Belden & Blake 10Q 2009 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2009


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: 0-20100

BELDEN & BLAKE CORPORATION

(Exact name of registrant as specified in its charter)


Ohio		34-1686642

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


1001 Fannin Street, Suite 800
Houston, Texas		77002

(Address of principal executive offices)		(Zip Code)

(713) 659-3500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.þ Yeso No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filero		Accelerated filero		Non-accelerated filerþ		Smaller reporting companyo

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

As of July 31, 2009, Belden & Blake Corporation had outstanding 1,534 shares of common stock, without par value, which is its only class of stock.

BELDEN & BLAKE CORPORATION

INDEX


	Page
PART I Financial Information

Item 1. Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008		1

Condensed Consolidated Statements of Operations: Three and six months ended June 30, 2009 and 2008		2

Condensed Consolidated Statements of Cash Flows: Six months ended June 30, 2009 and 2008		3

Notes to Condensed Consolidated Financial Statements		4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11

Item 3. Quantitative and Qualitative Disclosures About Market Risk		19

Item 4. Controls and Procedures		21

PART II Other Information

Item 1. Legal Proceedings		21

Item 1A. Risk Factors		21

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		21

Item 3. Defaults Upon Senior Securities		21

Item 4. Submission of Matters to a Vote of Security Holders		21

Item 5. Other Information		21

Item 6. Exhibits		22

Signatures		23

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I. FINANCIAL INFORMATION


Item 1.		Financial Statements

BELDEN & BLAKE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share data)


	June 30,			December 31,
	2009			2008
ASSETS
Current assets
Cash and cash equivalents	$	14,156		$	22,816
Accounts receivable (less accumulated provision for doubtful accounts: June 30, 2009- $365; December 31, 2008 — $312)		11,702			19,244
Inventories		885			1,004
Deferred income taxes		5,362			7,946
Assets held for sale		16,657			—
Other current assets		127			332
Derivative asset		2,121			430

Total current assets		51,010			51,772

Property and equipment, at cost
Oil and gas properties (successful efforts method)		687,715			735,398
Gas gathering systems		1,413			1,413
Land, buildings, machinery and equipment		2,562			2,836

		691,690			739,647
Less accumulated depreciation, depletion and amortization		133,594			124,175

Property and equipment, net		558,096			615,472
Long-term derivative asset		1,326			868
Other assets		1,398			1,352

	$	611,830		$	669,464


LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities
Accounts payable	$	2,600		$	3,570
Accrued expenses		16,385			19,251
Current portion of long-term liabilities		10,232			25,237
Derivative liability		15,678			20,520

Total current liabilities		44,895			68,578

Long-term liabilities
Bank and other long-term debt		74,934			74,938
Senior secured notes		162,805			163,302
Subordinated promissory note — related party		29,006			27,623
Asset retirement obligations and other long-term liabilities		24,375			23,863
Long-term derivative liability		85,776			101,570
Deferred income taxes		123,739			133,039

Total long-term liabilities		500,635			524,335

Shareholder’s equity
Common stock: without par value; 3,000 shares authorized and 1,534 shares issued		—			—
Paid in capital		122,500			122,500
Retained earnings		(45,878	)		(32,754	)
Accumulated other comprehensive loss		(10,322	)		(13,195	)

Total shareholder’s equity		66,300			76,551

	$	611,830		$	669,464

See accompanying notes.

BELDEN & BLAKE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands)


	Three months ended			Three months ended			Six months ended			Six months ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Revenues
Oil and gas sales	$	15,846		$	46,558		$	30,862		$	77,926
Gas gathering and marketing		1,326			3,528			3,246			6,378
Other		195			216			369			305

		17,367			50,302			34,477			84,609

Expenses
Production expense		4,989			6,493			11,219			12,978
Production taxes		231			924			553			1,596
Gas gathering and marketing		1,263			3,064			2,949			5,402
Exploration expense		790			367			2,315			559
Impairment of oil and gas properties		25,230			2,011			25,230			2,011
General and administrative expense		2,114			2,055			4,294			4,015
Depreciation, depletion and amortization		9,973			8,354			19,348			17,359
Accretion expense		339			349			670			688
Derivative fair value loss (gain)		10,804			118,404			(20,423	)		145,226

		55,733			142,021			46,155			189,834

Operating loss		(38,366	)		(91,719	)		(11,678	)		(105,225	)

Other (income) expense
Interest expense		5,315			5,812			10,132			11,658
Other income, net		(33	)		(104	)		(100	)		(230	)

Loss before income taxes		(43,648	)		(97,427	)		(21,710	)		(116,653	)
Benefit from income taxes		(17,282	)		(38,520	)		(8,586	)		(46,112	)

Net loss	$	(26,366	)	$	(58,907	)	$	(13,124	)	$	(70,541	)

See accompanying notes.

BELDEN & BLAKE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six months ended			Six months ended
	June 30, 2009			June 30, 2008

Cash flows from operating activities:
Net loss	$	(13,124	)	$	(70,541	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization		19,348			17,359
Accretion expense		670			688
Amortization of derivatives and other non-cash hedging activities		(17,740	)		149,807
Exploration expense		1,345			559
Deferred income taxes		(8,586	)		(46,112	)
Impairment of oil and gas properties		25,230			2,011
Other non-cash items		2,144			(233	)
Change in operating assets and liabilities
Accounts receivable and other current assets		7,747			(10,946	)
Inventories		60			107
Accounts payable and accrued expenses		(2,629	)		2,371

Net cash provided by operating activities		14,465			45,070

Cash flows from investing activities:
Additions to property and equipment		(6,743	)		(11,998	)
Proceeds from property and equipment disposals		746			3,049
Exploration expense		(1,345	)		(559	)
(Increase) decrease in other assets		(57	)		78

Net cash used in investing activities		(7,399	)		(9,430	)

Cash flows from financing activities:
Repayment of long-term debt and other obligations		(15,074	)		(5	)
Debt financing costs		(350	)		—
Settlement of derivative liabilities recorded in purchase accounting		(302	)		(31,593	)

Net cash used in financing activities		(15,726	)		(31,598	)


Net (decrease) increase in cash and cash equivalents		(8,660	)		4,042
Cash and cash equivalents at beginning of period		22,816			16,014

Cash and cash equivalents at end of period	$	14,156		$	20,056

See accompanying notes.

BELDEN & BLAKE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

June 30, 2009

(1) Basis of Presentation

Unless the context requires otherwise or unless otherwise noted, when we use the terms “Belden & Blake,” “we,” “us,” “our” or the “Company,” we are referring to Belden & Blake Corporation and its predecessors. On August 16, 2005, the former partners of the direct parent of Belden & Blake Corporation, Capital C Energy Operations, L.P., a Delaware limited partnership (“Capital C”), completed the sale of all of the partnership interests in Capital C to certain institutional funds managed by EnerVest, Ltd. (“EnerVest”), a Houston-based privately held oil and gas operator and institutional funds manager.

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the period ended June 30, 2009 are not necessarily indicative of the results that may be expected for the year ended December 31, 2009. For further information, refer to the financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2008.

(2) Derivatives and Hedging

Effective January 1, 2009, we adopted SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities and how they affect an entity’s financial position, financial performance and cash flows.

From time to time, we may enter into a combination of futures contracts, commodity derivatives and fixed-price physical commodity contracts to manage our exposure to natural gas, crude oil or interest rate price volatility and support our capital expenditure plans. Our derivative financial instruments take the form of swaps or collars. At June 30, 2009, our derivative contracts were comprised of natural gas swaps, natural gas basis differential swaps, crude oil swaps and interest rate swaps which were placed with major financial institutions that we believe are a minimal credit risk. All of our derivative instruments are currently accounted for as non-qualifying derivative contracts. The changes in fair value of non-qualifying derivative contracts are reported in expense in the consolidated statements of operations as derivative fair value (gain) loss.

We have derivative contracts that qualified for hedge accounting treatment in prior periods. As a result, balances remain in accumulated other comprehensive income relative to these contracts. During the second quarter of 2009 and 2008, net losses of $700,000 ($400,000 after tax) and $1.3 million ($700,000 after tax), respectively, were reclassified from accumulated other comprehensive income to earnings. The value of open hedges in accumulated other comprehensive income decreased $600,000 ($300,000 after tax) in the second quarter of 2009 and decreased $600,000 ($300,000 after tax) in the second quarter of 2008. During the first six months of 2009 and 2008, net losses of $4.8 million ($2.9 million after tax) and $5.9 million ($3.5 million after tax), respectively, were reclassified from accumulated other comprehensive income to earnings. The value of open hedges in accumulated other comprehensive income decreased $4.7 million ($2.8 million after tax) in the first six months of 2009 and decreased $5.2 million ($3.1 million after tax) in the first six months of 2008. At June 30, 2009, the estimated net loss in accumulated other comprehensive income that is expected to be reclassified into earnings within the next 12 months is approximately $4.2 million after tax. At June 30, 2009, we have partially hedged our exposure to the variability in future cash flows through December 2013.

The following table reflects the natural gas and crude oil volumes and the weighted average prices under financial derivative contracts (including settled derivative contracts) at June 30, 2009:


	Natural Gas Swaps				Crude Oil Swaps				Natural Gas Basis Swaps
			NYMEX				NYMEX
			Price per				Price per				Basis
	Bbtu		Mmbtu		Mbbls		Bbl		Bbtu		Differential
Quarter Ending
September 30, 2009		2,382		4.28		48		29.24		2,116		0.337
December 31, 2009		2,382		4.47		48		29.09		2,116		0.337

		4,764	$	4.38		96	$	29.17		4,232	$	0.337

Year Ending
December 31, 2010		8,938	$	4.28		175	$	28.86		7,665	$	0.243
December 31, 2011		8,231		4.19		157		28.77		5,110		0.252
December 31, 2012		7,005		4.09		138		28.70		3,660		0.110
December 31, 2013		6,528		4.04		127		28.70		—		—

At June 30, 2009, we had interest rate swaps in place covering $80 million of our outstanding debt under the revolving credit facility. As of June 30, 2009, the swaps provided 1-month LIBOR fixed rates at 4.07% plus the applicable margin. On July 10, 2009, we amended the existing swaps to cover $65 million of our outstanding debt through December 31, 2009 and $50 million of our outstanding debt through September 30, 2011. The amended swaps provide 1-month LIBOR fixed rates of 4.1525%, plus the applicable margin.

At June 30, 2009, the fair value of these derivatives was as follows:


	Asset Derivatives				Liability Derivatives
	June 30, 2009		December 31, 2008		June 30, 2009			December 31, 2008
Oil and natural gas commodity contracts	$	3,447	$	1,298	$	(98,482	)	$	(118,547	)

Interest rate swaps		—		—		(2,972	)		(3,543	)

Total fair value	$	3,447	$	1,298	$	(101,454	)	$	(122,090	)


Location of derivatives in our consolidated balance sheets:

Derivative asset	$	2,121	$	430	$	—		$	—
Long-term derivative asset		1,326		868		—			—
Derivative liability		—		—		(15,678	)		(20,520	)
Long-term derivative liability		—		—		(85,776	)		(101,570	)

	$	3,447	$	1,298	$	(101,454	)	$	(122,090	)

The net amount due under these derivative contracts may become due and payable if our Amended Credit Agreement or our senior secured notes become due and payable due to an event of default.

The following table presents the impact of derivatives and their location within the statement of operations:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
The following amounts are recorded in Oil and gas sales:
Unrealized losses:
Oil and natural gas commodity contracts	$	(603	)	$	(819	)	$	(4,682	)	$	(5,177	)


The following amounts are recorded in Interest expense:
Realized losses:
Interest rate swaps	$	—		$	420		$	—		$	618


The following are recorded in Derivative fair value loss (gain):
Unrealized (gains) losses:
Oil and natural gas commodity contracts	$	10,790		$	98,684		$	(22,213	)	$	113,074
Interest rate swaps		(290	)		(1,557	)		(571	)		(80	)

Total		10,500			97,127			(22,784	)		112,994

Realized (gains) losses:
Oil and natural gas commodity contracts		(442	)		21,277			892			32,232
Interest rate swaps		746			—			1,469			—

Total		304			21,277			2,361			32,232

Derivative fair value loss (gain)	$	10,804		$	118,404		$	(20,423	)	$	145,226

(3) Industry Segment Financial Information

We operate in one reportable segment, as an independent energy company engaged in producing oil and natural gas; exploring for and developing oil and gas reserves; acquiring and enhancing the economic performance of producing oil and gas properties; and marketing and gathering natural gas for delivery to intrastate and interstate gas transmission pipelines. Our operations are conducted entirely in the United States.

(4) Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, long-term debt and derivatives. Our derivatives are recorded at fair value (see Notes 2 and 11). The carrying amount of our other financial instruments other than debt approximates fair value because of the short-term nature of the items. The carrying value of our debt approximates fair value because the facility’s interest rate approximates current market rates.

(5) Supplemental Disclosure of Cash Flow Information


	Six months ended			Six months ended
(in thousands)	June 30, 2009			June 30, 2008
Cash paid during the period for:
Interest	$	8,951		$	11,865
Income taxes		—			—
Non-cash investing and financing activities:
Accrued additions to property and equipment		520			2,935
Non-cash additions to debt		(1,383	)		(15	)

(6) Contingencies

We are involved in several lawsuits arising in the ordinary course of business. We believe that the results of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or the results of operations.

(7) Comprehensive Income

Comprehensive income includes net income and certain items recorded directly to shareholder’s equity and classified as other comprehensive income. The table below summarizes comprehensive income and provides the components of the change in accumulated other comprehensive income (loss) for the six-month periods ended June 30, 2009 and 2008.


	Three months ended			Three months ended			Six months ended			Six months ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Comprehensive income (loss):
Net loss	$	(26,366	)	$	(58,907	)	$	(13,124	)	$	(70,541	)
Other comprehensive income (loss), net of tax:
Unrealized gain in derivative fair value		—			(11	)		—			391
Reclassification adjustment for derivative (loss) gain reclassified into earnings		(364	)		(748	)		(2,873	)		(3,543	)

Change in accumulated other comprehensive (loss) income		(364	)		(759	)		(2,873	)		(3,152	)

	$	(26,730	)	$	(59,666	)	$	(15,997	)	$	(73,693	)

(8) Related Party Transactions

We have a joint operating agreement with EnerVest Operating LLC (“EnerVest Operating”). In the second quarter of 2009, we recorded costs of approximately $1.6 million (as general and administrative expense) for operating overhead fees, $1.4 million (as production expense) for field labor, vehicles and district office expense, $11,000 (capitalized) for drilling overhead fees and $225,000 (capitalized) for drilling labor costs related to this agreement. We recorded costs of approximately $1.7 million for operating overhead fees, $1.6 million for field labor, vehicles and district office expense, $67,000 for drilling overhead fees and $196,000 for drilling labor costs in the second quarter of 2008 related to this agreement. In the first six months of 2009, we recorded costs of approximately $3.3 million (as general and administrative expense) for operating overhead fees, $3.0 million (as production expense) for field labor, vehicles and district office expense, $27,000 (capitalized) for drilling overhead fees and $745,000 (capitalized) for drilling labor costs related to this agreement. We recorded costs of approximately $3.2 million for operating overhead fees, $3.4 million for field labor, vehicles and district office expense, $123,000 for drilling overhead fees and $341,000 for drilling labor costs in the first six months of 2008 related to this agreement.

We have a note in favor of our parent, Capital C in the maximum amount of $94 million. The amount due under the note at June 30, 2009 was $29.0 million. In lieu of cash payments, we have the option to make interest payments on the note by borrowing additional amounts against the note. We borrowed $1.4 million against the note for interest payments in the first six months of 2009 and made cash payments of $1.3 million in the first six months of 2008 to Capital C.

As of June 30, 2009, we owed EnerVest $763,000 and EnerVest Operating owed us $265,000.

(9) Impairment of Oil and Gas Properties

For the periods ended June 30, 2009 and 2008, we reviewed our oil and gas properties for impairment as prescribed by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. As a result of this evaluation, we recorded an impairment of $2.0 million during the second quarter of 2008 to proved properties in the Utica Shale formation in Ohio. In the second quarter of 2009, we recorded an impairment of $25.2 million to our coalbed methane properties in Pennsylvania (see Note 13).

(10) New Accounting Standards

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No 141 (Revised 2007),Business Combinations(“SFAS No. 141(R)”) to replace SFAS No. 141,Business Combinations.SFAS No. 141(R) retains the acquisition method of accounting used in business combinations but replaces SFAS 141 by establishing principles and requirements for the recognition and measurement of assets, liabilities and goodwill, including the requirement that most transaction and restructuring costs related to the acquisition be expensed. In addition, the statement requires disclosures to enable users to evaluate the nature and financial effects of the business combination. We adopted SFAS No. 141(R) on January 1, 2009. The adoption of SFAS No. 141(R) has not yet impacted our condensed consolidated financial statements; however, our condensed consolidated financial statements will be impacted to the extent we acquire oil and natural gas properties in a purchase business combination in the future.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities and how they affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. We adopted the disclosure requirements of SFAS No. 161 on January 1, 2009 (see Note 2).

In December 2008, the SEC publishedModernization of Oil and Gas Reporting, a revision to its oil and natural gas reporting disclosures. The new disclosure requirements include provisions that permit the use of new technologies to determine proved reserves if those technologies have been demonstrated empirically to lead to reliable conclusions about reserves volumes. The new requirements also will allow companies to disclose their probable and possible reserves to investors. In addition, the new disclosure requirements require companies to: (i) report the independence and qualifications of its reserves preparer or auditor; (ii) file reports when a third party is relied upon to prepare reserves estimates or conducts a reserves audit; and (iii) report oil and natural gas reserves using an average price based upon the prior 12 month period rather than year end prices. The new disclosure requirements are effective for registration statements filed on or after January 1, 2010, and for annual reports on Forms 10-K and 20-F for fiscal years ending on or after December 31, 2009. We will adopt the new disclosure requirements when they become effective.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments(“FSP FAS 107-1 and APB -1”), to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 is effective for interim or financial periods ending after June 15, 2009. We adopted FSP FAS 107-1 and APB 28-1 in our interim period ending June 30, 2009 (see Note 4).

In May 2009, the FASB issued SFAS No. 165,Subsequent Events, to establish standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. SFAS No. 165 is effective for interim or financial periods ending after June 15, 2009. We adopted SFAS No. 165 in our interim period ending June 30, 2009 (see Note 13).

In June 2009, the FASB issued SFAS No. 166,Accounting for Transfers of Financial Assets — an Amendment of FASB Statement No. 140,to improve the relevance and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows and a transferor’s continuing involvement, if any, in transferred financial assets. SFAS No. 166 is effective for financial years beginning after November 15, 2009. We will adopt SFAS No. 166 on January 1, 2010, and we do not expect the adoption to have an impact on our condensed consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation No 46(R), to amend the consolidation guidance applicable to variable interest entities. SFAS No. 167 is effective for financial years beginning after November 15, 2009. We will adopt SFAS No. 167 on January 1, 2010, and we do not expect the adoption to have an impact on our condensed consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. SFAS No. 168 will become the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of SFAS No. 168, the Codification will supersede all then existing non-SEC accounting and reporting standards. All other non grandfathered non-SEC accounting literature not included in the Codification will become non authoritative. SFAS No. 168 is effective for interim or financial periods ending after September 15, 2009. We will adopt SFAS No. 168 on October 1, 2009, and we do not expect the adoption for have an impact of our condensed consolidated financial statements.

(11) Fair Value Measurements

SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into the following three levels:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration.

• Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table presents the fair value hierarchy table for our assets and liabilities that are required to be measured at fair value on a recurring basis:

Fair Value Measurements at June 30, 2009 Using:

Quoted Prices in

Significant

Active Markets

Other

Significant

for Identical

Observable

Unobservable

Assets

Inputs

Total Carrying Value

(Level 1)

(Level 2)

(Level 3)

Derivative instruments

(98,007

)

—

(98,007

)

—

Our derivative instruments consist of over-the-counter (“OTC”) contracts which are not traded on a public exchange. These derivative instruments are indexed to active trading hubs for the underlying commodity, and are OTC contracts commonly used in the energy industry and offered by a number of financial institutions and large energy companies.

As the fair value of these derivative instruments is based on inputs using market prices obtained from independent brokers or determined using quantitative models that use as their basis readily observable market parameters that are actively quoted and can be validated through external sources, including third-party pricing services, brokers and market transactions, we have categorized these derivative instruments as Level 2.

Our estimates of fair value have been determined at discreet points in time based on relevant market data. These estimates involve uncertainty and cannot be determined with precision. There were no changes in valuation techniques or related inputs in the three or six months ended June 30, 2009.

(12) Asset Retirement Obligations

If a reasonable estimate of the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells can be made, we record an asset retirement obligation (“ARO”) and capitalize the asset retirement cost in oil and natural gas properties in the period in which the retirement obligation is incurred. After recording these amounts, the ARO is accreted to its future estimated value using an assumed cost of funds and the additional capitalized costs are depreciated on a unit-of-production basis. The changes in the aggregate ARO are as follows:


Balance as of December 31, 2008	$	23,885
Accretion expense		670
Liabilities incurred		6
Liabilities settled		(99	)
Revisions in estimated cash flows		—

Balance as of June 30, 2009	$	24,462

As of June 30, 2009 and December 31, 2008, $223,000 and $229,000, respectively, of our ARO is classified as current.

(13) Subsequent Event

On July 10, 2009, we sold our coalbed methane properties in Pennsylvania. Proceeds from the sale were $16.7 million. In the second quarter of 2009, we recorded an impairment of $25.2 million on these properties. These assets are recorded as assets held for sale on the June 30, 2009 balance sheet.

We evaluated subsequent events through August 13, 2009, the date of our condensed consolidated financial statements were issued.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Information

The information in this document includes forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Statements preceded by, followed by or that otherwise include the statements “should,” “believe,” “expect,” “anticipate,” “intend,” “continue,” “estimate,” “plan,” “outlook,” “may,” “future,” “projection,” “likely,” “possible,” “could” and variations of these statements and similar expressions are forward-looking statements as are any other statements relating to developments, events, occurrences, results, efforts or impacts. These forward-looking statements are based on current expectations and projections about future events. Forward-looking statements and the business prospects of Belden & Blake are subject to a number of risks and uncertainties which may cause our actual results in future periods to differ materially from the forward-looking statements contained herein. These risks and uncertainties include, but are not limited to, our access to capital, the market demand for and prices of oil and natural gas, our oil and gas production and costs of operation, results of our future drilling activities, the uncertainties of reserve estimates, general economic conditions, including current economic and financial market crisis, new legislation or regulatory changes, changes in accounting principles, policies or guidelines and environmental risks. These and other risks are described in our Annual Report on Form 10-K for the year ended December 31, 2008, under the Heading “Risk Factors” and in our other filings with the Securities and Exchange Commission (“SEC”). We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions, or otherwise.

Impact of the Current Financial and Credit Markets

The U.S. and other world economies are currently in a recession which could last well into 2009 and beyond. Additionally, the financial and credit markets are undergoing unprecedented disruptions. Many financial institutions have liquidity concerns prompting intervention from governments. Our exposure to the disruptions in the financial markets includes our credit facility and investments exposure.

Our credit facility extends through August 16, 2010. If the disruption in the financial markets continues for an extended period of time, replacement or amendment of the credit facility may be more expensive.

Current market conditions also elevate concerns about cash and cash equivalent investments, which at June 30, 2009 totaled $14.2 million. We have reviewed the creditworthiness of the banks and financial institutions with which we maintain investments, each of whom we believe to be creditworthy, as well as the securities underlying these investments.

We have reviewed the creditworthiness and believe our hedge counterparties to be strong and creditworthy. However, current disruptions occurring in the financial markets could lead to sudden changes in a counterparty’s liquidity, which could impair their ability to perform under the terms of the hedging contract. We are unable to predict sudden changes in a counterparty’s creditworthiness or ability to perform. Even if we do accurately predict sudden changes, our ability to negate the risk may be limited depending upon market conditions.

Additionally, oil and gas prices are also volatile as evidenced by the significant decline during 2008 and 2009. Continued lower commodity prices will reduce the Company’s cash flows from operations.

Results of Operations

The following table sets forth certain information regarding our net oil and natural gas production, revenues and expenses for the periods indicated. The average prices shown in the table include the effects of our qualified effective hedging activities.


	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
Production
Gas (Mmcf)		3,170		3,282		6,347		6,594
Oil (Mbbls)		80		83		163		166
Total production (Mmcfe)		3,652		3,780		7,322		7,588

Average price (1)
Gas (per Mcf)	$	3.63	$	11.22	$	3.67	$	9.18
Oil (per Bbl)		54.01		117.08		46.52		104.84
Mcfe		4.34		12.32		4.21		10.27
Average costs (per Mcfe)
Production expense	$	1.37	$	1.72	$	1.53	$	1.71
Production taxes		0.06		0.24		0.08		0.21
Depletion		2.70		2.18		2.62		2.26


(1)		The average prices presented above include non-cash amounts related to derivative contracts. Excluding these non-cash amounts from oil and gas sales revenues would result in the following average prices:


	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
Gas (per Mcf)	$	3.82	$	11.47	$	4.41	$	9.97
Oil (per Bbl)		54.01		117.08		46.52		104.84
Mcfe		4.50		12.53		4.85		10.95

Results of Operations — Second Quarters of 2009 and 2008 Compared

Revenues

Operating revenues decreased from $50.3 million in the second quarter of 2008 to $17.4 million in the second quarter of 2009. The decrease in operating revenues was due to lower oil and gas sales revenues of $30.7 million and lower gas gathering and marketing revenues of $2.2 million. The decreased oil and gas sales revenues were due to a decrease of $29.1 million related to lower prices for oil and natural gas and a $1.6 million decrease due to lower production volumes.

Gas volumes sold were 3.2 Bcf in the second quarter of 2009, which was a decrease of 112 Mmcf (3%) compared to the second quarter of 2008. This decrease in gas volumes sold resulted in a decrease in gas sales revenues of approximately $1.3 million. Oil volumes sold decreased approximately 3,000 Bbls (3%) from 83,000 Bbls in the second quarter of 2008 to 80,000 Bbls in the second quarter of 2009 resulting in a decrease in oil sales revenues of approximately $310,000. The lower oil and gas sales volumes are primarily due to normal production declines which were partially offset by production from new wells drilled and wells reworked during 2008 and 2009.

The average price realized for our natural gas decreased $7.59 per Mcf from $11.22 in the second quarter of 2008 to $3.63 per Mcf in the second quarter of 2009, which reduced gas sales revenues by approximately $24.0 million. As a result of our qualified hedging and derivative financial instrument activities, gas sales revenues were lower by $603,000 ($0.19 per Mcf) in the second quarter of 2009 and lower by $819,000 ($0.25 per Mcf) in the second quarter of 2008 than if our gas price was not affected by derivative financial instruments. The average price realized for our oil decreased from $117.08 per Bbl in the second quarter of 2008 to $54.01 per Bbl in the second quarter of 2009, which reduced oil sales revenues by approximately $5.1 million.

Gas gathering and marketing revenues decreased from $3.5 million in the second quarter of 2008 to $1.3 million in the second quarter of 2009. The decrease was due to a $1.9 million decrease in gas marketing revenues and a $345,000 decrease in gas gathering revenues as a result of lower average gas prices in the second quarter of 2009 compared to the second quarter of 2008.

Costs and Expenses

Production expense decreased $1.5 million from $6.5 million in the second quarter of 2008 to $5.0 million in the second quarter of 2009. The average production cost decreased from $1.72 per Mcfe in the second quarter of 2008 to $1.37 per Mcfe in the second quarter of 2009. The decrease in production expense was due to decreases in labor costs, gas processing costs, well work activity and general decreases in third party service costs.

Production taxes decreased $693,000 from $924,000 in the second quarter of 2008 to $231,000 in the second quarter of 2009. Average per unit production taxes decreased from $0.24 per Mcfe in the second quarter of 2008 to $0.06 per Mcfe in the second quarter of 2009. The decreased production taxes were primarily due to lower oil and gas prices in Michigan in the second quarter of 2009 compared to the second quarter of 2008. In Michigan, production taxes are based on a percentage of revenues, excluding the effects of hedging.

Gas gathering and marketing expenses decreased from $3.1 million in the second quarter of 2008 to $1.3 million in the second quarter of 2009. The decrease was primarily due to a $1.9 million decrease in gas marketing expenses as a result of lower average gas prices in the second quarter of 2009 compared to the second quarter of 2008.

Exploration expense increased $423,000 from $367,000 in the second quarter of 2008 to $790,000 in the second quarter of 2009. The increase in exploration expense was primarily due higher lease rental expense and seismic costs related to the evaluation of Knox formation drilling potential on recently acquired acreage in Ohio.

Impairment of oil and gas properties was $2.0 million in the second quarter of 2008 due to the impairment of properties in the Utica Shale formation in Ohio. Impairment of oil and gas properties was $25.2 million in the second quarter of 2009 due to the impairment of coalbed methane properties in Pennsylvania.

General and administrative expense was $2.1 million in both the second quarters of 2008 and 2009.

Depreciation, depletion and amortization increased by $1.6 million from $8.4 million in the second quarter of 2008 to $10.0 million in the second quarter of 2009. This increase was primarily due to a $1.6 million increase in depletion expense. Depletion per Mcfe increased from $2.18 per Mcfe in the second quarter of 2008 to $2.70 per Mcfe in the second quarter of 2009 due primarily to decreased reserves volumes due to lower oil and gas prices at June 30, 2009.

Derivative fair value loss (gain) was a loss of $10.8 million in the second quarter of 2009 compared to a loss of $118.4 million in the second quarter of 2008. The derivative fair value loss (gain) reflects the changes in fair value of certain derivative instruments that are not designated or do not qualify as cash flow hedges.

Interest expense decreased $497,000 from $5.8 million in the second quarter of 2008 to $5.3 million in the second quarter of 2009. This decrease in interest expense was primarily due to lower blended interest rates and lower debt levels.

Income tax expense was a benefit of $17.3 million in the second quarter of 2009 compared to a benefit of $38.5 million in the second quarter of 2008. The decrease was primarily due to a decrease in loss before income taxes. The change in income tax expense in the loss before income taxes was primarily due to the decrease in the derivative fair value loss, which was partially offset by reduced oil and gas sales revenues and an increase in the impairment of oil and gas properties.

Results of Operations — Six Months of 2009 and 2008 Compared

Revenues

Operating revenues decreased from $84.6 million in the first six months of 2008 to $34.5 million in the first six months of 2009. The decrease in operating revenues was due to lower oil and gas sales revenues of $47.1 million and lower gas gathering and marketing revenues of $3.1 million. The decreased oil and gas sales revenues were due to a decrease of $44.5 million related to lower prices for oil and natural gas and a $2.6 million decrease in revenues due to lower production volumes.

Gas volumes sold were 6.3 Bcf in the first six months of 2009, which was a decrease of 247 Mmcf (4%) compared to the first six months of 2008. This decrease in gas volumes sold resulted in a decrease in gas sales revenues of approximately $2.3 million. Oil volumes sold decreased approximately 3,000 Bbls (2%) from 166,000 Bbls in the first six months of 2008 to 163,000 Bbls in the first six months of 2009 resulting in a decrease in oil sales revenues of approximately $330,000. The decrease in oil and gas sales volumes was primarily due to normal production declines, which were partially offset by production from new wells drilled and wells reworked in 2008 and 2009.

The average price realized for our natural gas decreased $5.51 per Mcf from $9.18 in the first six months of 2008 to $3.67 per Mcf in the first six months of 2009, which reduced gas sales revenues by approximately $35.0 million. As a result of our qualified hedging and derivative financial instrument activities, gas sales revenues were lower by $4.7 million ($0.74 per Mcf) in the first six months of 2009 and lower by $5.2 million ($0.79 per Mcf) in the first six months of 2008 than if our gas price was not affected by derivative financial instruments. The average price realized for our oil decreased from $104.84 per Bbl in the first six months of 2008 to $46.52 per Bbl in the first six months of 2009, which reduced oil sales revenues by approximately $9.5 million.

Gas gathering and marketing revenues decreased from $6.4 million in the first six months of 2008 to $3.2 million in the first six months of 2009 due to a $2.5 million decrease in gas marketing revenues and a $587,000 decrease in gas gathering revenues as a result of lower average gas prices in the first six months of 2009 compared to the first six months of 2008.

Costs and Expenses

Production expense decreased from $13.0 million in the first six months of 2008 to $11.2 million in the first six months of 2009. The average production cost decreased from $1.71 per Mcfe in the first six months of 2008 to $1.53 per Mcfe in the first six months of 2009. The decrease in production expense was primarily due to decreases in labor costs, gas processing costs, well work activity and general decreases in third party service costs.

Production taxes decreased from $1.6 million in the first six months of 2008 to $553,000 in the first six months of 2009. Average per unit production taxes decreased from $0.21 per Mcfe in the first six months of 2008 to $0.08 per Mcfe in the first six months of 2009. The decreased production taxes are primarily due to lower oil and gas prices in the first six months of 2009 in Michigan, where production taxes are based on a percentage of revenues, excluding the effects of hedging.

Gas gathering and marketing expenses decreased from $5.4 million in the first six months of 2008 to $2.9 million in the first six months of 2009, primarily due to a $2.5 million decrease in gas marketing expenses as a result of lower average gas prices in the first six months of 2009 compared to the first six months of 2008.

Exploration expense increased $1.8 million from $559,000 in the first six months of 2008 to $2.3 million in the first six months of 2009. The increase in exploration expense was primarily due to the noncash write-off of costs related to expired undeveloped leases in the first quarter of 2009, higher lease rental expense and seismic costs related to the evaluation of Knox formation drilling potential on recently acquired acreage in Ohio.

Impairment of oil and gas properties was $2.0 million in the first six months of 2008 due to the impairment of properties in the Utica Shale formation in Ohio. Impairment of oil and gas properties was $25.2 million in the first six months of 2009 due to the impairment of coalbed methane properties in Pennsylvania.

General and administrative expense increased from $4.0 million in the first six months of 2008 to $4.3 million in the first six months of 2009. This increase was primarily due to an increase in the allowance for doubtful accounts in the first six months of 2009.

Depreciation, depletion and amortization increased by $1.9 million from $17.4 million in the first six months of 2008 to $19.3 million in the first six months of 2009. This increase was primarily due to a $2.0 million increase in depletion expense, which was primarily due to a decrease in reserves volumes at June 30, 2009 due to lower oil and gas prices. Depletion per Mcfe increased from $2.26 per Mcfe in the first six months of 2008 to $2.62 in the first six months of 2009.

Derivative fair value loss (gain) was a gain of $20.4 million in the first six months of 2009 compared to a loss of $145.2 million in the first six months of 2008. The derivative fair value loss (gain) reflects the changes in fair value of certain derivative instruments that are not designated or do not qualify as cash flow hedges.

Interest expense decreased $1.6 million from $11.7 million in the first six months of 2008 to $10.1 million in the first six months of 2009. This decrease in interest expense was primarily due to lower blended interest rates.

Income tax expense was a benefit of $8.6 million in the first six months of 2009 compared to a benefit of $46.1 million in the first six months of 2008. The change in income tax expense was primarily due to a decrease in loss before income taxes. The decrease in the loss before income taxes was primarily due to the decrease in the derivative fair value loss, which was partially offset by reduced oil and gas sales revenues and an increase in the impairment of oil and gas properties.

Liquidity and Capital Resources

Cash Flows

The primary sources of cash in the six-month period ended June 30, 2009 have been funds generated from operations. Funds used during this period were primarily used for operations, development expenditures, debt repayment and interest expense. Our liquidity and capital resources are closely related to and dependent upon the current prices paid for our oil and gas.

Our operating activities provided cash flows of $14.5 million during the first six months of 2009 compared to $45.1 million in the first six months of 2008. The decrease was primarily due to a decrease in oil and gas revenues (net of hedging) which was partially offset by an increase in the change in working capital items of $13.6 million.

Our investing activities used cash flows of $7.4 million during the first six months of 2009 compared to $9.4 million used in the first six months of 2008. The decrease was due to a decrease in capital expenditures of $5.3 million which was partially offset by a decrease in cash received for property and equipment disposals of $2.3 million and an increase in exploration expense of $786,000.

Cash flows used in financing activities decreased $15.8 million in the first six months of 2009 primarily due to a decrease of $31.3 million in derivative settlements, which was partially offset by an increase in the repayment of long term debt of $15.1 million.

Our current ratio at June 30, 2009 was 1.14 to 1. During the first six months of 2009, working capital increased $22.9 million from a deficit of $16.8 million at December 31, 2008 to a surplus of $6.1 million at June 30, 2009. The increase in working capital was primarily due to an increase in assets held for sale of $16.7 million, a decrease in the current portion of long term liabilities of $15.0 million, a decrease of $4.8 million in the current liability related to the fair value of derivatives and a decrease in accrued expenses of $2.9 million, which was partially offset by a $8.7 million decrease in cash, a $7.5 million decrease in accounts receivable and a $2.6 million decrease in the current deferred tax asset.

Capital Expenditures

During the first six months of 2009, we spent approximately $6.7 million on our drilling activities and other capital expenditures. In the first six months of 2009, we drilled 2 gross (1.3 net) wells, which were both completed as producing wells in the target formation. We also performed major workovers on 9 wells during the first six months of 2009.

We currently expect to spend approximately $14 million during 2009 on our drilling activities and other capital expenditures. We intend to finance our planned capital expenditures through our cash on hand and available operating cash flow. At June 30, 2009, we had cash of $14.2 million and approximately $4.0 million available under our revolving facility. The level of our future cash flow will depend on a number of factors including the demand for and price levels of oil and gas and the scope and success of our drilling and workover activities. There can be no assurance that the future drilling of our proved undeveloped locations will provide adequate liquidity in the future.

Financing and Credit Facilities

At June 30, 2009, we had an Amended Credit Agreement comprised of a five-year $350 million revolving facility with a borrowing base of $90 million, of which $84.9 million was outstanding at June 30, 2009. This facility is for working capital requirements and general corporate purposes, including the issuance of letters of credit; and a five year $40 million letter of credit facility that may be used only to provide credit support for our obligations under the hedge agreement and other hedge transactions. Borrowings under the Amended Credit Agreement bear interest (i) at the greater of the prime rate, an adjusted federal funds rate or an adjusted Eurodollar rate, plus an applicable margin ranging from 1.0% to 1.75% based on the aggregate principal amount outstanding under the Amended Credit Agreement, or, (ii) at our option, the Eurodollar base rate plus an applicable margin ranging from 2.5% to 3.25% based on the aggregate principal amount outstanding under the Amended Credit Agreement. The full amount borrowed under the Amended Credit Agreement will mature on August 16, 2010.

The obligations under the Amended Credit Agreement are secured by a first lien security interest in substantially all of our assets. The obligations under the Amended Credit Agreement are further secured by a pledge of 100% of our capital stock held by Capital C, our parent.

The Amended Credit Agreement contains covenants that will limit or prohibit our ability to, among other things, incur or guarantee additional indebtedness; create liens; pay dividends on or repurchase stock; pay principal and interest on certain subordinated debt; make certain types of investments; sell assets or merge with another entity; pledge or otherwise encumber our capital stock; or enter into transactions with affiliates. The Amended Credit Agreement also requires compliance with customary financial covenants, including a minimum interest coverage ratio, a maximum leverage ratio and a minimum current ratio.

Changes in oil and gas prices significantly affect our revenues, financial condition, cash flows and borrowing capacity. Markets for oil and gas have historically been volatile and we expect this trend to continue. Prices for oil and gas may fluctuate in response to changes in supply and demand, market uncertainty, seasonal, political and other factors beyond our control. We are unable to accurately predict the prices we will receive for our oil and gas. Accordingly, any significant or sustained declines in oil and gas prices will materially adversely affect our financial condition, operating results, liquidity and ability to obtain additional financing or to refinance our Amended Credit Agreement upon maturity. Continued or prolonged low oil and gas prices may also result in non-compliance with our financial covenants in our Amended Credit Agreement. If we were not in compliance with the covenants in a future period, an event of default may occur which could cause all outstanding debt under the Amended Credit Agreement, the senior secured notes and our derivative contracts to be due and payable. We expect to maintain compliance with the covenants through 2009 and 2010.

At June 30, 2009, we were in compliance with our covenants under the Amended Credit Agreement.

At June 30, 2009, we had $41.1 million of outstanding letters of credit. At June 30, 2009, there was $84.9 million outstanding under the revolving credit agreement. We had $4.0 million of borrowing capacity under our revolving facility available for general corporate purposes.

In connection with our entry into the Amended Credit Agreement, we executed a Subordinated Promissory Note (“Subordinated Note”) in favor of Capital C in the maximum principal amount of $94 million. Under the Subordinated Note, Capital C loaned $25 million to us on August 16, 2005. As of June 30, 2009, the current amount due under the Subordinated Note was $29.0 million. The Subordinated Note accrues interest at a rate of 10% per annum and matures on August 16, 2012. In lieu of cash payments, we have the option to make interest payments on the Subordinated Note by borrowing additional amounts against the Subordinated Note. The Subordinated Note has no prepayment penalty or premium and may be prepaid in whole or in part at any time. Pursuant to our Amended Credit Agreement cash payments for principal or interest on the Subordinated Note are prohibited. The Subordinated Note is subordinate to our senior debt, which includes obligations under the Amended Credit Agreement, a long-term hedging program with J. Aron under a master agreement and related confirmations and documentation and senior secured notes issued under our Indenture dated July 7, 2004 with BNY Midwest Trust Company, as indenture trustee.

New Accounting Standards


Item 3.		Quantitative and Qualitative Disclosures About Market Risk

Among other risks, we are exposed to interest rate and commodity price risks.

The interest rate risk relates to existing debt under our revolving facility as well as any new debt financing needed to fund capital requirements. We may manage our interest rate risk through the use of interest rate swaps to hedge the interest rate exposure associated with the credit agreement, whereby a portion of our floating rate exposure is exchanged for a fixed interest rate. A portion of our long-term debt consists of senior secured notes where the interest component is fixed. At June 30, 2009, we had interest rate swaps in place covering $80 million of our outstanding balance on the revolving credit agreement. The fair value of these interest rate swaps was an unrealized loss of $3.0 million at June 30, 2009. If market interest rates for short-term borrowings increased 1%, the increase in interest expense in the first six months of 2009 would be approximately $485,000. The impact of the interest rate increase on our cash flows would be significantly less than this amount due to the interest rate swaps in place. The impact of the interest rate increase would reduce our cash flows by approximately $85,000. This sensitivity analysis is based on our financial structure at June 30, 2009.

The commodity price risk relates to natural gas and crude oil produced, held in storage and marketed. Our financial results can be significantly impacted as commodity prices fluctuate widely in response to changing market forces. From time to time, we may enter into a combination of futures contracts, commodity derivatives and fixed-price physical contracts to manage our exposure to commodity price volatility. We employ a policy of partially hedging oil and gas production selling NYMEX-based commodity derivative contracts which are placed with major financial institutions that we believe are minimal credit risks. The contracts may take the form of futures contracts, swaps or options. At June 30, 2009, we had derivatives covering a portion of our oil and gas production from 2009 through 2013. Our oil and gas sales revenues included a net pre-tax loss of $819,000 in the second quarter of 2008 and a pre-tax loss of $603,000 in the second quarter of 2009 on our qualified hedging activities. Our oil and gas sales revenues included a net pre-tax loss of $5.2 million in the first six months of 2008 and a net pre-tax loss of $4.7 million in the first six months of 2009 on our qualified hedging activities.

If gas prices decreased $1.00 per Mcf, our gas sales revenues for the first six months of 2009 would decrease by approximately $6.3 million. If the price of crude oil decreased $10.00 per Bbl, our oil sales revenues for the first six months of 2009 would decrease by approximately $1.6 million. The impact of these price decreases on our cash flows would be significantly less than these amounts due to our oil and gas derivatives. Price decreases of $1.00 per Mcf and $10.00 per Bbl would decrease cash flows from the sale of oil and gas for the first six months of 2009 by approximately $2.3 million after considering the effects of the derivative contracts in place as of June 30, 2009. This sensitivity analysis is based on our first six months 2009 oil and gas sales volumes.

The following table reflects the natural gas and crude oil volumes and the weighted average prices under financial hedges (including settled hedges) at July 31, 2009, which has not changed since June 30, 2009:


	Natural Gas Swaps				Crude Oil Swaps				Natural Gas Basis Swaps
			NYMEX				NYMEX
			Price per				Price per				Basis
	Bbtu		Mmbtu		Mbbls		Bbl		Bbtu		Differential
Quarter Ending
September 30, 2009		2,382		4.28		48		29.24		2,116		0.337
December 31, 2009		2,382		4.47		48		29.09		2,116		0.337

		4,764	$	4.38	��	96	$	29.17		4,232	$	0.337

Year Ending
December 31, 2010		8,938	$	4.28		175	$	28.86		7,665	$	0.243
December 31, 2011		8,231		4.19		157		28.77		5,110		0.252
December 31, 2012		7,005		4.09		138		28.70		3,660		0.110
December 31, 2013		6,528		4.04		127		28.70		—		—

The fair value of our oil and gas swaps was a net liability of approximately $95.0 million as of June 30, 2009.

At June 30, 2009, we had interest rate swaps in place covering $80 million of our outstanding debt under the revolving credit facility. As of June 30, 2009, the swaps provide 1-month LIBOR fixed rates at 4.07% plus the applicable margin. On July 10, 2009, we amended the existing swaps to cover $65 million of our outstanding debt through December 31, 2009 and $50 million of our outstanding debt through September 30, 2011. The amended swaps provide 1-month LIBOR fixed rates of 4.1525%, plus the applicable margin. The fair value of these interest rate swaps was an unrealized loss of $3.0 million at June 30, 2009.


Item 4.		Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established and maintain a system of disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this report, the principal executive officer and principal financial officer of Belden & Blake Corporation have concluded that our disclosure controls and procedures as of June 30, 2009 were effective, at a reasonable assurance level, in ensuring that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

Change in Internal Controls Over Financial Reporting

There have not been any changes in our internal controls over financial reporting that occurred during the quarterly period ended June 30, 2009 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II OTHER INFORMATION


Item 1.		Legal Proceedings

We are involved in several lawsuits arising in the ordinary course of business. We believe that the result of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or the results of operations.


Item 1A.		Risk Factors

As of the date of this filing, there have been no changes from the risk factors previously disclosed in our “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008.

These risks and uncertainties are not the only ones facing us and there may be additional matters that we are unaware of or that we currently consider immaterial. All of these could adversely affect our business, financial condition, results of operations and cash flows.


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.

(a) Exhibits


31.1*		Certification of Principal Executive Officer of Belden & Blake Corporation as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
31.2*		Certification of Principal Financial Officer of Belden & Blake Corporation as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
32.1*		Certification of Chief Executive Officer of Belden & Blake Corporation pursuant to 18 U.S.C. Section 1350.
32.2*		Certification of Chief Financial Officer of Belden & Blake Corporation pursuant to 18 U.S.C. Section 1350.


*		Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	BELDEN & BLAKE CORPORATION

Date: August 13, 2009	By:	/s/ Mark A. Houser
		Mark A. Houser, Chief Executive Officer,
		Chairman of the Board of Directors and Director
		(Principal Executive Officer)

Date: August 13, 2009	By:	/s/ James M. Vanderhider
		James M. Vanderhider, President,
		Chief Financial Officer and Director
		(Principal Financial Officer)

EXHIBIT INDEX


Exhibit
Number		Description
31.1*		Certification of Principal Executive Officer of Belden & Blake Corporation as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
31.2*		Certification of Principal Financial Officer of Belden & Blake Corporation as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
32.1*		Certification of Chief Executive Officer of Belden & Blake Corporation pursuant to 18 U.S.C. Section 1350.
32.2*		Certification of Chief Financial Officer of Belden & Blake Corporation pursuant to 18 U.S.C. Section 1350.


*		Filed herewith.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Good

Belden & Blake Inactive 10-Q2009 Q2 Quarterly report

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Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents