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, 2010
 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
 Yes o No þ
 Yes þ No 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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Forward-Looking Statements
  
    
    our future financial and operating performance and results;
    
    our business strategy;
    
    our estimated net proved reserves and standardized measure;
    
    market prices;
    
    our future derivative activities; and
    
    our plans and forecasts.
   
    
    fluctuations in prices of oil and natural gas;
    
    significant disruptions in the financial markets;
    
    future capital requirements and availability of financing;
    
    uncertainty inherent in estimating our reserves;
    
    risks associated with drilling and operating wells;
    
    discovery, acquisition, development and replacement of oil and natural gas reserves;
    
    cash flows and liquidity;
    
    timing and amount of future production of oil and natural gas;
    
    availability of drilling and production equipment;
    
    marketing of oil and natural gas;
    
    developments in oil and natural gas producing countries;
  1




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
    
    competition;
    
    general economic conditions;
    
    governmental regulations;
    
    receipt of amounts owed to us by purchasers of our production and
counterparties to our derivative financial instrument contracts;
    
    hedging decisions, including whether or not to enter into derivative financial instruments;
    
    events similar to those of September 11, 2001;
    
    actions of third party coowners of interest in properties in which we also own an interest;
    
    fluctuations in interest rates and the value of the U.S. dollar in international currency markets; and
    
    our ability to effectively integrate companies and properties that we acquire.
    2




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##### 



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.
  3




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##### 



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.
 Recompletion.
  4




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##### 



Reserves.
 Reservoir.
 Standardized measure.
 Successful well.
 Undeveloped acreage.
 Working interest.
 Workover.
  5




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##### 



PART I
 Items 1 and 2. BUSINESS AND PROPERTIES
 GENERAL
    SIGNIFICANT EVENTS
 Credit Agreement
    DESCRIPTION OF BUSINESS
 Overview
    6




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##### 



Oil and Gas Reserves
  Oil and Gas ReservesOil (MMBbl)
    
    
    Gas (Bcf)
    
    
    BcfeProvedDeveloped
    
    
    4.1
    
    
    
    157.2
    
    
    
    181.7Undeveloped
    
    
    1.0
    
    
    
    14.4
    
    
    
    20.7Total
    
    
    5.1
    
    
    
    171.6
    
    
    
    202.4
    December 31,2010
    
    
    2009
    
    
    2008Gas (per Mcf)
    
    $
    4.76
    
    
    $
    4.34
    
    
    $
    6.38Oil (per Bbl)
    
    
    74.63
    
    
    
    56.33
    
    
    
    41.00
  7




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##### 



Controls Over Reserve Estimates
    Appalachian Basin  Conventional Properties
    8




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##### 



Michigan Basin Properties
    Oil and Gas Operations and Production
 Operations .
   9




---



##### 



Production, Sales Prices and Costs .
 Year Ended December 31,2010
    
    
    2009
    
    
    2008ProductionGas (MMcf)
    
    
    10,109
    
    
    
    12,034
    
    
    
    13,217Oil (MBbl)
    
    
    272
    
    
    
    324
    
    
    
    334Total production (MMcfe)
    
    
    11,742
    
    
    
    13,977
    
    
    
    15,221Average sales price (1)Gas (per Mcf)
    
    $
    4.00
    
    
    $
    3.61
    
    
    $
    8.62Oil (per Bbl)
    
    
    73.92
    
    
    
    56.49
    
    
    
    94.40Per Mcfe
    
    
    5.16
    
    
    
    4.42
    
    
    
    9.55Average costs (per Mcfe)Production expense
    
    $
    1.75
    
    
    $
    1.50
    
    
    $
    1.73Production taxes
    
    
    0.10
    
    
    
    0.08
    
    
    
    0.20Depletion
    
    
    2.48
    
    
    
    2.62
    
    
    
    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 31,2010
    
    
    2009
    
    
    2008Gas (per Mcf)
    
    $
    4.61
    
    
    $
    4.27
    
    
    $
    9.31Oil (per Bbl)
    
    
    73.92
    
    
    
    56.49
    
    
    
    94.40Per Mcfe
    
    
    5.68
    
    
    
    4.98
    
    
    
    10.15
 Exploration and Development
      10




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##### 



Range of AverageDrilling andCompletion Costs perRange of Well Depths
    
    Well(in feet)
    
    (in thousands)Ohio:Clinton
    
    3,500            -        5,750
    
    $280            -          320Knox
    
    4,000            -        8,500
    
    550            -          800Pennsylvania:Clarendon
    
    1,100            -        2,100
    
    100            -          120Medina
    
    5,300            -        6,200
    
    325            -          350Michigan:Antrim
    
    1,300            -        2,100
    
    275            -          325
 Drilling Results .
 Development Wells
    
    
    Exploratory Wells2008
    
    
    2009
    
    
    2010
    
    
    2008
    
    
    2009
    
    
    2010Productive:Gross
    
    
    98
    
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    4
    
    
    
    4Net
    
    
    83.5
    
    
    
    
    
    
    
    38.0
    
    
    
    
    
    
    
    2.0
    
    
    
    1.0Dry:Gross
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    5
    
    
    
    
    
    
    
    2Net
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    4.9
    
    
    
    
    
    
    
    0.5
 Producing Well Data
   Gas Wells
    
    
    Oil Wells
    
    
    TotalState
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetOhio
    
    
    1,057
    
    
    
    900
    
    
    
    672
    
    
    
    603
    
    
    
    1,729
    
    
    
    1,503Pennsylvania
    
    
    1,299
    
    
    
    1,212
    
    
    
    106
    
    
    
    106
    
    
    
    1,405
    
    
    
    1,318New York
    
    
    18
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    7Michigan
    
    
    1,199
    
    
    
    633
    
    
    
    17
    
    
    
    2
    
    
    
    1,216
    
    
    
    6353,573
    
    
    
    2,752
    
    
    
    795
    
    
    
    711
    
    
    
    4,368
    
    
    
    3,463
  11




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##### 



Acreage Data
  Developed Acreage
    
    
    Undeveloped Acreage
    
    
    Total AcreageState
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetOhio
    
    
    404,898
    
    
    
    58,592
    
    
    
    391,844
    
    
    
    90,849
    
    
    
    796,742
    
    
    
    149,441Pennsylvania
    
    
    40,676
    
    
    
    30,372
    
    
    
    175,093
    
    
    
    147,624
    
    
    
    215,769
    
    
    
    177,996New York
    
    
    2,845
    
    
    
    608
    
    
    
    12,696
    
    
    
    12,117
    
    
    
