================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] 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: 000-22433 Brigham Exploration Company (Exact name of registrant as specified in its charter) Delaware 1311 75-2692967 (State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or organization) Classification Code Number) Identification Number) 6300 Bridgepoint Parkway Building Two, Suite 500 Austin, Texas 78730 (512) 427-3300 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) 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 twelve 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 X . No . --- --- As of May 15, 2000, 16,712,908 shares of Common Stock, $.01 per share, were outstanding. ================================================================================ Brigham Exploration Company First Quarter 2000 Form 10-Q Report TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION ITEM 1. UNAUDITED FINANCIAL STATEMENTS Condensed Consolidated Financial Statements of Brigham Exploration Company Balance Sheets - December 31, 1999 and March 31, 2000........... 1 Statements of Operations - Three months ended March 31, 1999 and 2000........................................2 Statements of Cash Flows - Three months ended March 31, 1999 and 2000........................................3 Statement of Changes in Stockholders' Equity - Three months ended March 31, 2000..............................4 Notes to Condensed Consolidated Financial Statements.............5 Condensed Financial Statements of Certain Brigham Exploration Company Subsidiaries Balance Sheets - March 31, 2000..................................8 Balance Sheets - December 31, 1999...............................9 Statements of Operations - Three months ended March 31, 2000....10 Statements of Operations - Three months ended March 31, 1999....11 Statements of Cash Flows - Three months ended March 31, 2000....12 Statements of Cash Flows - Three months ended March 31, 1999....13 Statements of Changes in Equity - Three months ended March 31, 2000..................................................14 Notes to Condensed Financial Statements.........................15 As all significant Brigham Exploration Company subsidiaries fully and unconditionally guarantee the Senior Subordinated Secured Notes and the Company has no significant assets other than its investments in its subsidiaries, the consolidated financial statements are substantially the same as the financial statements of the subsidiary guarantors and separate financial statements have been omitted as they would not be meaningful to investors. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION..................................18 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................................................26 PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...........................27 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................28 SIGNATURES...................................................................29 PART I - FINANCIAL INFORMATION ITEM 1. UNAUDITED FINANCIAL STATEMENTS BRIGHAM EXPLORATION COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) December 31, March 31, 1999 2000 --------------- ---------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,742 $ 1,659 Accounts receivable 4,945 5,166 Other current assets 577 387 --------------- ---------------- Total current assets 8,264 7,212 --------------- ---------------- Natural gas and oil properties, at cost, net 112,066 114,675 Other property and equipment, at cost, net 1,686 1,572 Drilling advances paid 23 433 Deferred loan fees 3,481 3,449 Other noncurrent assets 163 120 --------------- ---------------- $ 125,683 $ 127,461 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 14,851 $ 8,418 Accrued drilling costs 541 1,161 Participant advances received 850 1,977 Other current liabilities 1,502 1,976 --------------- ---------------- Total current liabilities 17,744 13,532 --------------- ---------------- Notes payable 56,000 58,000 Senior subordinated notes, net 41,341 42,898 Other noncurrent liabilities 1,600 1,741 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value, 10 million shares authorized, none issued and outstanding - - Common stock, $.01 par value, 30 million shares authorized, 14,517,786 and 16,712,908 issued and outstanding at December 31, 1999 and March 31, 2000, respective1y 145 167 Additional paid-in capital 64,171 68,591 Unearned stock compensation (290) (242) Accumulated deficit (55,028) (57,226) ---------------- ---------------- Total stockholders' equity 8,998 11,290 ---------------- ---------------- $ 125,683 $ 127,461 ================ ================ Natural gas and oil properties are accounted for using the full cost method. See accompanying notes to the consolidated financial statements. 1 BRIGHAM EXPLORATION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended March 31, ------------------------------------- 1999 2000 --------------- ---------------- Revenues: Natural gas and oil sales $ 3,191 $ 4,505 Workstation revenue 90 33 --------------- ---------------- 3,281 4,538 --------------- ---------------- Costs and expenses: Lease operating 535 459 Production taxes 169 304 General and administrative 918 740 Depletion of natural gas and oil properties 1,361 1,764 Depreciation and amortization 127 123 Amortization of stock compensation 58 12 --------------- ---------------- 3,168 3,402 --------------- ---------------- Operating income 113 1,136 --------------- ---------------- Other income (expense): Interest income 24 37 Interest expense, net (2,081) (2,775) Other expense - (596) --------------- ---------------- (2,057) (3,334) --------------- ---------------- Net loss before income taxes (1,944) (2,198) Income tax expense - - --------------- ---------------- Net loss $ (1,944) $ (2,198) =============== ================ Net loss per share: Basic/Diluted $ (0.15) $ (0.14) Weighted average common shares outstanding: Basic/Diluted 13,317 15,279 See accompanying notes to the consolidated financial statements. 2 BRIGHAM EXPLORATION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended March 31, --------------------------- 1999 2000 ------------ ------------ Cash flows from operating activities: Net loss $ (1,944) $ (2,198) Adjustments to reconcile net loss to cash provided by operating activities: Depletion of natural gas and oil properties 1,361 1,764 Depreciation and amortization 127 123 Amortization of stock compensation 58 12 Interest paid through issuance of additional senior subordinated notes 1,300 1,477 Amortization of deferred loan fees and debt issuance costs 262 391 Amortization of discount on senior subordinated notes 92 180 Amortization of deferred loss on derivatives instruments - 280 Market value adjustment for derivatives instruments - 443 Changes in working capital and other items: (Increase) decrease in accounts receivable 3,339 (221) (Increase) decrease in other current assets 33 (90) Increase (decrease) in accounts payable 2,543 (6,433) Increase (decrease) in participant advances received (103) 1,127 Increase (decrease) in other current liabilities (150) 138 Other noncurrent assets (169) 43 Other noncurrent liabilities (1,649) (8) ------------ ------------ Net cash provided (used) by operating activities 5,100 (2,972) ------------ ------------ Cash flows from investing activities: Additions to natural gas and oil properties (10,195) (3,738) Proceeds from sale of natural gas and oil properties 10,000 - Additions to other property and equipment (15) (9) Increase in drilling advances paid (80) (410) ------------ ------------ Net cash used by investing activities (290) (4,157) ------------ ------------ Cash flows from financing activities: Proceeds from issuance of common stock - 4,205 Proceeds from issuance of warrants - 260 Increase in notes payable - 2,000 Principal payments on capital lease obligations (63) (58) Deferred loan fees paid (298) (361) ------------ ------------ Net cash provided (used) by financing activities (361) 6,046 ------------ ------------ Net increase (decrease) in cash and cash equivalents 4,449 (1,083) Cash and cash equivalents, beginning of period 2,569 2,742 ------------ ------------ Cash and cash equivalents, end of period $ 7,018 $ 1,659 ============ ============ Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 1,174 $ 762 ============ ============ Supplemental disclosure of noncash investing and financing activities: Capital lease asset additions $ 51 $ - ============ ============ Decrease in accounts payable and other noncurrent liabilities in exchange for issuance of common stock $ 3,510 $ - ============ ============ Increase in accounts payable for deferred loan fees to be paid in future periods $ 450 $ - ============ ============ See accompanying notes to the consolidated financial statements. 3 BRIGHAM EXPLORATION COMPANY CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (in thousands) (unaudited) Additional Unearned Common Stock Paid-in Stock Accumulated --------------------------- Shares Amounts Capital Compensation Deficit Total ---------------- --------- -------------- ------------ ----------------- ----------------- Balance, December 31, 1999 14,517,786 $ 145 $ 64,171 $ (290) $ (55,028) $ 8,998 Net loss - - - - (2,198) (2,198) Issuance of common stock 2,195,122 22 4,183 - - 4,205 Forfeiture of stock options - - (23) - - (23) Issuance of warrants - - 260 - - 260 Amortization of unearned stock compensation - - - 48 - 48 ---------------- --------- -------------- ------------ ------------- ------------- Balance, March 31, 2000 16,712,908 $ 167 $ 68,591 $ (242) $ (57,226) $ 11,290 ================ ========= ============== ============ ============= ============= See accompanying notes to the consolidated financial statements. 4 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. ORGANIZATION AND NATURE OF OPERATIONS Brigham Exploration Company (the "Company") is a Delaware corporation formed on February 25, 1997 for the purpose of exchanging its common stock for the common stock of Brigham, Inc. and the partnership interests of Brigham Oil & Gas, L.P. The Company explores and develops onshore domestic natural gas and oil properties using 3-D seismic imaging and other advanced technologies. The Company focuses its exploration and development of natural gas and oil properties primarily in West Texas, the Anadarko Basin and the onshore Gulf Coast. 