    
    
    
    13,217
    
    
    
    13,357Oil (Mbbl)
    
    
    324
    
    
    
    334
    
    
    
    348Total production (MMcfe)
    
    
    13,977
    
    
    
    15,221
    
    
    
    15,446Average sales price (1)Gas (per Mcf)
    
    $
    3.61
    
    
    $
    8.62
    
    
    $
    6.81Oil (per Bbl)
    
    
    56.49
    
    
    
    94.40
    
    
    
    67.42Per Mcfe
    
    
    4.42
    
    
    
    9.55
    
    
    
    7.41Average costs (per Mcfe)Production expense
    
    $
    1.50
    
    
    $
    1.73
    
    
    $
    1.59Production taxes
    
    
    0.08
    
    
    
    0.20
    
    
    
    0.15Depletion
    
    
    2.62
    
    
    
    2.31
    
    
    
    2.31
 (1)
    
    The average prices presented above include non-cash amounts related to our derivatives as
a result of purchase accounting for the Merger and the Transaction. Excluding these non-cash
amounts from oil and gas sales revenues would result in the following average sales prices: Year Ended December 31,2009
    
    
    2008
    
    
    2007Gas (per Mcf)
    
    $
    4.27
    
    
    $
    9.31
    
    
    $
    7.34Oil (per Bbl)
    
    
    56.49
    
    
    
    94.40
    
    
    
    67.42Per Mcfe
    
    
    4.98
    
    
    
    10.15
    
    
    
    7.87
 Exploration and Development
      10




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Range of Average Drillingand Completion Costs perRange of Well Depths
    
    
    Well(in feet)
    
    
    (in thousands)Ohio:Clinton
    
    
    3,500             -         5,750
    
    
    $
    360              -            420Pennsylvania:Clarendon
    
    
    1,100             -         2,100
    
    
    
    120              -            150Medina
    
    
    5,300             -         6,200
    
    
    
    370              -            400Michigan:Antrim
    
    
    1,300             -         2,100
    
    
    
    310              -            370
   Drilling Results .
 Development Wells
    
    
    Exploratory Wells2007
    
    
    2008
    
    
    2009
    
    
    2007
    
    
    2008
    
    
    2009Productive:Gross
    
    
    96
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Net
    
    
    92.0
    
    
    
    83.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.0Dry:Gross
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.9
    
    
    
    Wells in progress:Gross
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Producing Well Data
   11




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December 31, 2009Gas Wells
    
    
    Oil Wells
    
    
    TotalState
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetOhio
    
    
    1,048
    
    
    
    893
    
    
    
    678
    
    
    
    609
    
    
    
    1,726
    
    
    
    1,502Pennsylvania
    
    
    1,282
    
    
    
    1,191
    
    
    
    104
    
    
    
    104
    
    
    
    1,386
    
    
    
    1,295New York
    
    
    18
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    7Michigan
    
    
    1,199
    
    
    
    590
    
    
    
    17
    
    
    
    2
    
    
    
    1,216
    
    
    
    5923,547
    
    
    
    2,681
    
    
    
    799
    
    
    
    715
    
    
    
    4,346
    
    
    
    3,396
 Acreage Data
  December 31, 2009Developed Acreage
    
    
    Undeveloped Acreage
    
    
    Total AcreageState
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetOhio
    
    
    98,748
    
    
    
    82,213
    
    
    
    118,252
    
    
    
    111,915
    
    
    
    217,000
    
    
    
    194,128Pennsylvania
    
    
    40,203
    
    
    
    29,895
    
    
    
    174,982
    
    
    
    147,438
    
    
    
    215,185
    
    
    
    177,333New York
    
    
    2,845
    
    
    
    591
    
    
    
    16,958
    
    
    
    14,248
    
    
    
    19,803
    
    
    
    14,839Michigan
    
    
    70,278
    
    
    
    64,794
    
    
    
    15,900
    
    
    
    13,686
    
    
    
    86,178
    
    
    
    78,480Indiana
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    36
    
    
    
    36
    
    
    
    36212,074
    
    
    
    177,493
    
    
    
    326,128
    
    
    
    287,323
    
    
    
    538,202
    
    
    
    464,816
  Undeveloped Acreage Subject to Expiration in the Year Ended December 31,2010
    
    
    2011
    
    
    2012
    
    
    ThereafterState
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetOhio
    
    
    3,765
    
    
    
    3,765
    
    
    
    12,485
    
    
    
    12,485
    
    
    
    686
    
    
    
    598
    
    
    
    4,448
    
    
    
    1,997Pennsylvania
    
    
    1,854
    
    
    
    1,548
    
    
    
    3,492
    
    
    
    2,312
    
    
    
    2,255
    
    
    
    2,211
    
    
    
    376
    
    
    
    376New York
    
    
    455
    
    
    
    269
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Michigan
    
    
    5,893
    
    
    
    3,339
    
    
    
    4,233
    
    
    
    2,553
    
    
    
    1,357
    
    
    
    657
    
    
    
    1,455
    
    
    
    723Indiana
    
    
    36
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,003
    
    
    
    8,957
    
    
    
    20,210
    
    
    
    17,350
    
    
    
    4,298
    
    
    
    3,466
    
    
    
    6,279
    
    
    
    3,096
 Disposition of Assets
     12




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Employees
  Competition
    Principal Customers
    Title to Properties
   13




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Regulation
 Regulation of Drilling and Production.
 
    
    the location of wells;
 
    
    the method of drilling and casing wells;
 
    
    the surface use and restoration of properties upon which wells are drilled; and
 
    
    the plugging and abandoning of wells.
     Federal Regulation of Sales and Transportation of Natural Gas.
   14




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Federal Regulation of Sales and Transportation of Crude Oil.
 Environmental Regulations.
     15




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16




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Item 1A.
    RISK FACTORS
  Risks Relating to Our Business
 Hedging transactions may limit our potential gains or expose us to loss.
  
    
    our production is less than expected;
 
    
    there is a narrowing of price differentials between delivery points for our
production and the delivery points assumed in the hedge arrangements;
 
    
    there is a failure of a hedge counterparty to perform under the Hedge Agreement or
other hedge transactions which risk has increased with the current economic and
financial crisis; or
 
    
    a sudden, unexpected event materially impacts natural gas and crude oil prices.
  17




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##### Table of Contents



Our operations require large amounts of capital that may not be recovered or raised.
  
    
    the success of our projects in the Appalachian and Michigan basins;
 
    
    our success in locating and producing new reserves;
 
    
    the level of production from existing wells; and
 
    
    prices of oil and natural gas.
  Oil and natural gas prices are volatile, and an extended decline in prices would hurt our
profitability and financial condition.
   18




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If oil and natural gas prices decrease or our drilling efforts are unsuccessful, we may be
required to write down the carrying value of our oil and natural gas properties.
     Information concerning our reserves and future net revenues is uncertain.
      19




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##### Table of Contents




    
    the amount and timing of actual production;
 
    
    supply and demand for natural gas;
 
    
    curtailments or increases in consumption by natural gas purchasers; and
    
    changes in governmental regulations or taxation.
  Our exploitation and development drilling activities may not be successful.
  
    
    unexpected drilling conditions;
 
    
    pressure or irregularities in formations;
 
    
    equipment failures or accidents;
 
    
    ability to hire and train personnel for drilling and completion services;
 
    
    adverse weather conditions;
 
    
    compliance with governmental requirements; and
 
    
    shortages or delays in the availability of drilling rig services and the delivery of
equipment.
   We face strong competition in the oil and natural gas industry, and the resources of many of
our competitors are greater than ours.
   20




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##### Table of Contents



Our operations are subject to the business and financial risk of oil and natural gas
exploration.
  Our business is subject to operating hazards that could result in substantial losses.
  We must comply with complex federal, state and local laws and regulations.
  We may incur substantial costs to comply with stringent environmental regulations.
  Climate Change Legislation or regulations restricting emissions of greenhouse gasses could result
in increased operating costs and reduced demand for the oil and gas we produce.
 EPA
  21




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Significant physical effects of climatic change have the potential to damage our facilities,
disrupt our production activities and cause us to incur significant costs in preparing for or
responding to those effects.
  Federal legislation and state legislative and regulatory initiatives relating to hydraulic
fracturing could result in increased costs and additional operating restrictions or delays.
  Our business depends on gathering and transportation facilities owned by others.
    22




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The adoption of derivatives legislation or regulations related to derivative contracts could have
an adverse impact on our ability to hedge risks associated with our business.
  All of our common stock is owned by one controlling shareholder whose interests may differ
from those of the holders of our Senior Secured Notes.
  Our structure may present conflicts of interest.
  The terms of our Amended Credit Agreement, as well as the J. Aron Swap and the indenture
relating to the Senior Secured Notes, restrict our current and future operations, particularly our
ability to respond to industry or economic changes or to take certain actions
      23




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##### Table of Contents




    
    incur additional debt;
    
    pay dividends and make investments, loans or advances;
    
    incur capital expenditures;
    
    create liens;
    
    use the proceeds from sales of assets and capital stock;
    
    enter into sale and leaseback transactions;
    
    enter into transactions with affiliates;
    
    transfer all or substantially all of our assets; and
    
    enter into merger or consolidation transactions.
  
    
    a minimum interest coverage ratio;
 
    
    a maximum senior secured leverage ratio; and
 
    
    a minimum current ratio.
  
    
    incur additional indebtedness;
 
    
    pay dividends or make other distributions on stock, redeem stock or redeem
subordinated obligations;
 
    
    make investments;
 
    
    create liens or other encumbrances; and
 
    
    sell or otherwise dispose of all or substantially all of our assets, or merge or
consolidate with another entity.
 
 Item 1B.
    UNRESOLVED STAFF COMMENTS
  
 Item 3.
    LEGAL PROCEEDINGS
  
 Item 4.
    (Removed and Reserved)
  24




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PART II
 
 Item 5.
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
   Dividends
   25




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Item 6.
    SELECTED FINANCIAL DATA
  PredecessorSuccessor Company
    
    
    CompanyFor the 138 Day
    
    
    For the 227 DayPeriod from
    
    
    Period FromAugust 16, 2005
    
    
    January 1, 2005As of or for the year ended December 31,
    
    
    to December 31,
    
    
    to August 15,(in thousands)
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2005Continuing Operations:Revenues
    
    $
    68,624
    
    
    $
    158,426
    
    
    $
    125,140
    
    
    $
    158,774
    
    
    $
    76,642
    
    
    $
    77,960Depreciation, depletion and amortization
    
    
    37,046
    
    
    
    35,560
    
    
    
    36,087
    
    
    
    38,074
    
    
    
    14,341
    
    
    
    21,265Impairment of oil and gas properties
    
    
    30,445
    
    
    
    3,924
    
    
    
    31
    
    
    
    546
    
    
    
    
    
    
    
    Impairment of goodwill
    
    
    
    
    
    
    90,076
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    2,776
    
    
    
    (28,944
    )
    
    
    (35,322
    )
    
    
    52,199
    
    
    
    17,563
    
    
    
    (320
    )Balance sheet data:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As of 12/31/2005Working capital (deficit) from continuing
operations
    
    
    28,179
    
    
    
    (16,806
    )
    
    
    (14,224
    )
    
    
    (11,635
    )
    
    
    (38,999
    )Oil and gas properties and gathering systems, net
    
    
    536,237
    
    
    
    613,834
    
    
    
    627,556
    
    
    
    641,879
    
    
    
    648,417Total assets
    
    
    608,078
    
    
    
    669,464
    
    
    
    774,225
    
    
    
    777,023
    
    
    
    810,118Long-term debt, less current portion
    
    
    236,707
    
    
    
    265,863
    
    
    
    291,118
    
    
    
    285,560
    
    
    
    277,648Total shareholders equity
    
    
    104,141
    
    
    
    76,551
    
    
    
    102,223
    
    
    
    143,703
    
    
    
    89,399
   26




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##### Table of Contents



Item 7.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
         27




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Critical Accounting Policies
  Successful Efforts Method of Accounting
     Oil and Gas Reserves
 Extractive
Activities  Oil and Gas (Topic 932),
  28




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##### Table of Contents




    
    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
         29




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Derivatives and Hedging
     Revenue Recognition
  Asset Retirement Obligations
    30




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##### Table of Contents



Results of Operations
  Year Ended December 31,2009
    
    
    2008
    
    
    2007RevenuesOil and gas sales
    
    $
    61,761
    
    
    
    90.0
    %
    
    $
    145,398
    
    
    
    91.8
    %
    
    $
    114,427
    
    
    
    91.4
    %Gas gathering and marketing
    
    
    5,894
    
    
    
    8.6
    
    
    
    12,254
    
    
    
    7.7
    
    
    
    10,275
    
    
    
    8.2Other
    
    
    969
    
    
    
    1.4
    
    
    
    774
    
    
    
    0.5
    
    
    
    438
    
    
    
    0.468,624
    
    
    
    100.0
    
    
    
    158,426
    
    
    
    100.0
    
    
    
    125,140
    
    
    
    100.0ExpensesProduction expense
    
    
    20,955
    
    
    
    30.6
    
    
    
    26,342
    
    
    
    16.6
    
    
    
    24,585
    
    
    
    19.7Production taxes
    
    
    1,098
    
    
    
    1.6
    
    
    
    3,054
    
    
    
    1.9
    
    
    
    2,265
    
    
    
    1.8Gas gathering and marketing
    
    
    5,492
    
    
    
    8.0
    
    
    
    10,252
    
    
    
    6.5
    
    
    
    8,640
    
    
    
    6.9Exploration expense
    
    
    3,925
    
    
    
    5.7
    
    
    
    2,543
    
    
    
    1.6
    
    
    
    1,935
    
    
    
    1.5General and administrative expense
    
    
    7,785
    
    
    
    11.3
    
    
    
    8,188
    
    
    
    5.2
    
    
    
    8,236
    
    
    
    6.6Depreciation, depletion and
amortization
    
    
    37,046
    
    
    
    54.0
    
    
    
    35,560
    
    
    
    22.4
    
    
    
    36,087
    
    
    
    28.8Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    90,076
    
    
    
    56.9Inpairment of oil and gas properties
    
    
    30,445
    
    
    
    44.4
    
    
    
    3,924
    
    
    
    2.5
    
    
    
    31
    
    
    
    Accretion expense
    
    
    1,304
    
    
    
    1.9
    
    
    
    1,412
    
    
    
    0.9
    
    
    
    1,290
    
    
    
    1.0(Gain) on asset sales
    
    
    (34,929
    )
    
    
    (50.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Derivative fair value (gain) loss
    
    
    (29,631
    )
    
    
    (43.2
    )
    
    
    (55,940
    )
    
    
    (35.3
    )
    
    
    78,120
    
    
    
    62.543,490
    
    
    
    63.4
    
    
    
    125,411
    
    
    
    79.2
    
    
    
    161,189
    
    
    
    128.8Operating income (loss)
    
    
    25,134
    
    
    
    36.6
    
    
    
    33,015
    
    
    
    20.8
    
    
    
    (36,049
    )
    
    
    (28.8
    )Other (income) expenseInterest expense
    
    
    20,612
    
    
    
    30.0
    
    
    
    22,818
    
    
    
    14.4
    
    
    
    23,712
    
    
    
    18.9Other income, net
    
    
    (131
    )
    