    15,541
    
    
    
    12,725Michigan
    
    
    70,418
    
    
    
    64,925
    
    
    
    12,326
    
    
    
    10,866
    
    
    
    82,744
    
    
    
    75,791518,837
    
    
    
    154,497
    
    
    
    591,959
    
    
    
    261,456
    
    
    
    1,110,796
    
    
    
    415,953
  Undeveloped Acreage Subject to Expiration in the Year Ended December 31,2011
    
    
    2012
    
    
    2013
    
    
    ThereafterState
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetOhio
    
    
    4,217
    
    
    
    4,212
    
    
    
    840
    
    
    
    489
    
    
    
    3,941
    
    
    
    2,157
    
    
    
    8,375
    
    
    
    4,664Pennsylvania
    
    
    3,769
    
    
    
    2,316
    
    
    
    2,280
    
    
    
    2,236
    
    
    
    3,092
    
    
    
    2,634
    
    
    
    602
    
    
    
    101New York
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Michigan
    
    
    2,143
    
    
    
    2,143
    
    
    
    1,079
    
    
    
    1,079
    
    
    
    714
    
    
    
    714
    
    
    
    368
    
    
    
    36610,129
    
    
    
    8,671
    
    
    
    4,199
    
    
    
    3,804
    
    
    
    7,747
    
    
    
    5,505
    
    
    
    9,345
    
    
    
    5,131
 Disposition of Assets
      Acquisition of Producing Properties
   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;
 
    
    the plugging and abandoning of wells; and
 
    
    notice to surface owners and other third parties.
      Federal Regulation of Sales and Transportation of Natural Gas.
  14




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##### 



i.e.
  State Natural Gas Regulation.
 Other Regulation.
 Federal Regulation of Sales and Transportation of Crude Oil.
 Environmental Regulations.
  15




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##### 



16




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##### 



17




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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.
   18




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##### 




    
    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.
  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.
   19




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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.
     20




---



##### 




    
    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.
    21




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##### 



We face strong competition in the oil and natural gas industry, and the resources of many of our
competitors are greater than ours.
  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 and these
regulations may adversely affect the manner or feasibility of conducting our operations.
  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.
   22




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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.
   23




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##### 



Our business depends on gathering and transportation facilities owned by others.
   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.
  The distressed financial conditions of customers could have an adverse impact on us in the event
these customers are unable to pay us for the products or services we provide.
  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.
   24




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##### 



The terms of our 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
      
    
    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;
  25




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##### 




    
    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)
 PART II
 Item 5.
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
   Dividends
   26




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##### 



Item 6.
    
    SELECTED FINANCIAL DATA
  As of or for the year ended December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Continuing Operations:Revenues
    
    $
    66,380
    
    
    $
    68,624
    
    
    $
    158,426
    
    
    $
    125,140
    
    
    $
    158,774Depreciation, depletion and amortization
    
    
    29,368
    
    
    
    37,046
    
    
    
    35,560
    
    
    
    36,087
    
    
    
    38,074Impairment of oil and gas properties
    
    
    1,565
    
    
    
    30,445
    
    
    
    3,924
    
    
    
    31
    
    
    
    546Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    90,076
    
    
    
    
    
    
    
    Net income (loss)
    
    
    40,146
    
    
    
    2,776
    
    
    
    (28,944
    )
    
    
    (35,322
    )
    
    
    52,199Balance sheet data:Working capital (deficit) from continuing
operations
    
    
    13,611
    
    
    
    28,179
    
    
    
    (16,806
    )
    
    
    (14,224
    )
    
    
    (11,635
    )Oil and gas properties and gathering systems, net
    
    
    524,538
    
    
    
    536,237
    
    
    
    613,834
    
    
    
    627,556
    
    
    
    641,879Total assets
    
    
    579,022
    
    
    
    608,078
    
    
    
    669,464
    
    
    
    774,225
    
    
    
    777,023Long-term debt, less current portion
    
    
    197,822
    
    
    
    236,707
    
    
    
    265,863
    
    
    
    291,118
    
    
    
    285,560Total shareholders equity
    
    
    147,882
    
    
    
    104,141
    
    
    
    76,551
    
    
    
    102,223
    
    
    
    143,703
  27




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##### 



Item 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 Overview
           28




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##### 



Critical Accounting Policies
  Successful Efforts Method of Accounting
     Oil and Gas Reserves
 Extractive
Activities  Oil and Gas (Topic 932),
   29




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##### 




    
    the quality and quantity of available data;
 
    
    the interpretation of that data;
 
    
    the accuracy of various mandated economic assumptions; and
 
    
    the judgment of the persons preparing the estimate.
  Capitalization, Depreciation, Depletion and Impairment of Long-Lived Assets
         30




---



##### 



Derivatives and Hedging
    Revenue Recognition
  Asset Retirement Obligations
     31




---



##### 



Results of Operations
  Year Ended December 31,2010
    
    
    2009
    
    
    2008RevenuesOil and gas sales
    
    $
    60,601
    
    
    
    91.3
    %
    
    $
    61,761
    
    
    
    90.0
    %
    
    $
    145,398
    
    
    
    91.8
    %Gas gathering and marketing
    
    
    5,223
    
    
    
    7.9
    
    
    
    5,894
    
    
    
    8.6
    
    
    
    12,254
    
    
    
    7.7Other
    
    
    556
    
    
    
    0.8
    
    
    
    969
    
    
    
    1.4
    
    
    
    774
    
    
    
    0.566,380
    
    
    
    100.0
    
    
    
    68,624
    
    
    
    100.0
    
    
    
    158,426
    
    
    
    100.0ExpensesProduction expense
    
    
    20,528
    
    
    
    30.9
    
    
    
    20,955
    
    
    
    30.6
    
    
    
    26,342
    
    
    
    16.6Production taxes
    
    
    1,133
    
    
    
    1.7
    
    
    
    1,098
    
    
    
    1.6
    
    
    
    3,054
    
    
    
    1.9Gas gathering and marketing
    
    
    4,988
    
    
    
    7.5
    
    
    
    5,492
    
    
    
    8.0
    
    
    
    10,252
    
    
    
    6.5Exploration expense
    
    
    2,635
    
    
    
    4.0
    
    
    
    3,925
    
    
    
    5.7
    
    
    
    2,543
    
    
    
    1.6General and administrative expense
    
    
    6,805
    
    
    
    10.3
    
    
    
    7,785
    
    
    
    11.3
    
    
    
    8,188
    
    
    
    5.2Depreciation, depletion and
amortization
    
    
    29,368
    
    
    
    44.2
    
    
    
    37,046
    
    
    
    54.0
    
    
    
    35,560
    
    
    
    22.4Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,076
    
    
    
    56.9Inpairment of oil and gas properties
    
    
    1,565
    
    
    
    2.4
    
    
    
    30,445
    
    
    
    44.4
    
    
    
    3,924
    
    
    
    2.5Accretion expense
    
    
    1,333
    
    
    
    2.0
    
    
    
    1,304
    
    
    
    1.9
    
    
    
    1,412
    
    
    
    0.9Gain on asset sales
    
    
    (33,644
    )
    
    
    (50.7
    )
    
    
    (34,929
    )
    
    
    (50.9
    )
    
    
    
    
    
    
    Derivative fair value gain
    
    
    (32,768
    )
    
    
    (49.4
    )
    
    
    (29,631
    )
    
    
    (43.2
    )
    
    
    (55,940
    )
    
    
    (35.3
    )1,943
    
    
    
    2.9
    
    
    
    43,490
    
    
    
    63.4
    
    
    
    125,411
    
    
    
    79.2Operating income
    
    
    64,437
    
    
    
    97.1
    
    
    
    25,134
    
    
    
    36.6
    
    
    
    33,015
    
    
    
    20.8Other expense (income)Gain on early extinguishment of debt
    
    
    (1,006
    )
    
    
    (1.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    19,006
    
    
    
    28.6
    
    
    
    20,612
    
    
    
    30.0
    
    
    
    22,818
    
    
    
    14.4Other income, net
    
    
    (92
    )
    
    
    (0.1
    )
    
    
    (131
    )
    
    
    (0.2
    )
    
    
    (495
    )
    
    
    (0.3
    )Income before income taxes
    
    
    46,529
    
    
    
    70.1
    
    
    
    4,653
    
    
    
    6.8
    
    
    
    10,692
    
    
    
    6.7Provision for income taxes
    
    
    6,383
    
    
    
    9.6
    
    
    
    1,877
    
    
    
    2.7
    
    
    
    39,636
    
    
    
    25.0Net income (loss)
    
    
    40,146
    
    
    
    60.5
    
    
    
    2,776
    
    
    
    4.1
    
    
    
    (28,944
    )
    
    
    (18.3
    )
  32




---



##### 



Production, Sales Prices and Costs
  Year Ended December 31,2010
    
    
    2009
    
    
    2008ProductionGas (MMcf)
    
    
    10,109
    
    
    
    12,034
    
    
    
    13,217Oil (MBbl)
    
    
    272
    
    
    
    324
    
    
    
    334Total production (MMcfe)
    
    
    11,742
    
    
    
    13,977
    
    
    
    15,221Average sales price (1)Gas (per Mcf)
    
    $
    4.00
    
    
    $
    3.61
    
    
    $
    8.62Oil (per Bbl)
    
    
    73.92
    
    
    
    56.49
    
    
    
    94.40Per Mcfe
    
    
    5.16
    
    
    
    4.42
    
    
    
    9.55Average costs (per Mcfe)Production expense
    
    $
    1.75
    
    
    $
    1.50
    
    
    $
    1.73Production taxes
    
    
    0.10
    
    
    
    0.08
    
    
    
    0.20Depletion
    
    
    2.48
    
    
    
    2.62
    
    
    
    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 31,2010
    
    
    2009
    
    
    2008Gas (per Mcf)
    
    $
    4.61
    
    
    $
    4.27
    
    
    $
    9.31Oil (per Bbl)
    
    
    73.92
    
    
    
    56.49
    
    
    
    94.40Per Mcfe
    
    
    5.68
    
    
    
    4.98
    
    
    
    10.15
 2010 Compared to 2009
 Revenues
    33




---



##### 



Costs and Expenses
              34




---



##### 



2009 Compared to 2008
 Revenues
     Costs and Expenses
         35




---



##### 



Liquidity and Capital Resources
 Cash Flows
    36




---



##### 



Year Ended December 31,2010
    
    
    2009
    
    
    Change(in millions)Cash flows provided by operating activities
    
    $
    18.7
    
    
    $
    23.9
    
    
    $
    (5.2
    )Cash flows provided by (used in) investing
activities
    
    
    19.9
    
    
    
    38.9
    
    
    
    (19.0
    )Cash flows (used in) financing activities
    
    
    (49.4
    )
    
    
    (38.9
    )
    
    
    (10.5
    )Net increase (decrease) in cash and cash
equivalents
    
    $
    (10.8
    )
    
    $
    23.9
    
    
    $
    (34.7
    )
     Capital Expenditures
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(in millions)Total capital expendituresDrilling including exploratory
dry hole expense
    
    $
    16
    
    
    $
    4
    
    
    $
    25Field improvements
    
    
    1
    
    
    
    6
    
    
    
    2Leasehold acreage
    
    
    1
    
    
    
    2
    
    
    
    1Total
    
    $
    18
    
    
    $
    12
    
    
    $
    28
   37




---



##### 



Financing and Credit Facilities
 Senior Secured Notes due 2012
  July 15, 2010 and thereafter
    
    
    100.000
    %
 
 Credit Agreement
      38




---



##### 



ISDA Master Agreement
    Derivative Instruments
 The Hedges
    39




---



##### 



Natural Gas Swaps
    
    
    Crude Oil Swaps
    
    
    Natural Gas Basis SwapsNYMEX
    
    
    
    
    
    
    NYMEXPrice per
    
    
    
    
    
    
    Price per
    
    
    
    
    
    
    BasisYear Ending
    
    Bbtu
    
    
    MMbtu
    
    
    MBbls
    
    
    Bbl
    
    
    Bbtu
    
    
    DifferentialDecember 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
    40




---



##### 



Contractual Obligations
   Payments Due by PeriodContractual Obligations at
    
    
    
    
    
    Less than 1
    
    
    
    
    
    
    
    
    
    
    After 5December 31, 2010
    
    Total
    
    
    Year
    
    
    1 - 3   Years
    
    
    4 - 5 Years
    
    
    Years(in thousands)Long-term debt
    
    $
    196,250
    
    
    $
    10
    
    
    $
    196,233
    
    
    $
    7
    
    
    $
    Asset retirement obligations
    
    
    24,701
    
    
    
    133
    
    
    
    4,115
    
    
    
    792
    
    
    
    19,661Derivative liabilities
    
    
    41,501
    
    
    
    11,347
    
    
    
    30,154
    
    
    
    
    
    
    
    Interest on debt (1)
    
    
    26,958
    
    
    
    17,683
    
    
    
    9,275
    
    
    
    
    
    
    
    Operating leases
    
    
    248
    
    
    
    210
    
    
    
    38
    
    
    
    
    
    
    
    Total contractual cash
obligations
    
    $
    289,658
    
    
    $
    29,383
    
    
    $
    239,815
    
    
    $
    799
    
    
    $
    19,661
 (1)
    
    Amounts represent the expected cash payments for interest based on the debt outstanding and the effective interest
rate as of December 31, 2010. Such amounts do not include the effects of our interest rate swaps.   Total
    
    
    Amount of Commitment Expiration Per PeriodCommercial Commitments at
    
    Amounts
    
    
    Less than 1
    
    
    
    
    
    
    
    
    
    
    Over 5December 31, 2010
    
    Committed
    
    
    Year
    
    
    1 - 3 Years
    
    
    4 - 5 Years
    
    
    years(in thousands)Standby Letters of Credit
    
    $
    40,792
    
    
    $
    40,792
    
    
    $
    
    
    
    $
    
    
    
    $
    Total Commercial Commitments
    
    $
    40,792
    
    
    $
    40,792
    
    
    $
    
    
    
    $
    
    
    
    $
    
  Off-Balance Sheet Arrangements
   41




---



##### 



NEW ACCOUNTING STANDARDS
 Extractive
Activities  Oil and Gas (Topic 932), Modernization of Oil and Gas Reporting
 Fair Value Measurements and Disclosures
(Topic 820
  Item 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   .
   42




---



##### 



Item 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  Item 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
   43




---



##### 



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 
Mark A. Houser
    
    /s/ James M. Vanderhider
James M. VanderhiderChief Executive Officer, Chairman of the
    
    President, Chief Financial Officer and DirectorBoard of Directors and Director
 
  44




---



##### 



Changes in Internal Control Over Financial Reporting
   Item 9B.
    
    OTHER INFORMATION
   45




---



##### 



PART III
 Item 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    
    PositionMark A. Houser
    
    
    49
    
    
    Chief Executive Officer and Chairman of the Board of DirectorsJames M. Vanderhider
    
    
    52
    
    
    President, Chief Financial Officer and DirectorKenneth Mariani
    
    
    49
    
    
    Senior Vice President, Chief Operating Officer and DirectorFrederick J. Stair
    
    
    51
    
    
    Vice President of AccountingBarry K. Lay
    
    
    54
    
    
    Vice President of OperationsCharles Goodin
    
    
    60
    
    
    Vice President of Land and Legal and SecretaryMatthew Coeny
    
    
    40
    
    
    Director
  Mark A. Houser.
 James M. Vanderhider.
 .
 Kenneth Mariani.
  46




---



##### 



Frederick J. Stair.
 Barry K. Lay.
  Charles Goodin.
  Matthew Coeny.
  47




---



##### 



Audit Committee
  Code of Ethics
  
  48




---



##### 



Item 11.
    
    EXECUTIVE COMPENSATION
  Compensation of Directors
  Compensation Committee Interlocks and Insider Participation
   49




---



##### 



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 800Houston, 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, Jon
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:
   50




---



##### 



Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
      51




---



##### 



Item 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
   December 31,2010
    
    
    2009Audit fees (1)
    
    $
    361,000
    
    
    $
    352,000Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    All other fees
    
    
    
    
    
    
    $
    361,000
    
    
    $
    352,000
 (1)
    
    Represents fees for professional services provided in connection with the
audit of our annual financial statements and review of our quarterly financial statements. Audit Committee Pre-Approval Policies and Procedures
  PART IV
 Item 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
       52




---



##### 



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 Corporation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 Corporation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
Corporation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.
  53




---



##### 



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 Corporation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, incorporated by reference to Exhibit 10.11 to Belden &
Blake Corporations Annual Report on Form 10-K for the year ended December 31, 2009.10.12
    
    
    Seventh 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 Corporations 8-K filed on August 26, 2010.14.1
    
    
    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  54




---



##### 



SIGNATURES
  BELDEN & BLAKE CORPORATIONMarch 28, 2011
    
    By:
    
    /s/ Mark A. HouserDate
    
    
    
    Mark A. Houser, Chief Executive Officer, Chairmanof the Board of Directors and Director
  /s/ Mark A. Houser
    
    Chief Executive Officer Chairman
of
    
    March 28, 2011Mark A. Houser
    
    the Board
of Directors and Director
(Principal Executive Officer)
    
    Date/s/ James M. Vanderhider
    
    President, Chief Financial Officer
and Director
    
    March 28, 2011James M. Vanderhider
    
    (Principal Financial Officer)
    
    Date/s/ Frederick J. Stair
    
    Vice President of Accounting
    
    March 28, 2011Frederick J. Stair
    
    (Principal Accounting Officer)
    
    Date/s/ Kenneth Mariani
    
    Senior Vice President, Chief Operating
Officer
    
    March 28, 2011Kenneth Mariani
    
    and Director
    
    Date/s/ Matthew Coeny
    
    Director
    
    March 28, 2011Matthew Coeny
    
    
    
    Date
  55




---



##### 



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, 2010 and 2009
    
    
    F-3Consolidated Statements of Operations:Years ended December 31, 2010, 2009 and 2008
    
    
    F-4Consolidated Statements of Shareholders Equity:Years ended December 31, 2010, 2009 and 2008
    
    
    F-5Consolidated Statements of Cash Flows:Years Ended December 31, 2010, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
    F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  .
   
  F-2




---



##### 



BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share data)
 December 31,2010
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    35,941
    
    
    $
    46,740Accounts receivable (less accumulated provision for doubtful accounts:
    
    
    9,913
    
    
    
    11,821December 31, 2010 - $452; December 31, 2009 - $393)Inventories
    
    
    832
    
    
    
    828Deferred income taxes
    
    
    4,266
    
    
    
    8,272Other current assets
    
    
    209
    
    
    
    183Fair value of derivatives
    
    
    794
    
    
    
    413Total current assets
    
    
    51,955
    
    
    
    68,257Property and equipment, at costOil and gas properties (successful efforts method)
    
    
    701,790
    
    
    
    684,787Gas gathering systems
    
    
    1,239
    
    
    
    1,275Land, buildings, machinery and equipment
    
    
    2,421
    
    
    
    2,566705,450
    
    
    
    688,628Less accumulated depreciation, depletion and amortization
    
    
    179,947
    
    
    
    151,208Property and equipment, net
    
    
    525,503
    
    
    
    537,420Fair value of derivatives
    
    
    47
    
    
    
    478Other assets
    
    
    1,517
    
    
    
    1,923$
    579,022
    
    
    $
    608,078LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    2,120
    
    
    $
    1,696Accounts payable  related party
    
    
    1,523
    
    
    
    910Accrued expenses
    
    
    22,417
    
    
    
    16,136Current portion of long-term liabilities
    
    
    143
    
    
    
    238Fair value of derivatives
    
    
    12,141
    
    
    
    21,098Total current liabilities
    
    
    38,344
    
    
    
    40,078Long-term liabilitiesBank and other long-term debt
    
    
    23,919
    
    
    
    43,929Senior secured notes
    
    
    141,056
    
    
    
    162,287Subordinated promissory note  related party
    
    
    32,846
    
    
    
    30,491Asset retirement obligations and other long-term liabilities
    
    
    24,637
    
    
    
    22,990Fair value of derivatives
    
    
    30,201
    
    
    
    66,876Deferred income taxes
    
    
    140,137
    
    
    
    137,286Total long-term liabilities
    
    
    392,796
    
    
    
    463,859Shareholders equityCommon stock: without par value; 3,000 shares authorized; 1,534 shares issued
    
    
    
    
    
    
    Additional paid in capital
    
    
    142,500
    
    
    
    142,500Retained earnings (deficit)
    
    
    10,168
    
    
    
    (29,978
    )Accumulated other comprehensive loss
    
    
    (4,786
    )
    
    
    (8,381
    )Total shareholders equity
    
    
    147,882
    
    
    
    104,141$
    579,022
    
    
    $
    608,078
   F-3




---



##### 



BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands)
 For the Year Ended December 31,2010
    
    
    2009
    
    
    2008RevenuesOil and gas sales
    
    $
    60,601
    
    
    $
    61,761
    
    
    $
    145,398Gas gathering and marketing
    
    
    5,223
    
    
    
    5,894
    
    
    
    12,254Other
    
    
    556
    
    
    
    969
    
    
    
    77466,380
    
    
    
    68,624
    
    
    
    158,426ExpensesProduction expense
    
    
    20,528
    
    
    
    20,955
    
    
    
    26,342Production taxes
    
    
    1,133
    
    
    
    1,098
    
    
    
    3,054Gas gathering and marketing
    
    
    4,988
    
    
    
    5,492
    
    
    
    10,252Exploration expense
    
    
    2,635
    
    
    
    3,925
    
    
    
    2,543General and administrative expense
    
    
    6,805
    
    
    
    7,785
    
    
    
    8,188Depreciation, depletion and
amortization
    
    
    29,368
    
    
    
    37,046
    
    
    
    35,560Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    90,076Impairment of oil and gas properties
    
    
    1,565
    
    
    
    30,445
    
    
    
    3,924Accretion expense
    
    
    1,333
    
    
    
    1,304
    
    
    
    1,412Gain on sale of assets
    
    
    (33,644
    )
    
    
    (34,929
    )
    
    
    Derivative fair value gain
    
    
    (32,768
    )
    
    
    (29,631
    )
    
    
    (55,940
    )1,943
    
    
    
    43,490
    
    
    
    125,411Operating income
    
    
    64,437
    
    
    
    25,134
    
    
    
    33,015Other expense (income)Gain on early extinguishment of debt
    
    
    (1,006
    )
    
    
    
    
    
    
    Interest expense
    
    
    19,006
    
    
    
    20,612
    
    
    
    22,818Other income, net
    
    
    (92
    )
    
    
    (131
    )
    
    
    (495
    )Income before income taxes
    
    
    46,529
    
    
    
    4,653
    
    
    
    10,692Provision for income taxes
    
    
    6,383
    
    
    
    1,877
    
    
    
    39,636Net income (loss)
    
    $
    40,146
    
    
    $
    2,776
    
    
    $
    (28,944
    )
   F-4




---



##### 



BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 (in thousands)
 Accumulated OtherCommon
    
    
    Common
    
    
    Paid in
    
    
    Retained Earnings
    
    
    Comprehensive
    
    
    TotalShares
    
    
    Stock
    
    
    Capital
    
    
    (Accumulated Deficit)
    
    
    Loss
    
    
    EquityJanuary 1, 2008
    
    
    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 loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,590Contributions
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    20,000December 31, 2009
    
    
    2
    
    
    
    
    
    
    $
    142,500
    
    
    $
    (29,978
    )
    
    $
    (8,381
    )
    
    $
    104,141Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,146
    
    
    
    
    
    
    
    40,146Other comprehensive income (loss), net of tax:Reclassification adjustment for derivative
(gain) loss
reclassified into earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,595
    
    
    
    3,595Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,741December 31, 2010
    
    
    2
    
    
    
    
    
    
    $
    142,500
    
    
    $
    10,168
    
    
    $
    (4,786
    )
    
    $
    147,882
   F-5




---



##### 



BELDEN & BLAKE CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 For the Year
    
    
    For the Year
    
    
    For the YearEnded
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    40,146
    
    
    $
    2,776
    
    
    $
    (28,944
    )Adjustments to reconcile net (loss) income
to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    29,368
    
    
    
    37,046
    
    
    
    35,560Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    90,076Impairment of oil and gas properties
    
    
    1,565
    
    
    
    30,445
    
    
    
    3,924Gain on early extinguishment of debt
    
    
    (1,006
    )Accretion expense
    
    
    1,333
    
    
    
    1,304
    
    
    
    1,412Gain on sale of property and equipment
    
    
    (33,644
    )
    
    
    (34,929
    )
    
    
    Amortization of derivatives and other noncash derivative activities
    
    
    (29,721
    )
    
    
    (24,387
    )
    
    
    (46,064
    )Exploration expense
    
    
    2,494
    
    
    
    2,666
    
    
    
    1,974Deferred income taxes
    
    
    4,236
    
    
    
    771
    
    
    
    39,636Other non-cash expense
    
    
    2,093
    
    
    
    3,197
    
    
    
    747Change in operating assets and liabilities, net of
effects of acquisition and disposition of businesses:Accounts receivable and other current assets
    
    
    1,882
    
    
    
    7,572
    
    
    
    (1,135
    )Inventories
    
    
    (22
    )
    
    
    110
    
    
    
    147Accounts payable and accrued expenses
    
    
    2
    
    
    
    (2,624
    )
    
    
    (630
    )Net cash provided by operating activities
    
    
    18,726
    
    
    
    23,947
    
    
    
    96,703Cash flows from investing activities:Proceeds from property and equipment disposals
    
    
    36,688
    
    
    
    53,175
    
    
    
    3,049Exploration expense
    
    
    (2,494
    )
    
    
    (2,666
    )
    
    
    (1,974
    )Additions to property and equipment
    
    
    (14,234
    )
    
    
    (11,574
    )
    
    
    (28,620
    )(Increase) decrease in other assets
    
    
    (67
    )
    
    
    (51
    )
    
    
    54Net cash provided by (used in) investing
activities
    
    
    19,893
    
    
    
    38,884
    
    
    
    (27,491
    )Cash flows from financing activities:Debt redetermination costs
    
    
    (288
    )
    
    
    (1,470
    )
    
    
    Payment to shareholder or dividends
    
    
    
    
    
    
    
    
    
    
    (2,500
    )Capital contributions
    
    
    
    
    
    
    20,000
    
    
    
    Settlement of derivative liabilities recorded in purchase accounting
    
    
    (9,664
    )
    
    
    (1,358
    )
    
    
    (59,901
    )Repayment of Senior Secured Notes
    
    
    (19,175
    )
    
    
    
    
    
    
    Repayment of revolving line of credit
    
    
    (20,000
    )
    
    
    (56,000
    )
    
    
    Repayment of long-term debt and other obligations
    
    
    (291
    )
    
    
    (79
    )
    
    
    (9
    )Net cash used in financing activities
    
    
    (49,418
    )
    
    
    (38,907
    )
    
    
    (62,410
    )Net (decrease) increase in cash and equivalents
    
    
    (10,799
    )
    
    
    23,924
    
    
    
    6,802Cash and cash equivalents at beginning of period
    
    
    46,740
    
    
    
    22,816
    
    
    
    16,014Cash and cash equivalents at end of period
    
    $
    35,941
    
    
    $
    46,740
    
    
    $
    22,816
   F-6




---



##### 



BELDEN & BLAKE CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) Transaction and Merger
    (2) Business and Significant Accounting Policies
 Business
  Principles of Consolidation and Financial Presentation
 
 Use of Estimates in the Financial Statements
   F-7




---



##### 



Cash Equivalents
 
 Concentrations of Credit Risk
  Inventories
 
 Property and Equipment
 
      F-8




---



##### 



Goodwill and Other Intangible Assets
 
   Revenue Recognition
 
 Income Taxes
 
  F-9




---



##### 



Derivatives and Hedging
 
  Asset Retirement Obligations
   F-10




---



##### 



Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2010
    
    
    2009Beginning asset retirement obligations
    
    $
    23,083
    
    
    $
    23,885Liabilities incurred
    
    
    121
    
    
    
    9Liabilities settled
    
    
    (187
    )
    
    
    (2,115
    )Accretion expense
    
    
    1,333
    
    
    
    1,304Revisions in
estimated cash
flows
    
    
    351
    
    
    
    Ending asset retirement obligations
    
    $
    24,701
    
    
    $
    23,083
  (3) New Accounting Pronouncements
 Extractive
Activities  Oil and Gas (Topic 932), Modernization of Oil and Gas Reporting
 Fair Value Measurements and Disclosures
(Topic 820
   F-11




---



##### 



(4) Acquisitions
  (5) Dispositions
      (6) Derivatives and Hedging
    F-12




---



##### 



Natural Gas Swaps
    
    
    Crude Oil SwapsNYMEX
    
    
    
    
    
    
    NYMEX
    
    
    Natural Gas Basis SwapsPrice per
    
    
    
    
    
    
    Price per
    
    
    
    
    
    
    BasisYear Ending
    
    Bbtu
    
    
    MMbtu
    
    
    MBbls
    
    
    Bbl
    
    
    Bbtu
    
    
    DifferentialDecember 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, 2010
    
    
    December 31, 2009
    
    
    December 31, 2010
    
    
    December 31, 2009Oil and natural gas commodity contracts
    
    $
    841
    
    
    $
    864
    
    
    $
    (40,560
    )
    
    $
    (85,593
    )Interest rate swaps
    
    
    
    
    
    
    27
    
    
    
    (1,782
    )
    
    
    (2,381
    )Total fair value
    
    $
    841
    
    
    $
    891
    
    
    $
    (42,342
    )
    
    $
    (87,974
    )Location of derivatives in our consolidated balance
sheets:Derivative asset
    
    $
    794
    
    
    $
    413
    
    
    $
    
    
    
    $
    Longterm derivative asset
    
    
    47
    
    
    
    478
    
    
    
    
    
    
    
    Derivative liability
    
    
    
    
    
    
    
    
    
    
    (12,141
    )
    
    
    (21,098
    )Longterm derivative liability
    
    
    
    
    
    
    
    
    
    
    (30,201
    )
    
    
    (66,876
    )$
    841
    
    
    $
    891
    
    
    $
    (42,342
    )
    
    $
    (87,974
    )
   F-13




---



##### 



For the year endedDecember 31,2010
    
    
    2009
    
    
    2008The following amounts are recorded in Oil and gas sales:Unrealized losses:Oil and natural gas commodity
contracts reclassified into earnings
    
    $
    (6,129
    )
    
    $
    (7,893
    )
    
    $
    (9,163
    )The following amounts are recorded in Interest expense:Realized losses:Interest rate swaps
    
    $
    
    
    
    $
    
    
    
    $
    1,009The following are recorded in Derivative fair value (gain) loss:Unrealized (gains) losses:Oil and natural gas commodity contracts
    
    $
    (44,858
    )
    
    $
    (32,437
    )
    
    $
    (118,210
    )Interest rate swaps
    
    
    (571
    )
    
    
    (1,189
    )
    
    
    3,044Total
    
    
    (45,429
    )
    
    
    (33,626
    )
    
    
    (115,166
    )Realized (gains) losses:Oil and natural gas commodity contracts
    
    
    9,318
    
    
    
    1,438
    
    
    
    58,956Interest rate swaps
    
    
    3,343
    
    
    
    2,557
    
    
    
    270Total
    
    
    12,661
    
    
    
    3,995
    
    
    
    59,226Derivative fair value gain
    
    $
    (32,768
    )
    
    $
    (29,631
    )
    
    $
    (55,940
    )
  F-14




---



##### 



(7) Details of Balance Sheets
 December 31,(in thousands)
    
    2010
    
    
    2009Accounts receivableAccounts receivable
    
    $
    2,470
    
    
    $
    3,022Allowance for doubtful accounts
    
    
    (452
    )
    
    
    (393
    )Oil and gas production receivable
    
    
    7,895
    
    
    
    9,192$
    9,913
    
    
    $
    11,821InventoriesOil
    
    $
    606
    
    
    $
    602Natural gas
    
    
    
    
    
    
    Material, pipe and supplies
    
    
    226
    
    
    
    226$
    832
    
    
    $
    828Property and equipment, gross
oil and gas propertiesProducing properties
    
    $
    645,415
    
    
    $
    622,941Non-producing propertiesProved
    
    
    48,899
    
    
    
    52,428Unproved
    
    
    7,476
    
    
    
    9,418Other
    
    
    
    
    
    
    $
    701,790
    
    
    $
    684,787Land, buildings, machinery and equipmentLand, buildings and improvements
    
    $
    837
    
    
    $
    837Machinery and equipment
    
    
    1,584
    
    
    
    1,729$
    2,421
    
    
    $
    2,566Accrued expensesAccrued interest expense
    
    $
    5,557
    
    
    $
    6,397Accrued other expenses
    
    
    3,186
    
    
    
    3,022Accrued general and administrative
expense
    
    
    1,827
    
    
    
    1,576Accrued lease operating expense
    
    
    1,595
    
    
    
    1,224Accrued drilling and completion costs
    
    
    7,608
    
    
    
    273Accrued income taxes
    
    
    633
    
    
    
    Ad valorem and other taxes
    
    
    567
    
    
    
    702Undistributed production revenue
    
    
    1,444
    
    
    
    2,942$
    22,417
    
    
    $
    16,136
  F-15




---



##### 



(8) Long-Term Debt
  December 31,2010
    
    
    2009Senior secured notes
    
    $
    139,475
    
    
    $
    159,475Bank revolving credit facility
    
    
    23,876
    
    
    
    43,876Subordinated promissory note (related party)
    
    
    32,846
    
    
    
    30,491Other
    
    
    53
    
    
    
    62196,250
    
    
    
    233,904Less current portion
    
    
    10
    
    
    
    9Long-term debt
    
    
    196,240
    
    
    
    233,895Fair value adjustment  senior secured notes
    
    
    1,581
    
    
    
    2,812$
    197,821
    
    
    $
    236,707
 Senior Secured Notes due 2012
   July 15, 2010 and thereafter
    
    
    100.000
    %
 
 Credit Agreement
   F-16




---



##### 



F-17




---



##### 



ISDA Master Agreement
    F-18




---



##### 



(9) Leases
   OperatingAs of December 31, 2010
    
    Leases(in thousands)2011
    
    $
    2102012
    
    
    382013
    
    
    2014
    
    
    2015 and thereafter
    
    
    Total minimum rental payments
    
    $
    248
 (10) Goodwill
   (11) Impairment of Proved Oil and Gas Properties
   F-19




---



##### 



(12) Taxes
  For the year
    
    
    For the year
    
    
    For the yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008CurrentFederal
    
    $
    380
    
    
    $
    849
    
    
    $
    State
    
    
    1,767
    
    
    
    
    
    
    
    2,147
    
    
    
    849
    
    
    
    DeferredFederal
    
    
    15,637
    
    
    
    813
    
    
    
    35,076State
    
    
    (11,401
    )
    
    
    215
    
    
    
    4,5604,236
    
    
    
    1,028
    
    
    
    39,636Total
    
    $
    6,383
    
    
    $
    1,877
    
    
    $
    39,636
  For the year
    
    
    For the year
    
    
    For the yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Increases (reductions) in taxes resulting from:State income taxes, net of federal tax benefit
    
    
    4.3
    
    
    
    4.6
    
    
    
    4.6Permanent differences related to goodwill
impairment
    
    
    
    
    
    
    
    
    
    
    333.1Reduction in valuation allowance (1)
    
    
    (11.0
    )
    
    
    
    
    
    
    Reduction in state tax rate (2)
    
    
    (14.7
    )
    
    
    
    
    
    
    Other, net
    
    
    0.1
    
    
    
    0.7
    
    
    
    (2.0
    )Effective income tax rate for the period
    
    
    13.7
    %
    
    
    40.3
    %
    
    
    370.7
    %
 (1)
    
    The decrease was due to a reduction of the state tax valuation allowance.
The valuation allowance was reduced upon the realization of state tax net operating loss carryforwards,
which resulted from taxable gains on asset sales.(2)
    
    The decrease in the state tax rate was due to the elimination of the state of Ohio corporate income tax. The Ohio
corporate income tax was replaced with a Commercial Activity Tax which is not considered an income tax.   F-20




---



##### 



December 31,
    
    
    December 31,2010
    
    
    2009Deferred income tax liabilities:Property and equipment, net
    
    $
    183,949
    
    
    $
    190,088Other, net
    
    
    276
    
    
    
    2,732Total deferred income tax
liabilities
    
    
    184,225
    
    
    
    192,820Deferred income tax assets:Accrued expenses
    
    
    881
    
    
    
    881Asset retirement obligations
    
    
    9,529
    
    
    
    9,098Fair value of derivatives
    
    
    26,072
    
    
    
    43,420Net operating loss carryforwards
    
    
    8,308
    
    
    
    15,444Senior Secured Notes
    
    
    1,133
    
    
    
    2,913Tax credit carryforwards
    
    
    3,003
    
    
    
    2,623Other, net
    
    
    1,787
    
    
    
    903Valuation allowance
    
    
    (2,359
    )
    
    
    (11,476
    )Total deferred income tax assets
    
    
    48,354
    
    
    
    63,806Net deferred income tax liability
    
    $
    135,871
    
    
    $
    129,014Long-term liability
    
    $
    140,137
    
    
    $
    137,286Current asset
    
    
    (4,266
    )
    
    
    (8,272
    )Net deferred income tax liability
    
    $
    135,871
    
    
    $
    129,014
   (13) Commitments and Contingencies
   F-21




---



##### 



(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)
    
    2010
    
    
    2009
    
    
    2008Cash paid during the period for:Interest
    
    $
    17,784
    
    
    $
    17,909
    
    
    $
    22,764Income taxes, net of refunds
    
    
    1,494
    
    
    
    1,100
    
    
    
    Non-cash investing and financing activities:Non-cash additions to property and
equipment
    
    
    (7,608
    )
    
    
    (273
    )
    
    
    (1,728
    )Non-cash additions to debt
    
    
    (2,355
    )
    
    
    (2,868
    )
    
    
    (692
    )
 (15) Fair Value of Financial Instruments
    F-22




---



##### 



(16) Fair Value Measurements
 Recurring Basis
  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,
2010:Commodity contracts
    
    $
    (39,719
    )
    
    $
    
    
    
    $
    (39,719
    )
    
    $
    Interest rate swaps
    
    
    (1,782
    )
    
    $
    
    
    
    
    (1,782
    )
    
    $
    Total derivative liabilities
    
    $
    (41,501
    )
    
    $
    
    
    
    $
    (41,501
    )
    
    $
    At December 31,
2009:Commodity contracts
    
    $
    (84,729
    )
    
    
    
    
    
    $
    (84,729
    )
    
    
    Interest rate swaps
    
    
    (2,354
    )
    
    $
    
    
    
    
    (2,354
    )
    
    $
    Total derivative liabilities
    
    $
    (87,083
    )
    
    
    
    
    
    $
    (87,083
    )
    
    
    
   Nonrecurring Basis
   F-23




---



##### 



(17) Supplementary Information on Oil and Gas Activities

(Unaudited)
  December 31,
    
    
    December 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008Acquisition costs:Proved properties
    
    $
    4,349
    
    
    $
    
    
    
    $
    1,504Unproved
properties
    
    
    634
    
    
    
    1,282
    
    
    
    802Developmental costs
    
    
    16,386
    
    
    
    8,357
    
    
    
    26,845Exploratory costs
    
    
    2,635
    
    
    
    3,925
    
    
    
    2,543$
    24,004
    
    
    $
    13,564
    
    
    $
    31,694
  December 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009Proved oil and natural gas properties
    
    $
    694,314
    
    
    $
    675,371Unproved oil and natural gas properties
    
    
    7,476
    
    
    
    9,418701,790
    
    
    
    684,789Accumulated depreciation, depletion and
amortization
    
    
    (178,057
    )
    
    
    (149,442
    )Net capitalized costs
    
    $
    523,733
    
    
    $
    535,347
 Estimated Proved Oil and Gas Reserves (Unaudited)
   F-24




---



##### 



Oil
    
    
    Gas(MBbl)
    
    
    (MMcf)
    
    
    MMcfeJanuary 1, 2008
    
    
    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
    
    
    
    189,663Extensions and discoveries
    
    
    155
    
    
    
    3,408
    
    
    
    4,338Purchase of reserves in place
    
    
    
    
    
    
    4,670
    
    
    
    4,670Divestiture of reserves
    
    
    
    
    
    
    (230
    )
    
    
    (230
    )Revisions of previous estimates
    
    
    801
    
    
    
    10,872
    
    
    
    15,678Production
    
    
    (272
    )
    
    
    (10,109
    )
    
    
    (11,741
    )December 31, 2010
    
    
    5,132
    
    
    
    171,586
    
    
    
    202,378Proved developed reservesDecember 31, 2008
    
    
    3,559
    
    
    
    176,340
    
    
    
    197,694December 31, 2009
    
    
    3,438
    
    
    
    151,995
    
    
    
    172,623December 31, 2010
    
    
    4,091
    
    
    
    157,150
    
    
    
    181,696
 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.
  F-25




---



##### 




    
    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.
  December 31,2010
    
    
    2009
    
    
    2008(in thousands)Estimated future cash inflows (outflows)Revenues from the sale of oil and
gas
    
    $
    1,200,350
    
    
    $
    958,416
    
    
    $
    1,431,631Production costs
    
    
    (414,615
    )
    
    
    (388,247
    )
    
    
    (534,167
    )Development costs
    
    
    (57,102
    )
    
    
    (47,016
    )
    
    
    (57,491
    )Future income taxes
    
    
    (236,479
    )
    
    
    (148,529
    )
    
    
    (262,865
    )Future net cash flows
    
    
    492,154
    
    
    
    374,624
    
    
    
    577,10810% timing discount
    
    
    (292,549
    )
    
    
    (207,813
    )
    
    
    (324,433
    )Standardized measure of discounted
future net cash flows
    
    $
    199,605
    
    
    $
    166,811
    
    
    $
    252,675
   December 31,2010
    
    
    2009
    
    
    2008Gas (per Mcf)
    
    $
    4.76
    
    
    $
    4.34
    
    
    $
    6.38Oil (per Bbl)
    
    
    74.63
    
    
    
    56.33
    
    
    
    41.00
  F-26




---



##### 



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Beginning of year
    
    $
    166,811
    
    
    $
    252,675
    
    
    $
    388,886Sale of oil and gas, net of production costs
    
    
    (45,069
    )
    
    
    (47,601
    )
    
    
    (125,165
    )Extensions and discoveries, less related
estimated
future development and production costs
    
    
    10,261
    
    
    
    3,797
    
    
    
    9,514Previously estimated development costs
incurred
during the period
    
    
    3,954
    
    
    
    
    
    
    
    26,845Purchase of reserves in place less
estimated future production costs
    
    
    5,811
    
    
    
    
    
    
    
    643Sale of reserves in place less
estimated future production costs
    
    
    (240
    )
    
    
    (19,988
    )
    
    
    Changes in estimated future development costs
    
    
    5,404
    
    
    
    751
    
    
    
    31,949Revisions of previous quantity estimates
    
    
    24,138
    
    
    
    (7,374
    )
    
    
    (47,442
    )Net changes in prices and production costs
    
    
    77,748
    
    
    
    (79,091
    )
    
    
    (195,400
    )Change in income taxes
    
    
    (51,285
    )
    
    
    47,752
    
    
    
    101,046Accretion of 10% timing discount
    
    
    19,366
    
    
    
    31,253
    
    
    
    38,889Changes in production rates (timing) and other
    
    
    (17,294
    )
    
    
    (15,363
    )
    
    
    22,910End of period
    
    $
    199,605
    
    
    $
    166,811
    
    
    $
    252,675
 (18) Industry Segment Financial Information
  Major Customers
 
  F-27




---



##### 



(19) Quarterly Results of Operations

(Unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    Fourth2010Operating revenues
    
    $
    17,417
    
    
    $
    17,034
    
    
    $
    16,599
    
    
    $
    15,331Gross profit
    
    
    2,571
    
    
    
    3,041
    
    
    
    2,380
    
    
    
    (820
    )Net income (loss)
    
    
    19,100
    
    
    
    15,487
    
    
    
    8,150
    
    
    
    (2,591
    )2009Operating revenues
    
    $
    17,110
    
    
    $
    17,367
    
    
    $
    17,022
    
    
    $
    17,125Gross profit
    
    
    (2,202
    )
    
    
    (74
    )
    
    
    117
    
    
    
    1,298Net income (loss)
    
    
    13,242
    
    
    
    (26,366
    )
    
    
    (3,616
    )
    
    
    19,516
 (20) Related Party Transactions
      F-28




---



##### 



(21) Subsequent Events
   F-29