2. BASIS OF PRESENTATION The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiaries, and its proportionate share of assets, liabilities and income and expenses of the limited partnerships in which the Company, or any of its subsidiaries, has a participating interest. All significant intercompany accounts and transactions have been eliminated. The accompanying condensed consolidated financial statements are unaudited, and in the opinion of management, reflect all adjustments that are necessary for a fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal and recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year. The unaudited condensed consolidated financial statements should be read in conjunction with the Company's 1999 Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 3. AMENDMENT TO REVOLVING CREDIT FACILITY AND SENIOR SUBORDINATED NOTES In February 2000, the Company entered into an amended and restated Credit Facility with its existing lenders and a new lender. This amended and restated Credit Facility provides the Company with $70 million in borrowing availability for a three-year term. If the Company exceeds certain asset value and interest coverage tests in the second or third quarters of 2000, the total borrowing availability under the Credit Facility will increase to $75 million. The Credit Facility includes a provision whereby certain amounts, not to exceed $30 million of the outstanding borrowings, are convertible into shares of the Company's common stock (the "Convertible Notes") to the extent total borrowings under the Credit Facility exceed $45 million. As of March 31, 2000, the Company had $58 million in borrowings outstanding under the Credit Facility, of which the Convertible Notes approximate $15 million (the minimum under the Credit Facility). The Credit Facility provides that the Convertible Notes will be convertible as follows: (i) the first $10 million of borrowings is convertible at $3.90 per share, (ii) the second $10 million is convertible at $6.00 per share, and (iii) the final $10 million is convertible at $8.00 per share. The Convertible Notes could result in a beneficial conversion feature based on the relationship between the Company's stock price at the time of a borrowing and the strike price of the relative portion of the convertible debt. The value assigned to the beneficial conversion feature would be recorded as a component of interest expense to the extent the Convertible Notes are immediately convertible. Due to the fact that the strike price of the Convertible Notes at February 17, 2000 was in excess of the market price of the Company's common stock at that date, no beneficial conversion feature was recorded. If the Credit Facility is repaid at maturity or is prepaid prior to maturity without payments of cash premiums, the warrants issued to the new participant in the Credit Facility to purchase Brigham common stock become exercisable. Further, to the extent the Company chooses to prepay any of the Convertible Notes without the warrants becoming exercisable, and also assuming the Lender chooses not to convert to equity upon notice of such prepayment, the Company will be required to pay a premium above the face value of the Convertible Notes to the lender. Such premium amounts would range from 150% to 110%, depending on the timing of the prepayment. Such prepayment, however, would require the 5 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) prior approval of the original lenders to the Credit Facility. In addition, certain financial covenants of the Credit Facility were amended or added. In connection with this most recent amendment, the Company reset the price of the warrants previously issued to its existing senior lenders to purchase one million shares of the Company's common stock from an exercise price of $2.25 per share to $2.02 per share. In February 2000, the indenture governing the Notes was amended. In this amendment, the holders of the Notes waived the minimum consolidated interest coverage ratio covenant through June 30, 2000, and adjusted subsequent levels under this test. In addition, the amendment provides the Company with an extension of its right to pay interest through the issuance of additional Notes in lieu of cash (or "in kind") through the third quarter of 2000 and potentially through the fourth quarter of 2000 if certain conditions are met. In exchange for granting these amendments, the Company (i) reset the price of the warrants previously issued to the holders of the Notes to purchase one million shares of the Company's common stock from an exercise price of $3.50 per share to $2.43 per share, and (ii) granted to the holders of the Notes a term overriding royalty interest that provides for the limited right to receive 4%, or 3% if certain conditions are met, of the Company's net production revenue to reduce any outstanding Notes issued as interest paid in kind. As payments are made pursuant to the term overriding royalty interest, they will be recorded by the Company as a reduction of the balance payable pursuant to the Notes. The modification of these agreements did not result in any material adjustment to debt issuance costs. 4. ISSUANCE OF COMMON STOCK In February 2000, the Company entered into an agreement to issue 2,195,122 shares of common stock and 731,707 warrants to purchase the Company's common stock for total net proceeds of $4.2 million in a private placement to a group of institutional investors led by affiliates of two members of the Company's board of directors. The equity sale consisted of units that included one share of common stock and one-third of a warrant to purchase the Company's common stock at an exercise price of $2.5625 per share with a three-year term. 5. HEDGING ACTIVITIES In March 2000, the Company entered into new fixed price cap and fixed price floor hedging contracts with a counterparty for certain future oil and natural gas production. Under the terms of the fixed price cap contracts, for any month where the average index price (NYMEX) is greater than the strike price per the contract, the Company is required to pay to the counterparty the absolute value of that difference times the production volumes covered under the contract. If the average index price is less than the strike price for a given month, no settlement is required. Under the terms of the fixed price floor contracts, for any month where the average index price (NYMEX or ANR - Oklahoma) is less than the strike price per the contract, the counterparty is required to pay to the Company the absolute value of that difference times the production volumes covered under the contract. If the average index price is greater than the strike price for a given month, no settlement is required. Additionally in March 2000, the Company effectively modified its existing fixed price swap contracts so that a portion of the volumes were associated with new index prices (Houston Ship Channel and TETCO South Texas). 6 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The new contracts are summarized as follows: Daily Average Volumes Total Volumes Hedged Fixed -------------------- Hedged Monthly Term 2000 2001 Contract Price ------ ------------ ---- ---- -------------- Fixed Price Cap: Contract #1 600 July 2000 - 110,400 - $31.75 Bbls December 2000 Bbls per Bbl Contract #2 400 January 2001 - - 72,400 $26.60 Bbls June 2001 Bbls per Bbl Contract #3 200 June 2001 - - 36,800 $25.25 Bbls December 2001 Bbls per Bbl Fixed Price Floor: Contract #4 600 March 2000 - 183,600 - $18.00 Bbls December 2000 Bbls per Bbl Contract #5 400 January 2001 - - 72,400 $18.00 Bbls June 2001 Bbls per Bbl Contract #6 200 July 2001 - - 36,800 $16.10 Bbls December 2001 Bbls per Bbl Contract #7 5,000 May 2001 - - 305,000 $1.80 MMBtu June 2001 MMBtu per MMBtu Contract #8 2,500 July 2001 - - 460,000 $1.80 MMBtu December 2001 MMBtu per MMBtu 7 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES CONDENSED BALANCE SHEETS AS OF MARCH 31, 2000 (in thousands) (unaudited) BRIGHAM BRIGHAM BRIGHAM OIL & BRIGHAM, HOLDINGS HOLDINGS GAS, L.P. INC. I, LLC II, LLC ASSETS Current assets: Cash and cash equivalents $ 1,646 $ 1,656 $ 3 $ 4 Accounts receivable 5,166 5,166 - - Other current assets 387 387 - - -------------- -------------- ------------ ------------- Total current assets 7,199 7,209 3 4 -------------- -------------- ------------ ------------- Natural gas and oil properties, at cost, net 114,675 114,675 - - Other property and equipment, at cost, net 1,572 1,572 - - Investment in subsidiaries and intercompany advances 190 27 3,046 50,079 Drilling advances paid 433 433 - - Deferred loan fees 2,085 2,085 - - Other noncurrent assets 120 120 - - -------------- -------------- ------------ ------------- $ 126,274 $ 126,121 $ 3,049 $ 50,083 ============== ============== ============ ============= LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 8,418 $ 8,418 $ - $ - Accrued drilling costs 1,161 1,161 - - Participant advances received 1,977 1,977 - - Other current liabilities 1,784 1,784 - - -------------- -------------- ------------ ------------- Total current liabilities 13,340 13,340 - - -------------- -------------- ------------ ------------- Notes payable 58,000 58,000 - - Other noncurrent liabilities 1,741 1,741 - - Intercompany accounts payable 1,773 1,642 - 1,799 Intercompany notes payable 46,936 46,936 - 46,936 Commitments and contingencies Minority interest - 3,072 - - Equity Partners' capital 4,484 - 3,049 1,348 Common stock, $1.00 par value, 1,000 shares authorized, issued and outstanding - 1 - - Additional paid-in capital - 19,238 - - Accumulated deficit - (17,849) - - -------------- -------------- ------------ ------------- Total equity 4,484 1,390 3,049 1,348 -------------- -------------- ------------ ------------- $ 126,274 $ 126,121 $ 3,049 $ 50,083 ============== ============== ============ ============= Natural gas and oil properties are accounted for using the full cost method. See accompanying notes to the condensed financial statements. 