    
    (0.2
    )
    
    
    (495
    )
    
    
    (0.3
    )
    
    
    (516
    )
    
    
    (0.4
    )Income (loss)
before income taxes
    
    
    4,653
    
    
    
    6.8
    
    
    
    10,692
    
    
    
    6.7
    
    
    
    (59,245
    )
    
    
    (47.3
    )Provision (benefit) for income taxes
    
    
    1,877
    
    
    
    2.7
    
    
    
    39,636
    
    
    
    25.0
    
    
    
    (23,923
    )
    
    
    (19.1
    )Net income (loss)
    
    
    2,776
    
    
    
    4.1
    
    
    
    (28,944
    )
    
    
    (18.3
    )
    
    
    (35,322
    )
    
    
    (28.2
    )
  31




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##### Table of Contents



Production, Sales Prices and Costs
  Year Ended December 31,2009
    
    
    2008
    
    
    2007ProductionGas (MMcf)
    
    
    12,034
    
    
    
    13,217
    
    
    
    13,357Oil (Mbbl)
    
    
    324
    
    
    
    334
    
    
    
    348Total production (MMcfe)
    
    
    13,977
    
    
    
    15,221
    
    
    
    15,446Average sales price (1)Gas (per Mcf)
    
    $
    3.61
    
    
    $
    8.62
    
    
    $
    6.81Oil (per Bbl)
    
    
    56.49
    
    
    
    94.40
    
    
    
    67.42Per Mcfe
    
    
    4.42
    
    
    
    9.55
    
    
    
    7.41Average costs (per Mcfe)Production expense
    
    $
    1.50
    
    
    $
    1.73
    
    
    $
    1.59Production taxes
    
    
    0.08
    
    
    
    0.20
    
    
    
    0.15Depletion
    
    
    2.62
    
    
    
    2.31
    
    
    
    2.31
 (1)
    
    The average prices presented above include non-cash amounts related to our derivatives as
a result of purchase accounting for the Merger and the Transaction. Excluding these non-cash
amounts from oil and gas sales revenues would result in the following average sales prices: Year Ended December 31,2009
    
    
    2008
    
    
    2007Gas (per Mcf)
    
    $
    4.27
    
    
    $
    9.31
    
    
    $
    7.34Oil (per Bbl)
    
    
    56.49
    
    
    
    94.40
    
    
    
    67.42Per Mcfe
    
    
    4.98
    
    
    
    10.15
    
    
    
    7.87
 2009 Compared to 2008
 Revenues
    32




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##### Table of Contents



Costs and Expenses
            33




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##### Table of Contents



2008 Compared to 2007
 Revenues
     Costs and Expenses
       34




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows
    Year Ended December 31,2009
    
    
    2008
    
    
    Change(in millions)Cash flows provided by operating activities
    
    $
    23.9
    
    
    $
    96.7
    
    
    $
    (72.8
    )Cash flows provided by (used in) investing
activities
    
    
    38.9
    
    
    
    (27.5
    )
    
    
    66.4Cash flows (used in) financing activities
    
    
    (38.9
    )
    
    
    (62.4
    )
    
    
    23.5Net increase (decrease) in cash and cash equivalents
    
    $
    23.9
    
    
    $
    6.8
    
    
    $
    17.1
  35




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##### Table of Contents



Capital Expenditures
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(in millions)Total capital expendituresDrilling including exploratory dry hole expense
    
    $
    4
    
    
    $
    25
    
    
    $
    21Field improvements
    
    
    6
    
    
    
    2
    
    
    
    1Leasehold acreage
    
    
    2
    
    
    
    1
    
    
    
    1Total
    
    $
    12
    
    
    $
    28
    
    
    $
    23
   Financing and Credit Facilities
 Senior Secured Notes due 2012
  July 15, 2009
    
    
    102.188
    %July 15, 2010 and thereafter
    
    
    100.000
    %
  36




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##### Table of Contents



Amended Credit Agreement
        37




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##### Table of Contents



ISDA Master Agreement
    Derivative Instruments
 The Hedges
    38




---



##### Table of Contents



Natural Gas Swaps
    
    
    Crude Oil Swaps
    
    
    Natural Gas Basis SwapsNYMEX
    
    
    
    NYMEXPrice per
    
    
    
    
    
    
    Price per
    
    
    
    
    
    
    BasisYear Ending
    
    Bbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    Bbl
    
    
    Bbtu
    
    
    DifferentialDecember 31,
2010
    
    
    8,938
    
    
    $
    4.28
    
    
    
    175
    
    
    $
    28.86
    
    
    
    7,666
    
    
    $
    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
    
    
    
    
    
    
    
    
   Inflation and Changes in Prices
    Contractual Obligations
   39




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##### Table of Contents



Payments Due by PeriodContractual Obligations at
    
    
    
    
    
    Less than 1
    
    
    
    
    
    
    
    
    After 5December 31, 2009
    
    Total
    
    
    Year
    
    
    1 - 3  Years
    
    
    4 - 5 Years
    
    
    Years(in thousands)Long-term debt
    
    $
    233,904
    
    
    $
    9
    
    
    $
    233,863
    
    
    $
    26
    
    
    $
    6Asset retirement obligations
    
    
    23,083
    
    
    
    229
    
    
    
    3,545
    
    
    
    456
    
    
    
    18,853Derivative liabilities
    
    
    87,056
    
    
    
    21,384
    
    
    
    45,438
    
    
    
    20,234
    
    
    
    Interest on debt
    
    
    48,417
    
    
    
    20,047
    
    
    
    28,370
    
    
    
    
    
    
    
    Operating leases
    
    
    7,300
    
    
    
    4,482
    
    
    
    2,818
    
    
    
    
    
    
    
    Total contractual cash
obligations
    
    $
    399,760
    
    
    $
    46,151
    
    
    $
    314,034
    
    
    $
    20,716
    
    
    $
    18,859
   Total
    
    
    Amount of Commitment Expiration Per PeriodCommercial Commitments at
    
    Amounts
    
    
    Less than 1
    
    
    
    
    
    
    
    
    Over 5December 31, 2009
    
    Committed
    
    
    Year
    
    
    1 - 3 Years
    
    
    4 - 5 Years
    
    
    years(in thousands)Standby Letters of Credit
    
    $
    40,250
    
    
    $
    40,250
    
    
    $
    
    
    
    $
    
    
    
    $
    Total Commercial Commitments
    
    $
    40,250
    
    
    $
    40,250
    
    
    $
    
    
    
    $
    
    
    
    $
    
  Off-Balance Sheet Arrangements
  NEW ACCOUNTING STANDARDS
   Modernization of Oil and Gas Reporting
  40




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##### Table of Contents



The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles
 Extractive Activities  Oil and Gas (Topic
932), Modernization of Oil and Gas Reporting
 Fair Value Measurements and Disclosures
(Topic 820
    41




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##### Table of Contents



Item 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     
 Item 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 Item 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   42




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##### Table of Contents



Item 9A.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Managements Annual Report On Internal Control Over Financial Reporting
  Internal Control  Integrated Framework
  /s/
Mark A. Houser
    
    /s/ James M. VanderhiderMark A. Houser
    
    James
M. VanderhiderChief Executive Officer, Chairman of the
Board of Directors and Director
    
    President, Chief Financial Officer and DirectorHouston, TXMarch 26, 2010
  43




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
   
 Item 9B.
    
    OTHER INFORMATION
   44




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##### Table of Contents



PART III
 
 Item 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    PositionMark A. Houser
    
    
    48
    
    
    Chief Executive Officer and Chairman of the Board of DirectorsJames M. Vanderhider
    
    
    51
    
    
    President, Chief Financial Officer and DirectorKenneth Mariani
    
    
    48
    
    
    Senior Vice President, Chief Operating Officer and DirectorFrederick J. Stair
    
    
    50
    
    
    Vice President of AccountingBarry K. Lay
    
    
    53
    
    
    Vice President of OperationsCharles Goodin
    
    
    59
    
    
    Vice President of Land and Legal and SecretaryMark L. Barnhill
    
    
    54
    
    
    Vice President of ExplorationMatthew Coeny
    
    
    39
    
    
    Director
  Mark A. Houser.
 James M. Vanderhider.
 .
  45




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##### Table of Contents



Kenneth Mariani.
  Frederick J. Stair.
 Barry K. Lay.
  Charles Goodin.
   Mark L. Barnhill.
   46




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##### Table of Contents



Matthew Coeny.
 Audit Committee
  Code of Ethics
  
  47




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##### Table of Contents



Item 11.
    
    EXECUTIVE COMPENSATION
  Compensation of Directors
  Compensation Committee Interlocks and Insider Participation
   48




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##### Table of Contents



Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  Number of
    
    
    Percentage ofFive Percent Shareholders
    
    Shares
    
    
    SharesCapital C Energy Operations, LP (1)
1001 Fanin Street, Suite 800
Houston, Texas 77002
    
    
    1,534
    
    
    
    100.0
    %
 (1)
    
    Subsidiaries of EnerVest, Ltd., are the general partners of the limited
partnership that owns Capital C Energy Operations, L.P. EnerVest, therefore, also may be deemed to
be a beneficial owner of the 1,534 shares (100%) of our Common Stock. The address of EnerVest,
Ltd., is 1001 Fannin Street, Suite 800, Houston, Texas 77002. EnerVest is a Texas limited
partnership. Messrs. John B. Walker, Jon Rex Jones and A.V. Jones by virtue of their direct and
indirect ownership of the limited liability company that acts as EnerVests general partner, may be
deemed to beneficially own the Common Stock beneficially owned by EnerVest. Messrs. Walker, John
Rex Jones and A.V. Jones disclaim beneficial ownership of such Common Stock. The addresses for
Messrs. Walker, Jon Rex Jones and A.V. Jones are the same as for EnerVest. Equity Compensation Plan Information:
   49




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##### Table of Contents



Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
      50




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##### Table of Contents



Item 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
   December 31,2009
    
    
    2008Audit fees (1)
    
    $
    352,000
    
    
    $
    470,000Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    All other fees
    
    
    
    
    
    
    $
    352,000
    
    
    $
    470,000
 (1)
    
    Represents fees for professional services provided in connection with the
audit of our annual financial statements, review of our quarterly financial statements and audits
performed as part of our registration filings. Audit Committee Pre-Approval Policies and Procedures
  PART IV
 
 Item 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
       51




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##### Table of Contents



No.
    
    Description2.1
    
    
    Agreement and Plan of Merger, dated as of June 15, 2004, by and among Capital C Energy
Operations, LP, Capital C Ohio, Inc. and Belden & Blake Corporation, incorporated by reference
to Exhibit 2.1 to Belden & Blake Corporations Form 8-K dated July 7, 2004 (as amended).3.1
    
    
    Amended and Restated Articles of Incorporation of Belden & Blake Corporation (fka Belden &
Blake Energy Corporation), incorporated by reference to Exhibit 3.1 to Belden & Blake
Corporations Form 8-K dated November 29, 2004.3.2
    
    
    Amended and Restated Code of Regulations of Belden & Blake Corporation, incorporated by
reference to Exhibit 3.2 to the Companys Registration Statement on Form S-4 (Registration No.
333-119194).4.1
    
    
    Indenture, dated as of July 7, 2004, by and among Belden & Blake Corporation, The Canton Oil
& Gas Company, Ward Lake Drilling, Inc. and BNY Midwest Trust Company, incorporated by
reference to Exhibit 4.2 to Belden & Blake Corporations Form 8-K dated July 7, 2004 (as
amended).10.1
    
    
    ISDA Master Agreement, dated as of June 30, 2004, between Capital C Ohio, Inc. and J. Aron &
Company, incorporated by reference to Exhibit 10.1 to Belden & Blake Corporations Form 8-K
dated July 7, 2004 (as amended).10.2
    
    
    First Amended and Restated Credit and Guaranty Agreement, dated as of August 16, 2005, by and
among Belden & Blake Corporation, as borrower, certain subsidiaries of Belden & Blake
Corporation, as guarantors, various lenders signatory thereto, and BNP Paribas., as sole lead
arranger, sole bookrunner, syndication agent and administrative agent (incorporated by
reference to Exhibit 10.1 to Belden & Blake Corporations Form 8-K dated August 22, 2005.10.3
    
    
    Collateral Trust Agreement, dated as of July 7, 2004, among Belden & Blake Corporation, the
other Pledgors party from time to time thereto, Goldman Sachs Credit Partners L.P., as
Administrative Agent under the Credit Agreement, J. Aron & Company, as Hedge Counterparty
under the Hedge Agreement, BNY Midwest Trust Company, as Trustee under the Indenture, and
Wells Fargo Bank, N.A., as Collateral Trustee, incorporated by reference to Exhibit 10.7 to
Belden & Blake Corporations Form 8-K dated July 7, 2004 (as amended).10.4
    
    
    Schedule to the ISDA Master Agreement, dated as of June 30, 2004 and amended and restated as
of August 16, 2005, by and between J. Aron & Company and Belden & Blake Corporation
(incorporated by reference to Exhibit 10.2 to Belden & Blakes 8- K filed on August 22, 2005).10.5
    
    
    Credit Support Annex to the Schedule to the ISDA Master Agreement, dated as of June 30, 2004
and amended and restated as of August 16, 2005, by and between J. Aron & Company and Belden &
Blake Corporation (incorporated by reference to Exhibit 10.3 to Belden & Blakes 8-K filed on
August 22, 2005).10.6
    
    
    Subordinated Promissory Note, dated August 16, 2005, between Capital C Energy Operations, LP
and Belden & Blake Corporation (incorporated by reference to Exhibit 10.8 to Belden & Blakes
8-K filed on August 22, 2005).10.7
    
    
    First Amendment to Credit Agreement, dated as of September 27, 2005, by and among Belden &
Blake Corporation and BNP Paribas, incorporated by reference to Exhibit 10.25 to the Belden &
Blake Corporations annual report on Form 10-K for the year ended December 31, 2005.10.8
    
    
    Operating Agreement dated October 1, 2005, by and between Belden & Blake Corporation and
EnerVest Operating L.L.C. incorporated by reference to Exhibit 10.26 to the Belden & Blake
Corporations annual report on Form 10-K for the year ended December 31, 2005.
  52




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##### Table of Contents



No.
    
    Description10.9
    
    
    Fourth Amendment, Waiver and Agreement to the First Amended and Restated Credit and Guarantee
Agreement dated as of August 16, 2005, incorporated by reference to Exhibit 10.9 to Belden &
Blake Corporations Annual Report on Form 10-K for the year ended December 31, 2008.10.10
    
    
    Fifth Amendment and Agreement to the First Amended and Restated Credit and Guarantee
Agreement dated as of August 16, 2005, incorporated by reference to Exhibit 10.1 to Belden &
Blakes 8-K filed on October 1, 2009).10.11
    *
    
    Sixth Amendment and Agreement to the First Amended and Restated Credit and Guarantee
Agreement dated as of August 16, 2005.14.1
    
    
    Code of Ethics for Senior Financial Officers, incorporated by reference to Exhibit 14.1 to
Belden & Blake Corporations Annual Report on Form 10-K for the year ended December 31, 2003.23.1
    *
    
    Consent of Independent Petroleum Engineering Consultants.31.1
    *
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    *
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    *
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    *
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.99.1
    *
    
    Wright & Company, Inc. Reserve Report.
 *
    
    Filed herewith  53




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##### Table of Contents



SIGNATURES
  BELDEN & BLAKE CORPORATIONMarch 26, 2010

    By:
    /s/ Mark A. HouserDate

    
    Mark A. Houser, Chief Executive Officer, Chairman of the Board of Directors and Director  /s/ Mark A. HouserMark A. Houser
    
    Chief Executive Officer
Chairman of the Board
of Directors and Director
(Principal Executive Officer)
    
    March 26, 2010
Date/s/ James M. VanderhiderJames M. Vanderhider
    
    President, Chief Financial
Officer and Director

(Principal Financial Officer)
    
    March 26, 2010
Date/s/ Frederick J. StairFrederick J. Stair
    
    Vice President of Accounting
(Principal Accounting Officer)
    
    March 26, 2010
Date/s/ Kenneth MarianiKenneth Mariani
    
    Senior Vice President, Chief
Operating 
Officer and Director
    
    March 26, 2010
Date/s/ Matthew CoenyMatthew Coeny
    
    Director
    
    March 26, 2010
Date
  54




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##### Table of Contents



BELDEN & BLAKE CORPORATION
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS AND SCHEDULES
 Item 15(a) (1) and (2)
 PageCONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    F-3Consolidated Statements of Operations: Years ended
December 31, 2009, 2008 and 2007
    
    
    F-4Consolidated Statements of Shareholders Equity: 
Years ended December 31, 2009, 2008 and 2007
    
    
    F-5Consolidated Statements of Cash Flows: 
Years Ended December 31, 2009, 2008 and 2007
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
   F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  .
  Oil and Gas Reserve Estimation and Disclosures
 
  F-2




---



##### Table of Contents



BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share data)
 December 31,2009
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    46,740
    
    
    $
    22,816Accounts receivable (less accumulated provision for doubtful accounts: December 31, 2009  $393;
December 31, 2008  $312)
    
    
    11,821
    
    
    
    19,244Inventories
    
    
    828
    
    
    
    1,004Deferred income taxes
    
    
    8,272
    
    
    
    7,946Other current assets
    
    
    183
    
    
    
    332Fair value of derivatives
    
    
    413
    
    
    
    430Total current assets
    
    
    68,257
    
    
    
    51,772Property and equipment, at costOil and gas properties (successful efforts method)
    
    
    684,787
    
    
    
    735,398Gas gathering systems
    
    
    1,275
    
    
    
    1,413Land, buildings, machinery and equipment
    
    
    2,566
    
    
    
    2,836688,628
    
    
    
    739,647Less accumulated depreciation, depletion and amortization
    
    
    151,208
    
    
    
    124,175Property and equipment, net
    
    
    537,420
    
    
    
    615,472Fair value of derivatives
    
    
    478
    
    
    
    868Other assets
    
    
    1,923
    
    
    
    1,352$
    608,078
    
    
    $
    669,464LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    1,696
    
    
    $
    2,522Accounts payable  related party
    
    
    910
    
    
    
    1,048Accrued expenses
    
    
    16,136
    
    
    
    19,251Current portion of long-term liabilities
    
    
    238
    
    
    
    25,237Fair value of derivatives
    
    
    21,098
    
    
    
    20,520Total current liabilities
    
    
    40,078
    
    
    
    68,578Long-term liabilitiesBank and other long-term debt
    
    
    43,929
    
    
    
    74,938Senior secured notes
    
    
    162,287
    
    
    
    163,302Subordinated promissory note  related party
    
    
    30,491
    
    
    
    27,623Asset retirement obligations and other long-term liabilities
    
    
    22,990
    
    
    
    23,863Fair value of derivatives
    
    
    66,876
    
    
    
    101,570Deferred income taxes
    
    
    137,286
    
    
    
    133,039Total long-term liabilities
    
    
    463,859
    
    
    
    524,335Shareholders equityCommon stock: without par value; 3,000 shares authorized; 1,534 shares issued
    
    
    
    
    
    
    Additional paid in capital
    
    
    142,500
    
    
    
    122,500Accumulated
deficit
    
    
    (29,978
    )
    
    
    (32,754
    )Accumulated other comprehensive loss
    
    
    (8,381
    )
    
    
    (13,195
    )Total shareholders equity
    
    
    104,141
    
    
    
    76,551$
    608,078
    
    
    $
    669,464
   F-3




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##### Table of Contents



BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands)
 For the Year Ended December 31,2009
    
    
    2008
    
    
    2007RevenuesOil and gas sales
    
    $
    61,761
    
    
    $
    145,398
    
    
    $
    114,427Gas gathering and marketing
    
    
    5,894
    
    
    
    12,254
    
    
    
    10,275Other
    
    
    969
    
    
    
    774
    
    
    
    43868,624
    
    
    
    158,426
    
    
    
    125,140ExpensesProduction expense
    
    
    20,955
    
    
    
    26,342
    
    
    
    24,585Production taxes
    
    
    1,098
    
    
    
    3,054
    
    
    
    2,265Gas gathering and marketing
    
    
    5,492
    
    
    
    10,252
    
    
    
    8,640Exploration expense
    
    
    3,925
    
    
    
    2,543
    
    
    
    1,935General and administrative expense
    
    
    7,785
    
    
    
    8,188
    
    
    
    8,236Depreciation, depletion and amortization
    
    
    37,046
    
    
    
    35,560
    
    
    
    36,087Impairment of goodwill
    
    
    
    
    
    
    90,076
    
    
    
    Impairment of oil and gas properties
    
    
    30,445
    
    
    
    3,924
    
    
    
    31Accretion expense
    
    
    1,304
    
    
    
    1,412
    
    
    
    1,290Gain on sale of assets
    
    
    (34,929
    )
    
    
    
    
    
    
    Derivative fair value (gain) loss
    
    
    (29,631
    )
    
    
    (55,940
    )
    
    
    78,12043,490
    
    
    
    125,411
    
    
    
    161,189Operating (loss) income
    
    
    25,134
    
    
    
    33,015
    
    
    
    (36,049
    )Other expense (income)Interest expense
    
    
    20,612
    
    
    
    22,818
    
    
    
    23,712Other income, net
    
    
    (131
    )
    
    
    (495
    )
    
    
    (516
    )Income (loss) before income taxes
    
    
    4,653
    
    
    
    10,692
    
    
    
    (59,245
    )Provision (benefit) for income taxes
    
    
    1,877
    
    
    
    39,636
    
    
    
    (23,923
    )Net income (loss)
    
    $
    2,776
    
    
    $
    (28,944
    )
    
    $
    (35,322
    )
   F-4




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##### Table of Contents



BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 (in thousands)
 Accumulated OtherCommon
    
    
    Common
    
    
    Paid in
    
    
    Retained Earnings
    
    
    Comprehensive
    
    
    TotalShares
    
    
    Stock
    
    
    Capital
    
    

(Accumulated
Deficit)
    
    
    Income
    
    
    EquityJanuary 1, 2007
    
    
    2
    
    
    
    
    
    
    $
    125,000
    
    
    $
    41,262
    
    
    $
    (22,559
    )
    
    $
    143,703Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,322
    )
    
    
    
    
    
    
    (35,322
    )Other comprehensive income (loss), net of tax:Change in derivative fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,371
    
    
    
    4,371Reclassification adjustment for derivative (gain) loss
reclassified into earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (779
    )
    
    
    (779
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,730
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,750
    )
    
    
    
    
    
    
    (9,750
    )December 31, 2007
    
    
    2
    
    
    
    
    
    
    $
    125,000
    
    
    $
    (3,810
    )
    
    $
    (18,967
    )
    
    $
    102,223Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,944
    )
    
    
    
    
    
    
    (28,944
    )Other comprehensive income (loss), net of tax:Change in derivative fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (409
    )
    
    
    (409
    )Reclassification adjustment for derivative (gain) loss
reclassified into earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,181
    
    
    
    6,181Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,172
    )Dividends
    
    
    
    
    
    
    
    
    
    
    (2,500
    )
    
    
    
    
    
    
    
    
    
    
    (2,500
    )December 31, 2008
    
    
    2
    
    
    
    
    
    
    $
    122,500
    
    
    $
    (32,754
    )
    
    $
    (13,195
    )
    
    $
    76,551Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,776
    
    
    
    
    
    
    
    2,776Other comprehensive income (loss), net of tax:Reclassification adjustment for derivative (gain) loss
reclassified into earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,814
    
    
    
    4,814Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,590Capital contribution
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    20,000December 31, 2009
    
    
    2
    
    
    
    
    
    
    $
    142,500
    
    
    $
    (29,978
    )
    
    $
    (8,381
    )
    
    $
    104,141
   F-5




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##### Table of Contents



BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 For the Year
    
    
    For the Year
    
    
    For the YearEnded December 31,
    
    
    Ended December 31,
    
    
    Ended December 31,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    2,776
    
    
    $
    (28,944
    )
    
    $
    (35,322
    )Adjustments to reconcile net (loss) income
to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    37,046
    
    
    
    35,560
    
    
    
    36,087Impairment of goodwill
    
    
    
    
    
    
    90,076
    
    
    
    Impairment of oil and gas properties
    
    
    30,445
    
    
    
    3,924
    
    
    
    31Accretion expense
    
    
    1,304
    
    
    
    1,412
    
    
    
    1,290(Gain) loss on disposal of property and equipment
    
    
    (34,929
    )
    
    
    
    
    
    
    (75
    )Amortization of derivatives and other noncash derivative activities
    
    
    (24,387
    )
    
    
    (46,064
    )
    
    
    84,901Exploration expense
    
    
    2,666
    
    
    
    1,974
    
    
    
    610Deferred income taxes
    
    
    771
    
    
    
    39,636
    
    
    
    (23,923
    )Other non-cash expense
    
    
    3,197
    
    
    
    747
    
    
    
    2,783Change in operating assets and liabilities, net of
effects of acquisition and disposition of businesses:Accounts receivable and other current assets
    
    
    7,572
    
    
    
    (1,135
    )
    
    
    1,734Inventories
    
    
    110
    
    
    
    147
    
    
    
    (266
    )Accounts payable and accrued expenses
    
    
    (2,624
    )
    
    
    (630
    )
    
    
    219Net cash provided by operating activities
    
    
    23,947
    
    
    
    96,703
    
    
    
    68,069Cash flows from investing activities:Proceeds from property and equipment disposals
    
    
    53,175
    
    
    
    3,049
    
    
    
    267Exploration expense
    
    
    (2,666
    )
    
    
    (1,974
    )
    
    
    (610
    )Additions to property and equipment
    
    
    (11,574
    )
    
    
    (28,620
    )
    
    
    (22,696
    )(Increase) decrease in other assets
    
    
    (51
    )
    
    
    54
    
    
    
    (10
    )Net cash provided by (used in) investing activities
    
    
    38,884
    
    
    
    (27,491
    )
    
    
    (23,049
    )Cash flows from financing activities:Debt redetermination costs
    
    
    (1,470
    )
    
    
    
    
    
    
    Payment to shareholders and optionholders or dividends
    
    
    
    
    
    
    (2,500
    )
    
    
    (9,750
    )Capital contributions
    
    
    20,000
    
    
    
    
    
    
    
    Settlement of derivative liabilities recorded in purchase accounting
    
    
    (1,358
    )
    
    
    (59,901
    )
    
    
    (29,659
    )Proceeds from revolving line of credit
    
    
    
    
    
    
    
    
    
    
    6,500Repayment of revolving line of credit
    
    
    (56,000
    )
    
    
    
    
    
    
    (2,000
    )Repayment of long-term debt and other obligations
    
    
    (79
    )
    
    
    (9
    )
    
    
    (24
    )Net cash used in financing activities
    
    
    (38,907
    )
    
    
    (62,410
    )
    
    
    (34,933
    )Net increase in cash and equivalents
    
    
    23,924
    
    
    
    6,802
    
    
    
    10,087Cash and cash equivalents at beginning of period
    
    
    22,816
    
    
    
    16,014
    
    
    
    5,927Cash and cash equivalents at end of period
    
    $
    46,740
    
    
    $
    22,816
    
    
    $
    16,014
   F-6




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##### Table of Contents



BELDEN
& BLAKE CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) Transaction and Merger
       (2) Business and Significant Accounting Policies
 Business
   F-7




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##### Table of Contents



Principles of Consolidation and Financial Presentation
  Use of Estimates in the Financial Statements
  Cash Equivalents
  Concentrations of Credit Risk
  Inventories
  Property and Equipment
     F-8




---



##### Table of Contents



Goodwill and Other Intangible Assets
    Revenue Recognition
   F-9




---



##### Table of Contents



Income Taxes
  Stock-Based Compensation
  Derivatives and Hedging
   Asset Retirement Obligations
   F-10




---



##### Table of Contents



Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2009
    
    
    2008Beginning asset retirement obligations
    
    $
    23,885
    
    
    $
    22,264Liabilities incurred
    
    
    9
    
    
    
    565Liabilities settled
    
    
    (2,115
    )
    
    
    (399
    )Accretion expense
    
    
    1,304
    
    
    
    1,412Revisions in estimated cash flows
    
    
    
    
    
    
    43Ending asset retirement obligations
    
    $
    23,083
    
    
    $
    23,885
  (3) New Accounting Pronouncements
   Modernization of Oil and Gas Reporting
  F-11




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##### Table of Contents



The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principle
 Extractive Activities  Oil and Gas (Topic
932), Modernization of Oil and Gas Reporting
 Fair Value Measurements and Disclosures
(Topic 820
   (4) Dispositions
     F-12




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##### Table of Contents



(5) Derivatives and Hedging
      F-13




---



##### Table of Contents



Natural Gas Swaps
    
    
    Crude Oil Swaps
    
    
    Natural Gas Basis SwapsNYMEX
    
    
    
    
    
    
    NYMEXPrice per
    
    
    
    
    
    
    Price per
    
    
    
    
    
    
    BasisYear Ending
    
    Bbtu
    
    
    Mmbtu
    
    
    Mbbls
    
    
    Bbl
    
    
    Bbtu
    
    
    DifferentialDecember 31, 2010
    
    
    8,938
    
    
    $
    4.28
    
    
    
    175
    
    
    $
    28.86
    
    
    
    7,666
    
    
    $
    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
    
    
    
    
    
    
    
    
   Asset Derivatives
    
    
    Liability DerivativesDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Oil and natural gas commodity contracts
    
    $
    864
    
    
    $
    1,298
    
    
    $
    (85,593
    )
    
    $
    (118,547
    )Interest rate swaps
    
    
    27
    
    
    
    
    
    
    
    (2,381
    )
    
    
    (3,543
    )Total fair value
    
    $
    891
    
    
    $
    1,298
    
    
    $
    (87,974
    )
    
    $
    (122,090
    )Location of derivatives in our consolidated balance sheets:Derivative asset
    
    $
    413
    
    
    $
    430
    
    
    $
    
    
    
    $
    Long-term derivative asset
    
    
    478
    
    
    
    868
    
    
    
    
    
    
    
    Derivative liability
    
    
    
    
    
    
    
    
    
    
    (21,098
    )
    
    
    (20,520
    )Long-term derivative liability
    
    
    
    
    
    
    
    
    
    
    (66,876
    )
    
    
    (101,570
    )$
    891
    
    
    $
    1,298
    
    
    $
    (87,974
    )
    
    $
    (122,090
    )
   F-14




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##### Table of Contents



For the year endedDecember 31,2009
    
    
    2008
    
    
    2007The following amounts are recorded in Oil and gas sales:Unrealized losses:Oil and natural gas commodity
contracts reclassified into earnings
    
    $
    (7,893
    )
    
    $
    (9,163
    )
    
    $
    (7,109
    )The following amounts are recorded in Interest expense:Realized losses (gains):Interest rate swaps
    
    $
    
    
    
    $
    1,009
    
    
    $
    (477
    )The following are recorded in Derivative fair value (gain) loss:Unrealized (gains) losses:Oil and natural gas commodity contracts
    
    $
    (32,437
    )
    
    $
    (118,210
    )
    
    $
    47,882Interest rate swaps
    
    
    (1,189
    )
    
    
    3,044
    
    
    
    579Total
    
    
    (33,626
    )
    
    
    (115,166
    )
    
    
    48,461Realized (gains) losses:Oil and natural gas commodity contracts
    
    
    1,438
    
    
    
    58,956
    
    
    
    29,659Interest rate swaps
    
    
    2,557
    
    
    
    270
    
    
    
    Total
    
    
    3,995
    
    
    
    59,226
    
    
    
    29,659Derivative fair value (gain) loss
    
    $
    (29,631
    )
    
    $
    (55,940
    )
    
    $
    78,120
  F-15




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##### Table of Contents



(6) Details of Balance Sheets
 December 31,2009
    
    
    2008(in thousands)
    
    
    (in thousands)Accounts receivableAccounts receivable
    
    $
    3,022
    
    
    $
    3,884Allowance for doubtful accounts
    
    
    (393
    )
    
    
    (312
    )Oil and gas production receivable
    
    
    9,192
    
    
    
    15,672$
    11,821
    
    
    $
    19,244InventoriesOil
    
    $
    602
    
    
    $
    755Natural gas
    
    
    
    
    
    
    Material, pipe and supplies
    
    
    226
    
    
    
    249$
    828
    
    
    $
    1,004Property and equipment, gross
oil and gas propertiesProducing properties
    
    $
    622,941
    
    
    $
    662,473Non-producing propertiesProved
    
    
    52,428
    
    
    
    58,995Unproved
    
    
    9,418
    
    
    
    13,930Other
    
    
    
    
    
    
    $
    684,787
    
    
    $
    735,398Land, buildings, machinery and equipmentLand, buildings and improvements
    
    $
    837
    
    
    $
    838Machinery and equipment
    
    
    1,729
    
    
    
    1,998$
    2,566
    
    
    $
    2,836Accrued expensesAccrued interest expense
    
    $
    6,397
    
    
    $
    6,418Accrued other expenses
    
    
    3,022
    
    
    
    3,402Accrued general and administrative expense
    
    
    1,576
    
    
    
    1,263Accrued lease operating expense
    
    
    1,224
    
    
    
    1,172Accrued drilling and completion costs
    
    
    273
    
    
    
    1,727Ad valorem and other taxes
    
    
    702
    
    
    
    968Undistributed production revenue
    
    
    2,942
    
    
    
    4,301$
    16,136
    
    
    $
    19,251
  F-16




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##### Table of Contents



(7) Long-Term Debt
  December 31,2009
    
    
    2008Senior secured notes
    
    $
    159,475
    
    
    $
    159,475Bank revolving credit facility
    
    
    43,876
    
    
    
    99,876Subordinated promissory note (related party)
    
    
    30,491
    
    
    
    27,623Other
    
    
    62
    
    
    
    70233,904
    
    
    
    287,044Less current portion
    
    
    9
    
    
    
    25,008Long-term debt
    
    
    233,895
    
    
    
    262,036Fair value adjustment  senior secured notes
    
    
    2,812
    
    
    
    3,827$
    236,707
    
    
    $
    265,863
 Senior Secured Notes due 2012
  July 15, 2009
    
    
    102.188
    %July 15, 2010 and thereafter
    
    
    100.000
    %
  Amended Credit Agreement
   F-17




---



##### Table of Contents



F-18




---



##### Table of Contents



ISDA Master Agreement
    F-19




---



##### Table of Contents



(8) Leases
   OperatingAs of December 31, 2009
    
    Leases(in thousands)2010
    
    $
    4,4822011
    
    
    2,8182012
    
    
    2013
    
    
    2014 and thereafter
    
    
    Total minimum rental payments
    
    $
    7,300
 (9) Goodwill
   (10) Impairment
of Proved Oil and Gas Properties
   F-20




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##### Table of Contents



(11) Taxes
  For the year
    
    
    For the year
    
    
    For the yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007CurrentFederal
    
    $
    849
    
    
    $
    
    
    
    $
    (525
    )State
    
    
    
    
    
    
    
    
    
    
    849
    
    
    
    
    
    
    
    (525
    )DeferredFederal
    
    
    813
    
    
    
    35,076
    
    
    
    (20,499
    )State
    
    
    215
    
    
    
    4,560
    
    
    
    (2,899
    )1,028
    
    
    
    39,636
    
    
    
    (23,398
    )Total
    
    $
    1,877
    
    
    $
    39,636
    
    
    $
    (23,923
    )
  For the year
    
    
    For the year
    
    
    For the yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Increases (reductions) in taxes resulting from:State income taxes, net of federal tax benefit
    
    
    4.6
    
    
    
    4.6
    
    
    
    4.6Permanent differences related to goodwill impairment
    
    
    
    
    
    
    333.1
    
    
    
    Other, net
    
    
    0.7
    
    
    
    (2.0
    )
    
    
    0.8Effective income tax rate for the period
    
    
    40.3
    %
    
    
    370.7
    %
    
    
    40.4
    %
   F-21




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##### Table of Contents



December 31,
    
    
    December 31,2009
    
    
    2008Deferred income tax liabilities:Property and equipment, net
    
    $
    190,088
    
    
    $
    213,795Other, net
    
    
    2,732
    
    
    
    3,885Total deferred income tax liabilities
    
    
    192,820
    
    
    
    217,680Deferred income tax assets:Accrued expenses
    
    
    881
    
    
    
    881Asset retirement obligations
    
    
    9,098
    
    
    
    8,620Fair value of derivatives
    
    
    43,420
    
    
    
    56,984Net operating loss carryforwards
    
    
    15,444
    
    
    
    32,226Senior Secured Notes
    
    
    2,913
    
    
    
    2,913Tax credit carryforwards
    
    
    2,623
    
    
    
    1,775Other, net
    
    
    903
    
    
    
    664Valuation allowance
    
    
    (11,476
    )
    
    
    (11,476
    )Total deferred income tax assets
    
    
    63,806
    
    
    
    92,587Net deferred income tax liability
    
    $
    129,014
    
    
    $
    125,093Long-term liability
    
    $
    137,286
    
    
    $
    133,039Current asset
    
    
    (8,272
    )
    
    
    (7,946
    )Net deferred income tax liability
    
    $
    129,014
    
    
    $
    125,093
   (12) Stock Option Plans
   F-22




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##### Table of Contents



(13) Commitments and Contingencies
   F-23




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##### Table of Contents



(14) Supplemental Disclosure of Cash Flow Information
 For the year
    
    
    For the year
    
    
    For the yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008
    
    
    2007Cash paid during the period for:Interest
    
    $
    17,909
    
    
    $
    22,764
    
    
    $
    17,939Income taxes, net of refunds
    
    
    1,100
    
    
    
    
    
    
    
    Non-cash investing and financing activities:Non-cash additions to property and equipment
    
    
    (273
    )
    
    
    (1,728
    )
    
    
    (1,296
    )Non-cash additions to debt
    
    
    (2,868
    )
    
    
    (692
    )
    
    
    (1,931
    )
 (15) Fair Value of Financial Instruments
    F-24




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##### Table of Contents



(16) Fair Value Measurements
  
 
 
   Fair Value Measurements Using:Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal Carrying Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)At December 31, 2009:Derivative instruments
    
    $
    (87,083
    )
    
    $
    
    
    
    $
    (87,083
    )
    
    $
    At December 31, 2008:Derivative instruments
    
    
    (120,792
    )
    
    
    
    
    
    
    (120,792
    )
    
    
    
     F-25




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##### Table of Contents



(17) Supplementary Information on Oil and Gas Activities (Unaudited)
  December 31,
    
    
    December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008
    
    
    2007Acquisition costs:Proved properties
    
    $
    
    
    
    $
    1,504
    
    
    $
    107Unproved properties
    
    
    1,282
    
    
    
    802
    
    
    
    567Developmental costs
    
    
    8,357
    
    
    
    26,845
    
    
    
    21,910Exploratory costs
    
    
    3,925
    
    
    
    2,543
    
    
    
    1,935$
    13,564
    
    
    $
    31,694
    
    
    $
    24,519
  December 31,
    
    
    December 31,2009
    
    
    2008Proved oil and natural gas properties
    
    $
    675,371
    
    
    $
    721,470Unproved oil and natural gas properties
    
    
    9,418
    
    
    
    13,931684,789
    
    
    
    735,401Accumulated depreciation, depletion and
    
    
    (149,442
    )
    
    
    (122,667
    )Net capitalized costs
    
    $
    535,347
    
    
    $
    612,734
 Estimated Proved Oil and Gas Reserves (Unaudited)
   F-26




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##### Table of Contents



Oil
    
    
    Gas(Mbbl)
    
    
    (Mmcf)
    
    
    MmcfeJanuary 1, 2007
    
    
    5,181
    
    
    
    233,011
    
    
    
    264,096Extensions and discoveries
    
    
    153
    
    
    
    4,853
    
    
    
    5,771Purchase of reserves in place
    
    
    
    
    
    
    5,340
    
    
    
    5,340Revisions of previous estimates
    
    
    163
    
    
    
    (2,647
    )
    
    
    (1,668
    )Production
    
    
    (348
    )
    
    
    (13,357
    )
    
    
    (15,445
    )December 31, 2007
    
    
    5,149
    
    
    
    227,200
    
    
    
    258,094Extensions and discoveries
    
    
    78
    
    
    
    6,415
    
    
    
    6,883Purchase of reserves in place
    
    
    22
    
    
    
    61
    
    
    
    193Revisions of previous estimates
    
    
    (1,082
    )
    
    
    (20,625
    )
    
    
    (27,117
    )Production
    
    
    (334
    )
    
    
    (13,217
    )
    
    
    (15,221
    )December 31, 2008
    
    
    3,833
    
    
    
    199,834
    
    
    
    222,832Extensions and discoveries
    
    
    145
    
    
    
    2,242
    
    
    
    3,112Purchase of reserves in place
    
    
    
    
    
    
    
    
    
    
    Divestiture of reserves
    
    
    
    
    
    
    (17,753
    )
    
    
    (17,753
    )Revisions of previous estimates
    
    
    794
    
    
    
    (9,314
    )
    
    
    (4,550
    )Production
    
    
    (324
    )
    
    
    (12,034
    )
    
    
    (13,978
    )December 31, 2009
    
    
    4,448
    
    
    
    162,975
    
    
    
    189,663Proved developed reservesDecember 31, 2007
    
    
    3,890
    
    
    
    186,765
    
    
    
    210,105December 31, 2008
    
    
    3,559
    
    
    
    176,340
    
    
    
    197,694December 31, 2009
    
    
    3,438
    
    
    
    151,995
    
    
    
    172,623
 Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
(Unaudited)
  
    
    Future cash inflows were based on prices used in estimating our proved oil, natural gas
and natural gas liquids reserves. Future price changes were included only to the extent
provided by existing contractual agreements.
 
    
    Future development and production costs were computed using year end costs assuming no
change in present economic conditions.
 
    
    Future net cash flows were discounted at an annual rate of 10%.
 
    
    Future income taxes were computed using the approximate statutory tax rate and giving
effect to available net operating losses, tax credits and statutory depletion.
  F-27




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##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007(in thousands)Estimated future cash inflows (outflows)Revenues from the sale of oil and gas
    
    $
    958,416
    
    
    $
    1,431,631
    
    
    $
    2,190,884Production costs
    
    
    (388,247
    )
    
    
    (534,167
    )
    
    
    (590,328
    )Development costs
    
    
    (47,016
    )
    
    
    (57,491
    )
    
    
    (152,465
    )Future income taxes
    
    
    (148,529
    )
    
    
    (262,865
    )
    
    
    (497,904
    )Future net cash flows
    
    
    374,624
    
    
    
    577,108
    
    
    
    950,18710% timing discount
    
    
    (207,813
    )
    
    
    (324,433
    )
    
    
    (561,301
    )Standardized measure of discounted
future net cash flows
    
    $
    166,811
    
    
    $
    252,675
    
    
    $
    388,886
   December 31,2009Gas (per Mcf)
    
    $
    4.34Oil (per Bbl)
    
    
    56.33
  F-28




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##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Beginning of year
    
    $
    252,675
    
    
    $
    388,886
    
    
    $
    299,481Sale of oil and gas, net of production costs
    
    
    (47,601
    )
    
    
    (125,165
    )
    
    
    (96,317
    )Extensions and discoveries, less related estimated
future development and production costs
    
    
    3,797
    
    
    
    9,514
    
    
    
    14,720Previously estimated development costs incurred
during the period
    
    
    
    
    
    
    26,845
    
    
    
    21,910Purchase of reserves in place less
estimated future production costs
    
    
    
    
    
    
    643
    
    
    
    2,728Sale of reserves in place less
estimated future production costs
    
    
    (19,988
    )
    
    
    
    
    
    
    Changes in estimated future development costs
    
    
    751
    
    
    
    31,949
    
    
    
    (7,337
    )Revisions of previous quantity estimates
    
    
    (7,374
    )
    
    
    (47,442
    )
    
    
    (237
    )Net changes in prices and production costs
    
    
    (79,091
    )
    
    
    (195,400
    )
    
    
    196,244Change in income taxes
    
    
    47,752
    
    
    
    101,046
    
    
    
    (75,511
    )Accretion of 10% timing discount
    
    
    31,253
    
    
    
    38,889
    
    
    
    29,948Changes in production rates (timing) and other
    
    
    (15,363
    )
    
    
    22,910
    
    
    
    3,257End of period
    
    $
    166,811
    
    
    $
    252,675
    
    
    $
    388,886
 (18) Industry Segment Financial Information
  Major Customers
   F-29




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##### Table of Contents



(19) Quarterly Results of Operations (Unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    Fourth2009Operating revenues
    
    $
    17,110
    
    
    $
    17,367
    
    
    $
    17,022
    
    
    $
    17,125Gross profit
    
    
    (2,202
    )
    
    
    (74
    )
    
    
    117
    
    
    
    1,298Net (loss) income
    
    
    13,242
    
    
    
    (26,366
    )
    
    
    (3,616
    )
    
    
    19,5162008Operating revenues
    
    $
    34,307
    
    
    $
    50,302
    
    
    $
    45,463
    
    
    $
    28,354Gross profit
    
    
    15,526
    
    
    
    30,884
    
    
    
    24,926
    
    
    
    8,565Net (loss) income
    
    
    (11,634
    )
    
    
    (58,907
    )
    
    
    91,705
    
    
    
    (50,108
    )
 (20) Related Party Transactions
     (21) Subsequent
Event
   F-30