Bayou City Exploration (BYCX) 10-Q 2009 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                    TO                    

BAYOU CITY EXPLORATION, INC.

(Exact Name of Small Business Issuer as Specified in Its Charter)

NEVADA
(State or Other Jurisdiction of
Incorporation of Organization) 61-1306702
(IRS Employer Identification No.)

632 Adams Street — Suite 700, Bowling Green, KY 42101
(Address of Principal Executive Offices)

(800) 798-3389
(Issuer’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Not Applicable

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “larger accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

APPLICABLE ONLY TO CORPORATE ISSUERS
Shares outstanding for each class of stock as of the latest practicable date

Title or Class	Share Outstanding on July 31, 2009
Common Stock, $0.005 par value		26,653,633
Preferred Stock, $0.001 par value		0

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
Yes o     No þ

PART I
FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)
	FINANCIAL STATEMENTS OF REGISTRANT
	BALANCE SHEETS AS OF JUNE 30, 2009 AND DECEMBER 31, 2008	3
	STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008	4
	STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008	5
	NOTES TO FINANCIAL STATEMENTS	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS	7
ITEM 3.	CONTROLS AND PROCEDURES	11
PART II
OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	12
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	12
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	12
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	12
ITEM 5.	OTHER INFORMATION	12
ITEM 6.	EXHIBITS	12
EX-31.1
EX-31.2
EX-32.1
EX-32.2

EX-31.1
EX-31.2
EX-32.1
EX-32.2

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BAYOU CITY EXPLORATION, INC.
BALANCE SHEETS

	June 30,			December 31,
	2009			2008
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	71,240		$	18,042
Accounts receivable:
Trade and other (net of reserves — $57,705 as of June 30, 2009 and $222,011 os of December 31 31, 2008)		155,200			210,674
TOTAL CURRENT ASSETS		226,440			228,716
PROPERTY, PLANT, AND EQUIPMENT, NET		82,185			5,834
TOTAL ASSETS	$	308,625		$	234,550
LIABILITIES & STOCKHOLDERS’ DEFICIT:
CURRENT LIABILITIES:
Accounts payable and acrued expenses	$	95,171		$	354,789
Accounts payable — related party		188,844			246,298
AFE advances from JIB owners		0			51,186
Notes payable — related parties		425,000			616,569
TOTAL CURRENT LIABILITIES		709,015			1,268,842
LONG TERM LIABILITY — P&A COSTS		0			43,806
TOTAL LIABILITIES		709,015			1,312,648
STOCKHOLDERS’ DEFICIT:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2009 and December 31, 2008		—			—
Common stock, $0.005 par value; 150,000,000 shares authorized; 26,653,633 shares issued and outstanding at June 30, 2009 and December 31, 2008		133,268			133,268
Additional paid in capital		13,284,765			13,284,765
Accumulated deficit		(13,818,423	)		(14,496,131	)
TOTAL STOCKHOLDERS’ DEFICIT		(400,390	)		(1,078,098	)
TOTAL LIABILITIES & SHAREHOLDERS’ DEFICIT	$	308,625		$	234,550

The accompanying notes are an integral part
of these financial statements

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BAYOU CITY EXPLORATION, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
OPERATING REVENUES:
Oil and gas sales	$	263,878		$	29,066		$	546,903		$	34,160
TOTAL OPERATING REVENUES		263,878			29,066			546,903			34,160
OPERATING COSTS AND EXPENSES:
Lease operating expenses and production taxes		22,401			(3,989	)		46,730			1,855
Exploration costs		—			1,459			—			14,899
Depreciation, depletion and amortization		(35,571	)		14,441			(34,112	)		31,147
General and administrative costs		(46,755	)		120,875			5,848			188,039
TOTAL OPERATING COSTS		(59,925	)		132,786			18,466			235,940
OPERATING INCOME (LOSS)		323,803			(103,720	)		528,437			(201,780	)
OTHER INCOME (EXPENSE):
Interest expense		(7,980	)		(10,993	)		(18,073	)		(18,856	)
Gain (loss) on sale of assets		—			(79,879	)		—			(22,129	)
Forgiveness of debt		1,803			14,018			167,344			14,018
NET INCOME (LOSS) BEFORE INCOME TAX		317,626			(180,574	)		677,708			(228,747	)
Income Tax Provision		—			—			—			—
NET INCOME (LOSS)	$	317,626		$	(180,574	)	$	677,708		$	(228,747	)
NET LOSS PER COMMON SHARE	$	0.01		$	(0.01	)	$	0.03		$	(0.01	)
Weighted Average Common Shares Outstanding — Basic and Diluted		26,653,633			26,653,633			26,653,633			26,653,633

