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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, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For
the transition period from ___________ to ___________
 Commission file number: 001-34224
 Brigham Exploration Company
 (Exact name of Registrant as Specified in its Charter)
 Delaware
    
    75-2692967(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 6300 Bridge Point Parkway, Building 2, Suite 500, Austin, Texas 78730  (Address of principal executive offices) (Zip Code)
 (512) 427-3300  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $0.01 par value
    
    NASDAQ Global Select Market
 Securities registered pursuant to Section 12(g) of the Act:
None  (Title of Class)
 Yes o No þ
 Yes o No þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



BRIGHAM EXPLORATION COMPANY
 TABLE OF CONTENTS
 PagePart IItem 1. Business
    
    
    2Item 1A. Risk Factors
    
    
    9Item 1B. Unresolved Staff Comments
    
    
    20Item 2. Properties
    
    
    20Item 3. Legal Proceedings
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Executive Officers of the Registrant
    
    
    31Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    32Item 6. Selected Consolidated Financial Data
    
    
    34Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    36Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    62Item 8. Financial Statements and Supplementary Data
    
    
    65Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    65Item 9A. Controls and Procedures
    
    
    65Item 9B. Other Information
    
    
    67Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    67Item 11. Executive Compensation
    
    
    67Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    67Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    67Item 14. Principal Accounting Fees and Services
    
    
    67Part IVItem 15. Exhibits, Financial Statement Schedules
    
    
    67Glossary of Oil and Gas Terms
    
    
    68Signatures
    
    
    70Index to Financial Statements
    
    
    F-1Exhibit 3.4Exhibit 21Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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BRIGHAM EXPLORATION COMPANY
 2008 ANNUAL REPORT ON FORM 10-K
 
 PART I
 
 Item 1. Business
 Overview
     At December 31, 2008
    
    
    2008%
    
    
    Productive
    
    
    3-D
    
    
    AverageProved
    
    
    Pre-tax
    
    
    Natural
    
    
    Wells
    
    
    Seismic
    
    
    DailyProvince
    
    Reserves
    
    
    PV10%(a)(b)
    
    
    Gas
    
    
    Gross
    
    
    Net
    
    
    Data
    
    
    Production(Bcfe)
    
    
    (Millions)
    
    
    
    
    
    
    
    
    
    
    
    (Sq. Miles)
    
    
    (MMcfe)Onshore Gulf Coast
    
    
    75.8
    
    
    $
    198.3
    
    
    
    83
    %
    
    
    94
    
    
    
    48.2
    
    
    
    4,459
    
    
    
    19.3Anadarko Basin
    
    
    30.3
    
    
    
    48.4
    
    
    
    94
    %
    
    
    96
    
    
    
    26.8
    
    
    
    2,381
    
    
    
    5.5Rocky Mountains
    
    
    24.5
    
    
    
    28.2
    
    
    
    10
    %
    
    
    62
    
    
    
    15.8
    
    
    
    1,386
    
    
    
    5.0West Texas and Other
    
    
    6.5
    
    
    
    13.1
    
    
    
    12
    %
    
    
    92
    
    
    
    26.2
    
    
    
    4,698
    
    
    
    2.0Total
    
    
    137.1
    
    
    $
    288.0
    
    
    
    69
    %
    
    
    344
    
    
    
    117.0
    
    
    
    12,924
    
    
    
    31.8
 
 (a)
    
    The prices used to calculate this measure were $44.60 per barrel of oil and $5.71 per MMbtu
of natural gas, both as of December 31, 2008.(b)
    
    The standardized measure for our proved reserves at December 31, 2008 was $279.3 million. See
Item 2. Properties  Reconciliation of Standardized Measure to Pre-tax PV10% for a
definition of pre-tax PV10% and a reconciliation of our standardized measure to our pre-tax
PV10% value.  2




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Business Strategy
  
    
    Focus on Core Provinces and Trends.We have built our multi-year inventory of drilling
prospects by leveraging our staffs strong technical knowledge base in the following four
core provinces and associated trends: 1) our Rocky Mountains province, which includes the
Williston Basin in North Dakota and Montana and the Powder River Basin in Wyoming; 2) our
Onshore Gulf Coast province, which includes the Vicksburg trend in South Texas, the Miocene
and Upper Oligocene trends in Southern Louisiana and the Frio trend in and around Matagorda
County, Texas; 3) our Anadarko Basin province in the Texas Panhandle and northwest
Oklahoma, including the Hunton and Springer trends; and 4) our West Texas province.
Further, we believe our focus on these four core provinces and associated trends provides
us with important drilling investment diversification. Since 1999, our exploration success
in these trends has resulted in nine significant field discoveries and a resulting
multi-year inventory of development drilling locations. We plan to focus the majority of
our near term capital expenditures in our Rocky Mountain and Onshore Gulf Coast provinces,
where we believe our accumulated knowledge base provides us with a substantial competitive
advantage.
  3




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
    
    Internally Generate Inventory of High Quality Exploratory Prospects.Utilizing 3-D
seismic data and other advanced technologies, our highly skilled staff of 11 geologists and
seven geophysicists generates the majority of our drilling prospects. We believe that our
nine significant field discoveries reflect the quality and depth of our prospect inventory
as well our ability to continue to generate such opportunities.
 
    
    Leverage our Operational Expertise.Our staff is very proficient with state-of-the-art
drilling and completion techniques in difficult drilling environments, including
directional drilling, horizontal drilling and multi-stage fracture stimulations utilizing
swell packers. We have demonstrated a successful track record of drilling in deep and
highly pressured environments in the Vicksburg trend of South Texas and the Miocene and
Oligocene trends of Southern Louisiana. Additionally, we have successfully utilized
directional drilling techniques in the deep Hunton trend in the Texas Panhandle. Finally,
in the Williston Basin, we have successfully utilized the latest horizontal drilling and
multi-stage fracture stimulation completion techniques to drill and complete our Bakken and
Three Forks wells.
 
    
    Evaluate and Selectively Pursue New Potential Plays.We have an 18 year track record of
successfully identifying, evaluating and initiating new oil and natural gas plays. We are
particularly interested in those plays with attractive exploration and development
potential that complement our current exploration, development and production activities.
After identifying such a play, we will often selectively build an acreage position in the
play. Our current Vicksburg and Hunton plays are examples of successful plays where our
position in the play was identified and originated by us. We believe our activities to date
in the Williston Basin located in North Dakota and Montana have generated an exciting new
play with tremendous reserve potential and that our efforts there will soon lead to growth
in our reserves and production. For 2009, we currently plan to spend
approximately $19.6 million, or approximately 81% of our 2009 exploration and development expenditures, in the
Williston Basin.
 
    
    Capitalize on Exploration Successes Through Development of Field Discoveries.From 1990
to 1999, we grew our reserves and production volumes primarily through successful 3-D
delineated exploration drilling. In recent years, our conventional exploratory drilling
successes have generated a multi-year inventory of development drilling locations. Over the
three year period ended December 31, 2008, approximately 71% of our drilling expenditures
were spent on development activities. Our unconventional drilling successes in 2008 in the
Bakken have further supplemented our development drilling inventory. We believe our ability
to balance our higher risk exploratory drilling with lower risk development drilling has
reduced our risk profile. For 2009, approximately 86% of the planned drilling capital
expenditures that we announced at the beginning of the year will fund development
activities.
 
    
    Enhance Returns Through Operational Control.We seek to maintain operational control of
our exploration and drilling activities. As operator, we retain more control over the
timing and selection of drilling prospects, which enhances our ability to maximize our
return on invested capital. Since we generate most of our projects, we generally have the
ability to retain operational control over all phases of our exploration and development
activities. As of December 31, 2008, we operated approximately 70% of our proved reserves.
Further, in 2008 we operated 77% of the net wells we drilled, representing 84% of our
drilling capital expenditures. We expect to operate approximately 80% of our planned 2009 drilling capital
expenditures.
 Exploration and Development Staff
   4




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Operations and Operations Staff
   Oil and Natural Gas Market and Major Customers
      5




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Competition
  Operating Hazards and Uninsured Risks
     6




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Governmental Regulation
    Environmental Matters
    7




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8




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Formation
  Facilities
  Employees
  Website Access
  
 Item 1A. Risk Factors
  Oil and natural gas prices are volatile and a substantial reduction in these prices could adversely
affect our results and the price of our common stock.
     
    
    worldwide and domestic supplies of oil and natural gas;
 
    
    actions taken by foreign oil and natural gas producing nations;
 
    
    political conditions and events (including instability or armed conflict) in oil-producing
or natural gas-producing regions;
 
    
    the level of global and domestic oil and natural gas inventories;
 
    
    the price and level of foreign imports, including liquefied natural gas imports;
 
    
    the level of global and domestic demand;
 
    
    the price and availability of alternative fuels;
 
    
    the availability of pipeline or other takeaway capacity;
 
    
    weather conditions;
 
    
    domestic and foreign governmental regulations and taxes; and
 
    
    the overall worldwide and domestic economic environment.
  9




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
    
    adversely affect our financial condition, liquidity, ability to finance planned capital
expenditures and results of operations;
 
    
    reduce the amount of oil and natural gas that we can produce economically;
 
    
    cause us to delay or postpone some of our capital projects;
 
    
    reduce our revenues, operating income and cash flow;
 
    
    reduce the carrying value of our oil and natural gas properties; and
 
    
    limit our access to sources of capital, such as equity and long-term debt.
 The current financial crisis and recession have negatively impacted the price for oil and natural
gas, limited access to the credit and equity markets, increased the cost of capital and may have
other negative consequences that we cannot predict.
  Our level of indebtedness may adversely affect our cash available for operations, which would limit
our growth, our ability to make interest and principal payments on our indebtedness as they become
due and our flexibility to respond to market changes.
  
    
    we will dedicate a portion of our internally generated cash flow to the payment of interest
on our indebtedness and to the payment of our other current obligations and will not have
these cash flows available for other purposes;
 
    
    our debt agreements limit our ability to borrow additional funds or dispose of assets and
may affect our flexibility in planning for, and reacting to, changes in business conditions;
 
    
    our ability to obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be impaired;
 
    
    we may be more vulnerable to economic downturns and our ability to withstand sustained
declines in oil and natural gas prices may be impaired;
 
    
    since a portion of our indebtedness is subject to variable interest rates, we are
vulnerable to increases in interest rates; and
 
    
    our flexibility in planning for or reacting to changes in market conditions may be limited.
   10




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The indenture governing the Senior Notes and our senior credit facility impose significant
operating and financial restrictions, which may prevent us from capitalizing on business
opportunities and taking some actions.
  
    
    incur additional debt;
 
    
    pay dividends on, redeem or repurchase stock;
 
    
    create liens;
 
    
    make specified types of investments;
 
    
    apply net proceeds from certain asset sales;
 
    
    engage in transactions with our affiliates;
 
    
    engage in sale and leaseback transactions;
 
    
    merge or consolidate;
 
    
    restrict dividends or other payments from subsidiaries;
 
    
    sell equity interests of subsidiaries; and
 
    
    sell, assign, transfer, lease, convey or dispose of assets.
    Availability under our senior credit facility is based on a borrowing base which is subject to
redetermination by our lenders. If our borrowing base is reduced, we may be required to repay
amounts outstanding under our senior credit facility.
   11




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We may incur additional indebtedness. This could further exacerbate the risks associated with our
substantial leverage.
  To service our indebtedness we will require a significant amount of cash. Our ability to generate
cash depends on many factors beyond our control. Failure to generate sufficient cash to service
our indebtedness could adversely affect our business, financial condition and results of
operations.
   Lower oil and natural gas prices may cause us to record ceiling limitation write-downs, which would
reduce our stockholders equity.
   12




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We may have difficulty financing our planned capital expenditures, which could adversely affect our
business.
  Part of our strategy involves drilling in existing or emerging shale plays using the latest
available horizontal drilling and completion techniques. The results of our planned exploratory
drilling in these plays are subject to drilling and completion technique risks and drilling results
may not meet our expectations for reserves or production.
  Operating in less developed basins such as the Williston Basin exposes us to risks that include,
but are not limited to, securing access to takeaway capacity and securing access to equipment and
service providers on a timely and cost effective basis.
  We may not be able to drill wells on a substantial portion of our resource play acreage.
   13




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Our exploration, development and drilling efforts and the operation of our wells may not be
profitable or achieve our targeted returns.
   
    
    unexpected drilling conditions;
 
    
    pressure or irregularities in formations;
 
    
    equipment failures or accidents;
 
    
    adverse weather conditions;
 
    
    compliance with governmental requirements; and
 
    
    shortages or delays in the availability of drilling rigs and the delivery of equipment.
 Exploratory drilling is a speculative activity that may not result in commercially productive
reserves and may require expenditures in excess of budgeted amounts.
  Although our oil and natural gas reserve data is independently estimated, these estimates may still
prove to be inaccurate.
  
    
    expected reservoir characteristics based on geological, geophysical and engineering
assessments;
 
    
    future production rates based on historical performance and expected future operating and
investment activities;
 
    
    future oil and gas prices and quality and location differentials; and
 
    
    future development and operating costs.
  14




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We need to replace our reserves at a faster rate than companies whose reserves have longer
production lives. Our failure to replace our reserves would result in decreasing reserves and
production over time.
      Drilling locations that we decide to drill may not yield oil or natural gas in commercially viable
quantities or quantities sufficient to meet our targeted rate of return.
   15




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The lack of availability or high cost of drilling rigs, equipment, supplies, insurance, personnel
and oil field services could adversely affect our ability to execute our exploration and
development plans on a timely basis and within our budget.
  The marketability of our oil and natural gas production depends on services and facilities that we
typically do not own or control. The failure or inaccessibility of any such services or facilities
could affect market-based prices or result in a curtailment of production and revenues.
  We are subject to various operating and other casualty risks that could result in liability
exposure or the loss of production and revenues.
  
    
    fires;
 
    
    natural disasters;
 
    
    formations with abnormal pressures;
 
    
    blowouts, craterings and explosions; and
 
    
    pipeline ruptures and spills.
   16




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We may not have enough insurance to cover all of the risks we face, which could result in
significant financial exposure.
  We cannot control activities on properties we do not operate. Failure to fund capital expenditure
requirements may result in reduction or forfeiture of our interests in some of our non-operated
projects.
   Our future operating results may fluctuate and significant declines in them would limit our ability
to invest in projects.
  
    
    industry conditions;
 
    
    prices of oil and natural gas;
 
    
    rates of drilling success;
 
    
    capital availability;
 
    
    rates of production from completed wells; and
 
    
    the timing and amount of capital expenditures.
  Our hedging activities may prevent us from benefiting from price increases and may expose us to
other risks.
   17




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We face significant competition and many of our competitors have resources in excess of our
available resources.
  
    
    acquiring desirable producing properties or new leases for future exploration;
 
    
    marketing our oil and natural gas production; and
 
    
    acquiring the equipment and expertise necessary to operate and develop those properties.
  We are subject to various governmental regulations and environmental risks that may cause us to
incur substantial costs.
     18




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We depend on our key management personnel and technical experts and the loss any of these
individuals could adversely affect our business.
  The market price of our stock is volatile.
  
    
    limited trading volume in our stock;
 
    
    changes in government regulations;
 
    
    quarterly variations in operating results;
 
    
    our involvement in litigation;
 
    
    general market conditions;
 
    
    the prices of oil and natural gas;
 
    
    announcements by us and our competitors;
 
    
    our liquidity;
 
    
    our ability to raise additional funds; and
 
    
    other events.
 Our stock price may decline when our financial results decline or when events occur that are
adverse to us or our industry.
  We do not intend to pay any dividends on our common stock.
  Our shares that are eligible for future sale may have an adverse effect on the price of our common
stock.
  Certain of our affiliates control a substantial portion of our outstanding common stock, which may
affect your vote as a stockholder.
   19




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Certain anti-takeover provisions may adversely affect your rights as a stockholder.
  Forward-Looking Statements
   
    
    our growth strategies;
 
    
    our ability to successfully and economically explore for and develop oil and gas resources;
 
    
    anticipated trends in our business;
 
    
    our future results of operations;
 
    
    our liquidity and ability to finance our exploration and development activities;
 
    
    market conditions in the oil and gas industry;
 
    
    our ability to make and integrate acquisitions; and
 
    
    the impact of governmental regulation.
   
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   20




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Onshore
    
    
    Anadarko
    
    
    Rocky
    
    
    West TexasGulf Coast
    
    
    Basin
    
    
    Mountains (a)
    
    
    & Other (b)
    
    
    TotalCapital expenditures for drilling,
land and seismic in 2008 (in
millions)
    
    $
    46.0
    
    
    $
    2.3
    
    
    $
    121.0
    
    
    $
    2.7
    
    
    $
    172.0Proved Reserves at December 31, 2008Pre-tax PV10% (in millions) (c)
    
    $
    198.3
    
    
    $
    48.4
    
    
    $
    28.2
    
    
    $
    13.1
    
    
    $
    288.0Oil (MMBbls)
    
    
    2.1
    
    
    
    0.3
    
    
    
    3.7
    
    
    
    1.0
    
    
    
    7.1Natural gas (Bcf)
    
    
    63.2
    
    
    
    28.3
    
    
    
    2.4
    
    
    
    0.8
    
    
    
    94.7Natural gas equivalents (Bcfe)
    
    
    75.8
    
    
    
    30.3
    
    
    
    24.5
    
    
    
    6.5
    
    
    
    137.1% Natural gas
    
    
    83
    %
    
    
    94
    %
    
    
    10
    %
    
    
    12
    %
    
    
    69
    %Average daily production (MMcfe/d)
    
    
    19.3
    
    
    
    5.5
    
    
    
    5.0
    
    
    
    2.0
    
    
    
    31.8Productive wells at December 31, 2008Gross
    
    
    94
    
    
    
    96
    
    
    
    62
    
    
    
    92
    
    
    
    344Net
    
    
    48.2
    
    
    
    26.8
    
    
    
    15.8
    
    
    
    26.2
    
    
    
    117.03-D Seismic Data
(square miles)
    
    
    4,459
    
    
    
    2,381
    
    
    
    1,386
    
    
    
    4,698
    
    
    
    12,924
 
 (a)
    
    Includes the Williston Basin located in North Dakota and Montana and the Powder River Basin
located in Wyoming.(b)
    
    Capital expenditures for drilling, land and seismic in 2008 for West Texas & Other includes
capital associated with the Barnett Shale.(c)
    
    The standardized measure for our proved reserves at December 31, 2008, was $279.3 million.
See - Reconciliation of Standardized Measure to Pre-tax PV10% for a definition of pre-tax
PV10% and a reconciliation of our standardized measure to our pre-tax PV10% value. Rocky Mountains Province
   21




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Williston Basin
            22




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Powder River Basin
   Onshore Gulf Coast Province
   23




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Vicksburg Trend
     Southern Louisiana Trend
    24




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Anadarko Basin Province
   West Texas and Other Province
    25




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Title to Properties
  Oil and Natural Gas Reserves
  At December 31,2008
    
    
    2007
    
    
    2006Estimated Net Proved Reserves:Oil (MBbls)
    
    
    7,065
    
    
    
    5,593
    
    
    
    4,494Natural gas (MMcf)
    
    
    94,679
    
    
    
    106,643
    
    
    
    119,486Natural gas equivalent (MMcfe)
    
    
    137,070
    
    
    
    140,202
    
    
    
    146,452Proved developed reserves as a percentage of net proved reserves
    
    
    46
    %
    
    
    49
    %
    
    
    55
    %Pre-tax PV10% (in millions)(a)
    
    $
    288.0
    
    
    $
    491.6
    
    
    $
    338.5Standardized measure (in millions)
    
    
    279.3
    
    
    
    394.5
    
    
    
    302.7Estimated future development cost (in millions)
    
    
    160.3
    
    
    
    160.5
    
    
    
    145.9Base price used to calculate reserves(b):Natural gas (per MMbtu)
    
    $
    5.71
    
    
    $
    7.10
    
    
    $
    5.48Oil (per Bbl)
    
    
    44.60
    
    
    
    96.01
    
    
    
    61.06
 
 (a)
    
    See  Reconciliation of Standardized Measure to Pre-tax PV10% for a definition of pre-tax
PV10% and a reconciliation of our standardized measure to our pre-tax PV10% value.(b)
    
    These base prices were adjusted to reflect applicable transportation and quality
differentials on a well-by-well basis to arrive at realized sales prices used to estimate our
reserves at these dates.    26




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Reconciliation of Standardized Measure to Pre-tax PV10%
  At December 31,2008
    
    
    2007
    
    
    2006Standardized measure of discounted future net cash flows
    
    $
    279.3
    
    
    $
    394.5
    
    
    $
    302.7Add present value of future income tax discounted at 10%
    
    
    8.7
    
    
    
    97.1
    
    
    
    34.6FAS 143 assumption differences
    
    
    
    
    
    
    
    
    
    
    1.2Pre-tax PV10%
    
    $
    288.0
    
    
    $
    491.6
    
    
    $
    338.5
  27




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Drilling Activities
  Year Ended December 31,2008 (a)
    
    
    2007 (b)
    
    
    2006 (c)Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetExploratory wells:Natural gas
    
    
    3
    
    
    
    0.8
    
    
    
    0
    
    
    
    0.0
    
    
    
    4
    
    
    
    1.4Oil
    
    
    0
    
    
    
    0.0
    
    
    
    2
    
    
    
    1.0
    
    
    
    6
    
    
    
    4.6Non-productive
    
    
    1
    
    
    
    0.5
    
    
    
    6
    
    
    
    3.2
    
    
    
    10
    
    
    
    5.2Total
    
    
    4
    
    
    
    1.3
    
    
    
    8
    
    
    
    4.2
    
    
    
    20
    
    
    
    11.2Development wells:Natural gas
    
    
    26
    
    
    
    6.7
    
    
    
    8
    
    
    
    5.7
    
    
    
    13
    
    
    
    9.7Oil
    
    
    27
    
    
    
    3.4
    
    
    
    5
    
    
    
    1.0
    
    
    
    1
    
    
    
    0.0Non-productive
    
    
    0
    
    
    
    0.0
    
    
    
    0
    
    
    
    0.0
    
    
    
    3
    
    
    
    1.4Total
    
    
    53
    
    
    
    10.1
    
    
    
    13
    
    
    
    6.7
    
    
    
    17
    
    
    
    11.1
 
 (a)
    
    Excludes two (1.3 net) exploratory wells and four (1.4 net) development wells that were
drilling and one (0.5 net) exploratory well and seven (3.0 net) development wells that were
completing.(b)
    
    Excludes two (0.6 net) exploratory wells and two (1.0 net) development wells that were
drilling and four (2.2 net) development wells that were completing at year end.(c)
    
    Excludes three (1.9 net) exploratory and two (0.8 net) development wells that were completing
and one (0.4 net) development well that was drilling at year end.  Productive Wells and Acreage
 Productive Wells
  Natural Gas
    
    
    Oil
    
    
    TotalGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetOnshore Gulf Coast
    
    
    74
    
    
    
    43.4
    
    
    
    20
    
    
    
    4.8
    
    
    
    94
    
    
    
    48.2Anadarko Basin
    
    
    83
    
    
    
    23.8
    
    
    
    13
    
    
    
    3.0
    
    
    
    96
    
    
    
    26.8Rocky Mountains
    
    
    0
    
    
    
    0
    
    
    
    62
    
    
    
    15.8
    
    
    
    62
    
    
    
    15.8West Texas and Other
    
    
    13
    
    
    
    2.0
    
    
    
    79
    
    
    
    24.2
    
    
    
    92
    
    
    
    26.2Total
    
    
    170
    
    
    
    69.2
    
    
    
    174
    
    
    
    47.8
    
    
    
    344
    
    
    
    117.0
   28




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##### Table of Contents



Acreage
  Developed(a)
    
    
    Undeveloped(a)
    
    
    TotalGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetOnshore Gulf Coast
    
    
    20,064
    
    
    
    9,426
    
    
    
    22,549
    
    
    
    14,867
    
    
    
    42,613
    
    
    
    24,293Anadarko Basin
    
    
    48,375
    
    
    
    17,644
    
    
    
    14,222
    
    
    
    13,804
    
    
    
    62,597
    
    
    
    31,448Rocky Mountains
    
    
    24,068
    
    
    
    19,670
    
    
    
    374,426
    
    
    
    316,509
    
    
    
    398,494
    
    
    
    336,179West Texas & Other
    
    
    15,420
    
    
    
    5,682
    
    
    
    7,460
    
    
    
    1,878
    
    
    
    22,880
    
    
    
    7,560Total
    
    
    107,927
    
    
    
    52,422
    
    
    
    418,657
    
    
    
    347,058
    
    
    
    526,584
    
    
    
    399,480
 
 (a)
    
    Does not include acreage for which assignments have not been received.  Acres ExpiringTwelve Months Ending:
    
    Gross
    
    
    NetDecember 31, 2009
    
    
    73,420
    
    
    
    57,236December 31, 2010
    
    
    63,641
    
    
    
    48,513December 31, 2011
    
    
    111,877
    
    
    
    92,653December 31, 2012
    
    
    81,588
    
    
    
    71,523December 31, 2013
    
    
    39,077
    
    
    
    39,077Thereafter
    
    
    49,054
    
    
    
    38,056Total
    
    
    418,657
    
    
    
    347,058
   Volumes, Prices and Production Costs
   29




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##### Table of Contents



Year Ended December 31,2008
    
    
    2007
    
    
    2006Production:Oil (MBbls)
    
    
    578
    
    
    
    392
    
    
    
    442Natural gas (MMcf)
    
    
    7,996
    
    
    
    12,626
    
    
    
    10,603Natural gas equivalent (MMcfe)
    
    
    11,463
    
    
    
    14,978
    
    
    
    13,254Average oil prices:Oil price (per Bbl)
    
    $
    89.06
    
    
    $
    72.30
    
    
    $
    64.04Oil price including derivative settlement gains (losses) (per Bbl)
    
    $
    84.63
    
    
    $
    71.51
    
    
    $
    64.39Oil price including derivative settlements and unrealized gains
(losses) (per Bbl)
    
    $
    89.79
    
    
    $
    65.57
    
    
    $
    64.79Average natural gas prices:Natural gas price (per Mcf)
    
    $
    9.21
    
    
    $
    7.30
    
    
    $
    6.74Natural gas price including derivative settlement gains (losses)
(per Mcf)
    
    $
    9.08
    
    
    $
    7.66
    
    
    $
    7.09Natural gas price including derivative settlements and unrealized
gains (losses) (per Mcf)
    
    $
    9.48
    
    
    $
    7.38
    
    
    $
    7.31Average equivalent prices:Natural gas equivalent price (per Mcfe)
    
    $
    10.91
    
    
    $
    8.05
    
    
    $
    7.53Natural gas equivalent price including derivative settlement
gains (losses) (per Mcfe)
    
    $
    10.60
    
    
    $
    8.33
    
    
    $
    7.82Natural gas equivalent price including derivative settlements and
unrealized gains (losses) (per Mcfe)
    
    $
    11.14
    
    
    $
    7.94
    
    
    $
    8.01Average production costs(per Mcfe):Lease operating expenses (includes costs for operating and
maintenance and expensed workovers)
    
    $
    0.98
    
    
    $
    0.61
    
    
    $
    0.69Ad valorem taxes
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    0.12Production taxes
    
    $
    0.47
    
    
    $
    0.17
    
    
    $
    0.30
 
 Item 3. Legal Proceedings
   
 Item 4. Submission of Matters to a Vote of Security Holders
   30




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##### Table of Contents



Executive Officers of the Registrant
  Name
    
    Age
    
    PositionBen M. Brigham
    
    
    49
    
    
    Chief Executive Officer, President and ChairmanEugene B. Shepherd, Jr.
    
    
    50
    
    
    Executive Vice President and Chief Financial OfficerDavid T. Brigham
    
    
    48
    
    
    Executive Vice President  Land and Administration
and DirectorA. Lance Langford
    
    
    46
    
    
    Executive Vice President  OperationsJeffery E. Larson
    
    
    50
    
    
    Executive Vice President  Exploration
 Ben M. Bud Brigham
 Eugene B. Shepherd, Jr.
 David T. Brigham
 A. Lance Langford
 Jeffery E. Larson
  31




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##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Price Range of Common Stock, Performance Graph, and Dividend Policy
  High
    
    
    Low2007:First Quarter
    
    $
    7.44
    
    
    $
    5.30Second Quarter
    
    
    6.85
    
    
    
    5.61Third Quarter
    
    
    6.12
    
    
    
    4.17Fourth Quarter
    
    
    8.08
    
    
    
    5.662008:First Quarter
    
    $
    8.16
    
    
    $
    4.86Second Quarter
    
    
    18.29
    
    
    
    5.76Third Quarter
    
    
    17.62
    
    
    
    10.00Fourth Quarter
    
    
    10.91
    
    
    
    2.30
    32




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33




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##### Table of Contents



Securities Authorized for Issuance under Equity Compensation Plans
  Number ofSecuritiesNumber of
    
    
    
    
    
    
    RemainingSecurities to be
    
    
    
    
    
    
    Available forIssued upon
    
    
    Weighted-
    
    
    Future IssuanceExercise of
    
    
    Average Price of
    
    
    Under EquityOutstanding
    
    
    Outstanding
    
    
    CompensationPlan Category
    
    Options
    
    
    Options
    
    
    PlansEquity compensation
plans approved by
security holders(a)
    
    
    3,128,651
    
    
    $
    7.00
    
    
    
    686,363Equity compensation
plans not approved
by security holders
    
    
    
    
    
    NA
    
    
    
    Total
    
    
    3,128,651
    
    
    $
    7.00
    
    
    
    686,363
 
 (a)
    
    Does not include 593,260 shares of restricted stock issued and outstanding at December 31,
2008. Issuer Purchases of Equity Securities
  Total Number of
    
    Average PricePeriod
    
    Shares Purchased
    
    Paid per ShareOctober 2008
    
    
    
    2,420

    
    $
    
    5.08
 
 Item 6. Selected Consolidated Financial Data
   34




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##### Table of Contents



Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands, except per share information)Statement of Operations Data:Revenues:Oil and natural gas sales
    
    $
    125,108
    
    
    $
    120,557
    
    
    $
    102,835
    
    
    $
    96,820
    
    
    $
    71,713Gain (loss) on derivatives, net
    
    
    2,548
    
    
    
    (1,664
    )
    
    
    3,335
    
    
    
    
    
    
    
    Other revenue
    
    
    132
    
    
    
    88
    
    
    
    127
    
    
    
    220
    
    
    
    515Total revenues
    
    
    127,788
    
    
    
    118,981
    
    
    
    106,297
    
    
    
    97,040
    
    
    
    72,228Costs and expenses:Lease operating
    
    
    12,363
    
    
    
    10,704
    
    
    
    10,701
    
    
    
    7,161
    
    
    
    6,173Production taxes
    
    
    5,374
    
    
    
    2,541
    
    
    
    4,021
    
    
    
    3,353
    
    
    
    3,107General and administrative
    
    
    9,557
    
    
    
    9,276
    
    
    
    7,887
    
    
    
    5,533
    
    
    
    5,392Depletion of oil and natural gas properties
    
    
    53,498
    
    
    
    59,079
    
    
    
    46,386
    
    
    
    33,268
    
    
    
    23,844Impairment of oil and natural gas properties
    
    
    237,180
    
    
    
    6,505
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    629
    
    
    
    613
    
    
    
    537
    
    
    
    762
    
    
    
    722Accretion of
discount on asset retirement obligations
    
    
    361
    
    
    
    379
    
    
    
    317
    
    
    
    180
    
    
    
    159Total costs and expenses
    
    
    318,962
    
    
    
    89,097
    
    
    
    69,849
    
    
    
    50,257
    
    
    
    39,397Operating income (loss)
    
    
    (191,174
    )
    
    
    29,884
    
    
    
    36,448
    
    
    
    46,783
    
    
    
    32,831Other income (expense):Interest income
    
    
    191
    
    
    
    654
    
    
    
    1,207
    
    
    
    245
    
    
    
    84Interest expense, net
    
    
    (14,495
    )
    
    
    (14,622
    )
    
    
    (9,688
    )
    
    
    (3,980
    )
    
    
    (3,144
    )Gain loss on derivatives, net
    
    
    
    
    
    
    
    
    
    
    3,213
    
    
    
    (814
    )
    
    
    625Other income (expense)
    
    
    530
    
    
    
    1,022
    
    
    
    1,352
    
    
    
    238
    
    
    
    117Total other income (expense )
    
    
    (13,774
    )
    
    
    (12,946
    )
    
    
    (3,916
    )
    
    
    (4,311
    )
    
    
    (2,318
    )Income (loss) before income taxes and
cumulative effect of change in accounting
principle
    
    $
    (204,948
    )
    
    $
    16,938
    
    
    $
    32,532
    
    
    $
    42,472
    
    
    $
    30,513Income tax benefit (expense):Current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred
    
    
    42,701
    
    
    
    (6,728
    )
    
    
    (12,744
    )
    
    
    (15,037
    )
    
    
    (10,863
    )42,701
    
    
    
    (6,728
    )
    
    
    (12,744
    )
    
    
    (15,037
    )
    
    
    (10,863
    )Net income (loss) available to common
stockholders
    
    $
    (162,247
    )
    
    $
    10,210
    
    
    $
    19,788
    
    
    $
    27,435
    
    
    $
    19,650Net income (loss) per share available to
common shareholders:Basic
    
    $
    (3.57
    )
    
    $
    0.23
    
    
    $
    0.44
    
    
    $
    0.65
    
    
    $
    0.49Diluted
    
    
    (3.57
    )
    
    
    0.22
    
    
    
    0.43
    
    
    
    0.63
    
    
    
    0.47Weighted average shares outstanding:Basic
    
    
    45,441
    
    
    
    45,110
    
    
    
    45,017
    
    
    
    42,481
    
    
    
    40,445Diluted
    
    
    45,441
    
    
    
    45,531
    
    
    
    45,597
    
    
    
    43,728
    
    
    
    41,616
  35




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##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands)Statement of Cash Flows Data:Net cash provided (used) by:Operating activities
    
    $
    69,630
    
    
    $
    90,449
    
    
    $
    88,687
    
    
    $
    64,379
    
    
    $
    56,381Investing activities
    
    
    (179,866
    )
    
    
    (99,093
    )
    
    
    (171,747
    )
    
    
    (113,220
    )
    
    
    (84,645
    )Financing activities
    
    
    136,416
    
    
    
    18,207
    
    
    
    83,385
    
    
    
    50,535
    
    
    
    24,766Balance Sheet Data:Cash and cash equivalents
    
    $
    40,043
    
    
    $
    13,863
    
    
    $
    4,300
    
    
    $
    3,975
    
    
    $
    2,281Oil and natural gas
properties, using the full
cost method of accounting,
net
    
    
    404,839
    
    
    
    510,207
    
    
    
    485,525
    
    
    
    347,329
    
    
    
    261,979Total assets
    
    
    489,056
    
    
    
    548,428
    
    
    
    522,587
    
    
    
    380,427
    
    
    
    286,307Long-term debt
    
    
    303,730
    
    
    
    168,492
    
    
    
    149,334
    
    
    
    63,100
    
    
    
    41,000Series A preferred stock,
mandatorily redeemable
    
    
    10,101
    
    
    
    10,101
    
    
    
    10,101
    
    
    
    10,101
    
    
    
    9,520Total stockholders equity
    
    
    121,269
    
    
    
    279,027
    
    
    
    266,015
    
    
    
    241,640
    
    
    
    183,276
 
 Item 7.

Managements Discussion and Analysis of Financial Condition and Results of Operations
  Sources of Our Revenues
   Components of Our Cost Structure
 Production Costs
 
    
    Lease operating expenses are generally comprised of several components including: the
cost of labor and supervision to operate our wells and related equipment; repairs and
maintenance; fluid treatment and disposal; related materials, supplies, and fuel; and
insurance applicable to our wells and related facilities and equipment. Lease operating
expenses also include the cost for expensed workovers. Lease operating expenses are driven
in part by the type of commodity produced, the level of workover activity and the
geographical location of the properties. Oil is inherently more expensive to produce than
natural gas.
 
    
    Lease operating expenses also include ad valorem taxes, which are imposed by local
taxing authorities such as school districts, cities, and counties or boroughs. The amount
of tax we pay is based on a percent of value of the property assessed or determined by the
taxing authority on an annual basis. When oil and natural gas prices rise, the value of our
underlying property interests increase, which results in higher ad valorem taxes.
  36




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##### Table of Contents




    
    In the U.S., there are a variety of state and federal taxes levied on the production of
oil and natural gas. These are commonly grouped together and referred to as production
taxes. The majority of our production tax expense is based on a percent of gross value
realized at the wellhead at the time the production is sold or removed from the lease. As a
result, our production tax expense increases when oil and gas prices rise.
 
    
    Historically, taxing authorities have occasionally encouraged the oil and natural gas
industry to explore for new oil and natural gas reserves, or to develop high cost reserves,
through reduced tax rates or tax credits. These incentives have been narrow in scope and
short-lived. A small number of our wells have qualified for reduced production taxes
because they were discoveries based on the use of 3-D seismic or they are high cost wells.
 Depreciation, Depletion and Amortization
 Asset Retirement Accretion Expense
 General and Administrative Expense
 Interest.
 Income Taxes.
 Capital Commitments
  Overview of Activity
   37




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38




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##### Table of Contents



Capital Expenditures
  
    
    cost of acquiring and maintaining our lease acreage position and our seismic resources;
    
    cost of drilling and completing new oil and natural gas wells;
    
    cost of installing new production infrastructure;
    
    cost of maintaining, repairing and enhancing existing oil and natural gas wells;
    
    cost related to plugging and abandoning unproductive or uneconomic wells; and
    
    indirect costs related to our exploration activities, including payroll and other
expenses attributable to our exploration professional staff.
   2009(In millions)Drilling
    
    $
    26.7Net land and seismic
    
    
    (2.4
    )Capitalized costs
    
    
    12.5Other non-oil & gas assets
    
    
    0.3Total
    
    $
    37.1
  
    
    commodity prices;
 
    
    production from our existing producing wells;
 
    
    the results of our current exploration and development drilling efforts;
 
    
    economic conditions at the time of drilling;
 
    
    industry conditions at the time of drilling, including the availability of drilling and
completion equipment;
 
    
    our liquidity and the availability of external sources of financing; and
 
    
    the availability of more economically attractive prospects.
     39




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##### Table of Contents



Contractual Obligations
  Payments Due by Year2011-
    
    
    2013 andTotal
    
    
    2009
    
    
    2010
    
    
    2012
    
    
    Thereafter(In thousands)Debt:Senior Notes
    
    $
    160,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    160,000Senior credit agreement
    
    
    145,000
    
    
    
    
    
    
    
    145,000
    
    
    
    
    
    
    
    Mandatorily redeemable, Series A preferred stock
    
    
    10,101
    
    
    
    
    
    
    
    10,101
    
    
    
    
    
    
    
    Total
    
    $
    315,101
    
    
    $
    
    
    
    $
    155,101
    
    
    $
    
    
    
    $
    160,000Other commitments:Interest, Senior Notes(a)
    
    $
    84,700
    
    
    $
    15,400
    
    
    $
    15,400
    
    
    $
    30,800
    
    
    $
    23,100Interest, senior credit agreement(b)
    
    
    5,813
    
    
    $
    3,900
    
    
    $
    1,913
    
    
    
    
    
    
    
    Dividend
Mandatorily redeemable, Series A preferred stock(c)
    
    
    1,110
    
    
    
    606
    
    
    
    504
    
    
    
    
    
    
    
    Non-cancelable operating leases
    
    
    2,541
    
    
    
    704
    
    
    
    721
    
    
    
    1,116
    
    
    
    Total
    
    $
    409,265
    
    
    $
    20,610
    
    
    $
    173,639
    
    
    $
    31,916
    
    
    $
    183,100
 
 (a)
    
    Calculated assuming $160 million of Senior Notes outstanding and an interest rate of 9.625%.
The payments are made in May and November until maturity in May 2014.(b)
    
    Calculated assuming $145.0 million outstanding under our senior credit agreement, an interest
rate of 2.69% and maturity in June 2010. This interest rate assumes that we utilize
approximately 100% of the available borrowing base during the period and a Eurodollar rate of
0.44% plus a margin of 2.25%. The Eurodollar rate used for the calculation is the one month
Eurodollar rate on December 31, 2008. The amount of interest that we pay on amounts borrowed
under our senior credit agreement will fluctuate over time as borrowings increase or decrease,
as the applicable Eurodollar rate increases and decreases and as the applicable interest rate
increases or decreases. See Item 7A. Quantitative and Qualitative Disclosures About Market
Risk  Interest Rate Risk.(c)
    
    Calculated assuming $10.1 million of Series A preferred stock outstanding, a cash dividend of
6% per annum and a maturity of October 31, 2010.   40




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Results of Operations
 Comparison of the twelve-month periods ended December 31, 2008, 2007 and 2006
 Production volumes
 Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006Oil (MBbls)
    
    
    578
    
    
    
    47
    %
    
    
    392
    
    
    
    (11
    %)
    
    
    442Natural gas (MMcf)
    
    
    7,996
    
    
    
    (37
    %)
    
    
    12,626
    
    
    
    19
    %
    
    
    10,603Total (MMcfe)(1)
    
    
    11,463
    
    
    
    (23
    %)
    
    
    14,978
    
    
    
    13
    %
    
    
    13,254Average daily production (MMcfe/d)
    
    
    31.8
    
    
    
    
    
    
    
    41.6
    
    
    
    
    
    
    
    36.8
 
 (1)
    
    MMcfe is defined as one million cubic feet equivalent of natural gas, determined using the
ratio of six MMcf of natural gas to one MBbl of crude oil, condensate or natural gas liquids.   
    
    Production from our Onshore Gulf Coast province for 2008 decreased 36% when compared to
2007. The decrease in production was attributable to the lower activity levels in the
Vicksburg where we drilled five wells in 2007 versus three wells in 2008. The decrease was
also attributable to the natural decline in our Southern Louisiana wells. Despite drilling
three successful wells in Southern Louisiana in 2008, we did not hook up to production the
first of these wells until December 2008. Our attempts to hook up these wells were
negatively impacted by both Hurricanes Gustav and Ike, which impacted the Southern
Louisiana area and affected the service providers that we utilize to hook up our wells.
Production from this province represented 61% of our total production in 2008 versus 73% in
2007. Approximately 87% of our 2008 production from this province was natural gas compared
to 89% in 2007.
 
    
    Production from our Anadarko Basin province for 2008 decreased 33% when compared to
2007. The decrease in our production volumes was due to the natural decline in our wells
and a lower activity level as we completed three wells in the province during 2007 versus
only two in 2008. Production from this province represented 17% of our total production in
2008 versus 20% in 2007. Approximately 93% of our 2008 production from this province was
natural gas compared to 94% in 2007.
 
    
    Production from our Rocky Mountains province for 2008 increased 513% when compared to
2007. The production increase is attributable to the rapid escalation of our drilling
activities in the Williston Basin, where we drilled 56 gross (11 net wells) during 2008.
Production from this province represented 15% of our total production in 2008 versus 2% in
2007. Approximately 97% of our 2008 production from this province was oil compared to 90%
in 2007.
 
    
    Production from our West Texas & Other province for 2008 decreased 7% when compared to
2007. The decrease in production was attributable to natural well production declines.
Production from this province represented 7% of our total production in 2008 versus 6% in
2007. Approximately 88% of our 2008 production from this province was oil compared to 86%
in 2007.
   41




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##### Table of Contents




    
    Production from our Onshore Gulf Coast province for 2007 increased 36% when compared to
2006, which was largely driven by our Bayou Postillion project in Southern Louisiana.
Production from this province represented 73% of our total production in 2007 versus 61% in
2006. Approximately 89% of our 2007 production from this province was natural gas compared
to 82% in 2006.
 
    
    Production from our Anadarko Basin province for 2007 decreased 29% when compared to
2006. The decrease in our production volumes was due to the natural decline of the wells as
well as the temporary abandonment of our Mills Ranch 98-2 because of mechanical
difficulties. Production from this province represented 20% of our total production in 2007
versus 31% in 2006. Approximately 94% of our 2007 production from this province was natural
gas compared to 92% in 2006.
 
    
    Production from our Rocky Mountains province for 2007 increased 167% when compared to
2006. The production increase is attributable to our wells in North Dakota being on line
for a full year as well as our increased level of activity in the Mowry during 2007.
Production from this province represented 2% of our total production in 2007 versus 1% in
2006. Approximately 90% of our 2007 production from this province was oil compared to 92%
in 2006.
 
    
    Production from our West Texas & Other province for 2007 decreased 12% when compared to
2006. The decrease in production was due to the natural decline of the wells. Production
from this province represented 6% of our total production in 2007 versus 7% in 2006.
Approximately 86% of our 2007 production from this province was oil compared to 83% in
2006.
  42




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##### Table of Contents



Revenue, commodity prices and hedging
  Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006(In thousands, except per unit measurements)Oil revenue:Oil revenue
    
    $
    51,449
    
    
    
    81
    %
    
    $
    28,347
    
    
    
    0
    %
    
    $
    28,291Oil derivative settlement gains (losses)
    
    
    (2,564
    )
    
    
    724
    %
    
    
    (311
    )
    
    NM
    
    
    
    157Oil revenue including oil derivative
settlements
    
    $
    48,885
    
    
    
    74
    %
    
    $
    28,036
    
    
    
    (1
    %)
    
    $
    28,448Oil derivative unrealized gains (losses)
    
    
    2,983
    
    
    NM
    
    
    
    (2,328
    )
    
    NM
    
    
    
    175Oil revenue including derivative
settlements and unrealized gains
(losses)
    
    
    51,868
    
    
    
    102
    %
    
    
    25,708
    
    
    
    (10
    %)
    
    
    28,623Natural gas revenue:Natural gas revenue
    
    $
    73,659
    
    
    
    (20
    %)
    
    $
    92,210
    
    
    
    29
    %
    
    $
    71,503Natural gas derivative settlement gains
(losses)
    
    
    (1,028
    )
    
    NM
    
    
    
    4,478
    
    
    
    23
    %
    
    
    3,639Natural gas revenue including
derivative settlements
    
    $
    72,631
    
    
    
    (25
    %)
    
    $
    96,688
    
    
    
    29
    %
    
    $
    75,142Natural gas derivative unrealized gains
(losses)
    
    
    3,157
    
    
    NM
    
    
    
    (3,503
    )
    
    NM
    
    
    
    2,405Natural gas revenue including
derivative settlements and unrealized
gains (losses)
    
    
    75,788
    
    
    
    (19
    %)
    
    
    93,185
    
    
    
    20
    %
    
    
    77,547Oil and natural gas revenue:Oil and natural gas revenue
    
    $
    125,108
    
    
    
    4
    %
    
    $
    120,557
    
    
    
    21
    %
    
    $
    99,794Oil and natural gas derivative
settlement gains (losses)
    
    
    (3,592
    )
    
    NM
    
    
    
    4,167
    
    
    
    10
    %
    
    
    3,796Oil and natural gas revenue including
derivative settlement gains (losses)
    
    
    121,516
    
    
    
    (3
    %)
    
    
    124,724
    
    
    
    20
    %
    
    
    103,590Oil and natural gas derivative
unrealized gains (losses)
    
    
    6,140
    
    
    NM
    
    
    
    (5,831
    )
    
    NM
    
    
    
    2,580Oil and natural gas revenue including
derivative settlements and unrealized
gains (losses)
    
    
    127,656
    
    
    
    7
    %
    
    
    118,893
    
    
    
    12
    %
    
    
    106,170Other revenue
    
    
    132
    
    
    
    50
    %
    
    
    88
    
    
    
    (31
    %)
    
    
    127Total revenue
    
    $
    127,788
    
    
    
    7
    %
    
    $
    118,981
    
    
    
    12
    %
    
    $
    106,297Average oil prices:Oil price (per Bbl)
    
    $
    89.06
    
    
    
    23
    %
    
    $
    72.30
    
    
    
    13
    %
    
    $
    64.04Oil price including derivative
settlement gains (losses) (per Bbl)
    
    $
    84.63
    
    
    
    18
    %
    
    $
    71.51
    
    
    
    11
    %
    
    $
    64.39Oil price including derivative
settlements and unrealized gains
(losses) (per Bbl)
    
    $
    89.79
    
    
    
    37
    %
    
    $
    65.57
    
    
    
    1
    %
    
    $
    64.79Average natural gas prices:Natural gas price (per Mcf)
    
    $
    9.21
    
    
    
    26
    %
    
    $
    7.30
    
    
    
    8
    %
    
    $
    6.74Natural gas price including derivative
settlement gains (losses) (per Mcf)
    
    $
    9.08
    
    
    
    19
    %
    
    $
    7.66
    
    
    
    8
    %
    
    $
    7.09
  43




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##### Table of Contents



Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006(In thousands, except per unit measurements)Natural gas price including derivative
settlements and unrealized gains
(losses) (per Mcf)
    
    $
    9.48
    
    
    
    28
    %
    
    $
    7.38
    
    
    
    1
    %
    
    $
    7.31Average equivalent prices:Natural gas equivalent price (per Mcfe)
    
    $
    10.91
    
    
    
    36
    %
    
    $
    8.05
    
    
    
    7
    %
    
    $
    7.53Natural gas equivalent price including
derivative settlement gains (losses)
(per Mcfe)
    
    $
    10.60
    
    
    
    27
    %
    
    $
    8.33
    
    
    
    7
    %
    
    $
    7.82Natural gas equivalent price including
derivative settlements and unrealized
gains (losses) (per Mcfe)
    
    $
    11.14
    
    
    
    40
    %
    
    $
    7.94
    
    
    
    (1
    %)
    
    $
    8.01
 2007
    
    
    2006to 2008
    
    to 2007Change in revenue from the sale of oilPrice variance impact
    
    $
    9,684
    
    
    $
    3,240Volume variance impact
    
    
    13,418
    
    
    
    (3,184
    )Cash settlement of derivative hedging contracts
    
    
    (2,253
    )
    
    
    (468
    )Unrealized gains (losses) due to derivative hedging contracts
    
    
    5,311
    
    
    
    (2,503
    )Total change
    
    $
    26,160
    
    
    $
    (2,915
    )Change in revenue from the sale of natural gasPrice variance impact
    
    $
    15,286
    
    
    $
    7,110Volume variance impact
    
    
    (33,837
    )
    
    
    13,597Cash settlement of derivative hedging contracts
    
    
    (5,506
    )
    
    
    839Unrealized gains (losses) due to derivative hedging contracts
    
    
    6,660
    
    
    
    (5,908
    )Total change
    
    $
    (17,397
    )
    
    $
    15,638Change in revenue from the sale of oil and natural gasPrice variance impact
    
    $
    24,970
    
    
    $
    10,350Volume variance impact
    
    
    (20,419
    )
    
    
    10,413Cash settlement of derivative hedging contracts
    
    
    (7,759
    )
    
    
    371Unrealized gains (losses) due to derivative hedging contracts
    
    
    11,971
    
    
    
    (8,411
    )Total change
    
    $
    8,763
    
    
    $
    12,723
  
    
    A 36% increase in the average natural gas equivalent price increased revenue by $25.0
million;
 
    
    A $6.1 million unrealized gain due to derivative hedging contracts in 2008 versus a
$5.8 million unrealized loss due to derivative hedging contracts in 2007 increased revenue
by $12.0 million;
 
    

A 23% decrease in our production volumes decreased revenue by
$20.4 million; and
 
    
    A $3.6 million loss from the settlement of derivative contracts in 2008 versus a $4.2
million settlement gain in 2007 decreased revenue by $7.8 million.
  44




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##### Table of Contents




    

An 13% increase in our production volumes increased revenue
by $10.4 million;
 
    
    An 7% increase in the average natural gas equivalent price increased revenue by $10.4
million;
 
    
    A $4.2 million gain from the settlement of derivative contracts in 2007 versus a $3.8
million settlement gain in 2006 increased revenue by $0.4 million; and
 
    
    A $5.8 million unrealized loss due to derivative hedging contracts in 2007 versus a
$2.6 million unrealized gain due to derivative hedging contracts in 2006 decreased revenue
by $8.4 million.
 Other revenue.
 Hedging.
  Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006Oil collars and three way
costless collarsVolumes (Bbls)
    
    
    182,500
    
    
    
    (31
    %)
    
    
    263,000
    
    
    
    59
    %
    
    
    165,000Average floor price (per Bbl)
    
    $
    69.55
    
    
    
    22
    %
    
    $
    56.82
    
    
    
    2
    %
    
    $
    55.86Average ceiling price (per Bbl)
    
    $
    93.82
    
    
    
    15
    %
    
    $
    81.50
    
    
    
    7
    %
    
    $
    76.23Gain /(loss) upon settlement

(in
thousands)
    
    $
    (2,564
    )
    
    
    724
    %
    
    $
    (311
    )
    
    NM
    
    
    $
    157Natural gas collars and three
way costless collarsVolumes (MMbtu)
    
    
    4,850,000
    
    
    
    (35
    %)
    
    
    7,425,000
    
    
    
    82
    %
    
    
    4,070,000Average floor price (per MMbtu)
    
    $
    7.65
    
    
    
    4
    %
    
    $
    7.34
    
    
    
    (7
    %)
    
    $
    7.90Average ceiling price (per MMbtu)
    
    $
    10.75
    
    
    
    (13
    %)
    
    $
    12.40
    
    
    
    (13
    %)
    
    $
    14.33Gain /(loss) upon settlement
 (in
thousands)
    
    $
    (1,028
    )
    
    NM
    
    
    $
    4,478
    
    
    
    23
    %
    
    $
    3,639
  45




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##### Table of Contents



Operating costs and expenses
 Production costs.
 Unit-of-Production(Per Mcfe)Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006Production costs:Operating & maintenance
    
    $
    0.82
    
    
    
    52
    %
    
    $
    0.54
    
    
    
    (14
    %)
    
    $
    0.63Expensed workovers
    
    
    0.16
    
    
    
    129
    %
    
    
    0.07
    
    
    
    17
    %
    
    
    0.06Ad valorem taxes
    
    
    0.10
    
    
    
    0
    %
    
    
    0.10
    
    
    
    (17
    %)
    
    
    0.12Lease operating expenses
    
    $
    1.08
    
    
    
    52
    %
    
    $
    0.71
    
    
    
    (12
    %)
    
    $
    0.81Production taxes
    
    
    0.47
    
    
    
    176
    %
    
    
    0.17
    
    
    
    (43
    %)
    
    
    0.30Production costs
    
    $
    1.55
    
    
    
    76
    %
    
    $
    0.88
    
    
    
    (21
    %)
    
    $
    1.11
 Amount(In thousands)Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006Production costs:Operating & maintenance
    
    $
    9,399
    
    
    
    15
    %
    
    $
    8,153
    
    
    
    (1
    %)
    
    $
    8,267Expensed workovers
    
    
    1,851
    
    
    
    69
    %
    
    
    1,097
    
    
    
    38
    %
    
    
    797Ad valorem taxes
    
    
    1,113
    
    
    
    (23
    %)
    
    
    1,454
    
    
    
    (11
    %)
    
    
    1,637Lease operating expenses
    
    $
    12,363
    
    
    
    15
    %
    
    $
    10,704
    
    
    
    0
    %
    
    $
    10,701Production taxes
    
    
    5,374
    
    
    
    111
    %
    
    
    2,541
    
    
    
    (37
    %)
    
    
    4,021Production costs
    
    $
    17,737
    
    
    
    34
    %
    
    $
    13,245
    
    
    
    (10
    %)
    
    $
    14,722
  
    
    O&M expenses increased 52%, or by $0.28 per Mcfe, due to increases in salt water
disposal, compressor rental and fuel costs;
 
    
    Production taxes increased 176%, or by $0.30 per Mcfe, due to a $2.7 million decrease
in gas production tax abatements in 2008 as compared to 2007; and
 
    
    Expensed workovers increased 129%, or by $0.09 per Mcfe, due to an increase in the
number and cost of our workovers in 2008.
  
    
    Production taxes decreased 43%, or by $0.13 per Mcfe, due to an increase in tax credits
associated with high cost gas production tax abatements. The increase in tax credits is
partially attributable to the fact that we are recording credits immediately upon
commencing production from our Vicksburg and Mills Ranch wells given our 100% success rate
in applying for credits rather than deferring recognition until receiving approval from the
relevant government authority;
 
    
    O&M expenses decreased 14%, or by $0.09 per Mcfe. Decreases in salt water disposal,
chemical treating, and equipment rental accounted for approximately 85% of the per unit
change. The divestiture of our Granite Wash assets in September 2007 reduced salt water
disposal and chemical treating costs. In South Texas, we elected to purchase production
equipment thereby reducing our equipment rental costs;
 
    
    Ad valorem taxes decreased 17%, or by $0.02 per Mcfe, due to a decrease in property
valuations for our oil and natural gas properties because of lower commodity prices at
year-end 2006, which were the basis for determining property tax rates for 2007; and
 
    
    Expensed workovers increased 17%, or by $0.01 per Mcfe, due to a higher level of
workover activity in 2007.
  46




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##### Table of Contents



General and administrative expenses
 Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006(In thousands, except per unit measurements)General and administrative costs
    
    $
    17,551
    
    
    
    1
    %
    
    $
    17,442
    
    
    
    21
    %
    
    $
    14,439Capitalized general and
administrative costs
    
    
    (7,994
    )
    
    
    (2
    %)
    
    
    (8,166
    )
    
    
    25
    %
    
    
    (6,552
    )General and
administrative expenses
    
    $
    9,557
    
    
    
    3
    %
    
    $
    9,276
    
    
    
    18
    %
    
    $
    7,887General and administrative
expenses (per Mcfe)
    
    $
    0.83
    
    
    
    34
    %
    
    $
    0.62
    
    
    
    3
    %
    
    $
    0.60
  
    
    Total compensation expense decreased by $0.8 million from 2007 to 2008 due to lower
levels of employee bonuses; and
 
    
    Contract and professional fees increased by $0.6 million from 2007 to 2008 due to
higher legal and audit fees.
  
    
    Increases in payroll, benefits expense, bonuses and FICA tax totaled $1.4 million. This
increase was primarily because of an increase in employee salaries for retention purposes;
and
 
    
    Increases in non-cash stock compensation costs increased general and administrative
costs by $1.1 million.
 Depletion of oil and natural gas properties.
 Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006(In thousands, except per unit measurements)Depletion of oil
and natural gas
properties
    
    $
    53,498
    
    
    
    (9
    %)
    
    $
    59,079
    
    
    
    27
    %
    
    $
    46,386Depletion of oil
and natural gas
properties (per
Mcfe)
    
    $
    4.67
    
    
    
    19
    %
    
    $
    3.94
    
    
    
    13
    %
    
    $
    3.50
    47




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##### Table of Contents



Impairment of oil and natural gas properties
   Net interest expense.
 Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006(In thousands)Interest on Senior Notes
    
    $
    15,401
    
    
    
    6
    %
    
    $
    14,483
    
    
    
    68
    %
    
    $
    8,632Interest on senior credit facility
    
    
    1,960
    
    
    
    3
    %
    
    
    1,900
    
    
    
    156
    %
    
    
    743Interest on senior subordinated notes(a)
    
    
    
    
    
    NM
    
    
    
    
    
    
    
    (100
    %)
    
    
    699Commitment fees
    
    
    256
    
    
    
    54
    %
    
    
    166
    
    
    
    (5
    %)
    
    
    174Dividend on
mandatorily redeemable preferred stock
    
    
    608
    
    
    
    0
    %
    
    
    606
    
    
    
    0
    %
    
    
    606Amortization
of deferred loan and debt issuance cost
    
    
    1,032
    
    
    
    11
    %
    
    
    932
    
    
    
    (44
    %)
    
    
    1,665Other general interest expense
    
    
    
    
    
    
    (100
    %)
    
    
    2
    
    
    
    (60
    %)
    
    
    5Capitalized interest expense
    
    
    (4,762
    )
    
    
    37
    %
    
    
    (3,467
    )
    
    
    22
    %
    
    
    (2,836
    )Net interest expense
    
    $
    14,495
    
    
    
    (1
    )%
    
    $
    14,622
    
    
    
    51
    %
    
    $
    9,688Weighted average debt outstanding
    
    $
    220,116
    
    
    
    16
    %
    
    $
    189,080
    
    
    
    54
    %
    
    $
    123,031Average interest rate on outstanding
indebtedness(b)
    
    
    8.28
    %
    
    
    
    
    
    
    9.1
    %
    
    
    
    
    
    
    8.8
    %
 
 (a)
    
    Our senior subordinated notes were repaid in April 2006 in conjunction
with our Senior Notes issuance. The agreement was terminated upon
repayment. In conjunction with the termination of the subordinated
notes agreement, the associated interest rate swap was terminated. The
$0.8 million gain associated with the termination of the swap is
included within other income (expense).(b)
    
    Calculated as the sum of the interest on our outstanding indebtedness,
commitment fees that we pay on our unused borrowing capacity and the
dividend on our mandatorily redeemable preferred stock divided by the
weighted average debt and preferred stock outstanding for the period.  48




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##### Table of Contents



Other income (expense).
 Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006(In thousands)Derivative:Non-cash gain (loss) due to change in
fair market value of undesignated hedges
    
    $
    NA
    
    
    NM
    
    
    $
    NA
    
    
    NM
    
    
    $

    NANon-cash gain (loss) for ineffective
portion of cash flow hedges
    
    NA
    
    
    NM
    
    
    NA
    
    
    NM
    
    
    
    3,213Cash settlement of undesignated hedges
    
    NA
    
    
    NM
    
    
    NA
    
    
    NM
    
    
    NADerivative other income
    
    
    
    
    
    NM
    
    
    
    
    
    
    NM
    
    
    
    3,213Other:Gain (loss) on sale of inventory or assets
    
    
    
    
    
    
    (100
    %)
    
    
    71
    
    
    NM
    
    
    
    (64
    )Other income (loss)
    
    
    530
    
    
    
    (44
    %)
    
    
    951
    
    
    
    (33
    %)
    
    
    1,416Miscellaneous other income (loss)
    
    
    530
    
    
    
    (48
    %)
    
    
    1,022
    
    
    
    (24
    %)
    
    
    1,352Total other income (loss)
    
    $
    530
    
    
    
    (48
    %)
    
    $
    1,022
    
    
    
    (78
    %)
    
    $
    4,565
  Year Ended December 31,2006Written oil putsVolumes (Bbls)
    
    
    40,500Average price ($  per Bbl)
    
    $
    43.56Total oil hedgesVolumes (Bbls)
    
    
    40,500Average price ($  per Bbl)
    
    $
    43.56Written natural gas putsVolumes (MMbtu)
    
    
    1,510,000Average price ($  per MMbtu)
    
    $
    6.81Written natural gas basis swapsVolumes (MMbtu)
    
    
    1,260,000Average price ($per MMbtu)
    
    $
    0.20Total natural gas hedgesVolumes (MMbtu)
    
    
    2,770,000Average price ($  per MMbtu)
    
    $
    3.80
  49




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##### Table of Contents



Income taxes.
    Liquidity and Capital Resources
 Sources of Capital
   50




---



##### Table of Contents



9 5/8% Senior Notes due 2014
     
    
    rank equally in right of payment with all our existing and future senior indebtedness;
    
    rank senior to all of our future subordinated indebtedness; and
 
    
    are effectively junior in right of payment to all of our and the Guarantors existing
and future secured indebtedness, including debt of our senior credit agreement.
   Senior Credit Agreement
     51




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##### Table of Contents



Percent of
    
    
    
    
    EurodollarBorrowing Base
    
    
    
    
    Rate
    
    
    Base RateUtilized
    
    
    
    
    Advances
    
    
    Advances(1)< 50%
    
    
    
    
    
    1.500
    %
    
    
    0.000
    %50% and < 75%
    
    
    
    
    
    1.750
    %
    
    
    0.250
    %75% and < 90%
    
    
    
    
    
    2.000
    %
    
    
    0.500
    %≥ 90%
    
    
    
    
    
    2.250
    %
    
    
    0.750
    %
 
 (1)
    
    Base rate is defined as for any day a fluctuating rate per annum equal to the highest of the
following, in each case, to the extent determinable by the Administrative Agent: (a) the
Federal Funds Rate plus 1/2 of 1%, (b) the Eurodollar Rate with respect to Interest Periods of
one month determined as of approximately 11:00 a.m. (London time) on such day plus 1.50% and
(c) the rate of interest in effect for such day as publicly announced from time to time by
Bank of America as its prime rate. The prime rate is a rate set by Bank of America based
upon various factors including Bank of Americas costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate. Any change in such rate announced by
Bank of America shall take effect at the opening of business on the day specified in the
public announcement of such change.  Percent ofBorrowing Base
    
    
    
    
    QuarterlyUtilized
    
    
    
    
    Commitment Fee< 50%
    
    
    
    
    
    0.300
    %50% and < 75%
    
    
    
    
    
    0.375
    %75% and < 90%
    
    
    
    
    
    0.500
    %≥ 90%
    
    
    
    
    
    0.500
    %
   Mandatorily Redeemable Preferred Stock
   52




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##### Table of Contents



Access to Capital Markets
  Off Balance Sheet Arrangements
  Analysis of Changes In Cash and Cash Equivalents
  Year Ended December 31,2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006(In thousands)Net income
    
    $
    (162,247
    )
    
    NM
    
    
    $
    10,210
    
    
    
    (48
    %)
    
    $
    19,788Non-cash charges
    
    
    245,545
    
    
    
    199
    %
    
    
    82,004
    
    
    
    42
    %
    
    
    57,555Changes in working capital and other
items
    
    
    (13,668
    )
    
    
    674
    %
    
    
    (1,765
    )
    
    NM
    
    
    
    11,344Cash flows provided by operating
activities
    
    $
    69,630
    
    
    
    (23
    %)
    
    $
    90,449
    
    
    
    2
    %
    
    $
    88,687Cash flows used by investing activities
    
    
    (179,866
    )
    
    
    82
    %
    
    
    (99,093
    )
    
    
    (42
    %)
    
    
    (171,747
    )Cash flows provided (used) by
financing activities
    
    
    136,416
    
    
    
    649
    %
    
    
    18,207
    
    
    
    (78
    %)
    
    
    83,385Net increase (decrease) in cash and
cash equivalents
    
    $
    26,180
    
    
    
    174
    %
    
    $
    9,563
    
    
    
    2,842
    %
    
    $
    325
 Analysis of net cash provided by operating activities
  
    
    A 23% decrease in production volumes decreased operating cash flow by $20.4 million.
 
    
    Lower levels of hedge settlements decreased operating cash flow by $7.8 million.
 
    
    Higher lease operating costs, production taxes and general & administrative expense
decreased operating cash flow by $4.8 million.
 
    
    The change in working capital reduced operating cash flow by $11.9 million.
 
    
    These decreases in operating cash flow were partially offset by a 36% increase in
prices, which increased operating cash flow by $25.0 million.
  
    
    A 13% increase in our production volumes from 2006 to 2007 combined with a 7% increase
in prices including hedge settlements from 2006 to 2007 increased net cash provided by
operating activities by $21.1 million.
 
    
The change in working capital reduced operating cash flow by $13.1 million.
 
    
    An increase in net interest expense reduced cash provided by operating activities by
$4.9 million
 
    
    A reduction in interest income and other income reduced operating cash flow by $0.9
million.
  53




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##### Table of Contents



Working Capital
   Analysis of changes in cash flows used by investing activities
    54




---



##### Table of Contents



2008
    
    
    % Change
    
    
    2007
    
    
    % Change
    
    
    2006Capital expenditures for oil and
natural gas activities:Drilling
    
    $
    136,248
    
    
    
    41
    %
    
    $
    96,833
    
    
    
    (32
    %)
    
    $
    142,338Land and seismic
    
    
    35,796
    
    
    
    104
    %
    
    
    17,527
    
    
    
    (45
    %)
    
    
    31,683Capitalized cost
    
    
    12,852
    
    
    
    10
    %
    
    
    11,631
    
    
    
    17
    %
    
    
    9,954Capitalized asset retirement obligation
    
    
    412
    
    
    
    27
    %
    
    
    325
    
    
    
    (47
    %)
    
    
    609Total
    
    $
    185,308
    
    
    
    47
    %
    
    $
    126,316
    
    
    
    (32
    %)
    
    $
    184,584Reconciling Items:Granite Wash proceeds & ARO reduction
    
    $
    
    
    
    
    100
    %
    
    $
    (36,050
    )
    
    
    100
    %
    
    $
    Other property and equipment
    
    
    470
    
    
    
    24
    %
    
    
    378
    
    
    NM
    
    
    
    (213
    )Change in accrued drilling costs
    
    
    (4,927
    )
    
    NM
    
    
    
    8,469
    
    
    NM
    
    
    
    (11,092
    )Other
    
    
    (985
    )
    
    
    4825
    %
    
    
    (20
    )
    
    
    (99
    %)
    
    
    (1,532
    )Total Reconciling Items
    
    
    (5,442
    )
    
    
    (80
    %)
    
    
    (27,223
    )
    
    
    112
    %
    
    
    (12,837
    )Net cash used in investing activities
    
    $
    (179,866
    )
    
    
    82
    %
    
    $
    (99,093
    )
    
    
    (42
    %)
    
    $
    (171,747
    )
  55




---



##### Table of Contents



Analysis of changes in cash flows from financing activities
   Common Stock Transactions
   Shares Issued
    
    
    Net Proceeds2008 common stock transactions:Exercise of employee stock options
    
    
    385,715
    
    
    
    2,0662007 common stock transactions:Exercise of employee stock options
    
    
    123,500
    
    
    
    4722006 common stock transactions:Exercise of employee stock options
    
    
    95,100
    
    
    
    467
 Critical Accounting Policies
  Use of Estimates
  Oil and Natural Gas Reserves
   56




---



##### Table of Contents



Oil and Natural Gas Property
     57




---



##### Table of Contents



Asset Retirement Obligations
   Income Taxes
     58




---



##### Table of Contents



Revenue Recognition
     Derivative Instruments and Hedging Activities
    New Accounting Pronouncements
   59




---



##### Table of Contents



SEC
Rulemaking
   60




---



##### Table of Contents



Other Matters
 Commodity Prices
    Derivative Instruments
  Effects of Inflation and Changes in Prices
   61




---



##### Table of Contents



Environmental and Other Regulatory Matters
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Management Opinion Concerning Derivative Instruments
  Fair Value of Derivative Contracts
    Fair Value ofUndesignatedDerivativeContractsEstimated fair value of open contracts at December 31, 2007
    
    $
    (627
    )Changes in fair values of derivative contracts:Natural gas collars
    
    $
    4,011Oil collars
    
    
    5,546Settlements of derivative contracts that were open at December 31, 2007:Natural gas collars
    
    $
    (1,029
    )Oil collars
    
    
    (2,564
    )Estimated fair value of open contracts at December 31, 2008
    
    $
    5,337
  62




---



##### Table of Contents



Derivative Instruments and Hedging Activities
         63




---



##### Table of Contents



Natural
    
    
    Purchased
    
    
    WrittenGas
    
    
    Put
    
    
    CallSettlement Period
    
    (MMbtu)
    
    
    (Nymex)
    
    
    (Nymex)Natural Gas Costless Collars01/01/09 - 03/31/09
    
    
    150,000
    
    
    $
    7.75
    
    
    $
    9.8201/01/09 - 03/31/09
    
    
    90,000
    
    
    $
    8.00
    
    
    $
    10.2001/01/09 - 03/31/09
    
    
    150,000
    
    
    $
    8.00
    
    
    $
    7.9501/01/09 - 01/31/09
    
    
    80,000
    
    
    $
    10.25
    
    
    $
    12.2502/01/09 - 03/31/09
    
    
    140,000
    
    
    $
    10.25
    
    
    $
    12.2504/01/09 - 09/30/09
    
    
    300,000
    
    
    $
    7.00
    
    
    $
    7.5004/01/09 - 09/30/09
    
    
    120,000
    
    
    $
    7.25
    
    
    $
    9.8004/01/09 - 09/30/09
    
    
    420,000
    
    
    $
    8.00
    
    
    $
    8.0001/01/09 - 03/31/09
    
    
    90,000
    
    
    $
    5.50
    
    
    $
    7.9002/01/09 - 03/31/09
    
    
    120,000
    
    
    $
    5.75
    
    
    $
    7.5004/01/09 - 09/30/09
    
    
    240,000
    
    
    $
    5.75
    
    
    $
    7.50
 Natural
    
    
    Purchased
    
    
    Written
    
    
    WrittenGas
    
    
    Put
    
    
    Call
    
    
    PutSettlement Period
    
    (MMbtu)
    
    
    (Nymex)
    
    
    (Nymex)
    
    
    (Nymex)Natural Gas Three Way Costless Collars01/01/09 - 03/31/09
    
    
    150,000
    
    
    $
    8.00
    
    
    $
    10.35
    
    
    $
    4.5010/01/09 - 03/31/10
    
    
    420,000
    
    
    $
    8.00
    
    
    $
    10.00
    
    
    $
    5.5004/01/09 - 09/30/09
    
    
    420,000
    
    
    $
    6.25
    
    
    $
    8.80
    
    
    $
    4.75
 Natural
    
    
    WrittenGas
    
    
    SwapSettlement Period
    
    (MMbtu)
    
    
    (Nymex)Natural Gas Swaps02/01/09 - 05/31/09
    
    
    160,000
    
    
    $
    5.865
 Crude
    
    
    Purchased
    
    
    WrittenOil
    
    
    Put
    
    
    CallSettlement Period
    
    (Bbls)
    
    
    (Nymex)
    
    
    (Nymex)Oil Costless Collars01/01/09 - 06/30/09
    
    
    18,000
    
    
    $
    62.00
    
    
    $
    81.7501/01/09 - 03/31/09
    
    
    21,000
    
    
    $
    86.50
    
    
    $
    120.00
  Natural
    
    
    Purchased
    
    
    WrittenGas
    
    
    Put
    
    
    CallSettlement Period
    
    (MMbtu)
    
    
    (Nymex)
    
    
    (Nymex)Natural Gas Costless Collars10/01/09 - 03/31/10
    
    
    420,000
    
    
    $
    5.75
    
    
    $
    7.0504/01/10 - 09/30/10
    
    
    420,000
    
    
    $
    5.75
    
    
    $
    7.3010/01/10 - 03/31/11
    
    
    240,000
    
    
    $
    6.50
    
    
    $
    8.2504/01/10 - 09/30/10
    
    
    240,000
    
    
    $
    5.75
    
    
    $
    7.00
 Natural
    
    
    Purchased
    
    
    Written
    
    
    WrittenGas
    
    
    Put
    
    
    Call
    
    
    PutSettlement Period
    
    (MMbtu)
    
    
    (Nymex)
    
    
    (Nymex)
    
    
    (Nymex)Natural Gas Three Way Costless Collars10/01/09 - 03/31/10
    
    
    360,000
    
    
    $
    5.75
    
    
    $
    7.00
    
    
    $
    3.50
 Natural
    
    
    WrittenGas
    
    
    SwapSettlement Period
    
    (MMbtu)
    
    
    (Nymex)Natural Gas Swaps03/01/09 - 06/30/09
    
    
    120,000
    
    
    $
    4.6403/01/09 - 08/31/09
    
    
    420,000
    
    
    $
    4.74510/01/09 - 12/31/09
    
    
    60,000
    
    
    $
    4.90
 Crude
    
    
    WrittenOil
    
    
    SwapSettlement Period
    
    (Bbls)
    
    
    (Nymex)Oil Swaps04/01/09 - 12/31/09
    
    
    90,000
    
    
    $
    50.75
  64




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##### Table of Contents



Interest Rate Risk
    
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
   65




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##### Table of Contents



Managements Report on Internal Control over Financial Reporting
 Internal Control  Integrated Framework Internal Control  Integrated
Framework
  Changes in Internal Control over Financial Reporting
   66




---



##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
   
 Item 11. Executive Compensation
  
 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 (a)
    
    1. Consolidated Financial Statements: See Index to Financial Statements on page F-1.
 2. No schedules are required.3. Exhibits:
   67




---



##### Table of Contents



GLOSSARY OF OIL AND GAS TERMS
  3-D seismic.
 Bbl.
 Bcfe.
 Completion.
 Completion Rate.
 Developed Acreage.
 Development Well.
 Dry Well.
 Exploratory Well.
 Fault.
 Fault Block.
 Gross Acres or Gross Wells.
 Lease Operating Expenses.
 MBbl.
 Mcf.
 MMBbl.
 Mcfe.
 MMBtu.
  68




---



##### Table of Contents



MMcf.
 MMcfe.
 MMcfe/d.
 Net Acres or Net Wells.
 Net Production.
 Oil.
 Operator.
 Pay.
 Pre-tax PV10%.
 Proved Developed Reserves.
 Proved Reserves.
 Proved Undeveloped Reserves.
 Royalty.
 Spud.
 Standardized Measure.
 Trend.
 Working Interest.
  69




---



##### Table of Contents



SIGNATURES
  BRIGHAM EXPLORATION COMPANYBy
    /s/ BEN M. BRIGHAMBen M. BrighamChief Executive Officer,

President and Chairman of the Board  /s/ BEN M. BRIGHAM
    
    Chief Executive Officer, President and Chairman of the BoardBen M. Brigham
    
    (Principal Executive Officer)/s/ EUGENE B. SHEPHERD, JR.
    
    Executive Vice President and Chief Financial OfficerEugene B. Shepherd, Jr.
    
    (Principal Financial and Accounting Officer)/s/ DAVID T. BRIGHAM
    
    Executive Vice President  Land and Administration and DirectorDavid T. Brigham/s/ HAROLD D. CARTER
    
    DirectorHarold D. Carter/s/ STEPHEN C. HURLEY
    
    DirectorStephen C. Hurley/s/ STEPHEN P. REYNOLDS
    
    DirectorStephen P. Reynolds/s/ HOBART A. SMITH
    
    DirectorHobart A. Smith/s/ SCOTT W. TINKER
    
    DirectorScott W. Tinker
  70




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 INDEX TO FINANCIAL STATEMENTS
 PageReports of Independent Registered Public Accounting Firms
    
    
    F-2Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    F-4Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007 and 2006
    
    
    F-5Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2008, 2007 and 2006
    
    
    F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006
    
    
    F-7Notes to the Consolidated Financial Statements
    
    
    F-8Supplemental Oil and Gas Information (Unaudited)
    
    
    F-29Supplemental Quarterly Financial Information (Unaudited)
    
    
    F-32
  F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Fair
Value Measurements
 Internal Control  Integrated
Framework
  
  F-2




---



##### Table of Contents





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Internal Control  Integrated Framework .








Internal Control  Integrated Framework .


9 .









F-3



---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    40,598
    
    
    $
    13,863Accounts receivable
    
    
    24,558
    
    
    
    14,609Derivative assets
    
    
    5,140
    
    
    
    1,416Inventory
    
    
    6,070
    
    
    
    519Other current assets
    
    
    2,154
    
    
    
    2,098Total current assets
    
    
    78,520
    
    
    
    32,505Oil and natural gas properties, using the full cost method of accountingProved    
    
    632,275
    
    
    
    728,607Unproved
    
    
    106,006
    
    
    
    61,544Accumulated depletion
    
    
    (333,442
    )
    
    
    (279,944
    )404,839
    
    
    
    510,207Other property and equipment, net
    
    
    1,873
    
    
    
    1,034Deferred loan fees
    
    
    3,122
    
    
    
    3,687Other noncurrent assets
    
    
    702
    
    
    
    995Total assets
    
    $
    489,056
    
    
    $
    548,428LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    14,297
    
    
    $
    12,301Royalties payable
    
    
    6,859
    
    
    
    5,978Accrued drilling costs
    
    
    19,768
    
    
    
    14,841Participant advances received
    
    
    2,226
    
    
    
    2,095Other current liabilities
    
    
    5,065
    
    
    
    6,503Total current liabilities
    
    
    48,215
    
    
    
    41,718Senior Notes
    
    
    158,730
    
    
    
    158,492Senior credit facility
    
    
    145,000
    
    
    
    10,000Series A Preferred Stock, mandatorily redeemable, $.01 par value, $20
stated and redemption value, 2,250,000 shares authorized, 505,051 and
505,051 shares issued and outstanding at December 31, 2008 and 2007,
respectively
    
    
    10,101
    
    
    
    10,101Deferred income taxes
    
    
    149
    
    
    
    41,625Other taxes payable
    
    
    
    
    
    
    2,162Other noncurrent liabilities
    
    
    5,592
    
    
    
    5,303Commitments and contingencies (Note 9)Stockholders equity:Common stock, $.01 par value, 90 million shares authorized, 45,829,277

and 45,304,139 shares issued and 45,686,295 and 45,197,303 shares
outstanding at December 31, 2008 and 2007, respectively
    
    
    458
    
    
    
    453Additional paid-in capital
    
    
    212,473
    
    
    
    207,526Treasury
stock, at cost; 142,982 and 106,836 shares at December 31, 2008 and 2007, respectively
    
    
    (1,202
    )
    
    
    (854
    )Accumulated other comprehensive income (loss)
    
    
    
    
    
    
    115Retained earnings (deficit)
    
    
    (90,460
    )
    
    
    71,787Total stockholders equity
    
    
    121,269
    
    
    
    279,027Total liabilities and stockholders equity
    
    $
    489,056
    
    
    $
    548,428
   F-4




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenues:Oil and natural gas sales
    
    $
    125,108
    
    
    $
    120,557
    
    
    $
    102,835Gain (loss) on derivatives, net
    
    
    2,548
    
    
    
    (1,664
    )
    
    
    3,335Other revenue
    
    
    132
    
    
    
    88
    
    
    
    127127,788
    
    
    
    118,981
    
    
    
    106,297Costs and expenses:Lease operating
    
    
    12,363
    
    
    
    10,704
    
    
    
    10,701Production taxes
    
    
    5,374
    
    
    
    2,541
    
    
    
    4,021General and administrative
    
    
    9,557
    
    
    
    9,276
    
    
    
    7,887Depletion of oil and natural gas properties
    
    
    53,498
    
    
    
    59,079
    
    
    
    46,386Impairment of oil and natural gas properties
    
    
    237,180
    
    
    
    6,505
    
    
    
    Depreciation and amortization
    
    
    629
    
    
    
    613
    
    
    
    537Accretion of discount on asset retirement obligations
    
    
    361
    
    
    
    379
    
    
    
    317318,962
    
    
    
    89,097
    
    
    
    69,849Operating income (loss)
    
    
    (191,174
    )
    
    
    29,884
    
    
    
    36,448Other income (expense):Interest income
    
    
    191
    
    
    
    654
    
    
    
    1,207Interest expense, net
    
    
    (14,495
    )
    
    
    (14,622
    )
    
    
    (9,688
    )Other income (expense)
    
    
    530
    
    
    
    1,022
    
    
    
    4,565(13,774
    )
    
    
    (12,946
    )
    
    
    (3,916
    )Income (loss) before income taxes
    
    
    (204,948
    )
    
    
    16,938
    
    
    
    32,532Income tax benefit (expense):Current
    
    
    
    
    
    
    
    
    
    
    Deferred
    
    
    42,701
    
    
    
    (6,728
    )
    
    
    (12,744
    )42,701
    
    
    
    (6,728
    )
    
    
    (12,744
    )Net Income (loss)
    
    $
    (162,247
    )
    
    $
    10,210
    
    
    $
    19,788Net income (loss) per share available to common stockholders:Basic
    
    $
    (3.57
    )
    
    $
    0.23
    
    
    $
    0.44Diluted
    
    $
    (3.57
    )
    
    $
    0.22
    
    
    $
    0.43Weighted average common shares outstanding:Basic
    
    
    45,441
    
    
    
    45,110
    
    
    
    45,017Diluted
    
    
    45,441
    
    
    
    45,531
    
    
    
    45,597
   F-5




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands)
 AccumulatedOther
    
    
    RetainedAdditional
    
    
    
    
    
    
    Unearned
    
    
    Comprehensive
    
    
    Earnings
    
    
    TotalCommon Stock
    
    
    Paid In
    
    
    Treasury
    
    
    Stock
    
    
    Income
    
    
    (Accumulated
    
    
    StockholdersShares
    
    
    Amounts
    
    
    Capital
    
    
    Stock
    
    
    Compensation
    
    
    (Loss)
    
    
    Deficit)
    
    
    EquityBalance, December 31, 2005
    
    
    44,918
    
    
    $
    449
    
    
    $
    202,127
    
    
    $
    
    
    
    $
    (2,299
    )
    
    $
    (426
    )
    
    $
    41,789
    
    
    $
    241,640Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,788
    
    
    
    19,788Unrealized gains (losses) on
cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,016
    
    
    
    
    
    
    
    8,016Tax provisions related to cash
flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (770
    )
    
    
    
    
    
    
    (770
    )Net (gains) losses included in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,814
    )
    
    
    
    
    
    
    (5,814
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,220Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Vesting of restricted stock
    
    
    77
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of employee stock options
    
    
    95
    
    
    
    1
    
    
    
    468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    469Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (230
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (230
    )Forfeitures of restricted stock
    
    
    
    
    
    
    
    
    
    
    432
    
    
    
    (432
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adoption of FAS 123R
    
    
    
    
    
    
    
    
    
    
    (2,299
    )
    
    
    
    
    
    
    2,299
    
    
    
    
    
    
    
    
    
    
    
    Vesting of share-based payments
    
    
    
    
    
    
    
    
    
    
    2,879
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,879Balance, December 31, 2006
    
    
    45,090
    
    
    $
    451
    
    
    $
    203,643
    
    
    $
    (662
    )
    
    $
    
    
    
    $
    1,006
    
    
    $
    61,577
    
    
    $
    266,015Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,210
    
    
    
    10,210Tax provisions related to cash
flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    480
    
    
    
    
    
    
    
    480Net (gains) losses included in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,371
    )
    
    
    
    
    
    
    (1,371
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,319Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vesting of restricted stock
    
    
    90
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of employee stock options
    
    
    124
    
    
    
    1
    
    
    
    441
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    442Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (192
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (192
    )Vesting of share-based payments
    
    
    
    
    
    
    
    
    
    
    3,443
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,443Balance, December 31, 2007
    
    
    45,304
    
    
    $
    453
    
    
    $
    207,526
    
    
    $
    (854
    )
    
    $
    
    
    
    $
    115
    
    
    $
    71,787
    
    
    $
    279,027Comprehensive income (loss):Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162,247
    )
    
    
    (162,247
    )Tax provisions related to cash
flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    61Net (gains) losses included in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (176
    )
    
    
    
    
    
    
    (176
    )Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162,362
    )Vesting of restricted stock
    
    
    139
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of employee stock options
    
    
    386
    
    
    
    4
    
    
    
    2,062
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,066Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (348
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (348
    )Vesting of share-based payments
    
    
    
    
    
    
    
    
    
    
    2,886
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,886Balance, December 31, 2008
    
    
    45,829
    
    
    $
    458
    
    
    $
    212,473
    
    
    $
    (1,202
    )
    
    $
    
    
    
    $
    
    
    
    $
    (90,460
    )
    
    $
    121,269
   F-6




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    (162,247
    )
    
    $
    10,210
    
    
    $
    19,788Adjustments to reconcile net income (loss) to cash provided
(used) by operating activities:Depletion of oil and natural gas properties
    
    
    53,498
    
    
    
    59,079
    
    
    
    46,386Impairment of oil and natural gas properties
    
    
    237,180
    
    
    
    6,505
    
    
    
    Depreciation and amortization
    
    
    629
    
    
    
    613
    
    
    
    537Stock based compensation
    
    
    1,592
    
    
    
    1,905
    
    
    
    1,571Write-off of deferred loan costs
    
    
    
    
    
    
    
    
    
    
    965Amortization of discount and deferred loan fees
    
    
    1,105
    
    
    
    968
    
    
    
    717Accretion of discount on asset retirement obligations
    
    
    361
    
    
    
    379
    
    
    
    317Market value adjustment for derivative instruments
    
    
    (6,140
    )
    
    
    5,831
    
    
    
    (5,794
    )Deferred income taxes
    
    
    (42,701
    )
    
    
    6,728
    
    
    
    12,744Provision for doubtful accounts
    
    
    17
    
    
    
    
    
    
    
    48Other noncash items
    
    
    4
    
    
    
    (4
    )
    
    
    64Changes in working capital and other items:Accounts receivable
    
    
    (9,966
    )
    
    
    3,743
    
    
    
    4,425Other current assets
    
    
    (6,521
    )
    
    
    1,183
    
    
    
    (1,874
    )Accounts and royalties payable
    
    
    2,877
    
    
    
    (6,197
    )
    
    
    7,336Other current liabilities
    
    
    500
    
    
    
    (890
    )
    
    
    1,803Noncurrent assets
    
    
    (330
    )
    
    
    514
    
    
    
    Noncurrent liabilities
    
    
    (228
    )
    
    
    (118
    )
    
    
    (346
    )Net cash provided by operating activities
    
    
    69,630
    
    
    
    90,449
    
    
    
    88,687Cash flows from investing activities:Additions to oil and natural gas properties
    
    
    (178,637
    )
    
    
    (132,932
    )
    
    
    (171,597
    )Proceeds from sale of oil and natural gas properties
    
    
    
    
    
    
    35,446
    
    
    
    25Additions to other property and equipment
    
    
    (1,472
    )
    
    
    (707
    )
    
    
    (510
    )(Increase) decrease in drilling advances paid
    
    
    798
    
    
    
    (900
    )
    
    
    335Additions to restricted cash
    
    
    (555
    )
    
    
    
    
    
    
    Net cash used by investing activities
    
    
    (179,866
    )
    
    
    (99,093
    )
    
    
    (171,747
    )Cash flows from financing activities:Proceeds from issuance of common stock, net of issuance costs
    
    
    
    
    
    
    
    
    
    
    37Proceeds from exercise of employee stock options
    
    
    2,066
    
    
    
    472
    
    
    
    469Proceeds from Senior Notes offering
    
    
    
    
    
    
    34,825
    
    
    
    123,286Repurchases of common stock
    
    
    (348
    )
    
    
    (192
    )
    
    
    (230
    )Increase in senior credit facility
    
    
    139,500
    
    
    
    58,800
    
    
    
    55,800Repayment of senior credit facility
    
    
    (4,500
    )
    
    
    (74,700
    )
    
    
    (63,000
    )Principal payments on senior subordinated notes
    
    
    
    
    
    
    
    
    
    
    (30,000
    )Deferred loan fees paid and equity costs
    
    
    (302
    )
    
    
    (998
    )
    
    
    (2,977
    )Net cash provided (used) by financing activities
    
    
    136,416
    
    
    
    18,207
    
    
    
    83,385Net increase (decrease) in cash and cash equivalents
    
    
    26,180
    
    
    
    9,563
    
    
    
    325Cash and cash equivalents, beginning of year
    
    
    13,863
    
    
    
    4,300
    
    
    
    3,975Cash and cash equivalents, end of year
    
    $
    40,043
    
    
    $
    13,863
    
    
    $
    4,300
   F-7




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization and Nature of Operations
  2. Summary of Significant Accounting Policies
 Use of Estimates
  Principles of Consolidation
  Cash and Cash Equivalents
  Inventory
  Property and Equipment
   F-8




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Furniture and fixtures
    
    10 yearsMachinery and equipment
    
    5 years3-D seismic interpretation workstations and software
    
    3 yearsPipeyard equipment
    
    15 yearsLand
    
    
    
  Asset Retirement Obligations
  Revenue Recognition
   Derivative Instruments and Hedging Activities
   F-9




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Other Comprehensive Income (Loss)
   2008
    
    
    2007
    
    
    2006Balance, beginning of year
    
    $
    115
    
    
    $
    1,006
    
    
    $
    (426
    )Current period settlements reclassified to earnings
    
    
    
    
    
    
    
    
    
    
    (3,042
    )Current period change in fair value of hedges
    
    
    
    
    
    
    
    
    
    
    11,058Tax benefits (provisions) related to cash flow hedges
    
    
    61
    
    
    
    480
    
    
    
    (770
    )Net (gains) losses included in earnings
    
    
    (176
    )
    
    
    (1,371
    )
    
    
    (5,814
    )Balance, end of year
    
    $
    
    
    
    $
    115
    
    
    $
    1,006
  F-10




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Stock Based Compensation
   Income Taxes
  Deferred Loan Fees
  Segment Information
  Treasury Stock
  Mandatorily Redeemable Preferred Stock
   F-11




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 New Pronouncements
        F-12




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  3. Property and Equipment
  December 31,2008
    
    
    2007Oil and natural gas properties
    
    $
    738,281
    
    
    $
    790,151Accumulated depletion
    
    
    (333,442
    )
    
    
    (279,944
    )404,839
    
    
    
    510,207
 December 31,2008
    
    
    2007Other property and equipment:3-D seismic interpretation workstations and software
    
    
    1,585
    
    
    
    1,442Office furniture and equipment
    
    
    3,438
    
    
    
    3,110Pipeyard equipment
    
    
    546
    
    
    
    Land
    
    
    408
    
    
    
    Accumulated depreciation
    
    
    (4,104
    )
    
    
    (3,518
    )1,873
    
    
    
    1,034$
    406,712
    
    
    $
    511,241
   Year Ended December 31,2008
    
    
    2007
    
    
    2006Capitalized certain payroll and other internal costs
    
    $
    7,994
    
    
    $
    8,164
    
    
    $
    7,118Capitalized interest costs
    
    
    4,761
    
    
    
    3,467
    
    
    
    2,836$
    12,755
    
    
    $
    11,631
    
    
    $
    9,954
  F-13




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
      4. Senior Credit Facility, Senior Notes, and Senior Subordinated Notes
  December 31,2008
    
    
    2007(In thousands)Senior Credit Facility
    
    $
    145,000
    
    
    $
    10,000Senior Notes
    
    
    160,000
    
    
    
    160,000Discount on Senior Notes
    
    
    (1,270
    )
    
    
    (1,508
    )Total Debt
    
    $
    303,730
    
    
    $
    168,492Less: Current Maturities
    
    
    
    
    
    
    Total Long-Term Debt
    
    $
    303,730
    
    
    $
    168,492
 Senior Credit Facility
   F-14




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Senior Subordinated Notes
  Senior Notes
     F-15




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 5. Preferred Stock
 Series A Mandatorily Redeemable Preferred Stock
  Year Ended
    
    
    Year EndedDecember 31, 2008
    
    
    December 31, 2007Shares
    
    
    Amounts
    
    
    Shares
    
    
    AmountsBalance, beginning of year
    
    
    505,051
    
    
    $
    10,101
    
    
    
    505,051
    
    
    $
    10,101Balance, end of year
    
    
    505,051
    
    
    $
    10,101
    
    
    
    505,051
    
    
    $
    10,101
  6. Asset Retirement Obligations
   Year Ended December 31,2008
    
    
    2007Beginning asset retirement obligations
    
    $
    5,047
    
    
    $
    5,002Liabilities incurred for new wells placed on production
    
    
    412
    
    
    
    326Liabilities settled
    
    
    (228
    )
    
    
    (45
    )Revisions to estimates due to sale of oil and gas properties
    
    
    
    
    
    
    (615
    )Accretion of discount on asset retirement obligations
    
    
    361
    
    
    
    379$
    5,592
    
    
    $
    5,047
 7. Income Taxes
   F-16




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Current income taxes
    
    $
    
    
    
    $
    
    
    
    $
    Deferred income taxes (benefits):Federal
    
    
    (71,445
    )
    
    
    5,827
    
    
    
    11,528State
    
    
    (5,745
    )
    
    
    901
    
    
    
    1,216Valuation
allowances
    
    
    34,489
    
    
    
    
    
    
    
    $
    (42,701
    )
    
    $
    6,728
    
    
    $
    12,744
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Tax (benefit) at statutory rate
    
    $
    (71,732
    )
    
    $
    5,929
    
    
    $
    11,386Add the effect of:Nondeductible expenses
    
    
    6
    
    
    
    6
    
    
    
    27Preferred stock dividends
    
    
    212
    
    
    
    212
    
    
    
    212Incentive stock options not exercised
    
    
    47
    
    
    
    34
    
    
    
    252State income taxes (benefits), net of federal deduction
    
    
    (3,734
    )
    
    
    586
    
    
    
    872State valuation allowance
    
    
    2,455
    
    
    
    
    
    
    
    Federal valuation allowance
    
    
    30,002
    
    
    
    (61
    )
    
    
    Other
    
    
    43
    
    
    
    22
    
    
    
    (5
    )$
    (42,701
    )
    
    $
    6,728
    
    
    $
    12,744
  December 31,2008
    
    
    2007Deferred tax assetsCurrent:Unrealized hedging and other derivative losses
    
    $
    2
    
    
    $
    138State deferred taxes
    
    
    52
    
    
    
    741Other
    
    
    42
    
    
    
    36Current
    
    
    96
    
    
    
    915Non-current:Net operating loss carryforwards (NOLs)
    
    
    75,956
    
    
    
    53,039Percentage depletion carryforwards
    
    
    4,201
    
    
    
    3,448Stock compensation
    
    
    2,786
    
    
    
    2,263Asset retirement obligations
    
    
    1,957
    
    
    
    1,766Other
    
    
    73
    
    
    
    49Non-current
    
    
    84,973
    
    
    
    60,56585,069
    
    
    
    61,480Valuation allowance
    
    
    (34,202
    )
    
    
    (3,448
    )Total net deferred tax assets
    
    
    50,867
    
    
    
    58,032Deferred tax liabilitiesCurrent:Unrealized derivative gains
    
    $
    (1,799
    )
    
    $
    Current
    
    
    (1,799
    )
    
    
    Non-current:Depreciable and depletable property
    
    
    (48,983
    )
    
    
    (96,698
    )Other
    
    
    (85
    )
    
    
    74Non-current
    
    
    (49,068
    )
    
    
    (96,624
    )Total net deferred tax liabilities
    
    
    (50,867
    )
    
    
    (96,624
    )Total federal deferred tax asset (liability)
    
    
    
    
    
    
    (38,592
    )Total state deferred tax asset (liability)
    
    
    (149
    )
    
    
    (2,117
    )Total deferred tax asset (liability)
    
    $
    (149
    )
    
    $
    (40,709
    )
  F-17




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     2008
    
    
    2007(In thousands)Unrecognized tax benefits at beginning of the year
    
    $
    2,162
    
    
    $
    Increases (decreases) resulting from adoption of FIN 48
    
    
    
    
    
    
    2,139Increases (decreases) resulting from tax positions taken in the current period
    
    
    (2,162
    )
    
    
    23Unrecognized tax benefits at end of the year
    
    $
    
    
    
    $
    2,162
    F-18




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 8. Net Income Available Per Common Share
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands, except per share amounts)Basic EPS:Income (loss) available to common stockholders
    
    $
    (162,247
    )
    
    $
    10,210
    
    
    $
    19,788Weighted average common shares outstanding  basic
    
    
    45,441
    
    
    
    45,110
    
    
    
    45,017Basic EPS:Income (loss) available to common stockholders
    
    $
    (3.57
    )
    
    $
    0.23
    
    
    $
    0.44Diluted EPS:Income (loss) available to common stockholders  diluted
    
    $
    (162,247
    )
    
    $
    10,210
    
    
    $
    19,788Common shares outstanding
    
    
    45,441
    
    
    
    45,110
    
    
    
    45,017Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    421
    
    
    
    580Potentially dilutive common shares
    
    
    
    
    
    
    421
    
    
    
    580Adjusted common shares outstanding  diluted
    
    
    45,441
    
    
    
    45,531
    
    
    
    45,597Diluted EPS:Income (loss) available to common stockholders
    
    $
    (3.57
    )
    
    $
    0.22
    
    
    $
    0.43
  9. Contingencies, Commitments and Factors Which May Affect Future Operations
 Litigation
   F-19




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Operating Lease Commitments
  2009
    
    
    7042010
    
    
    7212011
    
    
    7382012
    
    
    378$
    2,541
  Major Purchasers
  2008
    
    
    2007
    
    
    2006Purchaser A
    
    
    
    
    
    
    
    
    
    
    15
    %Purchaser B
    
    
    
    %
    
    
    13
    %
    
    
    14
    %Purchaser C
    
    
    21
    %
    
    
    27
    %
    
    
    Purchaser D
    
    
    
    %
    
    
    13
    %
    
    
    Purchaser E
    
    
    19
    %
    
    
    11
    %
    
    
    
  Factors Which May Affect Future Operations
   F-20




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 10. Derivative Instruments and Hedging Activities
  Natural Gas and Crude Oil Derivative Contracts  Cash flow hedges
    Year Ended December 31,2008
    
    
    2007
    
    
    2006Natural gasAverage price per Mcf realized excluding gas hedging results
    
    $
    9.21
    
    
    $
    7.30
    
    
    $
    6.74Average price per Mcf including gas hedging settlement results
    
    $
    9.08
    
    
    $
    7.66
    
    
    $
    7.09Increase (decrease) in revenue, in thousands
    
    $
    (1,028
    )
    
    $
    4,478
    
    
    $
    3,639Average price per Mcf including gas hedging settlement
results and any unrealized gains (losses)
    
    $
    9.48
    
    
    $
    7.38
    
    
    
    7.31Increase (decrease) in revenue, in thousands
    
    $
    2,129
    
    
    $
    975
    
    
    
    6,044OilAverage price per Bbl realized excluding oil hedging results
    
    $
    89.06
    
    
    $
    72.30
    
    
    $
    64.04Average price per Bbl including oil hedging settlement results
    
    $
    84.63
    
    
    $
    71.51
    
    
    $
    64.39Increase (decrease) in revenue, in thousands
    
    $
    (2,564
    )
    
    $
    (311
    )
    
    $
    157Average price per Mcf including oil hedging settlement
results and any unrealized gains (losses)
    
    $
    89.79
    
    
    $
    65.57
    
    
    
    64.79Increase (decrease) in revenue, in thousands
    
    $
    419
    
    
    $
    (2,639
    )
    
    
    332
  F-21




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Natural
    
    
    
    
    
    
    Purchased
    
    
    WrittenGas
    
    
    Oil
    
    
    Put
    
    
    CallSettlement Period
    
    (MMBTU)
    
    
    (Barrels)
    
    
    Nymex
    
    
    NymexNatural Gas Costless Collars01/01/09 - 03/31/09
    
    
    90,000
    
    
    
    
    
    
    $
    5.50
    
    
    $
    7.9001/01/09 - 03/31/09
    
    
    90,000
    
    
    
    
    
    
    $
    8.00
    
    
    $
    10.2001/01/09 - 03/31/09
    
    
    150,000
    
    
    
    
    
    
    $
    8.00
    
    
    $
    7.9501/01/09 - 03/31/09
    
    
    150,000
    
    
    
    
    
    
    $
    7.75
    
    
    $
    9.8201/01/09 - 03/31/09
    
    
    220,000
    
    
    
    
    
    
    $
    10.25
    
    
    $
    12.2502/01/09 - 09/30/09
    
    
    360,000
    
    
    
    
    
    
    $
    5.75
    
    
    $
    7.5004/01/09 - 09/30/09
    
    
    120,000
    
    
    
    
    
    
    $
    7.25
    
    
    $
    9.8004/01/09 - 09/30/09
    
    
    420,000
    
    
    
    
    
    
    $
    8.00
    
    
    $
    8.0004/01/09 - 09/30/09
    
    
    300,000
    
    
    
    
    
    
    $
    7.00
    
    
    $
    7.50Oil Costless Collars01/01/09 - 06/30/09
    
    
    
    
    
    
    18,000
    
    
    $
    62.00
    
    
    $
    81.7501/01/09 - 03/31/09
    
    
    
    
    
    
    21,000
    
    
    $
    86.50
    
    
    $
    120.00
 Natural
    
    
    Purchased
    
    
    Written
    
    
    WrittenGas
    
    
    Put
    
    
    Call
    
    
    PutSettlement Period
    
    (MMBTU)
    
    
    Nymex
    
    
    Nymex
    
    
    NymexNatural Gas Three Way Costless Collars01/01/09 - 03/31/09
    
    
    150,000
    
    
    $
    8.00
    
    
    $
    10.35
    
    
    $
    4.5010/01/09 - 03/31/10
    
    
    420,000
    
    
    $
    8.00
    
    
    $
    10.00
    
    
    $
    5.5004/01/09 - 09/30/09
    
    
    420,000
    
    
    $
    6.25
    
    
    $
    8.80
    
    
    $
    4.75
 Natural
    
    
    WrittenGas
    
    
    SwapSettlement Period
    
    (MMBTU)
    
    
    NymexNatural Gas Swaps02/01/09 - 05/31/09
    
    
    160,000
    
    
    $
    5.87
  Natural
    
    
    
    
    
    
    Purchased
    
    
    WrittenGas
    
    
    Oil
    
    
    Put
    
    
    CallSettlement Period
    
    (MMBTU)
    
    
    (Barrels)
    
    
    Nymex
    
    
    NymexNatural Gas Costless Collars10/01/09 - 03/31/10
    
    
    420,000
    
    
    
    
    
    
    $
    5.75
    
    
    $
    7.0504/01/10 - 09/30/10
    
    
    420,000
    
    
    
    
    
    
    $
    5.75
    
    
    $
    7.3004/01/10 - 09/30/10
    
    
    240,000
    
    
    
    
    
    
    $
    5.75
    
    
    $
    7.0010/01/10 - 03/31/11
    
    
    240,000
    
    
    
    
    
    
    $
    6.50
    
    
    $
    8.25
 Natural
    
    
    Purchased
    
    
    Written
    
    
    WrittenGas
    
    
    Put
    
    
    Call
    
    
    PutSettlement Period
    
    (MMBTU)
    
    
    Nymex
    
    
    Nymex
    
    
    NymexNatural Gas Three Way Costless Collars10/01/09 - 03/31/10
    
    
    360,000
    
    
    $
    5.75
    
    
    $
    7.00
    
    
    $
    3.50
 Natural
    
    
    WrittenGas
    
    
    SwapSettlement Period
    
    (MMBTU)
    
    
    NymexNatural Gas Swaps03/01/09  06/30/09
    
    
    120,000
    
    
    $
    4.6403/01/09 - 08/31/09
    
    
    420,000
    
    
    $
    4.7510/01/09 - 12/31/09
    
    
    60,000
    
    
    $
    4.90
 WrittenOil
    
    
    SwapSettlement Period
    
    (Barrels)
    
    
    NymexOil Swaps04/01/09  12/31/09
    
    
    90,000
    
    
    $
    50.75
  F-22




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Interest rate swap
   11. Fair values
  Fair Value Measurements at December 31, 2008 usingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    for Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2007
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Current derivative liabilities
    
    $
    (1,812
    )
    
    $
    
    
    
    $
    (5
    )
    
    $
    Other non-current liabilities
    
    
    (256
    )
    
    
    
    
    
    
    
    
    
    
    Current derivative assets
    
    
    1,416
    
    
    
    
    
    
    
    5,140
    
    
    
    Other non-current assets
    
    
    25
    
    
    
    
    
    
    
    202
    
    
    
    $
    (627
    )
    
    $
    
    
    
    $
    5,337
    
    
    $
    
 12. Financial Instruments
   F-23




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  13. Stock Based Compensation
   2008
    
    
    2007
    
    
    2006Risk-free interest rate
    
    
    2.78
    %
    
    
    3.88
    %
    
    
    4.7
    %Expected life (in years)
    
    
    5.0
    
    
    
    5.0
    
    
    
    5.0Expected volatility
    
    
    56
    %
    
    
    47
    %
    
    
    52
    %Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    Weighted average fair value per share of stock compensation
    
    $
    2.52
    
    
    $
    3.21
    
    
    $
    3.33
     F-24




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Twelve Months EndedDecember 31,2008
    
    
    2007
    
    
    2006Pre-tax stock based compensation expense
    
    $
    2,926
    
    
    $
    3,443
    
    
    $
    2,879Capitalized stock based compensation
    
    
    (1,334
    )
    
    
    (1,538
    )
    
    
    (1,308
    )Tax benefit
    
    
    (557
    )
    
    
    (667
    )
    
    
    (550
    )Stock based compensation expense, net
    
    $
    1,035
    
    
    $
    1,238
    
    
    $
    1,021
     2008
    
    
    2007
    
    
    2006Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOptions outstanding at beginning
of year
    
    
    3,046,166
    
    
    $
    7.14
    
    
    
    3,243,566
    
    
    $
    7.08
    
    
    
    2,946,333
    
    
    $
    6.96Granted
    
    
    534,000
    
    
    $
    5.08
    
    
    
    105,000
    
    
    $
    7.06
    
    
    
    608,000
    
    
    $
    6.57Forfeited or cancelled
    
    
    (65,300
    )
    
    $
    7.79
    
    
    
    (178,900
    )
    
    $
    8.19
    
    
    
    (215,667
    )
    
    $
    4.96Exercised
    
    
    (386,215
    )
    
    $
    5.35
    
    
    
    (123,500
    )
    
    $
    3.82
    
    
    
    (95,100
    )
    
    $
    4.93Options outstanding at end of year
    
    
    3,128,651
    
    
    $
    7.00
    
    
    
    3,046,166
    
    
    $
    7.14
    
    
    
    3,243,566
    
    
    $
    7.08Options exercisable at end of year
    
    
    1,954,851
    
    
    $
    7.17
    
    
    
    1,869,066
    
    
    $
    6.62
    
    
    
    1,439,866
    
    
    $
    6.18
   F-25




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Options Outstanding
    
    
    Options ExercisableWeighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-Number
    
    
    Average
    
    
    Weighted-
    
    
    Number
    
    
    Average
    
    
    Weighted-Outstanding at
    
    
    Remaining
    
    
    Average
    
    
    Exercisable at
    
    
    Remaining
    
    
    AverageDecember 31,
    
    
    Contractual
    
    
    Exercise
    
    
    December 31,
    
    
    Contractual
    
    
    ExerciseExercise Price
    
    2008
    
    
    Life
    
    
    Price
    
    
    2008
    
    
    Life
    
    
    Price$3.11 to $3.41
    
    
    93,000
    
    
    4.1 years
    
    $
    3.24
    
    
    
    43,000
    
    
    0.7 years
    
    $
    3.413.66 to 5.08
    
    
    805,200
    
    
    4.2 years
    
    $
    4.75
    
    
    
    339,200
    
    
    0.7 years
    
    $
    4.296.10 to 6.73
    
    
    1,134,576
    
    
    2.9 years
    
    $
    6.49
    
    
    
    864,676
    
    
    2.3 years
    
    $
    6.607.22 to 8.84
    
    
    736,875
    
    
    3.2 years
    
    $
    8.45
    
    
    
    503,975
    
    
    2.9 years
    
    $
    8.598.93 to 12.31
    
    
    359,000
    
    
    3.8 years
    
    $
    11.64
    
    
    
    204,000
    
    
    3.7 years
    
    $
    11.663.11 to 12.31
    
    
    3,128,651
    
    
    3.5 years
    
    $
    7.00
    
    
    
    1,954,851
    
    
    2.3 years
    
    $
    7.17
   Restricted Stock
   Year Ended
    
    
    Year EndedDecember 31, 2008
    
    
    December 31, 2007Weighted-
    
    
    
    
    
    
    Weighted-Number of
    
    
    Average
    
    
    Number of
    
    
    AverageShares
    
    
    Price
    
    
    Shares
    
    
    PriceRestricted Stock Awards:Restricted shares outstanding at the beginning of the year
    
    
    653,623
    
    
    $
    7.16
    
    
    
    391,367
    
    
    $
    8.60Shares granted
    
    
    109,000
    
    
    $
    8.40
    
    
    
    379,550
    
    
    $
    5.78Lapse of restrictions
    
    
    (139,423
    )
    
    $
    6.46
    
    
    
    (90,241
    )
    
    $
    7.24Forfeitures
    
    
    (29,940
    )
    
    $
    6.58
    
    
    
    (27,053
    )
    
    $
    8.35Restricted shares outstanding at the end of the year
    
    
    593,260
    
    
    $
    7.58
    
    
    
    653,623
    
    
    $
    7.16
  F-26




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 14. Employee Benefit Plans
  15. Related Party Transactions
      F-27




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 16. Supplemental Cash Flow Information
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Cash paid for interest, net of capitalized amounts
    
    $
    17,143
    
    
    $
    14,059
    
    
    $
    5,893Noncash investing and financing activities:Capitalized asset retirement obligations
    
    
    412
    
    
    
    325
    
    
    
    610Accrued drilling costs
    
    
    4,927
    
    
    
    (8,469
    )
    
    
    11,092Capitalized stock compensation
    
    
    1,334
    
    
    
    1,538
    
    
    
    1,308
 17. Other Assets and Liabilities
  December 31,2008
    
    
    2007Prepayments
    
    $
    1,897
    
    
    $
    949Deferred taxes
    
    
    
    
    
    
    914Other
    
    
    257
    
    
    
    235$
    2,154
    
    
    $
    2,098
  December 31,2008
    
    
    2007Accrued interest
    
    $
    3,044
    
    
    $
    2,645Derivative liabilities
    
    
    5
    
    
    
    1,812Other accrued liabilities
    
    
    2,016
    
    
    
    2,046$
    5,065
    
    
    $
    6,503
  F-28




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##### Table of Contents



BRIGHAM
EXPLORATION COMPANY
 
 SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
 Oil and Natural Gas Exploration and Production Activities
  Costs Incurred and Capitalized Costs
  December 31,2008
    
    
    2007
    
    
    2006Costs incurred for the year:Exploration (including geological and geophysical costs)
    
    $
    43,229
    
    
    $
    37,324
    
    
    $
    77,704Property acquisition
    
    
    35,299
    
    
    
    18,554
    
    
    
    15,846Development
    
    
    110,155
    
    
    
    69,851
    
    
    
    91,058$
    188,683
    
    
    $
    125,729
    
    
    $
    184,608
  December 31,
    
    
    Prior2008
    
    
    2007
    
    
    2006
    
    
    Years
    
    
    TotalProperty acquisition
    
    $
    20,022
    
    
    $
    4,411
    
    
    $
    2,966
    
    
    $
    7,262
    
    
    $
    34,661Exploration
(including
geological and
geophysical costs)
    
    
    6,103
    
    
    
    2,787
    
    
    
    11,682
    
    
    
    14,233
    
    
    
    34,805Drilling
    
    
    29,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,126Capitalized interest
    
    
    4,069
    
    
    
    2,279
    
    
    
    200
    
    
    
    866
    
    
    
    7,414Total
    
    $
    59,320
    
    
    $
    9,477
    
    
    $
    14,848
    
    
    $
    22,361
    
    
    $
    106,006
 Oil and Natural Gas Reserves and Related Financial Data
  Oil and Natural Gas Reserve Data
   F-29




---



##### Table of Contents



BRIGHAM
EXPLORATION COMPANY
 SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)  (Continued)
 NaturalGas
    
    
    Oil(MMcf)
    
    
    (MBbls)Proved reserves at December 31, 2005
    
    
    113,264
    
    
    
    3,326Revisions of previous estimates
    
    
    (861
    )
    
    
    97Extensions, discoveries and other additions
    
    
    17,687
    
    
    
    1,513Production
    
    
    (10,603
    )
    
    
    (442
    )Proved reserves at December 31, 2006
    
    
    119,487
    
    
    
    4,494Revisions of previous estimates
    
    
    7,926
    
    
    
    172Extensions, discoveries and other additions
    
    
    14,349
    
    
    
    1,546Sales of mineral in place
    
    
    (22,493
    )
    
    
    (227
    )Production
    
    
    (12,626
    )
    
    
    (392
    )Proved reserves at December 31, 2007
    
    
    106,643
    
    
    
    5,593Revisions of previous estimates
    
    
    (7,834
    )
    
    
    413Extensions, discoveries and other additions
    
    
    3,866
    
    
    
    1,637Production
    
    
    (7,996
    )
    
    
    (578
    )Proved reserves at December 31, 2008
    
    
    94,679
    
    
    
    7,065Proved developed reserves at December 31:2005
    
    
    55,664
    
    
    
    2,0692006
    
    
    64,401
    
    
    
    2,7522007
    
    
    49,367
    
    
    
    3,3212008
    
    
    41,928
    
    
    
    3,583
  Standardized Measure of Discounted Future Net Cash Inflows and Changes Therein
   F-30




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##### Table of Contents



BRIGHAM
EXPLORATION COMPANY
 SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)  (Continued)
 December 31,2008
    
    
    2007
    
    
    2006Future cash inflows
    
    $
    899,745
    
    
    $
    1,319,011
    
    
    $
    900,982Future production costs
    
    
    (206,640
    )
    
    
    (248,116
    )
    
    
    (186,440
    )Future development costs
    
    
    (160,304
    )
    
    
    (160,506
    )
    
    
    (145,949
    )Future income tax expense
    
    
    (32,152
    )
    
    
    (219,748
    )
    
    
    (83,591
    )Future net cash inflows
    
    
    500,649
    
    
    
    690,641
    
    
    
    485,00210% annual discount for estimated timing of cash flows
    
    
    (221,353
    )
    
    
    (296,127
    )
    
    
    (182,328
    )Standardized measure of discounted future net cash
flows
    
    $
    279,296
    
    
    $
    394,514
    
    
    $
    302,674
  NaturalGas
    
    
    Oil(MMbtu)
    
    
    (Bbl)December 31, 2008
    
    $
    5.71
    
    
    $
    44.60December 31, 2007
    
    
    7.10
    
    
    $
    96.01December 31, 2006
    
    
    5.48
    
    
    
    61.06
  December 31,2008
    
    
    2007
    
    
    2006Beginning of period
    
    $
    394,514
    
    
    $
    302,674
    
    
    $
    396,341Sales of oil
and natural gas produced, net of production costs
    
    
    (107,144
    )
    
    
    (107,221
    )
    
    
    (85,070
    )Previously
estimated development costs incurred during the period
    
    
    51,494
    
    
    
    24,502
    
    
    
    51,373Extensions and discoveries
    
    
    30,175
    
    
    
    66,342
    
    
    
    55,020Net change of prices and production costs
    
    
    (184,497
    )
    
    
    164,728
    
    
    
    (243,607
    )Change in future development costs
    
    
    (28,901
    )
    
    
    (31,586
    )
    
    
    (27,214
    )Changes in production rates (timing)
    
    
    (2,201
    )
    
    
    (33,995
    )
    
    
    5,905Revisions of previous quantity estimates
    
    
    (16,436
    )
    
    
    41,017
    
    
    
    (883
    )Accretion of discount
    
    
    49,130
    
    
    
    33,730
    
    
    
    51,981Change in income taxes
    
    
    88,868
    
    
    
    (62,161
    )
    
    
    88,842Sales of reserves in place
    
    
    
    
    
    
    (2,923
    )
    
    
    Other
    
    
    4,294
    
    
    
    (593
    )
    
    
    9,986End of period
    
    $
    279,296
    
    
    $
    394,514
    
    
    $
    302,674
  F-31




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##### Table of Contents



Quarterly Financial Data (Unaudited)
 Year Ended December 31, 2008Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter1
    
    
    2
    
    
    3
    
    
    4Revenue
    
    $
    25,071
    
    
    $
    25,026
    
    
    $
    47,191
    
    
    $
    30,500Operating income
    
    
    5,528
    
    
    
    5,789
    
    
    
    28,254
    
    
    
    (230,745
    )Net income
    
    
    1,527
    
    
    
    1,517
    
    
    
    15,260
    
    
    
    (180,551
    )Net income per share:Basic
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.34
    
    
    $
    (3.95
    )Diluted
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.33
    
    
    $
    (3.93
    )
 Year Ended December 31, 2007Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter1
    
    
    2
    
    
    3
    
    
    4Revenue
    
    $
    25,021
    
    
    $
    36,576
    
    
    $
    31,146
    
    
    $
    26,238Operating income
    
    
    5,964
    
    
    
    7,050
    
    
    
    10,107
    
    
    
    6,763Net income
    
    
    1,873
    
    
    
    2,310
    
    
    
    4,183
    
    
    
    1,844Net income per share:Basic
    
    $
    0.04
    
    
    $
    0.05
    
    
    $
    0.09
    
    
    $
    0.04Diluted
    
    $
    0.04
    
    
    $
    0.05
    
    
    $
    0.09
    
    
    $
    0.04
  F-32




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##### Table of Contents



INDEX TO EXHIBITS
 Number
    
    
    
    Description3.1
    
    
    
    Certificate of Incorporation (filed as Exhibit 3.1 to Brighams Registration Statement on Form
S-1 (Registration No. 333-22491), and incorporated herein by reference)3.2
    
    
    
    Certificates of Amendment to Certificate of Incorporation (filed as Exhibit 3.1.1 to Brighams
Registration Statement on Form S-3 (Registration No. 333-37558), and incorporated herein by
reference)3.3
    
    
    
    Bylaws (filed as Exhibit 3.2 to Brighams Registration Statement on Form S-1 (Registration No.
333-22491), and incorporated herein by reference)3.4
    
    
    
    Certificate of Amendment to Certificate of Incorporation of Brigham Exploration Company dated
June 14, 20064.1
    
    
    
    Form of Common Stock Certificate (filed as Exhibit 4.1 to Brighams Registration Statement on
Form S-1 (Registration No. 333-22491), and incorporated herein by reference)4.2
    
    
    
    Certificate of Designations of Series A Preferred Stock (Par Value $.01 Per Share) of Brigham
Exploration Company filed October 31, 2000 (filed as Exhibit 4.1 to Brighams Current Report
on Form 8-K, as amended (filed November 8, 2000), and incorporated herein by reference)4.3
    
    
    
    Certificate of Amendment of Certificate of Designations of Series A Preferred Stock (Par Value
$.01 Per Share) of Brigham Exploration Company, filed March 2, 2001 (filed as Exhibit 4.2.1 to
Brighams Annual Report on Form 10-K for the year ended December 31, 2000 (filed March 23,
2001), and incorporated herein by reference)4.4
    
    
    
    Certificate of Designations of Series B Preferred Stock (Par Value $.01 Per Share) of Brigham
Exploration Company filed December 20, 2002 (filed as Exhibit 4.4 to Brighams Annual Report
on Form 10-K for the year ended December 31, 2002 (filed March 31, 2003) and incorporated
herein by reference)4.5
    
    
    
    Certificate of Elimination of Certificate of Designations of Series B Preferred Stock of
Brigham Exploration Company, dated June 4, 2004, (filed as Exhibit 99.2 to Brighams Current
Report on Form 8-K (filed July 20, 2004), and incorporated herein by reference)4.6
    
    
    
    Indenture, dated April 20, 2006, among Brigham Exploration Company, the Guarantors named
therein and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to Brighams Current
Report on Form 8-K, as amended (filed April 24, 2006), and incorporated herein by reference)4.7
    
    
    
    Notations of Guarantees, dated April 20, 2006, among Brigham Exploration Company, the
Guarantors named therein and Wells Fargo Bank, N.A., as trustee, (filed as Exhibit 4.2 to
Brighams Current Report on Form 8-K, as amended (filed April 24, 2006), and incorporated
herein by reference)4.8
    
    
    
    Rule 144A 9 5/8% Senior Notes due 2014, dated April 20, 2006 (filed as Exhibit 4.3 to
Brighams Current Report on Form 8-K, as amended (filed April 24, 2006), and incorporated
herein by reference)4.9
    
    
    
    Reg S 9 5/8% Senior Notes due 2014, dated April 20, 2006 (filed as Exhibit 4.4 to Brighams
Current Report on Form 8-K, as amended (filed April 24, 2006), and incorporated herein by
reference)4.10
    
    
    
    Notations of Guarantees dated as of April 9, 2007, among Brigham Exploration Company, the
Guarantors named therein and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.2 to
Brighams Current Report on Form 8-K filed on April 13, 2007 and incorporated in by reference)4.11
    
    
    
    Rule 144A 9 5/8% Senior Notes due 2014 (filed as Exhibit 4.3 to Brighams Current Report on
Form 8-K filed on April 13, 2007 and incorporated in by reference)4.12
    
    
    
    Reg S 9 5/8% Senior Notes due 2014 (filed as Exhibit 4.4 on Form 8-K filed to Brighams
Current Report on April 13, 2007 and incorporated in by reference)4.13
    
    
    
    Rights Agreement, dated as of December 10, 2008, between Brigham Exploration Company and
American Stock Transfer & Trust Company, LLC, as Rights Agent (filed as Exhibit 4.1 to
Brighams Current Report on Form 8-K (filed December 11, 2008) and incorporated herein by
reference)




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##### Table of Contents



Number
    
    
    
    Description4.14
    
    
    
    Certificate of Designations of Series C Junior Preferred Stock of Brigham Exploration Company
effective as of December 10, 2008 (filed as Exhibit 3.1 to Brighams Current Report on Form
8-K (filed December 11, 2008) and incorporated herein by reference)10.1
    
    
    
    Amended and Restated Agreement of Limited Partnership of Brigham Oil & Gas, L.P., dated
December 30, 1997 by and among Brigham, Inc., Brigham Holdings I, L.L.C. and Brigham Holdings
II, L.L.C. (filed as Exhibit 10.1.4 to Brighams Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated herein by reference)10.2*
    
    
    
    Consulting Agreement dated May 1, 1997, by and between Brigham Oil & Gas, L.P. and Harold D.
Carter (filed as Exhibit 10.4 to Brighams Registration Statement on Form S-1 (Registration
No. 33-53873), and incorporated herein by reference)10.3*
    
    
    
    Letter agreement, dated as of March 20, 2000, setting forth amendments effective January 1,
2000, to the Consulting Agreement, dated May 1, 1997, by and between Brigham Oil & Gas, L.P.
and Harold D. Carter (filed as Exhibit 10.5.1 to Brighams Annual Report on Form 10-K for the
year ended December 31, 1999, and incorporated herein by reference)10.4*
    
    
    
    Letter agreement, setting forth amendments to the Consulting Agreement, dated May 1, 1997, by
and between Brigham Oil & Gas, L.P. and Harold D. Carter. (filed as Exhibit 10.4 to Brighams
Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by
reference)10.5
    
    
    
    Two Bridgepoint Lease Agreement dated September 30, 1996, by and between Investors Life
Insurance Company of North America and Brigham Oil & Gas, L.P. (filed as Exhibit 10.14 to
Brighams Registration Statement on Form S-1 (Registration No. 333-22491), and incorporated
herein by reference)10.6
    
    
    
    First Amendment to Two Bridge Point Lease Agreement dated April 11, 1997 between Investors
Life Insurance Company of North America and Brigham Oil & Gas, L.P. (filed as Exhibit 10.9.1
to Brighams Registration Statement on Form S-1 (Registration No. 333-53873), and incorporated
herein by reference)10.7
    
    
    
    Second Amendment to Two Bridge Point Lease Agreement dated October 13, 1997 between Investors
Life Insurance Company of North America and Brigham Oil & Gas, L.P. (filed as Exhibit 10.9.2
to Brighams Registration Statement on Form S-1 (Registration No. 333-53873), and incorporated
herein by reference)10.8
    
    
    
    Letter dated April 17, 1998 exercising Right of First Refusal to Lease 3rd Option Space
(filed as Exhibit 10.9.3 to Brighams Registration Statement on Form S-1 (Registration No.
333-53873), and incorporated herein by reference)10.9
    
    
    
    Third Amendment to Two Bridge Point Lease Agreement dated November 1998 between Hub Properties
Trust and Brigham Oil & Gas, L.P. (filed as Exhibit 10.14 to Brighams Annual Report on Form
10-K for the year ended December 31, 2004 and incorporated herein by reference)10.10
    
    
    
    Fourth Amendment to Two Bridge Point Lease Agreement dated February 7, 2002 between Hub
Properties Trust and Brigham Oil & Gas, L.P. (filed as Exhibit 10.13 to Brighams Annual
Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference)10.11
    
    
    
    Fifth Amendment to Two Bridge Point Lease Agreement dated December 20, 2004 between Hub
Properties Trust, a Maryland real estate investment trust, and Brigham Oil & Gas, L.P. (filed
as Exhibit 10.15 to Brighams Annual Report on Form 10-K for the year ended December 31, 2004
and incorporated herein by reference)10.12
    
    
    
    Registration Rights Agreement dated February 26, 1997 by and among Brigham Exploration
Company, General Atlantic Partners III L.P., GAP-Brigham Partners, L.P., RIMCO Partners, L.P.
II, RIMCO Partners L.P. III, and RIMCO Partners, L.P. IV, Ben M. Brigham, Anne L. Brigham,
Harold D. Carter, Craig M. Fleming, David T. Brigham and Jon L. Glass (filed as Exhibit 10.29
to Brighams Registration Statement on Form S-1 (Registration No. 333-22491), and incorporated
herein by reference)10.13
    
    
    
    Form of Employee Stock Ownership Agreement (filed as Exhibit 10.31 to Brighams Registration
Statement on Form S-1 (Registration No. 333-22491), and incorporated herein by reference)10.14*
    
    
    
    Form Change of Control Agreement dated as of September 20, 1999 between Brigham Exploration
Company and certain Officers (filed as Exhibit 10.3 to Brighams Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1999 and incorporated by reference herein)




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##### Table of Contents



Number
    
    
    
    Description10.15
    
    
    
    Registration Rights Agreement dated November 1, 2000 by and between Brigham Exploration
Company, DLJ MB Funding III, Inc., and DLJ ESC II, LP. (filed as Exhibit 10.10 to Brighams
Current Report on Form 8-K, as amended (filed November 8, 2000), and incorporated herein by
reference)10.16
    
    
    
    First Amendment to Registration Rights Agreement, dated February 20, 2001, by and among
Brigham Exploration Company, DLJMB Funding III, Inc., DLJ Merchant Banking Partners III, LP,
DLJ ESC II, LP and DLJ Offshore Partners III, CV (filed as Exhibit 10.71 to Brighams Annual
Report on Form 10-K for the year ended December 31, 2000 (filed March 23, 2001), and
incorporated herein by reference)10.17
    
    
    
    Registration Rights Agreement dated December 20, 2002 between Brigham Exploration Company and
Shell Capital Inc. (filed as Exhibit 10.50 to Brighams Annual Report on Form 10-K for the
year ended December 31, 2002 and incorporated herein by reference)10.18
    
    
    
    Second Amendment to Registration Rights Agreement dated December 21, 2002 between Brigham
Exploration Company and Credit Suisse First Boston Entities (filed as Exhibit 10.51 to
Brighams Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated
herein by reference)10.19
    
    
    
    Third Amendment to Registration Rights Agreement May 24, 2004 between Brigham Exploration
Company and Credit Suisse First Boston Entities (filed as Exhibit 99.1 to Brighams Current
Report on Form 8-K (filed July 20, 2004), and incorporated herein by reference)10.20
    
    
    
    Fourth Amended and Restated Credit Agreement, dated June 29, 2005 between Brigham Oil & Gas,
L.P., Bank of America, N.A., The Royal Bank of Scotland plc, BNP Paribas and Banc of America
Securities LLC. (filed as Exhibit 10.1 to Brighams Quarterly Report on Form 10-Q for the six
month period ended June 30, 2005 and incorporated herein by reference)10.21
    
    
    
    The Resignation of Agent, Appointment of Successor Agent and Assignment of Security
Instruments dated June 29, 2005 by and among Brigham Oil & Gas, L.P., Société Generale and
Bank of America, N.A. (filed as Exhibit 10.2 to Brighams Quarterly Report on Form 10-Q for
the six month period ended June 30, 2005 and incorporated herein by reference)10.22
    
    
    
    Purchase Agreement dated April 12, 2006, among Brigham Exploration Company, the Guarantors
named therein (filed as Exhibit 10.1 to Brighams Current Report on Form 8-K, as amended
(filed April 24, 2006), and incorporated herein by reference)10.23
    
    
    
    Registration Rights Agreement, dated April 20, 2006, among Brigham Exploration Company, the
Guarantors named therein and the Initial Purchasers named therein (filed as Exhibit 10.2 to
Brighams Current Report on Form 8-K, as amended (filed April 24, 2006), and incorporated
herein by reference)10.24
    
    
    
    First Amendment to Fourth Amended and Restated Credit Agreement, between Brigham Exploration
Company and the banks named therein, dated April 10, 2006 (filed as Exhibit 10.3 to Brighams
Current Report on Form 8-K, as amended (filed April 24, 2006), and incorporated herein by
reference)10.25
    
    
    
    Second Amendment to Fourth Amended and Restated Credit Agreement, between Brigham Exploration
Company and the banks named therein, dated March 27, 2007 (filed as Exhibit 10.3 to Brighams
Current Report on Form 8-K filed on April 13, 2007 and incorporated in by reference)10.26*
    
    
    
    Form of the Amended and Restated Indemnity Agreement, dated November 9, 2006 (filed as Exhibit
99.1 to Brighams Current Report on Form 8-K, as amended (filed December 5, 2006), and
incorporated herein by reference)10.27
    
    
    
    Purchase Agreement dated March 30, 2007, among Brigham Exploration Company, the Guarantors
named therein and the Initial Purchasers named therein (filed as Exhibit 10.1 to Brighams
Current Report on Form 8-K filed on April 13, 2007 and incorporated in by reference)10.28
    
    
    
    Registration Rights Agreement dated April 9, 2007, among Brigham Exploration Company, the
Guarantors named therein and the Initial Purchasers named therein (filed as Exhibit 10.2 to
Brighams Current Report on Form 8-K filed on April 13, 2007 and incorporated in by reference)




---



##### Table of Contents



Number
    
    
    
    Description10.29
    
    
    
    Amendment to Securities Purchase Agreement dated July 31, 2008, between Brigham Exploration
Company and DLJMB Funding III, Inc., DLJ ESC II, LP, DLJ Merchant Banking Partners III, L.P.,
and other parties (filed as Exhibit 10.41 to Brighams
Current Report on Form 8-K (filed August 5, 2008) and incorporated herein by reference)10.30
    
    
    
    Agreement Relating to Voting of Shares dated July 31, 2008, between Brigham Exploration
Company and DLJ Merchant Banking Partners III, L.P., DLJ Offshore Partners III, C.V., DLJ
Offshore Partners III-1, C.V., DLJ Offshore Partners III-2, C.V., DLJ MB Partners III GmbH &
Co. KG, Millennium Partners II, L.P., MBP III Plan Investors, L.P., DLJ ESC II, L.P. and DLJMB
Funding III, Inc. (filed as Exhibit 10.42 to Brighams
Current Report on Form 8-K (filed August 5, 2008) and incorporated herein by reference)10.31
    
    
    
    Third Amendment to the Fourth Amended and Restated Credit Agreement dated as of June 29, 2005
(filed as Exhibit 10.43 to Brighams Current Report on Form 8-K (filed November 12, 2008) and
incorporated herein by reference)10.32*
    
    
    
    1997 Incentive Plan of Brigham Exploration Company (as amended effective January 1, 2009)
(filed as Exhibit 10.44 to Brighams Current Report on Form 8-K (filed December 29, 2008) and
incorporated herein by reference)10.33*
    
    
    
    Form of Restricted Stock Agreement under the 1997 Incentive Plan of Brigham Exploration
Company (filed as Exhibit 10.45 to Brighams Current Report on Form 8-K (filed December 29,
2008) and incorporated herein by reference)10.34*
    
    
    
    Form of Option Agreement (Non-Qualified Stock Option) under the 1997 Incentive Plan of Brigham
Exploration Company (filed as Exhibit 10.46 to Brighams Current Report on Form 8-K (filed
December 29, 2008) and incorporated herein by reference)10.35*
    
    
    
    Form of Option Agreement (Incentive Option) under the 1997 Incentive Plan of Brigham
Exploration Company (filed as Exhibit 10.47 to Brighams Current Report on Form 8-K (filed
December 29, 2008) and incorporated herein by reference)10.36*
    
    
    
    Brigham Exploration Company 1997 Director Stock Option Plan (as amended effective January 1,
2009) (filed as Exhibit 10.48 to Brighams Current Report on Form 8-K (filed December 29,
2008) and incorporated herein by reference)10.37*
    
    
    
    Form of Non-Qualified Stock Option Agreement under the 1997 Director Stock Option Plan (filed
as Exhibit 10.49 to Brighams Current Report on Form 8-K (filed December 29, 2008) and
incorporated herein by reference)10.38*
    
    
    
    Form of Amendment to the Change of Control Agreement (filed as Exhibit 10.50 to Brighams
Current Report on Form 8-K (filed December 29, 2008) and incorporated herein by reference)10.39*
    
    
    
    Amendment to the Employment Agreement between the Company and Ben M. Brigham dated as of
December 23, 2008 (filed as Exhibit 10.51 to Brighams Current Report on Form 8-K (filed
December 29, 2008) and incorporated herein by reference)21
    
    
    
    Subsidiaries of the Registrant23.1
    
    
    
    Consent of KPMG LLP, Independent Registered Public Accounting Firm23.2
    
    
    
    Consent of Cawley Gillespie & Associates, Inc.31.1
    
    
    
    Certification of Chief Executive Officer pursuant to Sec. 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    
    Certification of Chief Financial Officer pursuant to Sec. 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. SECTION 135032.2
    
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. SECTION 1350
 
 *
    
    Management contract or compensatory plan.
    
    Filed herewith.