##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 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 þ No o
 Yes o No þ
 þ o
 Yes
o No o
 Form 10-K.
o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



BRIGHAM EXPLORATION COMPANY
 TABLE OF CONTENTS
 PagePart IItem 1. Business
    
    
    2Item 1A. Risk Factors
    
    
    10Item 1B. Unresolved Staff Comments
    
    
    22Item 2. Properties
    
    
    22Item 3. Legal Proceedings
    
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    
    33Executive Officers of the Registrant
    
    
    34Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    35Item 6. Selected Consolidated Financial Data
    
    
    38Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    40Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    66Item 8. Financial Statements and Supplementary Data
    
    
    70Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    70Item 9A. Controls and Procedures
    
    
    70Item 9B. Other Information
    
    
    70Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    71Item 11. Executive Compensation
    
    
    71Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    71Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    71Item 14. Principal Accounting Fees and Services
    
    
    71Part IVItem 15. Exhibits, Financial Statement Schedules
    
    
    71Glossary of Oil and Gas Terms
    
    
    72Signatures
    
    
    75Index to Financial Statements
    
    
    F-1Exhibit 21Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 99.1




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BRIGHAM EXPLORATION COMPANY
 2009 ANNUAL REPORT ON FORM 10-K
 
 PART I
 
 Item 1.
    
    Business
 Overview
     At December 31, 2009
    
    
    2009Productive
    
    
    3-D
    
    
    AverageProved
    
    
    Pre-Tax
    
    
    %
    
    
    Wells
    
    
    Seismic
    
    
    Daily ProductionProvince
    
    Reserves(a)
    
    
    PV10%(b)(c)
    
    
    Oil
    
    
    Gross
    
    
    Net
    
    
    Data
    
    
    Volumes (d)(MMBoe)
    
    
    (Millions)
    
    
    
    
    
    
    
    
    
    
    
    (Sq. Miles)
    
    
    (Boe)Rocky Mountains
    
    
    15.4
    
    
    
    133.6
    
    
    
    89
    %
    
    
    115
    
    
    
    22.9
    
    
    
    1,402
    
    
    
    1,816Onshore Gulf Coast
    
    
    8.2
    
    
    $
    87.7
    
    
    
    21
    %
    
    
    76
    
    
    
    38.3
    
    
    
    4,459
    
    
    
    2,194Anadarko Basin
    
    
    2.9
    
    
    
    13.1
    
    
    
    6
    %
    
    
    82
    
    
    
    21.3
    
    
    
    2,381
    
    
    
    726West Texas and Other
    
    
    1.2
    
    
    
    19.7
    
    
    
    90
    %
    
    
    83
    
    
    
    24.6
    
    
    
    4,698
    
    
    
    298Total
    
    
    27.7
    
    
    $
    254.1
    
    
    
    60
    %
    
    
    356
    
    
    
    107.1
    
    
    
    12,940
    
    
    
    5,034
 
 (a)
    
    MMBoe is defined as one million barrels of oil equivalent determined using the ratio of six
Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.(b)
    
    The prices used to calculate this measure were $61.18 per barrel of oil and $3.87 per MMbtu
of natural gas. The prices represent the average prices per barrel of oil and per MMbtu of
natural gas at the beginning of each month in the 12-month period prior to the end of the
reporting period. These 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 this
date.(c)
    
    The standardized measure for our proved reserves at December 31, 2009 was $246.5 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.(d)
    
    Average daily production volumes calculated based on 360 day year. Includes approximately
16,475 barrels of oil produced in the Williston Basin during 2009 and recorded as inventory at
year-end 2009. Ending inventory at year end 2008 and 2007 was not material. Adjusting the
production volumes for amounts included in
inventory would result in average daily sales volumes in the Rocky Mountains and  in total of 1,770 and 4,988 barrels of oil equivalent, respectively.  2




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Business Strategy
  
    
    Focus on Provinces.We plan to concentrate the majority of our near term capital
expenditures in the Williston Basin, where we believe our  approximately 282,584 net acres and the
application of advanced drilling and completion techniques provide us with a significant
competitive advantage in developing both the Bakken and Three Forks formations. In
addition to the Williston Basin, we have a multi-year inventory of drilling prospects in
the following three provinces: Onshore Gulf Coast, Anadarko Basin and West Texas. Our
projects in these provinces provide us with important future drilling investment
diversification.
 
    
    Leverage our Engineering and Operational Expertise. Our staff is proficient with
state-of-the-art drilling and completion technologies, including directional drilling,
horizontal drilling and multi-stage isolated fracture stimulations. Our drilling and
completion techniques in the Williston Basin have rapidly evolved from drilling and
completing long lateral wells with single large uncontrolled fracture stimulations in late
2006 to drilling long lateral wells with 20 isolated fracture stimulation stages in the
fourth quarter 2008 and first quarter 2009. Most recently, we have completed long lateral
wells with up to 32 isolated fracture
stimulation stages. We will continue to refine our drilling and completion techniques in
order to attempt to enhance well performance and the associated estimated ultimate
recoveries and rates of return.
  3




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
    
    Capitalize on Internally Generated Exploration Successes Through Disciplined Development Activities.From
1990 to 1999, we grew our reserves and production volumes primarily through successful
exploration drilling. In recent years, our exploratory drilling success has generated a
multi-year inventory of development drilling locations. We have a 19 year track record of
successfully generating and drilling exploration wells in 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 inventory of drilling locations in the Williston Basin, Vicksburg and
Hunton plays are examples of successful projects where our position in the play was
internally identified and originated.
 
    
    Enhance Returns Through Operational Control.We typically leverage our technical and
operational expertise by seeking to maintain operational control of our exploration and
drilling activities. As operator, we retain more control over the timing, selection and
process of drilling prospects, which enhances our ability to maximize our return on
invested capital. Since we generate most of our own projects, we generally have the
ability to retain operational control over all phases of our exploration and development
activities.
 Exploration and Development Staff
   Operations and Operations Staff
    4




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Oil and Natural Gas Market and Major Customers
      Competition
   5




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Operating Hazards and Uninsured Risks
   Governmental Regulation
   6




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Environmental Matters
     7




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Climate Change
  Impact of Legislation and Regulation
  8




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Indirect
Consequences of Regulation or Business Trends.
 Physical Impacts of Climate Change on our Costs and Operations.
  9




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Formation
  Facilities
  Employees
  Website Access
  
 Item 1A.
    
    Risk Factors
  Oil and natural gas prices are volatile and thus could be subject to further reduction, which would
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 consumer demand;
 
    
    the price and availability of alternative fuels;
  10




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
    
    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.
  
    
    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 ongoing financial uncertainty could negatively impact the prices for oil and natural gas, limit
access to the credit and equity markets, increase 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 cash flow from operations 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 outstanding balances under our Senior Credit Facility are 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.
  11




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The indenture governing the Senior Notes and the documents governing 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.
     12




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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.
  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.
   Our hedging activities may prevent us from benefiting from price increases and may expose us to
other risks.
   13




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The results of our planned drilling in the Bakken and Three Forks objectives, an emerging play with
limited drilling and production history, are subject to more uncertainties than our drilling
program in the more established formations and may not meet our expectations for reserves or
production.
   The proposed United States federal budget for fiscal year 2010 and other pending legislation
contain certain provisions that, if passed as originally submitted, will have an adverse effect on
our financial position, results of operations, and cash flows.
   14




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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.
  Lower oil and natural gas prices may cause us to record ceiling limitation writedowns, which would
reduce our stockholders equity.
  We may have difficulty financing our planned capital expenditures, which could adversely affect our
business.
  Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next
several years unless production is established on units containing the acreage or the leases are
extended.
    15




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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.
   16




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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.
   We need to replace our reserves at a faster rate than companies whose reserves have longer
production periods. Our failure to replace our reserves would result in decreasing reserves and
production over time.
   Our reserves in the Gulf Coast have high initial production rates followed by steep declines in
production, resulting in a reserve life for wells in this area that is shorter than the industry
average. This production volatility has impacted and, in the future, may continue to impact our
quarterly and annual production levels.
    17




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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.
  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, cratering and explosions; and
 
    
    pipeline ruptures and spills.
   18




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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.
  We face significant competition and many of our competitors have resources in excess of our
available resources.
  
    
    seeking to acquire desirable producing properties or new leases for future exploration;
 
    
    marketing our oil and natural gas production; and
 
    
    seeking to acquire the equipment and expertise necessary to operate and develop those
properties.
   19




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We are subject to various governmental regulations and environmental risks that may cause us to
incur substantial costs.
    The adoption of climate change legislation by Congress could result in increased operating costs
and reduced demand for the oil and natural gas we produce.
   20




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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 are prohibited from paying dividends on our common stock.
  Certain anti-takeover provisions may adversely affect your rights as a stockholder.
   21




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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
   22




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Rocky
    
    
    Onshore
    
    
    Anadarko
    
    
    West TexasMountains (a)
    
    
    Gulf Coast
    
    
    Basin
    
    
    & Other
    
    
    TotalCapital expenditures for drilling,
land and seismic in 2009 (in
millions)
    
    $
    53.1
    
    
    $
    7.4
    
    
    $
    (1.2
    )
    
    $
    0.7
    
    
    $
    60.0Proved Reserves at December 31, 2009Pre-tax PV10% (in millions) (b)
    
    $
    133.6
    
    
    $
    87.7
    
    
    $
    13.1
    
    
    $
    19.7
    
    
    $
    254.1Oil (MMBbls)
    
    
    13.7
    
    
    
    1.7
    
    
    
    0.2
    
    
    
    1.1
    
    
    
    16.6Natural gas (Bcf)
    
    
    10.4
    
    
    
    38.9
    
    
    
    16.4
    
    
    
    0.7
    
    
    
    66.4Oil equivalents (MMBoe) (c)
    
    
    15.4
    
    
    
    8.2
    
    
    
    2.9
    
    
    
    1.2
    
    
    
    27.7% Oil
    
    
    89
    %
    
    
    21
    %
    
    
    6
    %
    
    
    90
    %
    
    
    60
    %Average daily production volumes
(MBoe) (d)
    
    
    1,816
    
    
    
    2,194
    
    
    
    726
    
    
    
    298
    
    
    
    5,034Average daily sales volumes (MBoe)(d)
    
    
    1,770
    
    
    
    2,194
    
    
    
    726
    
    
    
    298
    
    
    
    4,988Productive wells at December 31, 2009Gross
    
    
    115
    
    
    
    76
    
    
    
    82
    
    
    
    83
    
    
    
    356Net
    
    
    22.9
    
    
    
    38.3
    
    
    
    21.3
    
    
    
    24.6
    
    
    
    107.13-D Seismic Data (square miles)
    
    
    1,402
    
    
    
    4,459
    
    
    
    2,381
    
    
    
    4,698
    
    
    
    12,940
 
 (a)
    
    Includes the Williston Basin located in North Dakota and Montana and the Powder River Basin
located in Wyoming.(b)
    
    The standardized measure for our proved reserves at December 31, 2009, was $246.5 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. The prices
used to calculate this measure were $61.18 per barrel of oil and $3.87 per MMbtu of natural
gas. These prices represent the average prices per barrel of oil and per MMbtu of natural gas
at the beginning of each month in the 12-month period prior to the end of the reporting
period. These 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 this
date.(c)
    
    Boe is defined as one barrel of oil equivalent determined using the ratio of six Mcf of
natural gas to one Bbl of crude oil, condensate or natural gas liquids.(d)
    
    Average daily production volumes calculated based on 360 day year. Includes approximately
16,475 barrels of oil produced in the Williston Basin during 2009 and recorded as inventory at
year-end 2009. Ending inventory at year end 2008 and 2007 was not material. Adjusting the
production volumes for amounts included in inventory would result in average daily sales
volumes in the Rocky Mountains and in total of 1,770 and 4,988 barrels of oil
equivalent, respectively. Rocky Mountains Province
  Overview of Williston Basin
   23




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Overview of Williston Basin Acreage Position
   Overview of Rough Rider Drilling Participation Agreement
   24




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2009 Williston Basin Drilling and Completion Activity
 FRAC
    
    
    IP
    
    
    30 DAYWELL NAME
    
    County
    
    OBJECTIVE
    
    ~WI
    
    
    STAGES
    
    
    (Boe/d)
    
    
    Average (Boe/d)**Williston 25-36 #1H
    
    Williams
    
    Bakken
    
    
    33
    %*
    
    
    32
    
    
    
    3,394
    
    
    
    1,505Strand 16-9 #1H
    
    Williams
    
    Bakken
    
    
    22
    %*
    
    
    26
    
    
    
    2,264
    
    
    
    948Lee 16-21 #1H
    
    Williams
    
    Bakken
    
    
    31
    %*
    
    
    28
    
    
    
    1,544
    
    
    
    698BCD Farms 16-21 #1H
    
    Williams
    
    Bakken
    
    
    25
    %*
    
    
    28
    
    
    
    1,776
    
    
    
    702Brad Olson 9-16 #1H
    
    Williams
    
    Bakken
    
    
    33
    %*
    
    
    28
    
    
    
    2,112
    
    
    
    811Figaro 29-32 #1H
    
    McKenzie
    
    Bakken
    
    
    95
    %
    
    
    19
    
    
    
    1,895
    
    
    
    831Anderson 28-33 #1H
    
    Mountrail
    
    Bakken
    
    
    66
    %
    
    
    24
    
    
    
    2,154
    
    
    
    1,346Strobeck 27-34 #1H
    
    Mountrail
    
    Three Forks
    
    
    77
    %
    
    
    18
    
    
    
    2,021
    
    
    
    989Olson 10-15 #1H
    
    Williams
    
    Bakken
    
    
    100
    %
    
    
    20
    
    
    
    1,433
    
    
    
    730Averages
    
    
    2,066
    
    
    
    951
 *
    
    Rough Rider drilling participation agreement wells where our working interest is anticipated to increase upon payout.**
    
    Excludes any days well was down for remediation. 2010 Williston Basin Drilling and Completion Activity / 2010 Capital Budget
 FRAC
    
    
    IP
    
    
    30 DAYWELL NAME
    
    County
    
    OBJECTIVE
    
    ~WI
    
    
    STAGES
    
    
    (Boe/d)
    
    
    Average (Boe/d)**Liffrig 29-20 #1H
    
    Mountrail
    
    Three Forks
    
    
    72
    %
    
    
    29
    
    
    
    2,477
    
    
    NAOwan-Nehring 27-34
    
    Williams
    
    Bakken
    
    
    49
    %
    
    
    30
    
    
    
    2,513
    
    
    NAJackson 35-34 #1H
    
    Williams
    
    Bakken
    
    
    62
    %
    
    
    30
    
    
    
    3,540
    
    
    907State 36-1 #1H
    
    Williams
    
    Bakken
    
    
    16
    %*
    
    
    30
    
    
    
    3,807
    
    
    1,516Averages
    
    
    3,084
    
    
    1,212
 *
    
    Rough Rider drilling participation agreement wells where our working interest is anticipated to increase upon payout.**
    
    Excludes any days well was down for remediation.  Onshore Gulf Coast Province
    25




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##### Table of Contents



Vicksburg Trend
    Southern Louisiana Trend
    Frio Trend
  In 2010, we have no current plans to drill in the Frio Trend.
 Anadarko Basin Province
    26




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##### Table of Contents



West Texas and Other Province
    Title to Properties
  Oil and Natural Gas Reserves
  Summary
of Oil and Gas Reserves as of Fiscal-Year-End Based on Average
Fiscal-Year Prices
 ReservesOil
    
    
    NaturalGas
    
    
    Total(MMBbls)
    
    
    (Bcf)
    
    
    (MMBoe)(a)PROVEDDeveloped:United States
    
    
    5.3
    
    
    
    29.2
    
    
    
    10.2Undeveloped:United States
    
    
    11.3
    
    
    
    37.2
    
    
    
    17.5TOTAL PROVED
    
    
    16.6
    
    
    
    66.4
    
    
    
    27.7
 (a)
    
    Boe is defined as one barrel of oil equivalent determined using the ratio of six Mcf of
natural gas to one Bbl of crude oil, condensate or natural gas liquids.    27




---



##### Table of Contents



Proved Undeveloped Reserves
     28




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##### Table of Contents



Reconciliation of Standardized Measure to Pre-tax PV10%
  At December 31,2009
    
    
    2008
    
    
    2007Standardized measure of discounted future net cash flows
    
    $
    246.5
    
    
    $
    279.3
    
    
    $
    394.5Add present value of future income tax discounted at 10%
    
    
    7.6
    
    
    
    8.7
    
    
    
    97.1Pre-tax PV10%
    
    $
    254.1
    
    
    $
    288.0
    
    
    $
    491.6
  29




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##### Table of Contents



Drilling Activities
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetExploratory wells:Natural gas
    
    
    0
    
    
    
    0.0
    
    
    
    4
    
    
    
    1.3
    
    
    
    0
    
    
    
    0Oil
    
    
    1
    
    
    
    0.1
    
    
    
    1
    
    
    
    0.8
    
    
    
    3
    
    
    
    1.1Non-productive
    
    
    1
    
    
    
    0.2
    
    
    
    2
    
    
    
    1.0
    
    
    
    7
    
    
    
    3.8Total
    
    
    2
    
    
    
    0.3
    
    
    
    7
    
    
    
    3.1
    
    
    
    10
    
    
    
    4.9Development wells:Natural gas
    
    
    1
    
    
    
    0.6
    
    
    
    9
    
    
    
    4.5
    
    
    
    8
    
    
    
    5.7Oil
    
    
    38
    
    
    
    4.8
    
    
    
    52
    
    
    
    7.8
    
    
    
    11
    
    
    
    4.2Non-productive
    
    
    0
    
    
    
    0.0
    
    
    
    0
    
    
    
    0.0
    
    
    
    0
    
    
    
    0.0Total
    
    
    39
    
    
    
    5.4
    
    
    
    61
    
    
    
    12.3
    
    
    
    19
    
    
    
    9.9
 Present Activities
   Delivery Commitments
  Productive Wells and Acreage
 Productive Wells
  Natural Gas
    
    
    Oil
    
    
    TotalGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetRocky Mountains
    
    
    0
    
    
    
    0
    
    
    
    115
    
    
    
    22.9
    
    
    
    115
    
    
    
    22.9Onshore Gulf Coast
    
    
    60
    
    
    
    34.1
    
    
    
    16
    
    
    
    4.2
    
    
    
    76
    
    
    
    38.3Anadarko Basin
    
    
    71
    
    
    
    19.6
    
    
    
    11
    
    
    
    1.7
    
    
    
    82
    
    
    
    21.3West Texas and Other
    
    
    10
    
    
    
    1.3
    
    
    
    73
    
    
    
    23.3
    
    
    
    83
    
    
    
    24.6Total
    
    
    141
    
    
    
    55.0
    
    
    
    215
    
    
    
    52.1
    
    
    
    356
    
    
    
    107.1
  30




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##### Table of Contents



Acreage
  Developed(a)
    
    
    Undeveloped(a)
    
    
    TotalGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetRocky Mountains
    
    
    55,657
    
    
    
    31,791
    
    
    
    499,600
    
    
    
    297,854
    
    
    
    555,257
    
    
    
    329,645Onshore Gulf Coast
    
    
    22,385
    
    
    
    9,558
    
    
    
    9,387
    
    
    
    5,430
    
    
    
    31,772
    
    
    
    14,988Anadarko Basin
    
    
    62,086
    
    
    
    17,629
    
    
    
    11,748
    
    
    
    7,826
    
    
    
    73,834
    
    
    
    25,455West Texas & Other
    
    
    20,326
    
    
    
    5,729
    
    
    
    10,000
    
    
    
    1,940
    
    
    
    30,326
    
    
    
    7,669Total
    
    
    160,454
    
    
    
    64,707
    
    
    
    530,735
    
    
    
    313,050
    
    
    
    691,189
    
    
    
    377,757
 
 (a)
    
    Does not include acreage for which assignments have not been received.  Acres ExpiringTwelve Months Ending:
    
    Gross
    
    
    NetDecember 31, 2010
    
    
    55,071
    
    
    
    29,151December 31, 2011
    
    
    118,412
    
    
    
    73,978December 31, 2012
    
    
    138,174
    
    
    
    89,781December 31, 2013
    
    
    103,532
    
    
    
    61,500December 31, 2014
    
    
    26,764
    
    
    
    21,035Thereafter
    
    
    88,782
    
    
    
    37,605Total
    
    
    530,735
    
    
    
    313,050
   31




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##### Table of Contents



Sales Volumes, Prices and Production Costs
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Sales volumes(a):Oil volumes (MBbls)Rocky Mountains
    
    
    610
    
    
    
    292
    
    
    
    44Onshore Gulf Coast
    
    
    88
    
    
    
    151
    
    
    
    200Anadarko Basin
    
    
    21
    
    
    
    24
    
    
    
    32West Texas & Other
    
    
    95
    
    
    
    111
    
    
    
    116Total oil
    
    
    814
    
    
    
    578
    
    
    
    392Natural gas volumes (MMcf)Rocky Mountains
    
    
    169
    
    
    
    53
    
    
    
    28Onshore Gulf Coast
    
    
    4,211
    
    
    
    6,032
    
    
    
    9,716Anadarko Basin
    
    
    1,441
    
    
    
    1,821
    
    
    
    2,766West Texas & Other
    
    
    71
    
    
    
    90
    
    
    
    116Total natural gas
    
    
    5,892
    
    
    
    7,996
    
    
    
    12,626Total oil equivalent (MBoe)
    
    
    1,796
    
    
    
    1,911
    
    
    
    2,496Average oil prices based on sales volumes:Oil price (per Bbl)
    
    $
    54.79
    
    
    $
    89.06
    
    
    $
    72.30Oil price including derivative settlement gains (losses) (per Bbl)
    
    $
    53.99
    
    
    $
    84.63
    
    
    $
    71.51Oil price including derivative settlements and unrealized gains
(losses) (per Bbl)
    
    $
    48.65
    
    
    $
    89.79
    
    
    $
    65.57Average natural gas prices based on sales volumes:Natural gas price (per Mcf)
    
    $
    4.01
    
    
    $
    9.21
    
    
    $
    7.30Natural gas price including derivative settlement gains (losses)
(per Mcf)
    
    $
    5.71
    
    
    $
    9.08
    
    
    $
    7.66Natural gas price including derivative settlements and unrealized
gains (losses) (per Mcf)
    
    $
    5.21
    
    
    $
    9.48
    
    
    $
    7.38Average equivalent prices based on sales volumes:Oil equivalent price (per Boe)
    
    $
    37.97
    
    
    $
    65.50
    
    
    $
    48.30Oil equivalent price including derivative settlement gains
(losses) (per Boe)
    
    $
    43.19
    
    
    $
    63.62
    
    
    $
    49.98Oil equivalent price including derivative settlements and
unrealized gains (losses) (per Boe)
    
    $
    39.12
    
    
    $
    66.84
    
    
    $
    47.64Average production costs (per Boe) based on sales volumes:Lease operating expenses (includes costs for operating and
maintenance and expensed workovers)
    
    $
    7.61
    
    
    $
    5.89
    
    
    $
    3.66Ad valorem taxes
    
    $
    0.56
    
    
    $
    0.58
    
    
    $
    0.60Production taxes
    
    $
    2.84
    
    
    $
    2.81
    
    
    $
    1.02
 
 (a)
    
    Sales volumes for 2009 exclude 16,475 barrels of oil produced during the year but held in
inventory. Ending inventory at year end 2008 and 2007 was not material. During 2009,
production volumes for crude oil were 830 MBbls and total oil equivalent production volumes
were 1,812 MBoe.  32




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##### Table of Contents



Item 3.
    
    Legal Proceedings
   
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
 (a)
    
    We convened a Special Meeting of Stockholders on Wednesday, October 7, 2009, in
Austin, Texas at 9:00 a.m. local time.(b)
    
    N/A
 (c)
    
    Out of the total 82,862,476 shares of our common stock outstanding and entitled
to vote, 73,600,146 shares were present in person or by proxy at the special
meeting, representing approximately 89% of our common stock outstanding. The only
matters voted on by our stockholders, as fully described in the definitive proxy
materials for the special meeting, are set forth below. The results were as follows:
 1.
    
    To approve an amendment to our Certificate of Incorporation to
increase the number of authorized shares of common stock from 90 million shares
to 180 million shares.
 For
    
    
    66,363,106Against
    
    
    6,976,123Abstained
    
    
    260,917Broker non-votes
    
    
    0
 2.
    
    To approve an amendment to the 1997 Incentive Plan to increase
the number of shares of common stock available under the plan.
 For
    
    
    40,626,366Against
    
    
    10,202,489Abstained
    
    
    113,391Broker non-votes
    
    
    22,657,900
  33




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##### Table of Contents



Executive Officers of the Registrant
  Name
    
    Age
    
    PositionBen M. Brigham
    
    
    50
    
    
    Chief Executive Officer, President and ChairmanEugene B. Shepherd, Jr.
    
    
    51
    
    
    Executive Vice President and Chief Financial OfficerDavid T. Brigham
    
    
    49
    
    
    Executive Vice President  Land and Administration
and DirectorA. Lance Langford
    
    
    47
    
    
    Executive Vice President  OperationsJeffery E. Larson
    
    
    51
    
    
    Executive Vice President  Exploration
 Ben M. Bud Brigham
 Eugene B. Shepherd, Jr.
 David T. Brigham
 A. Lance Langford
 Jeffery E. Larson
  34




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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
    
    
    Low2008:First Quarter
    
    $
    8.16
    
    
    $
    4.86Second Quarter
    
    
    18.29
    
    
    
    5.76Third Quarter
    
    
    17.62
    
    
    
    10.00Fourth Quarter
    
    
    10.91
    
    
    
    2.302009:First Quarter
    
    $
    4.25
    
    
    $
    1.04Second Quarter
    
    
    4.30
    
    
    
    1.60Third Quarter
    
    
    10.61
    
    
    
    2.50Fourth Quarter
    
    
    14.93
    
    
    
    7.99
   35




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##### Table of Contents



COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
 
 *
    
    $100 invested on 12/31/04 in stock or index, including reinvestment of dividends.Fiscal year ending December 31.    36




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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)
    
    
    4,170,137

    
    
    $
    5.14
    
    
    
    566,800Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    NA

    
    
    
    Total
    
    
    4,170,137

    
    
    $
    5.14
    
    
    
    566,800
 
 (a)
    
    Does not include 556,990 shares of restricted stock issued and outstanding at December 31,
2009. Issuer Purchases of Equity Securities
  Total Number of
    
    
    Average PricePeriod
    
    Shares Purchased
    
    
    Paid per ShareOctober 2009
    
    
    2,597
    
    
    $
    9.55December 2009
    
    
    37,433
    
    
    $
    13.86Total
    
    
    40,030
    
    
    
    13.58
  37




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##### Table of Contents



Item 6.
    
    Selected Consolidated Financial Data
   38




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##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands, except per share information)Statement of Operations Data:Revenues:Oil and natural gas sales
    
    $
    68,192
    
    
    $
    125,108
    
    
    $
    120,557
    
    
    $
    102,835
    
    
    $
    96,820Gain (loss) on derivatives, net
    
    
    2,064
    
    
    
    2,548
    
    
    
    (1,664
    )
    
    
    3,335
    
    
    
    Other revenue
    
    
    88
    
    
    
    132
    
    
    
    88
    
    
    
    127
    
    
    
    220Total revenues
    
    
    70,344
    
    
    
    127,788
    
    
    
    118,981
    
    
    
    106,297
    
    
    
    97,040Costs and expenses:Lease operating
    
    
    14,655
    
    
    
    12,363
    
    
    
    10,704
    
    
    
    10,701
    
    
    
    7,161Production taxes
    
    
    5,098
    
    
    
    5,374
    
    
    
    2,541
    
    
    
    4,021
    
    
    
    3,353General and administrative
    
    
    9,243
    
    
    
    9,557
    
    
    
    9,276
    
    
    
    7,887
    
    
    
    5,533Depletion of oil and natural gas properties
    
    
    32,054
    
    
    
    53,498
    
    
    
    59,079
    
    
    
    46,386
    
    
    
    33,268Impairment of oil and natural gas properties
    
    
    114,781
    
    
    
    237,180
    
    
    
    6,505
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    812
    
    
    
    629
    
    
    
    613
    
    
    
    537
    
    
    
    762Loss on inventory valuation
    
    
    2,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accretion of discount on asset retirement
obligations
    
    
    421
    
    
    
    361
    
    
    
    379
    
    
    
    317
    
    
    
    180Total costs and expenses
    
    
    179,260
    
    
    
    318,962
    
    
    
    89,097
    
    
    
    69,849
    
    
    
    50,257Operating income (loss)
    
    
    (108,916
    )
    
    
    (191,174
    )
    
    
    29,884
    
    
    
    36,448
    
    
    
    46,783Other income (expense):Interest income
    
    
    578
    
    
    
    191
    
    
    
    654
    
    
    
    1,207
    
    
    
    245Interest expense, net
    
    
    (16,431
    )
    
    
    (14,495
    )
    
    
    (14,622
    )
    
    
    (9,688
    )
    
    
    (3,980
    )Gain loss on derivatives, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,213
    
    
    
    (814
    )Other income (expense)
    
    
    1,544
    
    
    
    530
    
    
    
    1,022
    
    
    
    1,352
    
    
    
    238Total other income (expense )
    
    
    (14,309
    )
    
    
    (13,774
    )
    
    
    (12,946
    )
    
    
    (3,916
    )
    
    
    (4,311
    )Income (loss) before income taxes and
cumulative effect of change in accounting
principle
    
    
    (123,225
    )
    
    
    (204,948
    )
    
    
    16,938
    
    
    
    32,532
    
    
    
    42,472Income tax benefit (expense):Current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred
    
    
    233
    
    
    
    42,701
    
    
    
    (6,728
    )
    
    
    (12,744
    )
    
    
    (15,037
    )233
    
    
    
    42,701
    
    
    
    (6,728
    )
    
    
    (12,744
    )
    
    
    (15,037
    )Net income (loss) available to common
stockholders
    
    $
    (122,992
    )
    
    $
    (162,247
    )
    
    $
    10,210
    
    
    $
    19,788
    
    
    $
    27,435Net income (loss) per share available to
common shareholders:Basic
    
    $
    (1.74
    )
    
    $
    (3.57
    )
    
    $
    0.23
    
    
    $
    0.44
    
    
    $
    0.65Diluted
    
    
    (1.74
    )
    
    
    (3.57
    )
    
    
    0.22
    
    
    
    0.43
    
    
    
    0.63Weighted average shares outstanding:Basic
    
    
    70,569
    
    
    
    45,441
    
    
    
    45,110
    
    
    
    45,017
    
    
    
    42,481Diluted
    
    
    70,569
    
    
    
    45,441
    
    
    
    45,531
    
    
    
    45,597
    
    
    
    43,728
  39




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##### Table of Contents



At December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands)Statement of Cash Flows Data:Net cash provided (used) by:Operating activities
    
    $
    51,750
    
    
    $
    69,630
    
    
    $
    90,449
    
    
    $
    88,687
    
    
    $
    64,379Investing activities
    
    
    (164,620
    )
    
    
    (179,866
    )
    
    
    (99,093
    )
    
    
    (171,747
    )
    
    
    (113,220
    )Financing activities
    
    
    113,608
    
    
    
    136,416
    
    
    
    18,207
    
    
    
    83,385
    
    
    
    50,535Balance Sheet Data:Cash and cash equivalents
    
    $
    40,781
    
    
    $
    40,043
    
    
    $
    13,863
    
    
    $
    4,300
    
    
    $
    3,975Oil and natural gas properties,
using the full cost method of
accounting, net
    
    
    330,733
    
    
    
    404,839
    
    
    
    510,207
    
    
    
    485,525
    
    
    
    347,329Total assets
    
    
    498,256
    
    
    
    489,056
    
    
    
    548,428
    
    
    
    522,587
    
    
    
    380,427Long-term debt
    
    
    158,968
    
    
    
    303,730
    
    
    
    168,492
    
    
    
    149,334
    
    
    
    63,100Series A preferred stock,
mandatorily redeemable (a)
    
    
    10,101
    
    
    
    10,101
    
    
    
    10,101
    
    
    
    10,101
    
    
    
    10,101Total stockholders equity
    
    
    264,283
    
    
    
    121,269
    
    
    
    279,027
    
    
    
    266,015
    
    
    
    241,640
 
 (a)
    
    At year-end 2009, our Series A preferred stock was classified as a current
liability as it will be redeemed in October 2010.
 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.
  40




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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
   41




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##### Table of Contents



Overview of Capital Activity
          42




---



##### 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.
     43




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##### Table of Contents



2010(In millions)Drilling
    
    $
    183.7Net land and seismic
    
    
    15.6Capitalized costs
    
    
    14.8Other non-oil & gas assets
    
    
    2.2Total
    
    $
    216.3
  
    
    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.
      44




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##### Table of Contents



Contractual Obligations
  Payments Due by Year2012-
    
    
    2014 andTotal
    
    
    2010
    
    
    2011
    
    
    2013
    
    
    Thereafter(In thousands)Debt:Senior Notes
    
    $
    160,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    160,000Senior Credit Facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mandatorily redeemable, Series A preferred stock
    
    
    10,101
    
    
    
    10,101
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    170,101
    
    
    $
    10,101
    
    
    $
    
    
    
    $
    
    
    
    $
    160,000Other commitments:Interest, Senior Notes(a)
    
    $
    69,300
    
    
    $
    15,400
    
    
    $
    15,400
    
    
    $
    30,800
    
    
    $
    7,700Interest, Senior Credit Facility(b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividend Mandatorily redeemable, Series A
preferred stock(c)
    
    
    504
    
    
    
    504
    
    
    
    
    
    
    
    
    
    
    
    Drilling rigs(d)
    
    
    800
    
    
    
    800
    
    
    
    
    
    
    
    
    
    
    
    Non-cancelable operating leases
    
    
    1,837
    
    
    
    721
    
    
    
    738
    
    
    
    378
    
    
    
    Total
    
    $
    242,542
    
    
    $
    27,526
    
    
    $
    16,138
    
    
    $
    31,178
    
    
    $
    167,700
 
 (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 no amounts outstanding under our Senior Credit Facility. In October
2009, we repaid amounts outstanding under our Senior Credit Facility subsequent to our equity
offering. The interest rate under our facility is dependent upon Eurodollar borrowing rates
plus a margin that fluctuates dependent upon the amount outstanding under the facility. The
Eurodollar rate for one month borrowings was 0.32% on December 31, 2009. The amount of
interest that we pay on amounts borrowed under our Senior Credit Facility 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.(d)
    
    Early termination fee of $200,000 per rig if terminated during the quarter. Contract is
quarter-to-quarter evergreen through May 31, 2011.   45




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##### Table of Contents



Oil and Natural Gas Reserves
  At December 31,2009
    
    
    2008
    
    
    2007Estimated Net Proved Reserves:Oil (MMBbls)
    
    
    16.6
    
    
    
    7.1
    
    
    
    5.6Natural gas (Bcf)
    
    
    66.4
    
    
    
    94.7
    
    
    
    106.6Oil equivalent (MMBoe)(a)
    
    
    27.7
    
    
    
    22.8
    
    
    
    23.4Proved developed reserves as a percentage of net proved reserves
    
    
    37
    %
    
    
    46
    %
    
    
    49
    %
 (a)
    
    Boe is defined as one barrel of oil equivalent determined using the ratio of six Mcf of
natural gas to one Bbl of crude oil, condensate or natural gas liquids.       46




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##### Table of Contents



Results of Operations
 Comparison of the twelve-month periods ended December 31, 2009, 2008 and 2007
 Production volumes
 Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Oil (MBbls)(a)
    
    
    830
    
    
    
    44
    %
    
    
    578
    
    
    
    47
    %
    
    
    392Natural gas (MMcf)
    
    
    5,892
    
    
    
    (26
    %)
    
    
    7,996
    
    
    
    (37
    %)
    
    
    12,626Total (MBoe)(b)
    
    
    1,812
    
    
    
    (5
    %)
    
    
    1,910
    
    
    
    (23
    %)
    
    
    2,496Average daily production volumes (Boe/d)(c)
    
    
    5,034
    
    
    
    (5
    %)
    
    
    5,306
    
    
    
    (23
    %)
    
    
    6,933
 
 (a)
    
    Includes approximately 16,475 barrels of oil produced in the Williston Basin during 2009 and
recorded as inventory at year-end 2009. Ending inventory at year end 2008 and 2007 was not
material.(b)
    
    Boe is defined as one barrel equivalent of oil, determined using the ratio of six Mcf of
natural gas to one Bbl of crude oil, condensate or natural gas liquids.(c)
    
    Average daily production volumes calculated based on 360 day year. Inventory
 Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Oil (Bbls)
    
    
    16,475
    
    
    
    NM
    
    
    
    
    
    
    
    NM
    
    
    
    Natural gas (Mcf)
    
    
    
    
    
    
    NM
    
    
    
    
    
    
    
    NM
    
    
    
    Total (Boe)
    
    
    16,475
    
    
    
    NM
    
    
    
    
    
    
    
    NM
    
    
    
    
 Sales
volumes (Production volumes less Inventory)
 Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Oil (MBbls)(a)
    
    
    814
    
    
    
    41
    %
    
    
    578
    
    
    
    47
    %
    
    
    392Natural gas (MMcf)
    
    
    5,892
    
    
    
    (26
    %)
    
    
    7,996
    
    
    
    (37
    %)
    
    
    12,626Total (MBoe)(b)
    
    
    1,796
    
    
    
    (6
    %)
    
    
    1,910
    
    
    
    (23
    %)
    
    
    2,496Average daily sales volumes (Boe/d)(c)
    
    
    4,988
    
    
    
    (6
    %)
    
    
    5,306
    
    
    
    (23
    %)
    
    
    6,933
 
 (a)
    
    Excludes approximately 16,475 barrels of oil produced in the Williston Basin during 2009 and
recorded as inventory at year-end 2009. Ending inventory at year end 2008 and 2007 was not
material.(b)
    
    Boe is defined as one barrel equivalent of oil, determined using the ratio of six Mcf of
natural gas to one Bbl of crude oil, condensate or natural gas liquids.(c)
    
    Average daily sales volumes calculated based on 360 day year.   
    
    Sales volumes from our Rocky Mountains province for 2009
increased 112% when compared to
2008. The increase was attributable to the rapid escalation of our drilling activities in
the Williston Basin, where we completed 38 gross (4.8 net) wells during 2009. Sales volumes
from this province represented 35% of our total sales volumes in 2009 versus 15% in 2008.
Approximately 96% of our 2009 sales volumes from this province were oil compared to 97% in
2008.
 
    
    Sales volumes from our Onshore Gulf Coast province for 2009 decreased 32% when compared
to 2008. The decrease in volumes was attributable to the reduction in our drilling
activity in this province in order to
focus our activities in the Williston Basin. Because of our limited drilling program, only
limited new volumes were brought on line to offset the natural decline of our wells. Sales
volumes from this province represented 44% of our total sales volumes in 2009 versus 61% in
2008. Approximately 89% of our 2009 sales volumes from this province were natural gas
compared to 87% in 2008.
  47




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##### Table of Contents




    
    Sales volumes from our Anadarko Basin province for 2009 decreased 20% when compared to
2008. The decrease in volumes was attributable to the reduction in drilling activity in
this province in order to focus our activities in the Williston Basin. Because of the
reduction in our drilling program in this province, no new volumes were brought on line to
offset the natural decline of our wells. Sales volumes from this province represented 15%
of our volumes in 2009 versus 17% in 2008. Approximately 92% of our 2009 sales volumes
from this province were natural gas compared to 93% in 2008.
 
    
    Sales volumes from our West Texas & Other province for 2009 decreased 15% when compared
to 2008. The decrease in volumes was attributable to the reduction in our drilling
activity in this province in order to focus our activities in the Williston Basin. Because
of our limited drilling program, only limited new volumes were brought on line to offset
the natural decline of our wells. Sales volumes from this province represented 6% of our
total volumes in 2009 versus 7% in 2008. Approximately 89% of our 2009 sales volumes from
this province were oil compared to 88% in 2008.
   
    
    Sales volumes from our Rocky Mountains province for 2008 increased 513% when compared to
2007. The increase was attributable to the rapid escalation of our drilling activities in
the Williston Basin, where we drilled 56 gross (11 net wells) during 2008. Sales volumes
from this province represented 15% of our total volumes in 2008 versus 2% in 2007.
Approximately 97% of our 2008 sales volumes from this province were oil compared to 90% in
2007.
 
    
    Sales volumes from our Onshore Gulf Coast province for 2008 decreased 36% when compared
to 2007. The decrease in volumes 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.
Sales volumes from this province represented 61% of our total volumes in 2008 versus 73% in
2007. Approximately 87% of our 2008 sales volumes from this province were natural gas
compared to 89% in 2007.
 
    
    Sales volumes from our Anadarko Basin province for 2008 decreased 33% when compared to
2007. The decrease in our 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. Sales volumes from this province represented 17% of our total sales volumes in 2008
versus 20% in 2007. Approximately 93% of our 2008 sales volumes from this province were
natural gas compared to 94% in 2007.
 
    
    Sales volumes from our West Texas & Other province for 2008 decreased 7% when compared
to 2007. The decrease in volumes was attributable to natural well production declines.
Sales volumes from this province represented 7% of our total sales volumes in 2008 versus
6% in 2007. Approximately 88% of our 2008 sales volumes from this province were oil
compared to 86% in 2007.
  48




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##### Table of Contents



Revenue, commodity prices and hedging
  Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007(In thousands, except per unit measurements)Oil revenue:Oil revenue
    
    $
    44,580
    
    
    
    (13
    %)
    
    $
    51,449
    
    
    
    81
    %
    
    $
    28,347Oil derivative settlement gains
(losses)
    
    
    (654
    )
    
    
    (74
    %)
    
    
    (2,564
    )
    
    
    724
    %
    
    
    (311
    )Oil revenue including oil derivative settlements
    
    $
    43,926
    
    
    
    (10
    %)
    
    $
    48,885
    
    
    
    74
    %
    
    $
    28,036Oil derivative unrealized gains
(losses)
    
    
    (4,343
    )
    
    
    NM
    
    
    
    2,983
    
    
    
    NM
    
    
    
    (2,328
    )Oil revenue including derivative settlements and unrealized gains (losses)
    
    
    39,583
    
    
    
    (24
    %)
    
    
    51,868
    
    
    
    102
    %
    
    
    25,708Natural gas revenue:Natural gas revenue
    
    $
    23,612
    
    
    
    (68
    %)
    
    $
    73,659
    
    
    
    (20
    %)
    
    $
    92,210Natural gas derivative settlement gains (losses)
    
    
    10,031
    
    
    
    NM
    
    
    
    (1,028
    )
    
    
    NM
    
    
    
    4,478Natural gas revenue including derivative settlements
    
    $
    33,643
    
    
    
    (54
    %)
    
    $
    72,631
    
    
    
    (25
    %)
    
    $
    96,688Natural gas derivative unrealized gains (losses)
    
    
    (2,970
    )
    
    
    NM
    
    
    
    3,157
    
    
    
    NM
    
    
    
    (3,503
    )Natural gas revenue including derivative settlements and unrealized gains (losses)
    
    
    30,673
    
    
    
    (60
    %)
    
    
    75,788
    
    
    
    (19
    %)
    
    
    93,185Oil and natural gas revenue:Oil and natural gas revenue
    
    $
    68,192
    
    
    
    (45
    %)
    
    $
    125,108
    
    
    
    4
    %
    
    $
    120,557Oil and natural gas derivative settlement gains (losses)
    
    
    9,377
    
    
    
    NM
    
    
    
    (3,592
    )
    
    
    NM
    
    
    
    4,167Oil and natural gas revenue including derivative settlement gains (losses)
    
    
    77,569
    
    
    
    (36
    %)
    
    
    121,516
    
    
    
    (3
    %)
    
    
    124,724Oil and natural gas derivative unrealized gains (losses)
    
    
    (7,313
    )
    
    
    NM
    
    
    
    6,140
    
    
    
    NM
    
    
    
    (5,831
    )Oil and natural gas revenue including derivative settlements and unrealized gains (losses)
    
    
    70,256
    
    
    
    (45
    %)
    
    
    127,656
    
    
    
    7
    %
    
    
    118,893Other revenue
    
    
    88
    
    
    
    (33
    %)
    
    
    132
    
    
    
    50
    %
    
    
    88Total revenue
    
    $
    70,344
    
    
    
    (45
    %)
    
    $
    127,788
    
    
    
    7
    %
    
    $
    118,981Average oil prices (based on sales volumes):Oil price (per Bbl)
    
    $
    54.79
    
    
    
    (38
    %)
    
    $
    89.06
    
    
    
    23
    %
    
    $
    72.30Oil price including derivative settlement gains (losses) (per Bbl)
    
    $
    53.99
    
    
    
    (36
    %)
    
    $
    84.63
    
    
    
    18
    %
    
    $
    71.51Oil price including derivative settlements and unrealized gains (losses) (per Bbl)
    
    $
    48.65
    
    
    
    (46
    %)
    
    $
    89.79
    
    
    
    37
    %
    
    $
    65.57Average natural gas prices:Natural gas price (per Mcf)
    
    $
    4.01
    
    
    
    (56
    %)
    
    $
    9.21
    
    
    
    26
    %
    
    $
    7.30Natural gas price including derivative settlement gains (losses) (per Mcf)
    
    $
    5.71
    
    
    
    (37
    %)
    
    $
    9.08
    
    
    
    19
    %
    
    $
    7.66Natural gas price including derivative settlements and unrealized gains (losses) (per Mcf)
    
    $
    5.21
    
    
    
    (45
    %)
    
    $
    9.48
    
    
    
    28
    %
    
    $
    7.38Average oil equivalent prices (based on sales volumes):Oil equivalent price (per Bbl)
    
    $
    37.97
    
    
    
    (42
    %)
    
    $
    65.46
    
    
    
    36
    %
    
    $
    48.30Oil equivalent price including derivative settlement gains (losses) (per bbl)
    
    $
    43.19
    
    
    
    (32
    %)
    
    $
    63.60
    
    
    
    27
    %
    
    $
    49.98Oil equivalent price including derivative settlements and unrealized gains (losses) (per Bbl)
    
    $
    39.12
    
    
    
    (41
    %)
    
    $
    66.84
    
    
    
    40
    %
    
    $
    47.64
  49




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##### Table of Contents



2008
    
    
    2007to 2009
    
    
    to 2008Change in revenue from the sale of oilPrice variance impact
    
    $
    (27,885
    )
    
    $
    9,684Sales volume variance impact
    
    
    21,016
    
    
    
    13,418Cash settlement of derivative hedging contracts
    
    
    1,910
    
    
    
    (2,253
    )Unrealized gains (losses) due to derivative hedging contracts
    
    
    (7,326
    )
    
    
    5,311Total change
    
    $
    (12,285
    )
    
    $
    26,160Change in revenue from the sale of natural gasPrice variance impact
    
    $
    (30,657
    )
    
    $
    15,286Sales volume variance impact
    
    
    (19,390
    )
    
    
    (33,837
    )Cash settlement of derivative hedging contracts
    
    
    11,059
    
    
    
    (5,506
    )Unrealized gains (losses) due to derivative hedging contracts
    
    
    (6,127
    )
    
    
    6,660Total change
    
    $
    (45,115
    )
    
    $
    (17,397
    )Change in revenue from the sale of oil and natural gasPrice variance impact
    
    $
    (58,542
    )
    
    $
    24,970Volume variance impact
    
    
    1,626
    
    
    
    (20,419
    )Cash settlement of derivative hedging contracts
    
    
    12,969
    
    
    
    (7,759
    )Unrealized gains (losses) due to derivative hedging contracts
    
    
    (13,453
    )
    
    
    11,971Total change
    
    $
    (57,400
    )
    
    $
    8,763
  
    
    A 42% decrease in the average oil equivalent price decreased revenue by $58.5 million;
 
    
    A $7.3 million unrealized loss due to derivative hedging contracts in 2009 versus a $6.1
million unrealized gain due to derivative hedging contracts in 2008 decreased revenue by
$13.5 million;
 
    
    An 41% increase in our oil sales volumes, which was partially offset by a 26% decrease
in our natural gas sales volumes, increased revenue by $1.6 million; and
 
    
    A $9.4 million gain from the settlement of derivative contracts in 2009 versus a $3.6
million settlement loss in 2008 increased revenue by $13.0 million.
  
    
    A 36% increase in the average oil 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 sales 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.
  50




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Other revenue.
 Hedging.
  Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Oil collars and three way costless collarsVolumes (Bbls)
    
    
    251,000
    
    
    
    38
    %
    
    
    182,500
    
    
    
    (31
    %)
    
    
    263,000Average floor price (per Bbl)
    
    $
    59.43
    
    
    
    (15
    %)
    
    $
    69.55
    
    
    
    22
    %
    
    $
    56.82Average ceiling price (per Bbl)
    
    $
    80.12
    
    
    
    (15
    %)
    
    $
    93.82
    
    
    
    15
    %
    
    $
    81.50Gain /(loss) upon settlement
(in thousands)
    
    $
    902
    
    
    
    NM
    
    
    $
    (2,564
    )
    
    
    724
    %
    
    $
    (311
    )Oil swapsVolumes (Bbls)
    
    
    90,000
    
    
    
    NM
    
    
    
    
    
    
    
    NM
    
    
    
    Average swap price (per Bbl)
    
    $
    50.75
    
    
    
    NM
    
    
    $
    
    
    
    
    NM
    
    
    $
    Gain /(loss) upon settlement
(in thousands)
    
    $
    (1,556
    )
    
    
    NM
    
    
    $
    
    
    
    
    NM
    
    
    $
    Total oil gain / (loss) upon settlement
(in thousands)
    
    $
    (654
    )
    
    
    (75
    %)
    
    $
    (2,564
    )
    
    
    724
    %
    
    $
    (311
    )Natural gas collars and three way
costless collarsVolumes (MMbtu)
    
    
    1,960,000
    
    
    
    (60
    %)
    
    
    4,850,000
    
    
    
    (35
    %)
    
    
    7,425,000Average floor price (per MMbtu)
    
    $
    7.19
    
    
    
    (6
    %)
    
    $
    7.65
    
    
    
    4
    %
    
    $
    7.34Average ceiling price (per MMbtu)
    
    $
    8.83
    
    
    
    (18
    %)
    
    $
    10.75
    
    
    
    (13
    %)
    
    $
    12.40Gain /(loss) upon settlement
(in thousands)
    
    $
    8,133
    
    
    
    NM
    
    
    $
    (1,028
    )
    
    
    NM
    
    
    $
    4,478Natural gas swapsVolumes (MMbtu)
    
    
    2,490,000
    
    
    
    NM
    
    
    
    
    
    
    
    NM
    
    
    
    Average swap price (per MMbtu)
    
    $
    4.359
    
    
    
    NM
    
    
    $
    
    
    
    
    NM
    
    
    $
    Gain /(loss) upon settlement
(in thousands)
    
    $
    1,898
    
    
    
    NM
    
    
    $
    
    
    
    
    NM
    
    
    $
    Total natural gas gain /(loss) upon
settlement (in thousands)
    
    $
    10,031
    
    
    
    NM
    
    
    $
    (1,028
    )
    
    
    NM
    
    
    $
    4,478
  51




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##### Table of Contents



Operating costs and expenses
 Production costs.
 Unit-of-Production(Per Boe based on Sales Volumes)Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Production costs:Operating & maintenance
    
    $
    6.02
    
    
    
    22
    %
    
    $
    4.92
    
    
    
    52
    %
    
    $
    3.24Expensed workovers
    
    
    1.58
    
    
    
    65
    %
    
    
    0.96
    
    
    
    129
    %
    
    
    0.42Ad valorem taxes
    
    
    0.56
    
    
    
    (7
    %)
    
    
    0.60
    
    
    
    0
    %
    
    
    0.60Lease operating expenses
    
    $
    8.16
    
    
    
    26
    %
    
    $
    6.48
    
    
    
    52
    %
    
    $
    4.26Production taxes
    
    
    2.84
    
    
    
    1
    %
    
    
    2.82
    
    
    
    176
    %
    
    
    1.02Production costs
    
    $
    11.00
    
    
    
    18
    %
    
    $
    9.30
    
    
    
    76
    %
    
    $
    5.28
 Amount(In thousands)Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Production costs:Operating & maintenance
    
    $
    10,823
    
    
    
    15
    %
    
    $
    9,399
    
    
    
    15
    %
    
    $
    8,153Expensed workovers
    
    
    2,832
    
    
    
    53
    %
    
    
    1,851
    
    
    
    69
    %
    
    
    1,097Ad valorem taxes
    
    
    1,000
    
    
    
    (10
    %)
    
    
    1,113
    
    
    
    (23
    %)
    
    
    1,454Lease operating expenses
    
    $
    14,655
    
    
    
    19
    %
    
    $
    12,363
    
    
    
    15
    %
    
    $
    10,704Production taxes
    
    
    5,098
    
    
    
    (5
    %)
    
    
    5,374
    
    
    
    111
    %
    
    
    2,541Production costs
    
    $
    19,753
    
    
    
    11
    %
    
    $
    17,737
    
    
    
    34
    %
    
    $
    13,245
  
    
    O&M expenses increased 22%, or by $1.10 per Boe, due to increases in salt water
disposal, compressor rental and overhead fees; and
 
    
    Expensed workovers increased 65%, or by $0.62 per Boe, due to an increase in the number
and cost of our workovers in 2009, in particular two workovers
associated with our conventional natural gas wells.
  
    
    O&M expenses increased 52%, or by $1.68 per Boe, due to increases in salt water
disposal, compressor rental and fuel costs;
 
    
    Production taxes increased 176%, or by $1.80 per Boe, 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 $0.54 per Boe, due to an increase in the number
and cost of our workovers in 2008.
  52




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##### Table of Contents



General and administrative expenses
 Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007(In thousands, except per unit measurements which are based on sales volumes)General and administrative costs
    
    $
    16,961
    
    
    
    (3
    %)
    
    $
    17,551
    
    
    
    1
    %
    
    $
    17,442Capitalized general and administrative costs
    
    
    (7,718
    )
    
    
    (4
    %)
    
    
    (7,994
    )
    
    
    (2
    %)
    
    
    (8,166
    )General and administrative
Expenses
    
    $
    9,243
    
    
    
    (3
    %)
    
    $
    9,557
    
    
    
    3
    %
    
    $
    9,276General and administrative expenses (per Boe)
    
    $
    5.15
    
    
    
    3
    %
    
    $
    4.98
    
    
    
    34
    %
    
    $
    3.72
  
    
    Total compensation expense decreased by $0.3 million from 2008 to 2009 due to lower
levels of employee salaries and bonuses associated with our cost cutting measures implemented in April
2009; and
 
    
    Office expenses decreased by $0.3 million from 2008 to 2009 due to our cost containment
measures.
  
    
    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.
 Depletion of oil and natural gas properties.
 Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007(In thousands, except per unit measurements which are based on sales volumes)Depletion of oil
and natural gas
properties
    
    $
    32,054
    
    
    
    (40
    %)
    
    $
    53,498
    
    
    
    (9
    %)
    
    $
    59,079Depletion of oil
and natural gas
properties (per
Boe)
    
    $
    17.85
    
    
    
    (36
    %)
    
    $
    28.02
    
    
    
    19
    %
    
    $
    23.64
   Impairment of oil and natural gas properties
  53




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##### Table of Contents



Inventory Valuation.
 Net interest expense.
 Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007(In thousands)Interest on Senior Notes
    
    $
    15,400
    
    
    
    0
    %
    
    $
    15,401
    
    
    
    6
    %
    
    $
    14,483Interest on Senior Credit Facility
    
    
    3,375
    
    
    
    72
    %
    
    
    1,960
    
    
    
    3
    %
    
    
    1,900Commitment fees
    
    
    195
    
    
    
    (24
    %)
    
    
    256
    
    
    
    54
    %
    
    
    166Dividend on mandatorily
redeemable preferred stock
    
    
    606
    
    
    
    0
    %
    
    
    608
    
    
    
    0
    %
    
    
    606Amortization of deferred loan and
debt issuance cost
    
    
    1,538
    
    
    
    49
    %
    
    
    1,032
    
    
    
    11
    %
    
    
    932Other general interest expense
    
    
    30
    
    
    
    NM
    
    
    
    
    
    
    
    (100
    %)
    
    
    2Capitalized interest expense
    
    
    (4,713
    )
    
    
    (1
    %)
    
    
    (4,762
    )
    
    
    37
    %
    
    
    (3,467
    )Net interest expense
    
    $
    16,431
    
    
    
    13
    %
    
    $
    14,495
    
    
    
    (1
    )%
    
    $
    14,622Weighted average debt outstanding
    
    $
    274,211
    
    
    
    25
    %
    
    $
    220,116
    
    
    
    16
    %
    
    $
    189,080Average interest rate on
outstanding indebtedness(a)
    
    
    7.15
    %
    
    
    
    
    
    
    8.28
    %
    
    
    
    
    
    
    9.1
    %
 
 (a)
    
    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.  54




---



##### Table of Contents



Other income (expense). Other income (expense) included:
 Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007(In thousands)Other:Gain (loss) on sale of inventory or assets
    
    
    405
    
    
    
    NM
    
    
    
    
    
    
    
    (100
    %)
    
    
    71Other income (loss)
    
    
    1,139
    
    
    
    115
    %
    
    
    530
    
    
    
    (44
    %)
    
    
    951Total other income (loss)
    
    $
    1,544
    
    
    
    191
    %
    
    $
    530
    
    
    
    (48
    %)
    
    $
    1,022
  Income taxes.
     55




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##### Table of Contents



Liquidity and Capital Resources
 Sources of Capital
  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 Facility.
   Senior Credit Facility
    56




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##### Table of Contents



Percent of
    
    EurodollarBorrowing Base
    
    Rate
    
    
    Base RateUtilized
    
    Advances
    
    
    Advances(1)< 25%
    
    
    2.50
    %
    
    
    1.50
    %25% and < 50%
    
    
    2.75
    %
    
    
    1.75
    %50% and < 75%
    
    
    3.00
    %
    
    
    2.00
    %75% and < 90%
    
    
    3.25
    %
    
    
    2.25
    %≥ 90%
    
    
    3.50
    %
    
    
    2.50
    %
 
 (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
    
    AnnualUtilized
    
    Commitment Fee< 25%
    
    
    0.500
    %25% and < 50%
    
    
    0.500
    %50% and < 75%
    
    
    0.500
    %75% and < 90%
    
    
    0.500
    %≥
 90%
    
    
    0.500
    %
   57




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##### Table of Contents



Mandatorily Redeemable Preferred Stock
  Access to Capital Markets
  Off Balance Sheet Arrangements
  Analysis of Changes In Cash and Cash Equivalents
  Year Ended December 31,2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007(In thousands)Net income
    
    $
    (122,992
    )
    
    
    24
    %
    
    $
    (162,247
    )
    
    
    NM
    
    
    $
    10,210Non-cash charges
    
    
    159,132
    
    
    
    (35
    %)
    
    
    245,545
    
    
    
    199
    %
    
    
    82,004Changes in working capital and other
items
    
    
    15,610
    
    
    
    NM
    
    
    
    (13,668
    )
    
    
    674
    %
    
    
    (1,765
    )Cash flows provided by operating
activities
    
    $
    51,750
    
    
    
    (26
    %)
    
    $
    69,630
    
    
    
    (23
    %)
    
    $
    90,449Cash flows used by investing activities
    
    
    (164,620
    )
    
    
    (8
    %)
    
    
    (179,866
    )
    
    
    82
    %
    
    
    (99,093
    )Cash flows provided (used) by
financing activities
    
    
    113,608
    
    
    
    (17
    %)
    
    
    136,416
    
    
    
    649
    %
    
    
    18,207Net increase (decrease) in cash and
cash equivalents
    
    $
    738
    
    
    
    (97
    %)
    
    $
    26,180
    
    
    
    174
    %
    
    $
    9,563
 Analysis of net cash provided by operating activities
  
    
    A 42% decrease in sales prices of crude oil and natural gas decreased operating cash
flow by $58.5 million.
 
    
    Higher lease operating costs decreased operating cash flow by $2.3 million.
  58




---



##### Table of Contents




    
    The change in working capital increased operating cash flow
by $29.3 million.
 
    
    Higher realized hedge settlements increased operating cash flow by $13.0 million.
 
    
    Higher crude oil volumes partially offset by lower natural gas volumes decreased revenue
by $1.6 million.
  
    
    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.
 Working Capital
   Analysis of changes in cash flows used by investing activities
    59




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##### Table of Contents



2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Capital expenditures for oil and
natural gas activities:Drilling
    
    $
    58,209
    
    
    
    (57
    %)
    
    $
    136,248
    
    
    
    41
    %
    
    $
    96,833Land and seismic
    
    
    1,761
    
    
    
    (95
    %)
    
    
    35,796
    
    
    
    104
    %
    
    
    17,527Capitalized cost
    
    
    12,432
    
    
    
    (3
    %)
    
    
    12,852
    
    
    
    10
    %
    
    
    11,631Capitalized asset retirement obligation
    
    
    327
    
    
    
    (21
    %)
    
    
    412
    
    
    
    27
    %
    
    
    325Total
    
    $
    72,729
    
    
    
    (61
    %)
    
    $
    185,308
    
    
    
    47
    %
    
    $
    126,316Reconciling Items:Granite Wash proceeds & ARO reduction
    
    $
    
    
    
    
    NM
    
    
    $
    
    
    
    
    100
    %
    
    $
    (36,050
    )Short term investments
    
    
    80,093
    
    
    
    NM
    
    
    
    
    
    
    
    NM
    
    
    
    Other property and equipment
    
    
    1,642
    
    
    
    249
    %
    
    
    470
    
    
    
    24
    %
    
    
    378Change in accrued drilling costs
    
    
    4,270
    
    
    
    NM
    
    
    
    (4,927
    )
    
    
    NM
    
    
    
    8,469Change in inventory
    
    
    7,881
    
    
    
    NM
    
    
    
    
    
    
    
    NM
    
    
    
    Other
    
    
    (1,995
    )
    
    
    103
    %
    
    
    (985
    )
    
    
    4825
    %
    
    
    (20
    )Total Reconciling Items
    
    
    91,891
    
    
    
    NM
    
    
    
    (5,442
    )
    
    
    (80
    %)
    
    
    (27,223
    )Net cash used in investing activities
    
    $
    164,620
    
    
    
    (8
    %)
    
    $
    179,866
    
    
    
    82
    %
    
    $
    99,093
 Analysis of changes in cash flows from financing activities
    Common Stock Transactions
   Shares Issued
    
    
    Net Proceeds(in thousands)2009 common stock transactions:May 2009 common stock offering
    
    
    36,292,117
    
    
    $
    93,407October 2009 common stock offering
    
    
    16,837,523
    
    
    $
    168,318Exercise of employee stock options
    
    
    256,314
    
    
    $
    1,2192008 common stock transactions:Exercise of employee stock options
    
    
    385,715
    
    
    $
    2,0662007 common stock transactions:Exercise of employee stock options
    
    
    123,500
    
    
    $
    472
  60




---



##### Table of Contents



Critical Accounting Policies
  Use of Estimates
  Oil and Natural Gas Reserves
    Oil and Natural Gas Property
    61




---



##### Table of Contents



Asset Retirement Obligations
   62




---



##### Table of Contents



Income Taxes
    Revenue Recognition
     Derivative Instruments and Hedging Activities
   63




---



##### Table of Contents



New Accounting Pronouncements
      64




---



##### Table of Contents



Other Matters
 Commodity Prices
    Derivative Instruments
  Effects of Inflation and Changes in Prices
  Environmental and Other Regulatory Matters
   65




---



##### Table of Contents



Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Management Opinion Concerning Derivative Instruments
  Fair Value of Derivative Contracts
   66




---



##### Table of Contents



Fair Value ofUndesignatedDerivativeContractsEstimated fair value of open contracts at December 31, 2008
    
    $
    5,337Changes in fair values of derivative contracts:Natural gas collars
    
    $
    4,149Oil collars
    
    
    (3,216
    )Settlements of derivative contracts that were open at December 31, 2008:Natural gas collars
    
    $
    (7,118
    )Oil collars
    
    
    (1,127
    )Estimated fair value of open contracts at December 31, 2009
    
    $
    (1,975
    )
 Derivative Instruments and Hedging Activities
         67




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##### Table of Contents



Natural
    
    
    Purchased
    
    
    WrittenGas
    
    
    Put
    
    
    CallSettlement Period
    
    (MMbtu)
    
    
    (Nymex)
    
    
    (Nymex)Natural Gas Costless Collars01/01/10  03/31/10
    
    
    210,000
    
    
    $
    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
    
    
    $
    7.0001/01/10  12/31/10
    
    
    840,000
    
    
    $
    5.15
    
    
    $
    7.0004/01/10  09/30/10
    
    
    300,000
    
    
    $
    5.50
    
    
    $
    6.6510/01/10  03/31/11
    
    
    420,000
    
    
    $
    6.40
    
    
    $
    7.8001/01/11  12/31/11
    
    
    360,000
    
    
    $
    5.75
    
    
    $
    7.65
 Natural
    
    
    Purchased
    
    
    Written
    
    
    WrittenGas
    
    
    Put
    
    
    Call
    
    
    PutSettlement Period
    
    (MMbtu)
    
    
    (Nymex)
    
    
    (Nymex)
    
    
    (Nymex)Natural Gas Three Way Costless Collars01/01/10  03/31/10
    
    
    210,000
    
    
    $
    8.00
    
    
    $
    10.00
    
    
    $
    5.5001/01/10  03/31/10
    
    
    180,000
    
    
    $
    5.75
    
    
    $
    7.00
    
    
    $
    3.50
 Crude
    
    
    Purchased
    
    
    WrittenOil
    
    
    Put
    
    
    CallSettlement Period
    
    (Bbls)
    
    
    (Nymex)
    
    
    (Nymex)Oil Costless Collars01/01/10  12/31/10
    
    
    120,000
    
    
    $
    48.70
    
    
    $
    80.0001/01/10  05/31/10
    
    
    50,000
    
    
    $
    57.50
    
    
    $
    75.9506/01/10  12/31/10
    
    
    56,000
    
    
    $
    57.50
    
    
    $
    82.1501/01/10  12/31/10
    
    
    54,000
    
    
    $
    60.00
    
    
    $
    86.5001/01/11  12/31/11
    
    
    84,000
    
    
    $
    65.00
    
    
    $
    88.2501/01/10  03/31/10
    
    
    6,000
    
    
    $
    65.00
    
    
    $
    87.5007/01/10  09/30/10
    
    
    6,000
    
    
    $
    70.00
    
    
    $
    87.2510/01/10  12/31/10
    
    
    3,000
    
    
    $
    70.00
    
    
    $
    88.5001/01/10  03/31/10
    
    
    9,000
    
    
    $
    60.00
    
    
    $
    91.7504/01/10  09/30/10
    
    
    18,000
    
    
    $
    60.00
    
    
    $
    91.4001/01/10  12/31/10
    
    
    60,000
    
    
    $
    60.00
    
    
    $
    88.8001/01/11  12/31/11
    
    
    60,000
    
    
    $
    60.00
    
    
    $
    97.2501/01/10  06/30/10
    
    
    30,000
    
    
    $
    60.00
    
    
    $
    103.7501/01/11  12/31/11
    
    
    60,000
    
    
    $
    65.00
    
    
    $
    108.0001/01/11  06/30/11
    
    
    18,000
    
    
    $
    65.00
    
    
    $
    97.5001/01/10  12/31/10
    
    
    36,000
    
    
    $
    60.00
    
    
    $
    96.0001/01/10  12/31/10
    
    
    24,000
    
    
    $
    60.00
    
    
    $
    100.00
  68




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##### Table of Contents



Natural
    
    
    Purchased
    
    
    WrittenGas
    
    
    Put
    
    
    CallSettlement Period
    
    (MMbtu)
    
    
    (Nymex)
    
    
    (Nymex)Natural Gas Costless Collars01/01/11  12/31/11
    
    
    480,000
    
    
    $
    5.75
    
    
    $
    7.40
 Crude
    
    
    Purchased
    
    
    WrittenOil
    
    
    Put
    
    
    CallSettlement Period
    
    (Bbls)
    
    
    (Nymex)
    
    
    (Nymex)Oil Costless Collars07/01/10  12/31/10
    
    
    12,000
    
    
    $
    65.00
    
    
    $
    107.7001/01/11  12/31/11
    
    
    48,000
    
    
    $
    70.00
    
    
    $
    106.8003/01/10  12/31/10
    
    
    40,000
    
    
    $
    70.00
    
    
    $
    101.7503/01/10  08/31/10
    
    
    18,000
    
    
    $
    70.00
    
    
    $
    99.0001/01/11  12/31/11
    
    
    48,000
    
    
    $
    75.00
    
    
    $
    102.6007/01/11  12/31/11
    
    
    12,000
    
    
    $
    75.00
    
    
    $
    103.0004/01/10  06/30/10
    
    
    30,000
    
    
    $
    65.00
    
    
    $
    89.9007/01/10  12/31/10
    
    
    30,000
    
    
    $
    65.00
    
    
    $
    94.2501/01/11  06/30/11
    
    
    24,000
    
    
    $
    70.00
    
    
    $
    92.5007/01/11  09/30/11
    
    
    9,000
    
    
    $
    70.00
    
    
    $
    95.0010/01/11  12/31/11
    
    
    6,000
    
    
    $
    70.00
    
    
    $
    96.3501/01/11  02/28/11
    
    
    10,000
    
    
    $
    70.00
    
    
    $
    92.00
 Interest Rate Risk
     69




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##### Table of Contents



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
  Managements Report on Internal Control over Financial Reporting
 Internal Control  Integrated Framework Internal Control  Integrated Framework
  Changes in Internal Control over Financial Reporting
  
 Item 9B.
    
    Other Information
   70




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##### Table of Contents



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:
   71




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##### Table of Contents



GLOSSARY OF OIL AND GAS TERMS
  3-D seismic.
 Bbl.
 Boe.
 Completion.
 Completion Rate.
 Development Well.
 Dry Well.
 Exploratory Well.
 Fault.
 Fault Block.
 Gross Acres or Gross Wells.
 Hydraulic fracturing
 IP Rate. Initial Production Rate.
 Lease Operating Expenses.
 MBbl.
 MBoe
 Mcf.
  72




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##### Table of Contents



MMBbl.
 Mcfe.
 MMBtu.
 MMcf.
 MMcfe.
 Net Acres or Net Wells.
 Net Production.
 Oil.
 Operator.
 Pay.
 Pre-tax PV10%.
 Proved Developed Reserves.
 Proved Reserves.
 Proved Undeveloped Reserves.
  73




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##### Table of Contents



Royalty.
 Spud.
 Standardized Measure.
 Trend.
 Working Interest.
  74




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##### 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
  75




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##### 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, 2009 and 2008
    
    
    F-4Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007
    
    
    F-5Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2009,
2008 and 2007
    
    
    F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007
    
    
    F-7Notes to the Consolidated Financial Statements
    
    
    F-8Supplemental Oil and Gas Information (Unaudited)
    
    
    F-29Supplemental Quarterly Financial Information (Unaudited)
    
    
    F-31
  F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal Control  Integrated
Framework,
  
  F-2




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated
Framework .
    Internal Control  Integrated Framework, .
 .
  
  F-3




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data)
 December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    40,781
    
    
    $
    40,043Restricted cash
    
    
    
    
    
    
    555Accounts receivable
    
    
    21,194
    
    
    
    24,558Short term investments
    
    
    80,093
    
    
    
    Derivative assets
    
    
    1,152
    
    
    
    5,140Inventory
    
    
    14,087
    
    
    
    6,070Other current assets
    
    
    1,132
    
    
    
    2,154Total current assets
    
    
    158,439
    
    
    
    78,520Oil and natural gas properties, using the full cost method of accountingProved
    
    
    619,920
    
    
    
    632,275Unproved
    
    
    76,309
    
    
    
    106,006Accumulated depletion
    
    
    (365,496
    )
    
    
    (333,442
    )330,733
    
    
    
    404,839Other property and equipment, net
    
    
    3,025
    
    
    
    1,873Deferred loan fees
    
    
    5,213
    
    
    
    3,122Other noncurrent assets
    
    
    846
    
    
    
    702Total assets
    
    $
    498,256
    
    
    $
    489,056LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    19,251
    
    
    $
    14,297Royalties payable
    
    
    8,268
    
    
    
    6,859Accrued drilling costs
    
    
    15,498
    
    
    
    19,768Participant advances received
    
    
    6,949
    
    
    
    2,226Series A Preferred Stock, mandatorily redeemable, $.01 par value,
$20 stated and redemption value, 2,250,000 shares authorized,
505,051 shares issued and outstanding at December 31,
2009
    
    
    10,101
    
    
    
    Other current liabilities
    
    
    7,706
    
    
    
    5,065Total current liabilities
    
    
    67,773
    
    
    
    48,215Senior Notes
    
    
    158,968
    
    
    
    158,730Senior credit facility
    
    
    
    
    
    
    145,000Series A Preferred Stock, mandatorily redeemable, $.01 par value, $20 stated and redemption value, 2,250,000 shares authorized, 505,051 shares issued and outstanding at December 31, 2008
    
    
    
    
    
    
    10,101Deferred income taxes
    
    
    
    
    
    
    149Other noncurrent liabilities
    
    
    7,232
    
    
    
    5,592Commitments and contingencies (Note 10)Stockholders equity:Common stock, $.01 par value, 180 million shares authorized, 99,593,075
and 45,829,277 shares issued and 99,351,825 and 45,686,295 shares
outstanding at December 31, 2009 and 2008, respectively
    
    
    996
    
    
    
    458Additional paid-in capital
    
    
    479,077
    
    
    
    212,473Treasury stock, at cost; 241,250 and 142,982 shares at December 31,
2009 and 2008, respectively
    
    
    (2,133
    )
    
    
    (1,202
    )Accumulated other comprehensive income (loss)
    
    
    (205
    )
    
    
    Retained earnings (deficit)
    
    
    (213,452
    )
    
    
    (90,460
    )Total stockholders equity
    
    
    264,283
    
    
    
    121,269Total liabilities and stockholders equity
    
    $
    498,256
    
    
    $
    489,056
   F-4




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Revenues:Oil and natural gas sales
    
    $
    68,192
    
    
    $
    125,108
    
    
    $
    120,557Gain (loss) on derivatives, net
    
    
    2,064
    
    
    
    2,548
    
    
    
    (1,664
    )Other revenue
    
    
    88
    
    
    
    132
    
    
    
    8870,344
    
    
    
    127,788
    
    
    
    118,981Costs and expenses:Lease operating
    
    
    14,655
    
    
    
    12,363
    
    
    
    10,704Production taxes
    
    
    5,098
    
    
    
    5,374
    
    
    
    2,541General and administrative
    
    
    9,243
    
    
    
    9,557
    
    
    
    9,276Depletion of oil and natural gas properties
    
    
    32,054
    
    
    
    53,498
    
    
    
    59,079Impairment of oil and natural gas properties
    
    
    114,781
    
    
    
    237,180
    
    
    
    6,505Depreciation and amortization
    
    
    812
    
    
    
    629
    
    
    
    613Accretion of discount on asset retirement obligations
    
    
    421
    
    
    
    361
    
    
    
    379Loss on inventory valuation
    
    
    2,196
    
    
    
    
    
    
    
    179,260
    
    
    
    318,962
    
    
    
    89,097Operating income (loss)
    
    
    (108,916
    )
    
    
    (191,174
    )
    
    
    29,884Other income (expense):Interest income
    
    
    578
    
    
    
    191
    
    
    
    654Interest expense, net
    
    
    (16,431
    )
    
    
    (14,495
    )
    
    
    (14,622
    )Other income (expense)
    
    
    1,544
    
    
    
    530
    
    
    
    1,022(14,309
    )
    
    
    (13,774
    )
    
    
    (12,946
    )Income (loss) before income taxes
    
    
    (123,225
    )
    
    
    (204,948
    )
    
    
    16,938Income tax benefit (expense):Current
    
    
    
    
    
    
    
    
    
    
    Deferred
    
    
    233
    
    
    
    42,701
    
    
    
    (6,728
    )233
    
    
    
    42,701
    
    
    
    (6,728
    )Net Income (loss)
    
    $
    (122,992
    )
    
    $
    (162,247
    )
    
    $
    10,210Net income (loss) per share available to common stockholders:Basic
    
    $
    (1.74
    )
    
    $
    (3.57
    )
    
    $
    0.23Diluted
    
    $
    (1.74
    )
    
    $
    (3.57
    )
    
    $
    0.22Weighted average common shares outstanding:Basic
    
    
    70,569
    
    
    
    45,441
    
    
    
    45,110Diluted
    
    
    70,569
    
    
    
    45,441
    
    
    
    45,531
   F-5




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 (In thousands)
 AccumulatedOther
    
    
    RetainedAdditional
    
    
    
    
    
    
    Comprehensive
    
    
    Earnings
    
    
    TotalCommon Stock
    
    
    Paid In
    
    
    Treasury
    
    
    Income
    
    
    (Accumulated
    
    
    StockholdersShares
    
    
    Amounts
    
    
    Capital
    
    
    Stock
    
    
    (Loss)
    
    
    Deficit)
    
    
    EquityBalance, 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162,247
    )
    
    
    (162,247
    )Tax provisions related to cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    61Net (gains) losses included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (176
    )
    
    
    
    
    
    
    (176
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162,362
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    )
    
    $
    121,269Comprehensive income (loss):Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (122,992
    )
    
    
    (122,992
    )Unrealized gains (loss) on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (205
    )
    
    
    
    
    
    
    (205
    )Tax benefits (provisions)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (123,197
    )Issuance of common stock
    
    
    53,130
    
    
    
    532
    
    
    
    261,193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261,725Vesting of restricted stock
    
    
    378
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of employee stock options
    
    
    256
    
    
    
    2
    
    
    
    1,217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,219Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (931
    )
    
    
    
    
    
    
    
    
    
    
    (931
    )Vesting of share-based payments
    
    
    
    
    
    
    
    
    
    
    4,198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,198Balance, December 31, 2009
    
    
    99,593
    
    
    $
    996
    
    
    $
    479,077
    
    
    $
    (2,133
    )
    
    $
    (205
    )
    
    $
    (213,452
    )
    
    $
    264,283
   F-6




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    (122,992
    )
    
    $
    (162,247
    )
    
    $
    10,210Adjustments to reconcile net income (loss) to cash provided
(used) by operating activities:Depletion of oil and natural gas properties
    
    
    32,054
    
    
    
    53,498
    
    
    
    59,079Impairment of oil and natural gas properties
    
    
    114,781
    
    
    
    237,180
    
    
    
    6,505Depreciation and amortization
    
    
    812
    
    
    
    629
    
    
    
    613Stock based compensation
    
    
    2,278
    
    
    
    1,592
    
    
    
    1,905Write-off of deferred loan costs
    
    
    
    
    
    
    
    
    
    
    Amortization of discount and deferred loan fees
    
    
    1,635
    
    
    
    1,105
    
    
    
    968Accretion of discount on asset retirement obligations
    
    
    421
    
    
    
    361
    
    
    
    379Market value adjustment for derivative instruments
    
    
    7,313
    
    
    
    (6,140
    )
    
    
    5,831Deferred income taxes
    
    
    (233
    )
    
    
    (42,701
    )
    
    
    6,728Provision for doubtful accounts
    
    
    (19
    )
    
    
    17
    
    
    
    Other noncash items
    
    
    90
    
    
    
    4
    
    
    
    (4
    )Changes in working capital and other items:Accounts receivable
    
    
    3,383
    
    
    
    (9,966
    )
    
    
    3,743Other current assets
    
    
    803
    
    
    
    (6,521
    )
    
    
    1,183Accounts and royalties payable
    
    
    6,363
    
    
    
    2,877
    
    
    
    (6,197
    )Other current liabilities
    
    
    4,964
    
    
    
    500
    
    
    
    (890
    )Noncurrent assets
    
    
    114
    
    
    
    (330
    )
    
    
    514Noncurrent liabilities
    
    
    (17
    )
    
    
    (228
    )
    
    
    (118
    )Net cash provided by operating activities
    
    
    51,750
    
    
    
    69,630
    
    
    
    90,449Cash flows from investing activities:Additions to oil and natural gas properties
    
    
    (74,668
    )
    
    
    (178,637
    )
    
    
    (132,932
    )Proceeds from sale of oil and natural gas properties
    
    
    
    
    
    
    
    
    
    
    35,446Changes  in inventory
    
    
    (7,881
    )
    
    
    
    
    
    
    Additions to other property and equipment
    
    
    (2,054
    )
    
    
    (1,472
    )
    
    
    (707
    )Short term investments
    
    
    (80,298
    )
    
    
    
    
    
    
    (Increase) decrease in drilling advances paid
    
    
    (274
    )
    
    
    798
    
    
    
    (900
    )Changes to restricted cash
    
    
    555
    
    
    
    (555
    )
    
    
    Net cash used by investing activities
    
    
    (164,620
    )
    
    
    (179,866
    )
    
    
    (99,093
    )Cash flows from financing activities:Proceeds from issuance of common stock, net of issuance costs
    
    
    261,725
    
    
    
    
    
    
    
    Proceeds from exercise of employee stock options
    
    
    1,219
    
    
    
    2,066
    
    
    
    472Proceeds from Senior Notes offering
    
    
    
    
    
    
    
    
    
    
    34,825Repurchases of common stock
    
    
    (931
    )
    
    
    (348
    )
    
    
    (192
    )Increase in senior credit facility
    
    
    
    
    
    
    139,500
    
    
    
    58,800Repayment of senior credit facility
    
    
    (145,000
    )
    
    
    (4,500
    )
    
    
    (74,700
    )Principal payments on senior subordinated notes
    
    
    
    
    
    
    
    
    
    
    Deferred loan fees paid and equity costs
    
    
    (3,405
    )
    
    
    (302
    )
    
    
    (998
    )Net cash provided (used) by financing activities
    
    
    113,608
    
    
    
    136,416
    
    
    
    18,207Net increase (decrease) in cash and cash equivalents
    
    
    738
    
    
    
    26,180
    
    
    
    9,563Cash and cash equivalents, beginning of year
    
    
    40,043
    
    
    
    13,863
    
    
    
    4,300Cash and cash equivalents, end of year
    
    $
    40,781
    
    
    $
    40,043
    
    
    $
    13,863
   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
  Reclassifications
  Principles of Consolidation
  Cash and Cash Equivalents
  Investments
   F-8




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Inventory
  Property and Equipment
    Furniture and fixtures
    
    10 yearsMachinery and equipment
    
    5 years3-D seismic interpretation workstations and software
    
    3 yearsPipeyard equipment
    
    7 yearsPipeyard improvements
    
    15 yearsRental equipment
    
    3 - 5 yearsLand
    
    
    
   F-9




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Asset Retirement Obligations
  Revenue Recognition
   Derivative Instruments and Hedging Activities
   Other Comprehensive Income (Loss)
   F-10




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2009
    
    
    2008
    
    
    2007Balance, beginning of year
    
    $
    
    
    
    $
    115
    
    
    $
    1,006Unrealized (gains) losses on investments
    
    
    (205
    )
    
    
    
    
    
    
    Tax benefits (provisions) related to cash flow hedges
    
    
    
    
    
    
    61
    
    
    
    480Net (gains) losses included in earnings
    
    
    
    
    
    
    (176
    )
    
    
    (1,371
    )Balance, end of year
    
    $
    (205
    )
    
    $
    
    
    
    $
    115
 Stock Based Compensation
  Income Taxes
  Deferred Loan Fees
  Segment Information
  Treasury Stock
  Mandatorily Redeemable Preferred Stock
   F-11




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 New Pronouncements
     3. Property and Equipment
  December 31,2009
    
    
    2008Oil and natural gas properties
    
    $
    696,229
    
    
    $
    738,281Accumulated depletion
    
    
    (365,496
    )
    
    
    (333,442
    )330,733
    
    
    
    404,839
  F-12




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 December 31,2009
    
    
    2008Other property and equipment:3-D seismic interpretation workstations and software
    
    
    1,619
    
    
    
    1,585Office furniture and equipment
    
    
    3,307
    
    
    
    3,438Pipeyard equipment
    
    
    832
    
    
    
    546Rental equipment
    
    
    1,739
    
    
    
    Land
    
    
    409
    
    
    
    408Accumulated depreciation
    
    
    (4,881
    )
    
    
    (4,104
    )3,025
    
    
    
    1,873$
    333,758
    
    
    $
    406,712
   Year Ended December 31,2009
    
    
    2008
    
    
    2007Capitalized certain payroll and other internal costs
    
    $
    7,718
    
    
    $
    7,994
    
    
    $
    8,164Capitalized interest costs
    
    
    4,713
    
    
    
    4,761
    
    
    
    3,467$
    12,431
    
    
    $
    12,755
    
    
    $
    11,631
      F-13




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 4. Common Stock
     5. Senior Credit Facility, Senior Notes, and Senior Subordinated Notes
  December 31,2009
    
    
    2008(In thousands)Senior Credit Facility
    
    $
    
    
    
    $
    145,000Senior Notes
    
    
    160,000
    
    
    
    160,000Discount on Senior Notes
    
    
    (1,032
    )
    
    
    (1,270
    )Total Debt
    
    $
    158,968
    
    
    $
    303,730Less: Current Maturities
    
    
    
    
    
    
    Total Long-Term Debt
    
    $
    158,968
    
    
    $
    303,730
  F-14




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Senior Credit Facility
    Senior Notes
    6. Preferred Stock
 Series A Mandatorily Redeemable Preferred Stock
  Year Ended
    
    
    Year EndedDecember 31, 2009
    
    
    December 31, 2008Shares
    
    
    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
  F-15




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  7. Asset Retirement Obligations
   Year EndedDecember 31,2009
    
    
    2008Beginning asset retirement obligations
    
    $
    5,592
    
    
    $
    5,047Liabilities incurred for new wells placed on production
    
    
    327
    
    
    
    412Liabilities settled
    
    
    (17
    )
    
    
    (228
    )Revisions to estimates due to sale of oil and gas properties
    
    
    
    
    
    
    Accretion of discount on asset retirement obligations
    
    
    421
    
    
    
    361$
    6,323
    
    
    $
    5,592
 8. Income Taxes
   F-16




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Current income taxes
    
    $
    
    
    
    $
    
    
    
    $
    Deferred income taxes (benefits):Federal
    
    
    (43,029
    )
    
    
    (71,445
    )
    
    
    5,827State
    
    
    (1,141
    )
    
    
    (5,745
    )
    
    
    901Valuation allowances
    
    
    43,937
    
    
    
    34,489
    
    
    
    $
    (233
    )
    
    $
    (42,701
    )
    
    $
    6,728
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Tax (benefit) at statutory rate
    
    $
    (43,129
    )
    
    $
    (71,732
    )
    
    $
    5,929Add the effect of:Nondeductible expenses, net of tax exempt income
    
    
    1
    
    
    
    6
    
    
    
    6Preferred stock dividends
    
    
    212
    
    
    
    212
    
    
    
    212Incentive stock options not exercised
    
    
    26
    
    
    
    47
    
    
    
    34State income taxes (benefits), net of federal deduction
    
    
    (741
    )
    
    
    (3,734
    )
    
    
    586State valuation allowance, net of federal deduction
    
    
    644
    
    
    
    2,455
    
    
    
    Federal valuation allowance
    
    
    42,719
    
    
    
    30,002
    
    
    
    (61
    )Other
    
    
    35
    
    
    
    43
    
    
    
    22$
    (233
    )
    
    $
    (42,701
    )
    
    $
    6,728
  December 31,2009
    
    
    2008Deferred tax assetsCurrent:Unrealized hedging and other derivative losses
    
    $
    913
    
    
    $
    2State deferred taxes
    
    
    
    
    
    
    52Other
    
    
    36
    
    
    
    42Current
    
    
    949
    
    
    
    96Non-current:Net operating loss carryforwards (NOLs)
    
    
    84,706
    
    
    
    75,956Percentage depletion carryforwards
    
    
    4,433
    
    
    
    4,201Stock compensation
    
    
    3,328
    
    
    
    2,786Asset retirement obligations
    
    
    2,213
    
    
    
    1,957Unrealized derivative losses
    
    
    318
    
    
    
    Other
    
    
    81
    
    
    
    73
  F-17




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 December 31,2009
    
    
    2008Non-current
    
    
    95,079
    
    
    
    84,97396,028
    
    
    
    85,069Valuation allowance
    
    
    (77,153
    )
    
    
    (34,202
    )Total net deferred tax assets
    
    
    18,875
    
    
    
    50,867Deferred tax liabilitiesCurrent:Unrealized derivative gains
    
    $
    (403
    )
    
    $
    (1,799
    )Current
    
    
    (403
    )
    
    
    (1,799
    )Non-current:Depreciable and depletable property
    
    
    (18,392
    )
    
    
    (48,983
    )Other
    
    
    (80
    )
    
    
    (85
    )Non-current
    
    
    (18,472
    )
    
    
    (49,068
    )Total net deferred tax liabilities
    
    
    (18,875
    )
    
    
    (50,867
    )Total federal deferred tax asset (liability)
    
    
    
    
    
    
    Total state deferred tax asset (liability)
    
    
    
    
    
    
    (149
    )Total deferred tax asset (liability)
    
    $
    
    
    
    $
    (149
    )
     2009
    
    
    2008(In thousands)Unrecognized tax benefits at beginning of the year
    
    $
    
    
    
    $
    2,162Increases (decreases) resulting from adoption
    
    
    
    
    
    
    Increases (decreases) resulting from tax positions taken in the current period
    
    
    
    
    
    
    (2,162
    )Unrecognized tax benefits at end of the year
    
    $
    
    
    
    $
    
  F-18




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  9. Net Income Available Per Common Share
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands, except per share amounts)Basic EPS:Income (loss) available to common stockholders
    
    $
    (122,992
    )
    
    $
    (162,247
    )
    
    $
    10,210Weighted average common shares outstanding  basic
    
    
    70,569
    
    
    
    45,441
    
    
    
    45,110Basic EPS:Income (loss) available to common stockholders
    
    $
    (1.74
    )
    
    $
    (3.57
    )
    
    $
    0.23Diluted EPS:Income (loss) available to common stockholders  diluted
    
    $
    (122,992
    )
    
    $
    (162,247
    )
    
    $
    10,210Common shares outstanding
    
    
    70,569
    
    
    
    45,441
    
    
    
    45,110Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    
    
    
    
    421Potentially dilutive common shares
    
    
    
    
    
    
    
    
    
    
    421Adjusted common shares outstanding  diluted
    
    
    70,569
    
    
    
    45,441
    
    
    
    45,531Diluted EPS:Income (loss) available to common stockholders
    
    $
    (1.74
    )
    
    $
    (3.57
    )
    
    $
    0.22
  10. Contingencies, Commitments and Factors Which May Affect Future Operations
 Litigation
    F-19




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Operating Lease Commitments
  2010
    
    
    1,5212011
    
    
    7382012
    
    
    378$
    2,637
  Major Purchasers
  2009
    
    
    2008
    
    
    2007Purchaser A
    
    
    
    
    
    
    
    
    
    
    13
    %Purchaser B
    
    
    
    
    
    
    21
    %
    
    
    27
    %Purchaser C
    
    
    
    
    
    
    
    
    
    
    13
    %Purchaser D
    
    
    31
    %
    
    
    19
    %
    
    
    11
    %Purchaser E
    
    
    13
    %
    
    
    
    
    
    
    
  Factors Which May Affect Future Operations
  11. Derivative Instruments and Hedging Activities
  Natural
Gas and Crude Oil Derivative Contracts Cash flow hedges
   F-20




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##### 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 Collars01/01/10  03/31/10
    
    
    210,000
    
    
    
    
    
    
    $
    5.75
    
    
    $
    7.0501/01/10  12/31/10
    
    
    840,000
    
    
    
    
    
    
    $
    5.15
    
    
    $
    7.0004/01/10  09/30/10
    
    
    420,000
    
    
    
    
    
    
    $
    5.75
    
    
    $
    7.3004/01/10  09/30/10
    
    
    240,000
    
    
    
    
    
    
    $
    5.75
    
    
    $
    7.0004/01/10  09/30/10
    
    
    300,000
    
    
    
    
    
    
    $
    5.50
    
    
    $
    6.6510/01/10  03/31/11
    
    
    240,000
    
    
    
    
    
    
    $
    6.50
    
    
    $
    8.2510/01/10  03/31/11
    
    
    420,000
    
    
    
    
    
    
    $
    6.40
    
    
    $
    7.8001/01/11  12/31/11
    
    
    360,000
    
    
    
    
    
    
    $
    5.75
    
    
    $
    7.65Oil Costless Collars01/01/10  03/31/10
    
    
    
    
    
    
    9,000
    
    
    $
    60.00
    
    
    $
    91.7501/01/10  05/31/10
    
    
    
    
    
    
    50,000
    
    
    $
    57.50
    
    
    $
    75.9501/01/10  03/31/10
    
    
    
    
    
    
    6,000
    
    
    $
    65.00
    
    
    $
    87.5001/01/10  12/31/10
    
    
    
    
    
    
    120,000
    
    
    $
    48.70
    
    
    $
    80.0001/01/10  12/31/10
    
    
    
    
    
    
    54,000
    
    
    $
    60.00
    
    
    $
    86.5001/01/10  12/31/10
    
    
    
    
    
    
    60,000
    
    
    $
    60.00
    
    
    $
    88.8004/01/10  09/30/10
    
    
    
    
    
    
    18,000
    
    
    $
    60.00
    
    
    $
    91.4006/01/10  12/31/10
    
    
    
    
    
    
    56,000
    
    
    $
    57.50
    
    
    $
    82.1507/01/10  09/30/10
    
    
    
    
    
    
    6,000
    
    
    $
    70.00
    
    
    $
    87.2510/01/10  12/31/10
    
    
    
    
    
    
    3,000
    
    
    $
    70.00
    
    
    $
    88.5001/01/11  12/31/11
    
    
    
    
    
    
    84,000
    
    
    $
    65.00
    
    
    $
    88.2501/01/11  12/31/11
    
    
    
    
    
    
    60,000
    
    
    $
    60.00
    
    
    $
    97.2501/01/10  06/30/10
    
    
    
    
    
    
    30,000
    
    
    $
    60.00
    
    
    $
    103.7501/01/10  12/31/10
    
    
    
    
    
    
    24,000
    
    
    $
    60.00
    
    
    $
    100.0001/01/10  12/31/10
    
    
    
    
    
    
    36,000
    
    
    $
    60.00
    
    
    $
    96.0001/01/11  06/30/11
    
    
    
    
    
    
    18,000
    
    
    $
    65.00
    
    
    $
    97.5001/01/11  12/31/11
    
    
    
    
    
    
    60,000
    
    
    $
    65.00
    
    
    $
    108.00
 Natural
    
    
    Purchased
    
    
    Written
    
    
    WrittenGas
    
    
    Put
    
    
    Call
    
    
    PutSettlement Period
    
    (MMBTU)
    
    
    Nymex
    
    
    Nymex
    
    
    NymexNatural Gas Three Way
Costless Collars01/01/10  03/31/10
    
    
    210,000
    
    
    $
    8.00
    
    
    $
    10.00
    
    
    $
    5.5001/01/10  03/31/10
    
    
    180,000
    
    
    $
    5.75
    
    
    $
    7.00
    
    
    $
    3.50
  F-21




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##### 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 Collars01/01/11  12/31/11
    
    
    480,000
    
    
    
    
    
    
    $
    5.75
    
    
    $
    7.40Oil Costless Collars03/01/10  08/31/10
    
    
    
    
    
    
    18,000
    
    
    $
    70.00
    
    
    $
    99.0003/01/10  12/31/10
    
    
    
    
    
    
    40,000
    
    
    $
    70.00
    
    
    $
    101.7504/01/10  06/30/10
    
    
    
    
    
    
    30,000
    
    
    $
    65.00
    
    
    $
    89.9007/01/10  12/31/10
    
    
    
    
    
    
    30,000
    
    
    $
    65.00
    
    
    $
    94.2507/01/10  12/31/10
    
    
    
    
    
    
    12,000
    
    
    $
    65.00
    
    
    $
    107.7001/01/11  02/28/11
    
    
    
    
    
    
    10,000
    
    
    $
    70.00
    
    
    $
    92.0001/01/11  06/30/11
    
    
    
    
    
    
    24,000
    
    
    $
    70.00
    
    
    $
    92.5001/01/11  12/31/11
    
    
    
    
    
    
    48,000
    
    
    $
    70.00
    
    
    $
    106.8001/01/11  12/31/11
    
    
    
    
    
    
    48,000
    
    
    $
    75.00
    
    
    $
    102.6007/01/11  09/30/11
    
    
    
    
    
    
    9,000
    
    
    $
    70.00
    
    
    $
    95.0007/01/11  12/31/11
    
    
    
    
    
    
    12,000
    
    
    $
    75.00
    
    
    $
    103.0010/01/11  12/31/11
    
    
    
    
    
    
    6,000
    
    
    $
    70.00
    
    
    $
    96.35
 Additional Disclosures about Derivative Instruments and Hedging Activities
  EstimatedType of Contract
    
    Balance Sheet Location
    
    Fair Value(in thousands)Derivatives Not Designated as Hedging InstrumentsDerivative Assets:Oil and natural gas contracts
    
    Derivative assets  current
    
    $
    1,152Oil and natural gas contracts
    
    Other non-current assets
    
    
    186Total Derivative Assets
    
    
    
    $
    1,338Derivative Liabilities:Oil and natural gas contracts
    
    Other current liabilities
    
    $
    (2,404
    )Oil and natural gas contracts
    
    Other non-current liabilities
    
    
    (909
    )Total Derivative Liabilities
    
    
    
    $
    (3,313
    )
  Twelve MonthsEnded Dec 31,Statement of Operations

    
    Amount ofType of Contract
    
    Location of Gain (Loss)

    
    Gain (Loss)(in thousands)Derivatives Not Designated as Hedging InstrumentsNatural gas contracts
    
    Gain (loss) on derivatives, net
    
    $
    7,061Oil contracts
    
    Gain (loss) on derivatives, net
    
    
    (4,997
    )Total Derivative Gain (loss)
    
    
    
    $
    2,064
  F-22




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  12. Fair Values
  
    
    Level 1  Unadjusted quoted prices are available in active markets for identical assets
or liabilities.
 
    
    Level 2  Pricing inputs, other than quoted prices within Level 1, that are either
directly or indirectly observable.
 
    
    Level 3  Pricing inputs that are unobservable requiring the use of valuation
methodologies that result in managements best estimate of fair value.
  Fair Value Measurements at December 31, 2009 UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    for Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Other current liabilities
    
    $
    (2,404
    )
    
    $
    
    
    
    $
    (2,404
    )
    
    $
    Other non-current liabilities
    
    
    (909
    )
    
    
    
    
    
    
    (909
    )
    
    
    Current derivative assets
    
    
    1,152
    
    
    
    
    
    
    
    1,152
    
    
    
    Other non-current assets
    
    
    186
    
    
    
    
    
    
    
    186
    
    
    
    $
    (1,975
    )
    
    $
    
    
    
    $
    (1,975
    )
    
    $
    
 Fair Value Measurements at December 31, 2008 UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    for Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Other current liabilities
    
    $
    (5
    )
    
    $
    
    
    
    $
    (5
    )
    
    $
    Other non-current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Current derivative assets
    
    
    5,140
    
    
    
    
    
    
    
    5,140
    
    
    
    Other non-current assets
    
    
    202
    
    
    
    
    
    
    
    202
    
    
    
    $
    5,337
    
    
    $
    
    
    
    $
    5,337
    
    
    $
    
  F-23




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Fair Value Measurements at December 31, 2009 UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    for Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Other non-current liabilities
    
    
    (6,323
    )
    
    
    
    
    
    
    
    
    
    
    (6,323
    )$
    (6,323
    )
    
    $
    
    
    
    $
    
    
    
    $
    (6,323
    )
 Fair Value Measurements at December 31, 2008 UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    for Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Other non-current liabilities
    
    
    (5,592
    )
    
    
    
    
    
    
    
    
    
    
    (5,592
    )$
    (5,592
    )
    
    $
    
    
    
    $
    
    
    
    $
    (5,592
    )
   Fair Value Measurements at December 31, 2009 UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    for Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Investments
    
    
    80,093
    
    
    
    80,093
    
    
    
    
    
    
    
    $
    80,093
    
    
    $
    80,093
    
    
    $
    
    
    
    $
    
  Less Than 12 Months
    
    
    12 Months or Greater
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair
    
    
    Gains
    
    
    Fair
    
    
    Gains
    
    
    Fair
    
    
    GainsDescription of Securities
    
    Value
    
    
    (Losses)
    
    
    Value
    
    
    (Losses)
    
    
    Value
    
    
    (Losses)Certificates of deposit
    
    $
    8,877
    
    
    $
    (15
    )
    
    $
    239
    
    
    $
    (1
    )
    
    $
    9,116
    
    
    $
    (16
    )Corporate debt
    
    
    13,931
    
    
    
    (36
    )
    
    
    12,765
    
    
    
    (28
    )
    
    
    26,696
    
    
    
    (64
    )Government securities
    
    
    39,762
    
    
    
    (117
    )
    
    
    4,519
    
    
    
    (8
    )
    
    
    44,281
    
    
    
    (125
    )Total
    
    $
    62,570
    
    
    $
    (168
    )
    
    $
    17,523
    
    
    $
    (37
    )
    
    $
    80,093
    
    
    $
    (205
    )
  December 31, 2009
    
    
    December 31, 2008(in millions)
    
    
    (in millions)Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueSenior Notes
    
    $
    160,000
    
    
    $
    160,000
    
    
    $
    160,000
    
    
    $
    84,000Series A Preferred Stock
    
    $
    10,101
    
    
    $
    10,166
    
    
    $
    10,101
    
    
    $
    10,032
   F-24




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 13. Stock Based Compensation
   2009
    
    
    2008
    
    
    2007Risk-free interest rate
    
    
    2.64
    %
    
    
    2.78
    %
    
    
    3.88
    %Expected life (in years)
    
    
    5.0
    
    
    
    5.0
    
    
    
    5.0Expected volatility
    
    
    78
    %
    
    
    56
    %
    
    
    47
    %Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    Weighted average fair value per share of stock compensation
    
    $
    3.41
    
    
    $
    2.52
    
    
    $
    3.21
    Twelve Months EndedDecember 31,2009
    
    
    2008
    
    
    2007Pre-tax stock based compensation expense
    
    $
    4,282
    
    
    $
    2,926
    
    
    $
    3,443Capitalized stock based compensation
    
    
    (2,003
    )
    
    
    (1,334
    )
    
    
    (1,538
    )Tax benefit
    
    
    (798
    )
    
    
    (557
    )
    
    
    (667
    )Stock based compensation expense, net
    
    $
    1,481
    
    
    $
    1,035
    
    
    $
    1,238
   F-25




---



##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   2009
    
    
    2008
    
    
    2007Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOptions outstanding at
beginning of year
    
    
    3,128,651
    
    
    $
    7.00
    
    
    
    3,046,166
    
    
    $
    7.14
    
    
    
    3,243,566
    
    
    $
    7.08Granted
    
    
    2,846,975
    
    
    $
    4.80
    
    
    
    534,000
    
    
    $
    5.08
    
    
    
    105,000
    
    
    $
    7.06Forfeited or cancelled
    
    
    (1,549,675
    )
    
    $
    8.30
    
    
    
    (65,300
    )
    
    $
    7.79
    
    
    
    (178,900
    )
    
    $
    8.19Exercised
    
    
    (255,814
    )
    
    $
    4.89
    
    
    
    (386,215
    )
    
    $
    5.35
    
    
    
    (123,500
    )
    
    $
    3.82Options outstanding at end of year
    
    
    4,170,137
    
    
    $
    5.14
    
    
    
    3,128,651
    
    
    $
    7.00
    
    
    
    3,046,166
    
    
    $
    7.14Options exercisable at end of year
    
    
    691,962
    
    
    $
    6.17
    
    
    
    1,954,851
    
    
    $
    7.17
    
    
    
    1,869,066
    
    
    $
    6.62
   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
    
    2009
    
    
    Life
    
    
    Price
    
    
    2009
    
    
    Life
    
    
    Price$2.21 to $3.41
    
    
    1,219,000
    
    
    9.0 years
    
    $
    2.26
    
    
    
    29,000
    
    
    2.5 years
    
    $
    3.303.66 to 5.08
    
    
    619,900
    
    
    4.3 years
    
    $
    4.86
    
    
    
    251,900
    
    
    2.1 years
    
    $
    4.535.96 to 6.73
    
    
    1,906,437
    
    
    8.4 years
    
    $
    6.01
    
    
    
    224,262
    
    
    3.1 years
    
    $
    6.267.22 to 8.84
    
    
    187,800
    
    
    3.7 years
    
    $
    7.71
    
    
    
    112,800
    
    
    2.9 years
    
    $
    7.818.93 to 13.86
    
    
    237,000
    
    
    7.4 years
    
    $
    11.66
    
    
    
    74,000
    
    
    2.4 years
    
    $
    10.152.21 to 13.86
    
    
    4,170,137
    
    
    7.7 years
    
    $
    5.14
    
    
    
    691,962
    
    
    2.6 years
    
    $
    6.17
     F-26




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##### Table of Contents



BRIGHAM EXPLORATION COMPANY
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Restricted Stock
   Year Ended
    
    
    Year EndedDecember 31, 2009
    
    
    December 31, 2008Weighted-
    
    
    
    
    
    
    Weighted-Number of
    
    
    Average
    
    
    Number of
    
    
    AverageShares
    
    
    Price
    
    
    Shares
    
    
    PriceRestricted Stock Awards:Restricted shares outstanding at the beginning of the year
    
    
    593,260
    
    
    $
    7.58
    
    
    
    653,623
    
    
    $
    7.16Shares granted
    
    
    342,574
    
    
    $
    4.99
    
    
    
    109,000
    
    
    $
    8.40Lapse of restrictions
    
    
    (377,844
    )
    
    $
    6.02
    
    
    
    (139,423
    )
    
    $
    6.46Forfeitures
    
    
    (1,000
    )
    
    $
    9.49
    
    
    
    (29,940
    )
    
    $
    6.58Restricted shares outstanding at the end of the year
    
    
    556,990
    
    
    $
    7.04
    
    
    
    593,260
    
    
    $
    7.58
 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. Subsequent Events
  17. Supplemental Cash Flow Information
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Cash paid for interest, net of capitalized amounts
    
    $
    14,545
    
    
    $
    12,382
    
    
    $
    14,059Noncash investing and financing activities:Capitalized asset retirement obligations
    
    
    327
    
    
    
    412
    
    
    
    325Accrued drilling costs
    
    
    (4,270
    )
    
    
    4,927
    
    
    
    (8,469
    )Capitalized stock compensation
    
    
    2,003
    
    
    
    1,334
    
    
    
    1,538
 18. Other Assets and Liabilities
  December 312009
    
    
    2008Prepayments
    
    $
    767
    
    
    $
    1,897Deferred taxes
    
    
    
    
    
    
    Other
    
    
    365
    
    
    
    257$
    1,132
    
    
    $
    2,154
  December 312009
    
    
    2008Accrued interest
    
    $
    2,660
    
    
    $
    3,044Derivative liabilities
    
    
    2,405
    
    
    
    5Other accrued liabilities
    
    
    2,641
    
    
    
    2,016$
    7,706
    
    
    $
    5,065
  F-28




---



##### Table of Contents



BRIGHAM EXPORATION COMPANY
 
 SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
 Oil and Natural Gas Exploration and Production Activities
  Costs Incurred and Capitalized Costs
  December 31,2009
    
    
    2008
    
    
    2007Costs incurred for the year:Exploration (including geological and geophysical costs)
    
    $
    10,566
    
    
    $
    43,229
    
    
    $
    37,324Property acquisition
    
    
    15,416
    
    
    
    35,299
    
    
    
    18,554Development
    
    
    54,641
    
    
    
    110,155
    
    
    
    69,851$
    80,243
    
    
    $
    188,683
    
    
    $
    125,729
  December 31,
    
    
    Prior2009
    
    
    2008
    
    
    2007
    
    
    Years
    
    
    TotalProperty acquisition
    
    $
    6,018
    
    
    $
    19,903
    
    
    $
    4,328
    
    
    $
    2,095
    
    
    $
    32,344Exploration
(including
geological and
geophysical costs)
    
    
    (24
    )
    
    
    4,877
    
    
    
    1,932
    
    
    
    19,675
    
    
    
    26,460Drilling
    
    
    8,333
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,333Capitalized interest
    
    
    4,103
    
    
    
    3,979
    
    
    
    366
    
    
    
    724
    
    
    
    9,172Total
    
    $
    18,430
    
    
    $
    28,759
    
    
    $
    6,626
    
    
    $
    22,494
    
    
    $
    76,309
 Oil and Natural Gas Reserves and Related Financial Data
   F-29




---



##### Table of Contents



BRIGHAM EXPORATION COMPANY
 SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)   (Continued)
 Oil and Natural Gas Reserve Data
  NaturalOil
    
    
    Gas(MBbls)
    
    
    (MMcf)Proved reserves at December 31, 2006
    
    
    4,494
    
    
    
    119,487Revisions of previous estimates
    
    
    172
    
    
    
    7,926Extensions, discoveries and other additions
    
    
    1,546
    
    
    
    14,349Sales of mineral in place
    
    
    (227
    )
    
    
    (22,493
    )Production
    
    
    (392
    )
    
    
    (12,626
    )Proved reserves at December 31, 2007
    
    
    5,593
    
    
    
    106,643Revisions of previous estimates
    
    
    413
    
    
    
    (7,834
    )Extensions, discoveries and other additions
    
    
    1,637
    
    
    
    3,866Production
    
    
    (578
    )
    
    
    (7,996
    )Proved reserves at December 31, 2008
    
    
    7,065
    
    
    
    94,679Revisions of
previous estimates (a)
    
    
    2,055
    
    
    
    (28,742
    )Extensions,
discoveries and other additions (b)
    
    
    8,354
    
    
    
    6,367Sales of mineral in place
    
    
    (37
    )
    
    
    (13
    )Production
    
    
    (814
    )
    
    
    (5,892
    )Proved reserves at December 31, 2009
    
    
    16,623
    
    
    
    66,399Proved developed reserves at December 31:2006
    
    
    2,752
    
    
    
    64,4012007
    
    
    3,321
    
    
    
    49,3672008
    
    
    3,583
    
    
    
    41,9282009
    
    
    5,342
    
    
    
    29,178
 (a)
    
    Revisions of previous estimates include performance and technical
revisions of 1,501 MBoe, economic revisions of (296) MBoe, acreage changes of (1,049) MBoe, and elimination of
PUD reserves that will not be developed within 5 years of (2,891) MBoe.(b)
    
    Extensions, discoveries and other additions include discoveries and associated PUDs
of 5,374 MBoe and additions resulting from the modernization of SEC reserve reporting rules of 4,041 MBoe.
  Standardized Measure of Discounted Future Net Cash Inflows and Changes Therein
   F-30




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##### Table of Contents



BRIGHAM EXPORATION COMPANY
 SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)   (Continued)
 December 31,2009
    
    
    2008
    
    
    2007Future cash inflows
    
    $
    1,158,260
    
    
    $
    899,745
    
    
    $
    1,319,011Future production costs
    
    
    (330,837
    )
    
    
    (206,640
    )
    
    
    (248,116
    )Future development costs
    
    
    (266,733
    )
    
    
    (160,304
    )
    
    
    (160,506
    )Future income tax expense
    
    
    (32,493
    )
    
    
    (32,152
    )
    
    
    (219,748
    )Future net cash inflows
    
    
    528,197
    
    
    
    500,649
    
    
    
    690,64110% annual discount for estimated timing of cash flows
    
    
    (281,721
    )
    
    
    (221,353
    )
    
    
    (296,127
    )Standardized measure of discounted future net cash
flows
    
    $
    246,476
    
    
    $
    279,296
    
    
    $
    394,514
  NaturalOil
    
    
    Gas(Bbl)
    
    
    (MMbtu)December 31, 2009
    
    $
    61.18
    
    
    $
    3.87December 31, 2008
    
    
    44.60
    
    
    $
    5.71December 31, 2007
    
    
    96.01
    
    
    $
    7.10
  December 31,2009
    
    
    2008
    
    
    2007Beginning of period
    
    $
    279,296
    
    
    $
    394,514
    
    
    $
    302,674Sales of oil and natural gas produced,
net of production costs
    
    
    (48,439
    )
    
    
    (107,144
    )
    
    
    (107,221
    )Previously estimated development costs
incurred during the period
    
    
    16,574
    
    
    
    51,494
    
    
    
    24,502Extensions and discoveries
    
    
    75,803
    
    
    
    30,175
    
    
    
    66,342Net change of prices and production costs
    
    
    (41,750
    )
    
    
    (184,497
    )
    
    
    164,728Change in future development costs
    
    
    6,874
    
    
    
    (28,901
    )
    
    
    (31,586
    )Changes in production rates (timing)
    
    
    (17,557
    )
    
    
    (2,201
    )
    
    
    (33,995
    )Revisions of previous quantity estimates
    
    
    (41,726
    )
    
    
    (16,436
    )
    
    
    41,017Accretion of discount
    
    
    28,722
    
    
    
    49,130
    
    
    
    33,730Change in income taxes
    
    
    99
    
    
    
    88,868
    
    
    
    (62,161
    )Sales of reserves in place
    
    
    (591
    )
    
    
    
    
    
    
    (2,923
    )Other
    
    
    (10,829
    )
    
    
    4,294
    
    
    
    (593
    )End of period
    
    $
    246,476
    
    
    $
    279,296
    
    
    $
    394,514
  F-31




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##### Table of Contents



Quarterly Financial Data (Unaudited)
 Year Ended December 31, 2009Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter1
    
    
    2
    
    
    3
    
    
    4Revenue
    
    $
    18,486
    
    
    $
    10,514
    
    
    $
    19,867
    
    
    $
    21,477Operating income (loss)*
    
    
    (115,152
    )
    
    
    (2,787
    )
    
    
    4,750
    
    
    
    4,273Net income (loss)*
    
    
    (119,071
    )
    
    
    (6,960
    )
    
    
    491
    
    
    
    2,548Net income (loss) per share:Basic
    
    $
    (2.60
    )
    
    $
    (0.12
    )
    
    $
    0.01
    
    
    $
    0.03Diluted
    
    $
    (2.60
    )
    
    $
    (0.12
    )
    
    $
    0.01
    
    
    $
    0.03
 Year Ended December 31, 2008Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter1
    
    
    2
    
    
    3
    
    
    4Revenue
    
    $
    25,071
    
    
    $
    25,026
    
    
    $
    47,191
    
    
    $
    30,500Operating income (loss)*
    
    
    5,528
    
    
    
    5,789
    
    
    
    28,254
    
    
    
    (230,745
    )Net income (loss)*
    
    
    1,527
    
    
    
    1,517
    
    
    
    15,260
    
    
    
    (180,551
    )Net income (loss) per share:Basic
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.34
    
    
    $
    (3.95
    )Diluted
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.33
    
    
    $
    (3.93
    )
 *
    
    Operating income (loss) and Net income (loss) include the impact from the writedown of the net
capitalized costs of Brighams oil and gas properties in the amounts of $114.8 million and
$237.2 million for the first quarter of 2009 and the fourth quarter 2008, respectively.
  F-32




---



##### 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 3.5 to Brighams Current Report on Form 8-K (dated May 28, 2009) and
incorporated herein by reference)3.4
    
    
    
    
    Certificate of
Amendment to Certificate of Incorporation of Brigham Exploration Company dated
June 14, 2006, (filed as Exhibit 3.4 to Brighams
Annual Report on Form 10-K for the year ended December 31, 2008,
and incorporated herein by reference)3.5
    
    
    
    
    Certificate of Amendment to Certificate of Incorporation of Brigham Exploration Company dated
October 7, 2009 (filed as Exhibit 3.5 to Brighams Current Report on Form 8-K (dated October
13, 2009) and incorporated herein by reference)4.1
    
    
    
    
    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, 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, 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
    
    
    
    
    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)4.7
    
    
    
    
    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)4.8
    
    
    
    
    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)4.9
    
    
    
    
    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)4.10
    
    
    
    
    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)4.11
    
    
    
    
    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)4.12
    
    
    
    
    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)4.13
    
    
    
    
    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)4.14
    
    
    
    
    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)




---



##### Table of Contents



Number
    
    
    
    Description10.1
    
    
    
    
    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
    
    
    
    
    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)10.3
    
    
    
    
    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)10.4
    
    
    
    
    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)10.5
    
    
    
    
    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)10.6
    
    
    
    
    Third Amendment to Two Bridge Point Lease Agreement dated November 1998 between Hub Properties
Trust and Brigham Oil & Gas, L.P. (filed as Exhibit 10.13 to Brighams Annual Report on Form
10-K for the year ended December 31, 2004 and incorporated herein by reference)10.7
    
    
    
    
    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 10.14 to Brighams Annual
Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference)10.8
    
    
    
    
    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)10.9
    
    
    
    
    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)10.10
    
    
    
    
    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)10.11
    *
    
    
    
    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)10.12
    
    
    
    
    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)10.13
    
    
    
    
    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, and incorporated herein by
reference)




---



##### Table of Contents



Number
    
    
    
    Description10.14
    
    
    
    
    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)10.15
    
    
    
    
    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)10.16
    
    
    
    
    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)10.17
    
    
    
    
    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
fiscal quarter ended June 30, 2005 and incorporated herein by reference)10.18
    
    
    
    
    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 fiscal quarter ended June 30, 2005 and incorporated herein by reference)10.19
    
    
    
    
    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)10.20
    
    
    
    
    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)10.21
    
    
    
    
    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)10.22
    
    
    
    
    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)10.23
    *
    
    
    
    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)10.24
    
    
    
    
    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)10.25
    
    
    
    
    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)10.26
    
    
    
    
    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)




---



##### Table of Contents



Number
    
    
    
    Description10.27
    
    
    
    
    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)10.28
    
    
    
    
    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)10.29
    *
    
    
    
    1997 Incentive Plan of Brigham Exploration Company (as amended effective August 19, 2009)
(filed as Exhibit 10.50 to Brighams Current Report on Form 8-K (filed October 13, 2009) and
incorporated herein by reference)10.30
    *
    
    
    
    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)10.31
    *
    
    
    
    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)10.32
    *
    
    
    
    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)10.33
    *
    
    
    
    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)10.34
    *
    
    
    
    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)10.35
    *
    
    
    
    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)10.36
    *
    
    
    
    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)10.37
    
    
    
    
    Confirmation of Notice of Termination of Consulting Agreement with Harold D. Carter, between
Brigham Oil & Gas, L.P. and Harold D. Carter, effective as of January 1, 2009 (filed as
Exhibit 10.41 to Brighams Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2009 and incorporated herein by reference)10.38
    
    
    
    
    1997 Incentive Plan Amendment to Option Agreements, effective as of April 22, 2009 (filed as
Exhibit 10.42 to Brighams Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2009 and incorporated herein by reference)10.39
    
    
    
    
    Fourth Amendment to the Fourth Amended and Restated Credit Agreement dated as of June 28, 2005
(filed as Exhibit 10.43 to Brighams Current Report on Form 8-K (filed May 28, 2009) and
incorporated herein by reference)10.40
    
    
    
    
    Fifth Amendment to the Fourth Amended and Restated Credit Agreement dated as of June 28, 2005
(filed as Exhibit 10.45 to Brighams Current Report on Form 8-K (filed July 28, 2009) and
incorporated herein by reference)10.41
    
    
    
    
    Form of Non-Qualified Stock Option Agreement (filed as Exhibit 10.49 to Brighams Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2009) and incorporated herein by
reference)10.42
    
    
    
    
    Form of Non-Qualified Stock Option Agreement under the 1997 Director Stock Option Plan (filed
as Exhibit 10.3 to Brighams Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2009 and incorporated herein by reference)




---



##### Table of Contents



Number
    
    
    
    Description10.43
    
    
    
    
    Form of Amendment to Non-Qualified Stock Option Agreements (filed as Exhibit 10.4 to Brighams
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2009 and incorporated
herein by reference)10.44
    
    
    
    
    Amendment to Brigham Exploration Company 1997 Director Stock Option Plan, effective as of
September 23, 2009 (filed as Exhibit 10.6 to Brighams Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2009 and incorporated herein by reference)10.45
    
    
    
    
    Amendment to Non-Qualified Stock Option Agreements under the 1997 Director Stock Option Plan,
effective as of September 23, 2009 (filed as Exhibit 10.7 to Brighams Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 2009 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 135099.1
    
    
    
    
    Report of Cawley, Gillespie & Associates, Inc.
 
 *
    
    Management contract or compensatory plan. 
    
    Filed herewith