The accompanying notes are an integral part
of these financial statements

4

BAYOU CITY EXPLORATION, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Six Months Ended
	June 30,
	2009			2008
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss	$	677,708		$	(228,747	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation, depletion, and amortization		5,834			31,147
Impairment, abandonment, and dry hole costs		—			—
Loss on sale of assets		—			22,129
Forgiveness of Debt		(167,344	)		—
Change in operating assets and liabilities:
Accounts Receivable — trade		55,474			(16,459	)
Accounts receivable — related party		—			—
Prepaid expense and other assets		—			—
AFE advances — JIB owners		(51,186	)		—
Accounts payable — related party		(57,454	)		(54,454	)
Accounts payable and accrued liabilities		(92,274	)		(123,406	)
Long term liability — P&A costs		(43,806	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		326,952			(369,790	)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture and computer equipment		—			(3,977	)
Purchase of oil and gas properties		(82,185	)		—
Proceeds from sale of assets		—			408,936
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(82,185	)		404,959
CASH FLOWS FROM FINANCIANG ACTIVITIES:
Payments on long term debt		(207,019	)		(6,510	)
Proceeds from BR Group line of credit		15,450			23,295
Dividends paid		—			—
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(191,569	)		16,785
NET INCREASE IN CASH		53,198			51,954
CASH AT BEGINNING OF PERIOD		18,042			21,714
CASH AT END OF PERIOD	$	71,240		$	73,668

The accompanying notes are an integral part
of these financial statements

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BAYOU CITY EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM REPORTING

The financial statements of the Registrant included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Although certain information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States has been omitted, the Registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Form 10-K of the Registrant for its fiscal year ended December 31, 2008 and subsequent filings with the Securities and Exchange Commission.

The financial statements included herein reflect all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods. The results for interim periods are not necessarily indicative of trends or of results to be expected for a full year.

2. GOING CONCERN

The Company’s financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The independent registered public accounting firm’s report on our financial statements for the year ended December 31, 2008 included an explanatory paragraph stating that we have experienced recurring losses from operations and that our limited capital resources raises substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. For the years ended December 31, 2008 and 2007 the Company’s statement of operations reflects a net loss from continued operations of $174,000 and $1,464,000, respectively. For the six months ended June 30, 2009 the Company’s statement of operations reflects a net income from continued operations of $678,000 and for June 30, 2008 the Company’s statements of operations reflects a net loss of $229,000.

The Company’s ability to meet future cash and liquidity requirements is dependent on a variety of factors, including its ability to raise more capital, continued success of a newly producing well, the Sien #1, successfully negotiating extended payment terms and discounts with its creditors, and successfully implementing its plans of restructuring for the Company. The presence of the going concern note may have an adverse impact on the Company’s relationship with third parties such as potential investors. If the Company is unable to continue as a going concern it would have to liquidate its remaining assets, if any.

3. SALE OF PROPERTY:

In February, 2008, the Company was successful in selling its McAllen West Prospect and received $358,000. The Company had costs of $300,000 associated with this prospect previously included in property and equipment on the Company’s balance sheet resulting in a $58,000 gain on sale of assets recognized in the Company’s statement of operations for the six months ended June 30, 2008.

The fee mineral acres of the McAllen West Prospect secured the line of credit from BR Group. The sales proceeds from the secured property have not been paid to BR Group. BR Group has not yet demanded the proceeds from the sale to be paid on the secured indebtedness, but instead has allowed the sales proceeds to remain in Bayou to be used for operating capital. The Company is under negotiations to extend the terms of its line of credit to allow the Company to continue to retain a portion of the funds from the sale of this secured property for operating capital until additional sources of capital are obtained. No agreement has yet been finalized with BR Group.

On June 30, 2008, the Company sold its remaining furniture, computers, and equipment located in its Houston office space to Gulf Coast Drilling Company (“Gulf Coast”), an affiliate of BR Group for $50,000 in a non-cash transaction. This agreed sales price was applied to the Company’s liability to Gulf Coast for the excess of drilling advances received for the King Unit #1 well in 2006 over the actual amount of Gulf Coast’s participation for the costs attributable to the King Unit #1 well.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS

GENERAL OPERATIONS

Bayou City Exploration, Inc., (the “Company”), a Nevada corporation, was organized in November 1994, as Gem Source, Incorporated (“Gem Source”), and subsequently changed the name to Blue Ridge Energy, Inc. in May 1996. In September 2005, the Company changed its name to Bayou City Exploration, Inc.

The Company is engaged in the oil and gas business primarily in the gulf coast of Texas, east Texas, south Texas, and Louisiana. The Company develops oil and gas prospects for the drilling of oil and gas wells and attempts to sell the prospects to oil and gas exploration companies under terms that provide the participating company will provide the funds necessary to drill and complete a well on the prospect, reimburse the Company for any leasehold or exploration costs associated with the prospect, pay the Company a prospect fee for developing the oil and gas prospect, and allow the Company to retain a carried interest in the well to be drilled. The wells drilled by the Company included both exploratory and development wells.

The Company’s corporate headquarters are located at 632 Adams Street, Suite 700, Bowling Green, Kentucky 42101. Since April 3, 2008, Robert D. Burr has been the sole officer of the Company and has served as President and Chief Executive Officer of the Company without compensation.

The Company seeks to sell a portion of the interest in each prospect it generates to an operator that will be responsible for the drilling and operating of the oil and gas properties. Currently, all the Company’s ownership in oil and gas wells is through non-operated working interests.

The Company’s financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The independent registered public accounting firms’ report on our financial statements as of and for the year ended December 31, 2008 includes an explanatory paragraph that states the Company has experienced recurring losses from operations and its limited capital resources raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company plans to pursue other sources of capital through either the issuance of debt or equity securities. The Company also owns a royalty interest in the Sien #1 well which went into production in November 2008 and is currently producing cash flows sufficient to cover its ongoing operations.

At the end of February, 2008, the Company reduced its exploration budget by terminating its monthly contract payment arrangement with the two remaining contract geological staff located in Houston, Texas. With the Sien #1 well cash flow, the Company is currently looking to reorganize its business plan and negotiate settlements with its creditors to produce a long term business plan.

The Company’s office lease in Houston Texas expired June 2008 which completed the Company’s move from the Houston office space to the new corporate headquarters in Bowling Green, Kentucky. The Company sold its remaining furniture, computers, and equipment located in the Houston office space to Gulf Coast Drilling Company (“Gulf Coast”), an affiliate of BR Group for $50,000 in a non-cash transaction. This agreed sales price was applied to the Company’s liability to Gulf Coast for the excess of drilling advances received for the King Unit #1 well in 2006 over the actual amount of Gulf Coast’s participation for the costs attributable to the King Unit #1 well.

During the first six months of 2009, the Company was successful in reaching settlement or payout arrangements with some of its vendors. Negotiations are still in progress with several other vendors in an attempt to reach terms of settlement or a payout plan regarding the Company’s current accounts payable. A gain of $167,000 has been recognized for the first six months of 2009 due to these negotiations.

In prior years the Company has financed much of its operations through the sale of securities. For the six months ended June 30, 2009 and 2008 the Company sold no shares of common stock and no warrants or options were exercised.

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As of June 30, 2009, the Company had total assets of $309,000, total liabilities of $709,000 and a stockholders’ equity deficit of $400,000. The Company had a net income of $678,000 for the six months ended June 30, 2009 and net loss of $229,000 for the same period in 2008. The net income per common share was $0.03 per share during the six months ended June 30, 2009 as compared to a net loss of $0.01 during the same period in 2008. All per share data in this report has been adjusted to give effect to applicable stock issues and conversions.

All of the Company’s periodic report filings with the SEC pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, are available through the SEC web site located at www.sec.gov, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. The Company will also make available to any stockholder, without charge, copies of its Annual Report on Form 10-K as filed with the SEC and a copy of its Code of Ethics. For copies of this, or any other filings, please contact: Robert D. Burr at Bayou City Exploration, Inc., 632 Adams Street — Suite 700, Bowling Green, KY 42101 or call (800)-798-3389.

DESCRIPTION OF PROPERTIES

During the six months ended June 30, 2009 one of the Company’s two producing wells, the Pedigo #1, went dry and was subsequently plugged and abandoned. During the second quarter of 2009 the Company participated in the drilling of a new well, the Rooke #1, see description below. During 2008, the Company did not participate in the drilling of any new wells.

The following are the primary properties held by the Company as of June 30, 2009:

Key Developed Properties:

Sien #1: The Company owns an 8.1% royalty interest in 1 well located in Arkansas County, Texas which began producing in the fourth quarter of 2008. The well produces approximately 7000 Mcf per and 90 Bbls of oil per day.

Rooke #1: The Company owns a 10% working interest in 1 well located in Refugio County, Texas which was drilled during the second quarter of 2009. As of the filing date of this report it is believed that the well will be a producing well but the level of revenue that the Company will receive is unknown. This should be known by the end of the third quarter.

Key Undeveloped Properties:

At this time the Company has no undeveloped properties under lease.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008

The Company had a net income of $318,000 for the three months ended June 30, 2009 compared to a net loss of $181,000 for the same period in 2008. The net income per common share was $0.01 per share during the second quarter of 2009 compared to a net loss $0.01 per share during the second quarter of 2008. The substantial increase in net income in the second quarter of 2009 was the result of the Sien #1 well production, a credit in plugging and abandoning costs due to the actual costs to plug the Pedigo #1 being $39,000 less than previously estimated and taken to the income statement and collections of $151,000 of receivables previously written off as bad debts.

OPERATING REVENUES

Operating revenues from oil and gas sales were $264,000 during the three months ended June 30, 2009 as compared to $29,000 during the three months ended June 30, 2008 due to Sien #1 well production being substantially higher than the Pedigo #1 well was last year during the same period.

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DIRECT OPERATING COSTS

Direct operating costs are reflected as lease operating expenses on the company’s statement of operations and were $22,000 for the three months ended June 30, 2009 as compared to ($4,000) during the three months ended June 30, 2008. The increase is a result of production taxes paid on the Sien #1 well.

EXPLORATION COSTS

Exploration costs during the second quarter of 2009 were $-0- as compared to $15,000 in the second quarter of 2008. At the end of February, 2008, the Company reduced its exploration budget by terminating its monthly contract payment arrangement with the two remaining contract geological staff located in Houston, Texas. The Company continued a consulting agreement arrangement with one of the independent geological staff contract persons which allowed the consultant to use its Houston office space as long as it was available. Thereafter the consultant is responsible for providing his work space at his own expense. The Houston office lease expired and was vacated by the Company as of June 30, 2008. The Company continues to furnish geophysical data under its Eco Geophysical license to the independent contract geologist for the development of prospects; however the contract geologist will be paid a prospect fee only for each prospect accepted by the Company.

OTHER OPERATING EXPENSES

The Company’s general and administrative expenses decreased to ($47,000) for the second quarter 2009 as compared to $121,000 for the second quarter of 2008. The decrease mainly due to the collection of $151,000 of previously written off receivables.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

The Company had a net income of $678,000 during the six months ended June 30, 2009 compared to net loss of $229,000 for the same period in 2008. The net income per common share was $0.03 per share for the six months ended June 30, 2009 compared to a net loss of $0.01 per share for the six months ended June 30, 2008.

The increase in net income for the six months ended June 30, 2009 over the same period for 2008 was due to several factors; a substantial increase in oil and gas sales for the six month period primarily due to the Sien #1 well production which began production in late 2008, a large decrease in depreciation, depletion and amortization due to the actual plugging costs of the Pedigo #1 well being less than previously estimated, collection of receivables previously written off and negotiating with creditors to settle their debt for less than actually owed.

OPERATING REVENUES

Operating revenues totaled only $547,000 during the six months ended June 30, 2009 as compared to $34,000 during the six months ended June 30, 2008. This is primarily due to the production of the Sien #1 well.

In February, 2008, the Company was successful in selling its McAllen West Prospect and received $358,000. The Company had costs of $300,000 associated with this prospect previously included in property and equipment on the Company’s balance sheet resulting in a $58,000 gain on sale of assets recognized in the Company’s statement of operations for the six months ended June 30, 2008.

The fee mineral acres of the McAllen West Prospect secured the line of credit from BR Group. The sales proceeds from the secured property have not been paid to BR Group. The Company is under negotiations to extend the terms of its line of credit. No agreement has yet been finalized with BR Group.

DIRECT OPERATING COSTS

Direct operating costs totaled $47,000 during the six months ended June 30, 2009, as compared to $2,000 during the same period in 2008. The increase is a direct result of the Sien #1 well production taxes that went into production in late 2008.

9

EXPLORATION COSTS

Exploration costs during the six months ended June 30, 2009 were $-0- compared to $15,000 for the same period in 2008. During early 2008, the Company maintained its geological staff in its Houston office but reduced all other exploration expenses as much as possible because of limited cash flow in the first six months of 2008. At the end of February, 2008, the Company reduced its exploration budget by terminating its monthly contract payment arrangement with the two remaining contract geological staff located in Houston, Texas. The Company continued a consulting agreement arrangement with one of the independent geological staff contract persons which allowed the consultant to use its Houston office space as long as it was available. Thereafter the consultant is responsible for providing his work space at his own expense. The Houston office lease expired and was vacated by the Company as of June 30, 2008. The Company continues to furnish geophysical data under its Eco Geophysical license to the independent contract geologist for the development of prospects; however the contract geologist will be paid a prospect fee only for each prospect accepted by the Company.

OTHER OPERATING EXPENSES

Depreciation, depletion and amortization expense for the six months ended June 30, 2009 was ($34,000) as compared to $31,000 in the six months ended June 30, 2008. The credit in 2009 is due to the actual plugging and abandoning costs for the Pedigo #1 well were $39,000 less than what the Company had previously set up as a liability when the well went into production a few years ago. General and administrative expenses decreased to $6,000 for the six months ended June 30, 2009 as compared to $188,000 for the six months ended June 30, 2008. The decrease is mainly a result of the collecting $151,000 of receivables that had been previously written off.

OTHER INCOME (EXPENSES)

Net other income for the six months ended June 30, 2009 was $149,000 as compared to net other expenses for the same period in 2008 of $27,000. The major difference is a result of the Company negotiating with most of its creditors to accept reduced amounts to settle the Company’s debt if paid immediately. The Company has been successful in negotiating a reduction of debt of $167,000.

INCOME TAX PROVISION

Consistent with the prior period, the Company did not record a provision for income taxes due to the continued net losses incurred or available via the federal income tax carry forward provisions. A valuation allowance continues to be recorded due to the uncertainty regarding the Company’s ability to utilize the deferred tax assets.

CAPITAL RESOURCES AND FINANCIAL CONDITION

The Company’s current ratio (current assets / current liabilities) was .43 to 1 as of June 30, 2009 compared to .18 to 1 as of December 31, 2008. This increase is mainly due to a reduction in liabilities due to the Companies ability to settle many of its outstanding liabilities at a substantial discount during the first half of 2009 and pay off many more with the cash flow generated by the Sien #1 well.

The Company’s primary source of cash during the first six months of 2009 was from the production of the Sien #1 well. At this point it is unclear as to the total potential reserves of this well, therefore future cash flows and duration of those cash flows cannot be know with any degree of certainty.

Our financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The independent registered public accounting firms’ report on our financial statements as of and for the year ended December 31, 2008 includes an explanatory paragraph that states the Company has experienced recurring losses from operations and its limited capital resources raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company’s ability to meet future cash and liquidity requirements is dependent on a variety of factors, including our ability to raise more capital, successfully negotiate extended payment terms with our creditors and implement our plans of restructuring as described above. The presence of the going concern note may have an adverse impact on our relationship with third parties such as potential investors. If we are unable to continue as a going concern we would have to liquidate our remaining assets, if any.

10

CONTROLS AND PROCEDURES

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rules 13a-15(e) and 15d-15 (e) under the Securities Exchange Act of 1934 (Exchange Act) promulgated thereunder, our management, including our Chief Executive Officer (CEO) and Acting Chief Financial Officer (ACFO) evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2009 (the “Evaluation Date”). Based on this evaluation, our management including the CEO and ACFO concluded that the disclosure controls and procedures of the Company were effective, at a reasonable assurance level, as of June 30, 2009 to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and ACFO, in a manner that allows timely decisions regarding required disclosure. We did not effect any change in our internal controls over financial reporting as of June 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no current legal proceedings against the Company. However, negotiations are in process to resolve liabilities to certain vendors. If not resolved, various legal actions may be filed against the Company for the collection of these debts.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit 31.1 Chief Executive Officer’s 302 Certification
Exhibit 31.2 Chief Financial Officer’s 302 Certification
Exhibit 32.1 Chief Executive Officer’s 906 Certification
Exhibit 32.2 Chief Financial Officer’s 906 Certification

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BAYOU CITY EXPLORATION, INC.
Date: August 12, 2009	By	/s/ Robert D. Burr
		Chief Executive Officer and
		President and Acting Chief Financial Officer

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