8 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 1999 (in thousands) (unaudited) BRIGHAM BRIGHAM BRIGHAM OIL & BRIGHAM, HOLDINGS HOLDINGS GAS, L.P. INC. I, LLC II, LLC ASSETS Current assets: Cash and cash equivalents $ 2,718 $ 2,736 $ 6 $ 6 Accounts receivable 4,945 4,945 - - Other current assets 577 577 - - --------------- -------------- ------------ ------------- Total current assets 8,240 8,258 6 6 --------------- -------------- ------------ ------------- Natural gas and oil properties, at cost, net 112,066 112,066 - - Other property and equipment, at cost, net 1,686 1,686 - - Investment in subsidiaries and intercompany advances 130 26 1,299 47,802 Drilling advances paid 23 23 - - Deferred loan fees 2,108 2,108 - - Other noncurrent assets 164 164 - - --------------- -------------- ------------ ------------- $ 124,417 $ 124,331 $ 1,305 $ 47,808 =============== ============== ============ ============= LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 14,851 $ 14,851 $ - $ - Accrued drilling costs 541 541 - - Participant advances received 850 850 - - Other current liabilities 1,429 1,429 - - --------------- -------------- ------------ ------------- Total current liabilities 17,671 17,671 - - --------------- -------------- ------------ ------------- Notes payable 56,000 56,000 - - Other noncurrent liabilities 1,600 1,600 - - Intercompany accounts payable 1,752 1,687 - 1,779 Intercompany notes payable 45,459 45,459 - 45,459 Commitments and contingencies Minority interest - 1,325 - - Equity Partners' capital 1,935 - 1,305 570 Common stock, $1.00 par value, 1,000 shares authorized, issued and outstanding - 1 - - Additional paid-in capital - 17,832 - - Accumulated deficit - (17,244) - - --------------- -------------- ------------ ------------- Total equity 1,935 589 1,305 570 --------------- -------------- ------------ ------------- $ 124,417 $ 124,331 $ 1,305 $ 47,808 =============== ============== ============ ============= Natural gas and oil properties are accounted for using the full cost method. See accompanying notes to the condensed financial statements. 9 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (in thousands) (unaudited) BRIGHAM BRIGHAM BRIGHAM OIL & BRIGHAM, HOLDINGS HOLDINGS GAS, L.P. INC. I, LLC II, LLC Revenues: Natural gas and oil sales $ 4,505 $ 4,505 $ - $ - Workstation revenue 33 33 - - ------------ ----------- ------------ ------------ 4,538 4,538 - - ------------ ----------- ------------ ------------ Costs and expenses: Lease operating 459 459 - - Production taxes 304 304 - - General and administrative 735 737 2 2 Depletion of natural gas and oil properties 1,764 1,764 - - Depreciation and amortization 123 123 - - Amortization of stock compensation 12 12 - - ------------ ----------- ------------ ------------ 3,397 3,399 2 2 ------------ ----------- ------------ ------------ Operating income (loss) 1,141 1,139 (2) (2) ------------ ----------- ------------ ------------ Other income (expense): Interest income 37 37 - - Interest expense, net (1,000) (1,000) - - Interest expense - intercompany (1,497) (1,497) - (1,497) Other expense (596) (596) - - ------------ ----------- ------------ ------------ (3,056) (3,056) - (1,497) ------------ ----------- ------------ ------------ Minority interest in net loss - (1,312) - - ------------ ----------- ------------ ------------ Net loss before income taxes (1,915) (605) (2) (1,499) Income tax benefit - - - - Equity in net income (loss) of investee - - (1,312) 913 ------------ ----------- ------------ ------------ Net loss $ (1,915) $ (605) $ (1,314) $ (586) ============ =========== ============ ============ See accompanying notes to the condensed financial statements. 10 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (in thousands) (unaudited) BRIGHAM BRIGHAM BRIGHAM OIL & BRIGHAM, HOLDINGS HOLDINGS GAS, L.P. INC. I, LLC II, LLC Revenues: Natural gas and oil sales $ 3,191 $ 3,191 $ - $ - Workstation revenue 90 90 - - ----------- ----------- ----------- ----------- 3,281 3,281 - - ----------- ----------- ----------- ----------- Costs and expenses: Lease operating 535 535 - - Production taxes 169 169 - - General and administrative 918 918 - - Depletion of natural gas and oil properties 1,361 1,361 - - Depreciation and amortization 127 127 - - Amortization of stock compensation 58 58 - - ----------- ----------- ----------- ----------- 3,168 3,168 - - ----------- ----------- ----------- ----------- Operating income 113 113 - - ----------- ----------- ----------- ----------- Other income (expense): Interest income 24 24 - - Interest expense, net (1,315) (1,315) - - Interest expense - intercompany (581) (581) - (1,317) ----------- ----------- ----------- ----------- (1,872) (1,872) - (1,317) ----------- ----------- ----------- ----------- Minority interest in net loss - (1,205) - - ----------- ----------- ----------- ----------- Net loss before income taxes (1,759) (554) - (1,317) Income tax benefit - - - - Equity in net income (loss) of investee - - (1,205) 780 ----------- ----------- ----------- ----------- Net loss $ (1,759) $ (554) $ (1,205) $ (537) =========== =========== =========== =========== See accompanying notes to the condensed financial statements. 11 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (in thousands) (unaudited) BRIGHAM BRIGHAM BRIGHAM OIL & BRIGHAM, HOLDINGS HOLDINGS GAS, L.P. INC. I, LLC II, LLC Cash flows from operating activities: Net loss $ (1,915) $ (605) $ (1,314) $ (586) Adjustments to reconcile net loss to cash provided by operating activities: Depletion of natural gas and oil properties 1,764 1,764 - - Depreciation and amortization 123 123 - - Amortization of stock compensation 12 12 - - Amortization of deferred loan fees and debt issuance costs 292 292 - - Amortization of deferred loss on derivatives instruments 280 280 - - Market value adjustment for derivatives instruments 443 443 - - Minority interest in net loss - (1,312) - - Equity in net (income) loss of investee - - 1,312 (913) Changes in working capital and other items: Increase in accounts receivable (221) (221) - - Increase in other current assets (90) (90) - - Decrease in accounts payable (6,433) (6,433) - - Increase in participant advances received 1,127 1,127 - - Increase in other current liabilities 92 92 - - Increase (decrease) in intercompany accounts payable 21 (45) - 20 Other noncurrent assets 43 43 - - Other noncurrent liabilities (8) (8) - - ----------- ----------- ---------- ---------- (4,470) (4,538) (2) (1,479) ----------- ----------- ---------- ---------- Cash flows from investing activities: Additions to natural gas and oil properties (3,738) (3,738) - - Additions to other property and equipment (9) (9) - - Investment in subsidiaries and intercompany advances 4,405 4,465 (1) - Increase in drilling advances paid (410) (410) - - ----------- ----------- ---------- ---------- 248 308 (1) - ----------- ----------- ---------- ---------- Cash flows from financing activities: Increase in notes payable 2,000 2,000 - - Increase in intercompany notes payable 1,477 1,477 - 1,477 Principal payments on capital lease obligations (58) (58) - - Deferred loan fees paid (269) (269) - - ----------- ----------- ---------- ---------- 3,150 3,150 - 1,477 ----------- ----------- ---------- ---------- Net decrease in cash and cash equivalents (1,072) (1,080) (3) (2) Cash and cash equivalents, beginning of year 2,718 2,736 6 6 ----------- ----------- ---------- ---------- Cash and cash equivalents, end of period $ 1,646 $ 1,656 $ 3 $ 4 =========== =========== ========== ========== Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 761 $ 761 $ - $ - Supplemental disclosure of cash flow information: Intercompany capital contributions $ - $ 1,406 $ 3,058 $ 1,364 See accompanying notes to the condensed financial statements. 12 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (in thousands) (unaudited) BRIGHAM BRIGHAM BRIGHAM OIL & BRIGHAM, HOLDINGS HOLDINGS GAS, L.P. INC. I, LLC II, LLC Cash flows from operating activities: Net loss $ (1,759) $ (554) $ (1,205) $ (537) Adjustments to reconcile net loss to cash provided by operating activities: Depletion of natural gas and oil properties 1,361 1,361 - - Depreciation and amortization 127 127 - - Amortization of stock compensation 58 58 - - Amortization of deferred loan fees and debt issuance costs 168 168 - - Minority interest in net loss - (1,205) - - Equity in net (income) loss of investee - - 1,205 (780) Changes in working capital and other items: Decrease in accounts receivable 3,339 3,339 - - Decrease in prepaid expenses 33 33 - - Increase in accounts payable 2,543 2,543 - - Decrease in participant advances received (103) (103) - - Decrease in other current liabilities (167) (167) - - Increase in intercompany accounts payable 17 18 - 17 Other noncurrent assets (169) (169) - - Other noncurrent liabilities (1,649) (1,649) - - ---------- ----------- ---------- ---------- 3,799 3,800 - (1,300) ---------- ----------- ---------- ---------- Cash flows from investing activities: Additions to natural gas and oil properties (10,195) (10,195) - - Proceeds from sale of natural gas and oil properties 10,000 10,000 - - Additions to other property and equipment (15) (15) - - Increase in drilling advances paid (79) (79) - - ---------- ----------- ---------- ---------- (289) (289) - - ---------- ----------- ---------- ---------- Cash flows from financing activities: Increase in intercompany notes payable 1,300 1,300 - 1,300 Principal payments on capital lease obligations (63) (63) - - Deferred loan fees paid (298) (298) - - ---------- ----------- ---------- ---------- 939 939 - 1,300 ---------- ----------- ---------- ---------- Net increase in cash and cash equivalents 4,449 4,450 - - Cash and cash equivalents, beginning of year 2,549 2,563 5 6 ---------- ----------- ---------- ---------- Cash and cash equivalents, end of year $ 6,998 $ 7,013 $ 5 $ 6 ========== =========== ========== ========== Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 1,343 $ 1,343 $ - $ - Supplemental disclosure of noncash investing and financing activities: Capital lease asset additions $ 51 $ 51 $ - $ - Increase in accounts payable for deferred loan fees to be paid in future periods $ 450 $ 450 $ - $ - Capital contributions received in exchange for accounts payable and other noncurrent liabilities $ 3,510 $ - $ - $ - Intercompany capital contributions $ - $ 1,106 $ 2,404 $ 1,071 See accompanying notes to the condensed financial statements. 13 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES CONDENSED STATEMENTS OF CHANGES IN EQUITY (in thousands, except shares) (unaudited) Retained Common Stock Additional Earnings/ --------------------- Paid-in Accumulated Partners' Shares Amounts Capital Deficit Capital Total -------- -------- ------------- ------------- ------------- ------------ BRIGHAM OIL & GAS, L.P. Balance, December 31, 1999 - $ - $ - $ - $ 1,935 $ 1,935 Capital contribution - - - - 4,464 4,464 Net loss - - - - (1,915) (1,915) ------- --------- ------------- ------------- ------------- ------------ Balance, March 31, 2000 - $ - $ - $ - $ 4,421 $ 4,421 ======= ========= ============= ============= ============= ============ BRIGHAM INC. Balance, December 31, 1999 1,000 $ 1 $ 17,832 $ (17,244) $ - $ 589 Capital contribution - - 1,406 - - 1,406 Net loss - - - (605) - (605) ------- --------- ------------- ------------- ------------- ------------ Balance, March 31, 2000 1,000 $ 1 $ 19,238 $ (17,849) $ - $ 1,390 ======= ========= ============= ============= ============= ============ BRIGHAM HOLDING I, LLC Balance, December 31, 1999 - $ - $ - $ - $ 1,305 $ 1,305 Capital contribution - - - - 3,058 3,058 Net loss - - - - (1,314) (1,314) ------- --------- ------------- ------------- ------------- ------------ Balance, March 31, 2000 - $ - $ - $ - $ 3,049 $ 3,049 ======= ========= ============= ============= ============= ============ BRIGHAM HOLDINGS II, LLC Balance, December 31, 1999 - $ - $ - $ - $ 570 $ 570 Capital contribution - - - - 1,364 1,364 Net loss - - - - (586) (586) ------- --------- ------------- ------------- ------------- ------------ Balance, March 31, 2000 - $ - $ - $ - $ 1,348 $ 1,348 ======= ========= ============= ============= ============= ============ See accompanying notes to the condensed financial statements. 14 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited) 1. ORGANIZATION AND BACKGROUND In August 1998, upon the filing of a registration statement with the SEC, Brigham Exploration Company, a Delaware corporation, (the "Company") issued $50 million of debt and equity securities to two affiliated institutional investors. The financing transaction consisted of the issuance of $40 million of senior subordinated secured notes (the "Notes"). The Notes are fully and unconditionally guaranteed, on a joint and several basis, by each of the Company's directly or indirectly wholly-owned subsidiaries which are Brigham Oil & Gas, L.P. (the "Partnership"), Brigham Inc., Brigham Holdings I LLC ("Holdings I"), and Brigham Holdings II LLC ("Holdings II"). Furthermore, these subsidiaries have pledged their respective stock and partnership interests as collateral for the Notes. These financial statements include the financial statements for the wholly owned subsidiaries whose securities and partnership interests comprise substantially all of the collateral pledged for the Notes. The Partnership explores and develops onshore domestic natural gas and oil properties using 3-D seismic imaging and other advanced technologies. The Partnership focuses its exploration and development of natural gas and oil properties primarily in West Texas, the Anadarko Basin and the onshore Gulf Coast. Brigham, Inc. is a Nevada corporation whose only asset prior to the Exchange was its less than 1% ownership interest in the Partnership. Brigham, Inc. is the managing general partner of the Partnership. The Company is a Delaware corporation formed on February 25, 1997 for the purpose of exchanging its common stock for the common stock of Brigham, Inc. and the partnership interests of Brigham Oil & Gas, L.P. Subsequent to the Exchange and the Offering, the Company owned a 68.5% interest in the Partnership and Brigham, Inc. owned a 31.50% interest in the Partnership. Effective January 1, 1998, Brigham, Inc. contributed 30.5% of its 31.5% interest in the Partnership to Holdings II, a newly formed Nevada LLC and wholly owned subsidiary of Brigham, Inc., whose only asset is its investment in the Partnership. Also effective January 1, 1998 the Company contributed its 68.5% interest in the Partnership to Brigham Holdings I, a newly formed Nevada LLC and wholly owned subsidiary of the Company whose only asset is its investment in the Partnership. 2. BASIS OF PRESENTATION The accompanying financial condensed financial statements are unaudited, and in the opinion of management, reflect all adjustments that are necessary for a fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal and recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year. The unaudited condensed financial statements should be read in conjunction with the Company's 1999 Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934. 3. AMENDMENT TO REVOLVING CREDIT FACILITY In February 2000, the Partnership entered into an amended and restated Credit Facility with its existing lenders and a new lender. This amended and restated Credit Facility provides the Partnership with $70 million in borrowing availability for a three-year term. If the Company exceeds certain asset value and interest coverage tests in the second or third quarters of 2000, the total borrowing availability under the Credit Facility will increase to $75 million. The Credit Facility includes a provision whereby certain amounts, not to exceed $30 million of the outstanding borrowings, are convertible into shares of the Company's common stock (the "Convertible Notes") to 15 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited) the extent total borrowings under the Credit Facility exceed $45 million. As of March 31, 2000, the Company had $58 million in borrowings outstanding under the Credit Facility, of which the Convertible Notes approximate $15 million (the minimum under the Credit Facility). The Credit Facility provides that the Convertible Notes will be convertible as follows: (i) the first $10 million of borrowings is convertible at $3.90 per share, (ii) the second $10 million is convertible at $6.00 per share, and (iii) the final $10 million is convertible at $8.00 per share. The Convertible Notes could result in a beneficial conversion feature based on the relationship between the Company's stock price at the time of a borrowing and the strike price of the relative portion of the convertible debt. The value assigned to the beneficial conversion feature would be recorded as a component of interest expense to the extent the Convertible Notes are immediately convertible. Due to the fact that the strike price of the Convertible Notes at February 17, 2000 was in excess of the market price of the Company's common stock at that date, no beneficial conversion feature was recorded. If the Credit Facility is repaid at maturity or is prepaid prior to maturity without payments of cash premiums, the warrants issued to the new participant in the Credit Facility to purchase Brigham common stock become exercisable. Further, to the extent the Partnership chooses to prepay any of the Convertible Notes, without the warrants becoming exercisable, and also assuming the Lender chooses not to convert to equity upon notice of such prepayment, the Company will be required to pay a premium above the face value of the Convertible Notes to the lender. Such premium amounts would range from 150% to 110%, depending on the timing of the prepayment. Such prepayment, however, would require the prior approval of the original lenders to the Credit Facility. In addition, certain financial covenants of the Credit Facility were amended or added. In connection with this most recent amendment, the Partnership reset the price of the warrants previously issued to its existing senior lenders to purchase one million shares of the Company's common stock from an exercise price of $2.25 per share to $2.02 per share. The modification of this agreement did not result in any material adjustment to debt issuance costs. 4. HEDGING ACTIVITIES In March 2000, the Partnership entered into new fixed price cap and fixed price floor hedging contracts with a counterparty for certain future oil and natural gas production. Under the terms of the fixed price cap contracts, for any month where the average index price (NYMEX) is greater than the strike price per the contract, the Partnership is required to pay to the counterparty the absolute value of that difference times the production volumes covered under the contract. If the average index price is less than the strike price for a given month, no settlement is required. Under the terms of the fixed price floor contracts, for any month where the average index price (NYMEX or ANR - Oklahoma) is less than the strike price per the contract, the counterparty is required to pay to the Partnership the absolute value of that difference times the production volumes covered under the contract. If the average index price is greater than the strike price for a given month, no settlement is required. Additionally in March 2000, the Partnership effectively modified its existing fixed price swap contracts so that a portion of the volumes were associated with new index prices (Houston Ship Channel and TETCO South Texas). 16 BRIGHAM EXPLORATION COMPANY SUBSIDIARIES NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited) The new contracts are summarized as follows: Daily Average Volumes Total Volumes Hedged Fixed -------------------- Hedged Monthly Term 2000 2001 Contract Price ------ ------------ ---- ---- -------------- Fixed Price Cap: Contract #1 600 July 2000 - 110,400 - $31.75 Bbls December 2000 Bbls per Bbl Contract #2 400 January 2001 - - 72,400 $26.60 Bbls June 2001 Bbls per Bbl Contract #3 200 June 2001 - - 36,800 $25.25 Bbls December 2001 Bbls per Bbl Fixed Price Floor: Contract #4 600 March 2000 - 183,600 - $18.00 Bbls December 2000 Bbls per Bbl Contract #5 400 January 2001 - - 72,400 $18.00 Bbls June 2001 Bbls per Bbl Contract #6 200 July 2001 - - 36,800 $16.10 Bbls December 2001 Bbls per Bbl Contract #7 5,000 May 2001 - - 305,000 $1.80 MMBtu June 2001 MMBtu per MMBtu Contract #8 2,500 July 2001 - - 460,000 $1.80 MMBtu December 2001 MMBtu per MMBtu 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations Comparison of three month periods ended March 31, 1999 and 2000 NATURAL GAS AND OIL SALES. Natural gas and oil sales increased 41% from $3.2 million in the first quarter of 1999 to $4.5 million in the first quarter of 2000. Of this net increase, $1.4 million was attributable to a 45% increase in the average realized equivalent oil and natural gas sales price, partially offset by $99,000 attributable to a 3% decrease in net equivalent production volumes. Net natural gas production volumes decreased 10% from 1,047 MMcf in the first quarter of 1999 to 940 MMcf in the first quarter of 2000. Net natural gas volumes for the first quarter of 1999 included approximately 229 MMcf attributable to properties sold by Brigham in June 1999. Excluding production attributable to these divested properties, net natural gas volumes increased 15% in the first quarter of 2000, compared to adjusted volumes produced during the same period in 1999. This increase was principally due to the completion of wells drilled late in 1999 and recompletion and workover projects performed on certain producing wells. The average price received for natural gas decreased 8% from $2.09 per Mcf in the first quarter of 1999 to $1.93 per Mcf in the first quarter of 2000. Included in these realized prices were natural gas hedging gains of $559,000 ($0.53 per Mcf) in the first quarter of 1999, and natural gas hedging losses of $514,000 ($0.55 per Mcf) in the first quarter of 2000. Net oil production volumes increased 12% from 88 MBbls in the first quarter of 1999 to 99 MBbls in the first quarter of 2000. Excluding 11 MBbls of net oil production attributable to properties divested in June 1999, net oil volumes increased 29% in the first quarter of 2000 as compared to the adjusted volumes produced during the same period in 1999. This increase was principally due to the completion of wells drilled late in 1999 and recompletion and workover projects performed on certain producing wells. The average price received for oil increased 138% from $11.39 per Bbl in the first quarter of 1999 to $27.16 per Bbl in the first quarter of 2000. Oil hedging losses reduced realized average oil prices received in the first quarter of 2000 by $2,000 ($0.02 per Bbl). Brigham did not have any oil hedges in place during the first quarter of 1999. WORKSTATION REVENUE. Workstation revenue decreased 63% from $90,000 in the first quarter of 1999 to $33,000 in the first quarter of 2000. Brigham recognizes workstation revenue as industry participants in the Company's seismic programs are charged an hourly rate for the work performed by Brigham on its 3-D seismic interpretation workstations. The decrease in the first quarter 2000 is primarily attributable to a reduction in the volume of 3-D seismic interpretation activity billable to industry participants as compared with the prior year period. LEASE OPERATING EXPENSES. Lease operating expenses decreased 14% from $535,000 for the first quarter of 1999 to $459,000 for the first quarter of 2000 and, on a per unit of production basis, lease operating expenses for the same periods decreased 12% from $0.34 per Mcfe to $0.30 per Mcfe. The decrease in lease operating expenses was primarily due to a decrease in the number of producing wells in the first quarter of 2000, as compared with the same period in 1999, as a result of Brigham's June 1999 property divestitures. PRODUCTION TAXES. Production taxes increased 80% from $169,000 ($0.11 per Mcfe) for the first quarter of 1999 to $304,000 ($0.20 per Mcfe) for the first quarter of 2000, primarily as a result of a 96% increase in the average equivalent price received for natural gas and oil sales before the effects of hedging gains and losses, partially offset by the 3% decrease in equivalent natural gas and oil production volumes during the first quarter of 2000. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses decreased 19% from $918,000 for the first quarter of 1999 to $740,000 for the first quarter of 2000 primarily due to the reduction of various administrative costs, including reduced employee payroll and benefits expenses, lower office rent and reduced equipment rental and maintenance expenses. On a per unit of production basis, general and administrative expenses decreased from $0.58 per Mcfe for the first quarter of 1999 to $0.48 per Mcfe for the first quarter of 2000. 18 DEPLETION OF NATURAL GAS AND OIL PROPERTIEs. Depletion of natural gas and oil properties increased 30% from $1.4 million ($0.86 per Mcfe) in the first quarter of 1999 to $1.8 million ($1.15 per Mcfe) in the first quarter of 2000. Of this net increase, $450,000 was due to an increase in the depletion rate per unit of production, partially offset by $47,000 due to a decrease in production volumes. The increased depletion rate was principally the result of estimated additions of proved natural gas and oil reserves at higher average capital costs during the first quarter of 2000 as compared with estimated amounts for the first quarter of 1999. NET INTEREST EXPENSE. Net interest expense increased 33% from $2.1 million in the first quarter of 1999 to $2.8 million in the first quarter of 2000. This increase was due to a higher average debt balance with a higher average interest rate in the first quarter of 2000 compared with the first quarter of 1999. The weighted average outstanding debt balance increased from $99.6 million in the first quarter of 1999 to $103.5 million in the first quarter of 2000. The average effective annual interest rate on borrowings outstanding during the first quarter of 1999 was 11.4% compared to 13.1% for the first quarter of 2000. Interest expense in the first quarter of 2000 included $2 million of non-cash charges, including (i) $1.5 million of interest expense related to the Subordinated Notes that was paid through the issuance of additional Subordinated Notes (or "paid-in-kind"), (ii) $391,000 for amortization of deferred financing fees, and (iii) $180,000 for amortization of debt discounts related to the issuance of the Subordinated Notes. See "Liquidity and Capital Resources - Credit Facility; - Subordinated Notes". OTHER EXPENSE. The Company recognized other expense of $596,000 in the first quarter 2000 primarily related to the changes in the fair market values and the related cash flows of certain oil and natural gas hedging contracts that do not qualify for hedge accounting treatment. This expense in the first quarter 2000 included (i) $443,000 of non-cash expenses related to the changes in the fair market values of these hedging contracts during the period, and (ii) $148,000 of expenses related to cash settlements incurred during the period pursuant to these hedging contracts. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of capital have been credit facility and other debt borrowings, public and private equity financings, the sale of interests in projects and properties and funds generated by operations. The Company's primary capital requirements are 3-D seismic acquisition, processing and interpretation costs, land acquisition costs and drilling expenditures. CREDIT FACILITY In January 1998, the Company entered into a revolving credit agreement (the "Credit Facility"), which provided for an initial borrowing availability of $75 million. The Credit Facility was amended in March 1999 to reduce the borrowing availability, extend the date of borrowing base redetermination, modify certain financial covenants, include certain additional covenants that place significant restrictions on the Company's ability to incur certain capital expenditures, and to increase the interest rate on outstanding borrowings. As a result of the completion of the majority of the Company's strategic initiatives to improve its capital resources, including its June 1999 property divestitures and the application of the net sales proceeds to reduce borrowings outstanding under the Credit Facility, the Company and its senior lenders entered into an amendment to the Credit Facility in July 1999. This amendment provided the Company with borrowing availability of $56 million principally to fund its planned drilling activities and anticipated working capital requirements through the end of 1999. As consideration for this amendment to the Credit Facility, in July 1999 the Company issued to its senior lenders one million warrants to purchase the Company's common stock at an exercise price of $2.25 per share. The warrants have a seven-year term from the date of issuance and are exercisable at the holders' option at any time. An estimated value of $1.2 million was attributed to these warrants by the Company and was recognized as additional deferred loan fees that will be amortized and included in interest expense over the remaining period to maturity of the Credit Facility. In February 2000, Brigham entered into an amended and restated Credit Facility with its existing lenders and a new lender. This amended and restated Credit Facility provides the Company with $70 million in borrowing availability for a three-year term, an increase from the $56 million previously available. If Brigham exceeds certain asset value and 19 interest coverage tests in the second or third quarters of 2000, the total borrowing availability under the Credit Facility will increase to $75 million. The Company's lenders have indicated that the borrowing availability provided under the amended Credit Facility exceeded that which would otherwise have been made available under a more traditional conforming borrowing base calculation based on the estimated value of the Company's current net proved reserves and its cash flow. The Credit Facility includes a provision whereby certain amounts, not to exceed $30 million, are convertible into shares of Brigham common stock (the "Convertible Notes") to the extent total borrowings under the Credit Facility exceed $45 million. The Credit Facility provides that any outstanding Convertible Notes will be convertible into shares of Brigham common stock in the following amounts: (i) the first $10 million of borrowings is convertible at $3.90 per share, (ii) the second $10 million is convertible at $6.00 per share and (iii) the final $10 million is convertible at $8.00 per share. As of March 31, 2000, the Company had $58 million in borrowings outstanding under the Credit Facility, of which the Convertible Notes approximate $15 million (the minimum under the Credit Facility). The Convertible Notes could result in a beneficial conversion feature based on the relationship between Brigham's stock price at the time of a borrowing and the strike price of the relative portion of the Convertible Notes. The value assigned to the beneficial conversion feature would be recorded as a component of interest expense to the extent the applicable Convertible Notes are immediately convertible. Due to the fact that the strike price of the Convertible Notes at February 17, 2000 was in excess of the market price of Brigham's common stock at that date, no beneficial conversion feature was recorded. If the Credit Facility is repaid at maturity or is prepaid prior to maturity without payment of cash premiums, the warrants issued to the new participant in the Credit Facility to purchase Brigham common stock become exercisable. Further, to the extent Brigham chooses to prepay any of the Convertible Notes without the warrants becoming exercisable, and also assuming the Lender chooses not to convert to equity upon notice of such prepayment, the Company will be required to a pay a premium above the face value of the Convertible Notes to the lender. Such premium amounts would range from 150% to 110%, depending upon the timing of the prepayment. Such prepayment, however, would require prior approval of the original lenders to the Credit Facility. In addition, certain financial covenants of the Credit Facility were amended or added. In connection with this most recent amendment, the Company reset the price of the warrants previously issued to its existing senior lenders to purchase one million shares of Brigham common stock from the then current exercise price of $2.25 per share to $2.02 per share. Principal outstanding under the Credit Facility is due at maturity on December 31, 2002, with interest due monthly for base rate tranches or periodically as LIBOR tranches mature. The annual interest rate for borrowings under the Credit Facility is either the lender's base rate or LIBOR plus 3.00%, at the Company's option. The Company's obligations under the Credit Facility are secured by substantially all of the natural gas and oil properties and other tangible assets of the Company. At May 15, 2000, the Company had $60 million in borrowings outstanding under the Credit Facility, which currently bear interest at an annual rate of approximately 9.1%. The Credit Facility has certain financial covenants, including current and interest coverage ratios, as defined. The Company and its lenders effected the amendments to the Credit Facility in March 1999, July 1999 and February 2000, in part to enable the Company to comply with certain financial covenants of the Credit Facility, including the minimum current ratio (as defined), minimum interest coverage ratio (as defined) and the limitation on capital expenditures related to seismic and land activities. Should the Company be unable to comply with certain of the financial or other covenants, its senior lenders may be unwilling to waive compliance or amend the covenants in the future. In such instance, the Company's liquidity may be adversely affected, which could in turn have an adverse impact on the Company's future financial position and results of operations. SUBORDINATED NOTES In August 1998, the Company issued $50 million of debt and equity securities to affiliates of Enron Corp. Securities issued by the Company in connection with this financing transaction included: (i) $40 million of Subordinated Notes, (ii) warrants to purchase one million shares of the Company's common stock at a price of $10.45 per share (the "Subordinated Note Warrants"), and (iii) 1,052,632 shares of the Company's common stock at a price of $9.50 per share. The approximate $47.5 million in net proceeds received by the Company from this financing transaction were used to repay a portion of outstanding borrowings under its senior credit facility, which at the time increased the Company's borrowing availability under its credit facility to fund capital expenditures. 20 In March 1999, the Company and Chase Bank of Texas, National Association, as trustee (the "Trustee") for the holders of the Subordinated Notes, entered into an amendment to the indenture governing the Subordinated Notes. This amendment provided the Company with the option to pay interest due on the Subordinated Notes in kind, for any reason, through the second quarter of 2000. In addition, certain financial and other covenants were amended. The amendment also provided for a reduction in the exercise price per share of the Subordinated Note Warrants from $10.45 per share to $3.50 per share and extended the term of the Subordinated Note Warrants from seven to ten years. In February 2000, Brigham entered into another amendment to the terms of the indenture governing the Subordinated Notes. In this amendment, the holders of the Subordinated Notes waived the minimum consolidated interest coverage ratio covenant through June 30, 2000 and adjusted subsequent levels under this test. In addition, the amendment provides the Company with an extension of its right to pay interest in kind through the issuance of additional Subordinated Notes in lieu of cash through the third quarter of 2000 and potentially through the fourth quarter of 2000 if certain conditions are met. In exchange for granting these amendments, the Company (i) reset the price of the Subordinated Note Warrants from a then current exercise price of $3.50 per share to $2.43 per share, and (ii) granted to the holders of the Subordinated Notes a term overriding royalty interest that provides for the limited right to receive 4%, or 3% if certain conditions are met, of the Company's net production revenue to reduce any outstanding Subordinated Notes issued as interest paid in-kind. Payments made pursuant to the term overriding royalty interest will be recorded as a reduction of the balance payable pursuant to the Subordinated Notes. Principal outstanding under the Subordinated Notes is due at maturity on August 20, 2003. Interest on the Subordinated Notes is payable quarterly at rates that vary depending upon whether accrued interest is paid in cash or "in kind" through the issuance of additional Subordinated Notes. Interest is payable in cash at interest rates of 12%, 13% and 14% per annum during years one through three, year four and year five, respectively, of the term of the Subordinated Notes; provided, however, that the Company may pay interest in kind for a cumulative total of seven quarterly interest payments (potentially increasing to eight if certain conditions are met) at interest rates of 13%, 14% and 15% per annum during years one through three, year four and year five, respectively, of the term of the Subordinated Notes. As of May 15, 2000, the Company had made a cumulative total of five quarterly interest payments in kind and expects to make at least the next two quarterly interest payments (due May 20, 2000 and August 20, 2000) in kind. The Subordinated Notes rank subordinate in right of payment to Senior Indebtedness (as defined) and senior to all other financings (other than any allowed capital leases and purchase money financings) of the Company. The Subordinated Notes are secured by a second lien against substantially all of the natural gas and oil properties and other tangible assets of the Company. The Subordinated Notes may be prepaid at any time, in whole or in part, without premium or penalty, provided that all partial prepayments must be pro rata to the various holders of the Subordinated Notes. The Subordinated Notes were issued pursuant to an indenture that contains certain covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional indebtedness, pay dividends, make distributions, enter into certain sale and leaseback transactions, enter into certain transactions with affiliates, dispose of certain assets, incur liens, reborrow funds utilized to prepay the Senior Indebtedness and engage in most types of mergers and consolidations. The indenture governing the Subordinated Notes has certain financial covenants, including current and interest coverage ratios, as defined. The Company and the holders of the Subordinated Notes effected the March 1999 and February 2000 amendments to the indenture to enable the Company to comply with certain financial covenants of the indenture, including the minimum current ratio and the minimum interest coverage ratio, as defined. Should the Company be unable to comply with certain of the financial covenants, the holders of the Subordinated Notes may be unwilling to waive compliance or amend the covenants in the future. In such instance, the Company's liquidity may be adversely affected, which could in turn have an adverse impact on the Company's future financial position and results of operations. At March 31, 2000 and May 15, 2000, the Company had $46.9 million, respectively, principal amount of Subordinated Notes outstanding. 21 SALES OF INTERESTS IN PROJECTS AND NATURAL GAS AND OIL PROPERTIES DUKE PROJECT FINANCING. In February 1999, the Company entered into a project financing arrangement with Duke Energy Financial Services, Inc. ("Duke") to fund the continued exploration of five Anadarko Basin projects covered by approximately 200 square miles of 3-D seismic data acquired in 1998. In this transaction, the Company conveyed 100% of its working interest (land and seismic) in these project areas to a newly formed limited liability company (the "Duke LLC") for total consideration of $10 million. The Company is the managing member of the Duke LLC with a 1% interest, and Duke is the sole remaining member with a 99% interest. Pursuant to the terms of the Duke LLC agreement, Brigham pays 100% of the drilling and completion costs for all wells drilled by the Duke LLC within the designated project areas in exchange for a 70% working interest in the wells (and their allocable drilling and spacing units), with the remaining 30% working interest remaining in the Duke LLC, subject in each instance to proportionate reduction by any ownership rights held by third parties. Upon 100% project payout, the Company has the right to back-in for 80% of the Duke LLC's working interest in all of the then producing wells (and their allocable drilling and spacing units) and a 94% working interest in any wells (and their allocable drilling and spacing units) drilled after payout within the designated project areas governed by the Duke LLC agreement, thereby increasing the Company's effective working interest in the Duke LLC wells from 70% to 94%. The Company believes this project financing arrangement to be beneficial as it enabled Brigham to recoup substantially all of its pre-seismic land and seismic data acquisition costs incurred in these project areas and provided capital to fund the drilling of the first six wells within these projects. MID-1999 PROPERTY SALES. In June 1999, Brigham sold certain producing and non-producing natural gas and oil properties located in its Anadarko Basin province to two separate parties for a total of $17.1 million. The divested properties were located in two fields operated by third parties - the Chitwood Field in Grady County, Oklahoma (originally acquired by the Company for $13.4 million in the Chitwood Acquisition in November 1997), and the Red Deer Creek Field in Roberts County, Texas. Brigham's independent reservoir engineers estimated net proved reserve volumes attributable to the properties as of June 1, 1999 of approximately 36 Bcfe, of which 33% were classified as proved developed producing reserves and 59% were natural gas. The Company estimated that net production volumes from the divested properties were 2.8 MMcfe per day at the time of the sales. The Company used the proceeds from these transactions to reduce borrowings under its credit facility, which contributed to provide the Company with $8 million in borrowing availability under its then existing credit facility that was used to fund working capital needs and capital expenditures during the second half of 1999. The effective date of each transaction was June 30, 1999. EQUITY PLACEMENTS VERITAS EQUITY ISSUANCES. On March 30, 1999, the Company entered into an agreement with Veritas DGC Land, Inc. to exchange 1,002,865 shares of newly issued Brigham common stock valued at $3.50 per share for approximately $3.5 million of payment obligations due to Veritas in 1999 for certain seismic acquisition and processing services previously performed. In addition, this agreement provided for the payment by Brigham of up to $1 million in future seismic processing services to be performed by Veritas in newly issued shares of Brigham common stock valued at $3.50 per share, in the event that the Company did not elect to pay for such services in cash. The settlement of these future seismic processing services was determined on a quarterly basis through September 30, 1999. Pursuant to this agreement, Brigham issued a total of 1,211,580 shares of common stock to Veritas to satisfy $4.2 million in aggregate payment obligations due to Veritas for seismic acquisition and processing services performed prior to 1999 and certain seismic processing services performed during 1999. PRIVATE EQUITY PLACEMENT. On February 22, 2000, Brigham entered into an agreement to issue 2,195,122 shares of common stock and 731,707 warrants to purchase common stock for total consideration of $4.5 million in a private placement to a group of institutional investors led by affiliates of two members of the Company's board of directors. The equity sale consisted of units that included one share of common stock priced at $2.0525 per share and one-third of a warrant to purchase Brigham common stock at an exercise price of $2.5625 per share with a three-year term. Pricing of this private equity placement was based on the average market price of Brigham common stock during a twenty trading day period prior to issuance. Net proceeds from this equity placement will be used to fund a portion of the Company's planned 2000 capital expenditures and working capital obligations. 22 CASH FLOW ANALYSIS CASH FLOWS FROM OPERATING ACTIVITIES. Cash flows used by operating activities were $3 million in the first quarter of 2000, which consisted of $2.5 million in net operating cash flow (total revenues less lease operating expenses, production taxes, net general and administrative expenses and cash interest expenses) and $5.4 million in cash flow used for working capital items. This compares to cash flows provided by operating activities of $5.1 million in the first quarter of 1999, which consisted of $1.3 million in net operating cash flow and $3.8 million in cash flow provided by working capital items. CASH FLOWS FROM INVESTING ACTIVITIES. Cash flows used by investing activities were $4.2 million in the first quarter of 2000 as compared with $290,000 in the first quarter of 1999. This increase in net cash flows used by investing activities was due to the combined effects of (i) reduced capital expenditures in the current year quarter ($3.7 million) as compared with the prior year period ($10.2 million), and (ii) $10 million of proceeds received from the sales of interests in certain seismic projects during the first quarter of 1999. CASH FLOWS FROM FINANCING ACTIVITIES. Cash flows provided by financing activities were $6 million in the first quarter of 2000 as compared with cash flows used by financing activities of $361,000 in the first quarter of 1999. This increase in cash flows provided by financing activities resulted primarily from a $2 million increase in borrowings under the Credit Facility and the February 2000 placement of common stock and warrants that generated proceeds of $4.5 million before transaction expenses. CAPITAL EXPENDITURES Continuing its strategy implemented during 1999, Brigham intends to focus substantially all of its efforts and available capital resources in 2000 to the drilling and monetization of its highest grade prospects within its over 5,000 square mile inventory of 3-D seismic data. The Company's current 2000 capital expenditure budget is estimated to be $25 million, which includes approximately $20 million for drilling projects and $5 million for non-drilling activities (primarily acreage acquisition and capitalized overhead costs). Brigham's planned 2000 drilling program consists of a balanced blend of exploration and development drilling projects with approximately 54% of budgeted drilling expenditures targeted for exploratory prospects, 28% for development locations and the remaining 18% for development locations that are contingent upon drilling success during the year. In addition, the Company's 2000 budgeted drilling expenditures have been allocated approximately 75% to its Gulf Coast province and 25% to its Anadarko Basin province, concentrated within trends where the Company has experienced exploration success to date. The Company intends to fund these budgeted capital expenditures through a combination of cash flow from operations, available borrowings under its senior credit facility and the proceeds from its February 2000 private equity placement. Additionally, the Company intends to supplement its available capital resources through selective sales of interests in non-producing assets, including interests in its 3-D seismic projects and promoted interests in future drilling prospects or locations. Due to the Company's active exploration and development activities, Brigham has experienced and expects to continue to experience substantial working capital requirements. While the Company believes that cash flow from operations and borrowings under its senior credit facility should allow Brigham to finance its planned operations through 2000 based on current conditions and expectations, additional financing will be required in the future to fund the Company's exploration and development activities. In the event additional financing is not available, the Company may be required to curtail or delay its planned activities. OTHER MATTERS HEDGING ACTIVITIES The Company believes that hedging, although not free of risk, allows the Company to reduce its exposure to natural gas and oil sales price fluctuations and thereby to achieve more predictable cash flows. However, hedging 23 arrangements, when utilized, limit the benefit to the Company of increases in the prices of the hedged commodity. Moreover, the Company's hedging arrangements apply only to a portion of its production and provide only partial price protection against declines in commodity prices. The Company expects that the amount of its hedges will vary from time to time. In 1998, Brigham began using natural gas swap arrangements in an attempt to reduce its sensitivity to volatile commodity prices as its production base became increasingly weighted toward natural gas. Pursuant to these arrangements the Company exchanges a floating market price for a fixed contract price. The Company makes payments when the floating price exceeds the fixed price for a contract month and the Company receives payments when the fixed price exceeds the floating price. Settlements of these swaps are based on the difference between regional market index prices for a contract month and the fixed contract price for the same month. The Company accounts for substantially all of these transactions as hedging activities and, accordingly, adjusts the price received for natural gas and oil production during the period the hedged transactions occurred. In September 1999, Brigham sold call options on a portion of its future oil and natural gas production. The Company applied the proceeds from the sale of these call options to increase the effective fixed swap price on its then existing natural gas hedging contracts during the months of October 1999 through January 2000 by an average of $0.57 per MMBtu. For accounting purposes, the improvement in the Company's fixed natural gas swap price attributable to these transactions is not reflected in reported revenues. Rather, it is reflected in (i) other income (expense) on the income statement, and (ii) amortization of deferred loss on derivatives instruments and market value adjustment for derivatives instruments on the cash flow statement. In March 2000, Brigham purchased put options on a portion of its future oil and natural gas production. These transactions effectively converted a portion of its existing call options into collars, thus providing a hedge to future changes in oil and natural gas prices. Brigham also entered into costless collars on additional future oil and natural gas production thus providing further protection to the Company's exposure to potential oil and natural gas price declines. 24 The following tables summarize the Company's outstanding natural gas and oil hedging arrangements as of May 15, 2000: NATURAL GAS HEDGES 2000 2001 2002 ---------------------- --------------------- --------------------- Average Contract Average Average Volumes Price Volumes Contract Volumes Contract Monthly Hedged Price Hedged Price Hedged Price Pricing Basis Contract Term (MMBtu) ($/MMBtu) (MMBtu) ($/MMBtu) (MMBtu) ($/MMBtu) ------------ -------------- ----------- --------- ---------- --------- -------- ----------- Fixed Price Swaps: Contract #1 ANR November 1999 - 2,740,000 $2.1690 600,000 $2.0650 -- -- Oklahoma April 2001 Contract #2 Houston April 2000 - 1,375,000 $2.1500 600,000 $2.1500 -- -- Ship Channel April 2001 Contract #3 TETCO April 2000 - 1,375,000 $2.0575 600,000 $2.0575 -- -- South Texas April 2001 Fixed Price Cap ANR May 2001 - -- -- 2,450,000 $2.5498 1,810,000 $2.6326 Oklahoma June 2002 Fixed Price Floor ANR May 2001 - -- -- 765,000 $1.8000 -- -- Oklahoma December 2001 CRUDE OIL HEDGES 2000 2001 2002 ---------------------- --------------------- --------------------- Average Contract Average Average Volumes Price Volumes Contract Volumes Contract Monthly Hedged Price Hedged Price Hedged Price Pricing Basis Contract Term (Bbls) ($/Bbl) (Bbls) ($/Bbl) (Bbls) ($/Bbl) ------------ -------------- ----------- --------- ---------- --------- -------- ----------- Fixed Price Cap NYMEX October 1999 - 219,600 $27.40 109,200 $26.15 -- -- December 2001 Fixed Price Floor NYMEX March 2000 - 183,600 $18.00 109,200 $17.36 -- -- December 2001 EFFECTS OF INFLATION AND CHANGES IN PRICES The Company's results of operations and cash flows are affected by changing oil and gas prices. If the price of oil and gas increases (decreases), there could be a corresponding increase (decrease) in revenues as well as the operating costs that the Company is required to bear for operations. Inflation has had a minimal effect on the Company. ENVIRONMENTAL AND OTHER REGULATORY MATTERS The Company's business is subject to certain federal, state and local laws and regulations relating to the exploration for and the development, production and marketing of natural gas and oil, as well as environmental and safety matters. Many of these laws and regulations have become more stringent in recent years, often imposing greater liability on a larger number of potentially responsible parties. Although the Company believes it is in substantial compliance with all applicable laws and regulations, the requirements imposed by laws and regulations are frequently changed and subject to interpretation, and the Company is unable to predict the ultimate cost of compliance with these requirements or their effect on its operations. Any suspensions, terminations or inability to meet applicable bonding requirements could materially adversely affect the Company's financial condition and operations. Although significant expenditures may be required to comply with governmental laws and regulations applicable to the Company, compliance has not had a material adverse effect on the earnings or competitive position of the Company. Future regulations may add to the cost of, or significantly limit, drilling activity. 25 YEAR 2000 ISSUE The Company has initially incurred no significant problems related to the Year 2000 issue. However, the Company has not yet fully utilized all functions and processes of its systems and accordingly cannot be sure that all its systems will be free of Year 2000 issues. Also, the Company has no assurance that its critical business partners, governmental agencies or other key third parties have not incurred Year 2000 issues that may affect the Company. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Company must adopt SFAS No. 133, as amended by SFAS No. 137, effective January 1, 2001. The Company is currently assessing the impact adoption of this standard will have on its financial statement presentation. FORWARD LOOKING INFORMATION Brigham or its representatives may make forward looking statements, oral or written, including statements in this report, press releases and filings with the SEC, regarding estimated future net revenues from oil and natural gas reserves and the present value thereof, planned capital expenditures (including the amount and nature thereof), increases in oil and gas production, the number of wells the Company anticipates drilling through 2000 and the Company's financial position, business strategy and other plans and objectives for future operations. Although the Company believes that the expectations reflected in these forward looking statements are reasonable, there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected effects on its business or operations. Among the factors that could cause actual results to differ materially from the Company's expectations are general economic conditions, inherent uncertainties in interpreting engineering data, operating hazards, delays or cancellations of drilling operations for a variety of reasons, competition, fluctuations in oil and gas prices, availability of sufficient capital resources to the Company and its project participants, government regulations and other factors detailed herein and in the Company's 1999 Form 10-K report and other SEC filings. All subsequent oral and written forward looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. The Company assumes no obligation to update any of these statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In Part II, Item 7A of Brigham's Form 10-K report for the year ended December 31, 1999 (see page 41 of Brigham's 1999 Form 10-K), Brigham provided a discussion of its market risk. There were no material changes during the first quarter of 2000 in Brigham's exposures to loss from possible future changes in the prices of oil and natural gas or in interest rates, other than those described in Brigham's 1999 Form 10-K report. 26 PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On February 22, 2000, Brigham announced that it entered into a series of financing agreements to provide funding for its planned 2000 capital expenditure program and working capital obligations. These transactions included: (i) a restructuring of its senior credit facility to provide from $14 million to $19 million in borrowing availability, (ii) amendments to the terms of its senior subordinated notes to provide for the restructured credit facility and additional financial flexibility, and (iii) the issuance of $4.5 million of common stock and warrants to purchase common stock in a private placement. No underwriters were involved, and therefore no underwriting commissions or discounts were paid in connection with the privately placed notes, common stock and warrants. The sales of these securities were made in reliance upon the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) thereof for transactions not involving a public offering. AMENDED CREDIT FACILITY. On February 17, 2000, Brigham entered into an amended senior credit facility with its existing lenders, Bank of Montreal and Societe Generale, and a new lender, Shell Capital Inc. This amended facility provides the Company with $70 million in borrowing availability for a three-year term, an increase from the $56 million in availability under the existing facility. If Brigham exceeds certain asset value and interest coverage tests in the second or third quarters of 2000, the total borrowing availability under this credit facility will increase to $75 million. Borrowings under the senior credit facility in excess of $45 million are convertible into shares of Brigham common stock in the following amounts: (i) the first $10 million of borrowings is convertible at $3.90 per share, (ii) the second $10 million is convertible at $6.00 per share and (iii) the final $10 million is convertible at $8.00 per share. If the credit facility is repaid at maturity or is prepaid prior to maturity without payment of cash premiums, the warrants issued to Shell Capital to purchase Brigham common stock become exercisable. All borrowings under the senior credit facility bear interest at annual rates of LIBOR plus 3.00%, or approximately 8.875% based on current LIBOR rates. In addition, certain financial covenants of the senior credit facility were amended or added. In connection with this amendment, the Company has agreed to reset the price of the warrants to purchase one million shares of Brigham common stock previously issued to the Bank of Montreal and Societe Generale from a current exercise price of $2.25 per share to $2.02 per share. AMENDED SENIOR SUBORDINATED NOTES. On February 17, 2000, Brigham entered into an amendment to the terms of the indenture related to its outstanding senior subordinated notes due 2003 (the "Notes"). In this amendment, the holders of the Notes waived the minimum consolidated interest coverage ratio covenant through June 30, 2000 and adjusted subsequent levels under this test. In addition, the amendment to the Notes provides the Company with an extension of its right to pay interest through the issuance of additional Notes in lieu of cash (or "in-kind") through the third quarter of 2000 and potentially through the fourth quarter of 2000 if certain conditions are met. In exchange for granting these amendments, the Company (i) reset the price of the warrants to purchase one million shares of Brigham common stock previously issued to the holders of the Notes from a then current exercise price of $3.50 per share to $2.43 per share, and (ii) granted to the holders of the Notes a term overriding royalty interest that provides for the limited right to receive 4%, or 3% if certain conditions are met, of the Company's net production revenue to reduce any outstanding Notes issued as interest paid in-kind. PRIVATE EQUITY PLACEMENT. On February 22, 2000, Brigham entered into an agreement to issue 2,195,122 shares of common stock and 731,707 warrants to purchase common stock for total consideration of $4.5 million in a private placement to a group of institutional investors led by affiliates of two members of the Company's board of directors. The equity sale consists of units that include one share of common stock priced at $2.0525 per share and one-third of a warrant to purchase Brigham common stock at an exercise price of $2.5625 per share with a three-year term. Pricing of this private equity placement was based on the average market price of Brigham common stock during a twenty trading day period prior to issuance. 27 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27 Financial Data Schedule (b) Reports on Form 8-K: The Company filed a report on Form 8-K on February 29, 2000, to report the announcement on February 22, 2000, that it had entered into a series of financing agreements that provide funding for its planned 2000 capital expenditure program and working capital obligations. These transactions included (i) a restructuring of its senior credit facility to provide from $14 million to $19 million in borrowing availability, (ii) amendments to the terms of its senior subordinated notes to provide for the restructured credit facility and additional financial flexibility, and (iii) the issuance of $4.5 million of common stock and warrants to purchase common stock in a private placement. The Form 8-K included a copy of the Company's press release that provided this announcement. The Company filed a report on Form 8-K on March 9, 2000, to report the announcements on March 7, 2000, of (i) initial production results from two wells completed in its Gulf Coast exploration projects, and (ii) its proved reserve estimates as of December 31, 1999, finding costs and drilling results for 1999, capital budget for 2000, and operational and financial results for the fourth quarter and fiscal year ended December 31, 1999. The Form 8-K included copies of the Company's press releases that provided these announcements. 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 15, 2000. BRIGHAM EXPLORATION COMPANY By: /s/ BEN M. BRIGHAM -------------------------------------- Ben M. Brigham Chief Executive Officer, President and Chairman of the Board By: /s/ CURTIS F. HARRELL -------------------------------------- Curtis F. Harrell Chief Financial Officer 29 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION