-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MmyxwxKubxT4NEhPai/1+V/fskZzhI0inueXiaunjMr5jCX0SyVXWCnhaxEKJoSj Ak+goySp/ezKE4yqHaLlXg== 0001015402-03-001889.txt : 20030515 0001015402-03-001889.hdr.sgml : 20030515 20030515120634 ACCESSION NUMBER: 0001015402-03-001889 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRIGHAM EXPLORATION CO CENTRAL INDEX KEY: 0001034755 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 752692967 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22433 FILM NUMBER: 03702363 BUSINESS ADDRESS: STREET 1: 6300 BRIDGE POINT PARKWAY STREET 2: BLDG 2 SUITE 500 CITY: AUSTIN STATE: TX ZIP: 78730 BUSINESS PHONE: 5124273300 MAIL ADDRESS: STREET 1: 6300 BRIDGE POINT PARKWAY STREET 2: BLDG 2 SUITE 500 CITY: AUSTIN STATE: TX ZIP: 78730 10-Q 1 doc1.txt BRIGHAM EXPLORATION 10Q 3-31-2003 - -------------------------------------------------------------------------------- ================================================================================ 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, 2003 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 2, SUITE 500, AUSTIN, TEXAS 78730 (Address of principal executive offices) (512) 427-3300 (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 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 [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12 b-2 of the Act). Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Oustanding ----- ---------- Common Stock, par value $.01 per share as of March 31, 2003 19,935,700 ================================================================================ - -------------------------------------------------------------------------------- BRIGHAM EXPLORATION COMPANY FIRST QUARTER 2003 FORM 10-Q REPORT TABLE OF CONTENTS ----------------- PAGE ---- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets - March 31, 2003 and December 31, 2002. . . . . . . . . . . . . . . . . . . . . . 1 Consolidated Statements of Operations - Three months ended March 31, 2003 and 2002. . . . . . . . . . . . . . . . . . 2 Consolidated Statement of Changes in Stockholders' Equity - Three months ended March 31, 2003 . . . . . . . . . . . 3 Consolidated Statements of Cash Flows - Three months ended March 31, 2003 and 2002 . . . . . . . . . . . 4 Notes to the Consolidated Financial Statements . . . . . . . . . 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . 12 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ITEM 4. CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . . . . . 19 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . 20 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 20 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 CERTIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
BRIGHAM EXPLORATION COMPANY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) MARCH 31, DECEMBER 31, 2003 2002 ----------- -------------- ASSETS Current assets: Cash and cash equivalents $ 16,485 $ 15,318 Accounts receivable 15,342 11,361 Other current assets 5,419 6,643 ----------- -------------- Total current assets 37,246 33,322 ----------- -------------- Oil and natural gas properties, net (full cost method) 171,119 164,980 Other property and equipment, net 1,245 1,234 Deferred loan fees 3,126 2,391 Other noncurrent assets 607 132 ----------- -------------- $ 213,343 $ 202,059 =========== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 15,956 $ 14,486 Royalties payable 7,455 4,508 Accrued drilling costs 1,988 2,727 Participant advances received 1,361 1,955 Other current liabilities 13,221 10,334 ----------- -------------- Total current liabilities 39,981 34,010 ----------- -------------- Senior credit facility 56,000 60,000 Senior subordinated notes 22,093 21,797 Other noncurrent liabilities 2,223 186 Commitments and contingencies Series A Preferred Stock, mandatorily redeemable, $.01 par value, $20 stated and redemption value, 2,250,000 shares authorized, 1,799,955 and 1,765,132 shares issued and outstanding at March 31, 2003 December 31, 2002, respectively 20,329 19,540 Series B Preferred Stock, mandatorily redeemable, $.01 par value, $20 stated and redemption value, 1,000,000 shares authorized, 511,116 and 501,226 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively 4,983 4,777 Stockholders' equity: Preferred stock, $.01 par value, 10 million shares authorized, of which 2,250,000 and 1,000,000 shares are designated as Series A and Series B, respectively - - Common stock, $.01 par value, 50 million shares authorized, 21,037,989 and 20,618,161 shares issued and 19,893,707 and 19,479,979 shares outstanding at March 31, 2003 and December 31, 2002, respectively 210 206 Additional paid-in capital 92,850 93,436 Treasury stock, at cost; 1,144,282 and 1,138,182 shares at March 31, 2003 and December 31, 2002, respectively (4,292) (4,282) Unearned stock compensation (163) (212) Accumulated other comprehensive (loss) income (3,030) (3,047) Accumulated deficit (17,841) (24,352) ----------- -------------- Total stockholders' equity 67,734 61,749 ----------- -------------- $ 213,343 $ 202,059 =========== ============== The accompanying notes are an integral part of these consolidated financial statements.
1
BRIGHAM EXPLORATION COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) THREE MONTHS ENDED MARCH 31, ------------------ 2003 2002 -------- -------- Revenues: Oil and natural gas sales $14,639 $ 6,434 Other revenue 38 10 -------- -------- 14,677 6,444 -------- -------- Costs and expenses: Lease operating 974 871 Production taxes 938 353 General and administrative 1,139 964 Depletion of oil and natural gas properties 4,102 3,137 Depreciation and amortization 97 103 Accretion of discount on asset retirement obligations 34 - -------- -------- 7,284 5,428 -------- -------- Operating income 7,393 1,016 -------- -------- Other income (expense): Interest income 21 19 Interest expense (1,282) (1,421) Other income (expense) 111 (248) -------- -------- (1,150) (1,650) -------- -------- Income (loss) before income taxes and cumulative effect of change in accounting principle 6,243 (634) Income taxes - - -------- -------- Income (loss) before cumulative effect of change in accounting principle 6,243 (634) Cumulative effect of change in accounting principle 268 - -------- -------- Net income (loss) 6,511 (634) Less accretion and dividends on redeemable preferred stock 995 698 -------- -------- Net income (loss) available to common stockholders $ 5,516 $(1,332) ======== ======== Net income (loss) per share available to common stockholders: Basic Income (loss) before cumulative effect of change in accounting principle $ 0.27 $ (0.08) Cumulative effect of change in accounting principle 0.01 - -------- -------- $ 0.28 $ (0.08) ======== ======== Diluted Income (loss) before cumulative effect of change in accounting principle $ 0.19 $ (0.08) Cumulative effect of change in accounting principle 0.01 - -------- -------- $ 0.20 $ (0.08) ======== ======== Weighted average shares outstanding: Basic 19,707 16,016 ======== ======== Diluted 32,111 16,016 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
2
BRIGHAM EXPLORATION COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS) (UNAUDITED) ACCUMULATED TOTAL COMMON STOCK ADDITIONAL UNEARNED OTHER STOCK- ------------------- PAID IN TREASURY STOCK COMPREHENSIVE ACCUMULATED HOLDERS' SHARES AMOUNTS CAPITAL STOCK COMPENSATION INCOME (LOSS) DEFICIT EQUITY ------ ----------- ---------- ---------- --------------- -------------- --------------- -------- Balance, December 31, 2002 20,618 $ 206 $ 93,436 $ (4,282) $ (212) $ (3,047) $ (24,352) $61,749 Comprehensive income: Net income - - - - - - 6,511 6,511 Unrealized gain on cash flow hedges - - - - - 128 - 128 Net gains included in net income - - - - - (111) - (111) -------- Comprehensive income 6,528 Exercise of employee stock options 172 2 430 - - - - 432 Expiration of employee stock options - - (19) - - - - (19) Forfeitures of restricted stock - - - (10) 2 - - (8) Warrants exercised for common stock 248 2 (2) - - - - - In kind dividends on Series A mandatorily redeemable preferred stock - - (696) - - - - (696) Accretion on Series A mandatorily redeemable preferred stock - - (92) - - - - (92) In kind dividends on Series B mandatorily redeemable preferred stock - - (198) - - - - (198) Accretion on Series B mandatorily redeemable preferred stock - - (9) - - - - (9) Amortization of unearned stock compensation - - - - 47 - - 47 ------ ----------- ---------- ---------- --------------- -------------- --------------- -------- Balance, March 31, 2003 21,038 $ 210 $ 92,850 $ (4,292) $ (163) $ (3,030) $ (17,841) $67,734 ====== =========== ========== ========== =============== ============== =============== ======== The accompanying notes are an integral part of these consolidated financial statements.
3
BRIGHAM EXPLORATION COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED MARCH 31, ------------------ 2003 2002 -------- -------- Cash flows from operating activities: Net income (loss) $ 6,511 $ (634) Adjustments to reconcile net income to cash provided by operating activities: Depletion of oil and natural gas properties 4,102 3,137 Depreciation and amortization 97 103 Interest paid through issuance of additional senior subordinated notes 296 227 Amortization of deferred loan fees and debt issuance costs 253 286 Market value adjustment for derivative instruments (111) 251 Accretion of discount on asset retirement obligations 34 - Cumulative effect of change in accounting principle (268) - Changes in working capital and other items: Accounts receivable (3,981) 742 Other current assets 1,318 (394) Accounts payable 1,470 (453) Royalties payable 2,947 86 Participant advances received (594) 588 Other current liabilities 3,017 81 Other noncurrent assets and liabilities (29) 11 -------- -------- Net cash provided by operating activities 15,062 4,031 -------- -------- Cash flows from investing activities: Additions to oil and natural gas properties (8,921) (4,909) Proceeds from sale of oil and natural gas properties 151 - Additions to other property and equipment (98) (91) Decrease in drilling advances paid (471) - -------- -------- Net cash used by investing activities (9,339) (5,000) -------- -------- Cash flows from financing activities: Repayment of senior credit facility (4,000) - Deferred loan fees paid (988) (310) Proceeds from issuance of senior subordinated notes - 4,000 Proceeds from exercise of employee stock options 432 - Principal payments on capital lease obligations - (13) -------- -------- Net cash provided (used) by financing activities (4,556) 3,677 -------- -------- Net increase in cash and cash equivalents 1,167 2,708 Cash and cash equivalents, beginning of year 15,318 5,112 -------- -------- Cash and cash equivalents, end of period $16,485 $ 7,820 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
4 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. ORGANIZATION AND NATURE OF OPERATIONS Brigham Exploration Company ("Brigham"), a Delaware corporation formed on February 25, 1997, explores and develops onshore domestic oil and natural gas properties using 3-D seismic imaging and other advanced technologies. Brigham focuses its exploration and development of onshore oil and natural gas properties primarily in the Anadarko Basin, the Texas Gulf Coast and West Texas. 2. BASIS OF PRESENTATION The accompanying financial statements include the accounts of Brigham and its wholly-owned subsidiaries, and its proportionate share of assets, liabilities and income and expenses of the limited partnerships in which Brigham, or any of its subsidiaries, has a participating interest. All significant intercompany accounts and transactions have been eliminated. The accompanying 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 consolidated financial statements should be read in conjunction with Brigham's 2002 Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 3. COMMITMENTS AND CONTINGENCIES Brigham is, from time to time, party to certain lawsuits and claims arising in the ordinary course of business. While the outcome of lawsuits and claims cannot be predicted with certainty, management does not expect these matters to have a materially adverse effect on the financial condition, results of operations or cash flows of Brigham. On June 1, 2001, Leonel Garcia, a landowner in Brooks County, Texas, filed suit against Brigham claiming that Brigham transported natural gas under his property through an existing pipeline without his consent. Mr. Garcia claimed $1.2 million in actual damages and $3 million in exemplary damages. In May 2002, Brigham settled the case through mediation for a cash payment of $125,000. Subsequently, Brigham began using an alternate pipeline. On November 20, 2001, Brigham filed a lawsuit in the District Court of Travis County, Texas against Steve Massey Company, Inc. ("Massey") for breach of contract. The Petition claims Massey furnished defective casing to Brigham, which ultimately led to the casing failure of the Palmer "347" No. 5 well (the "Palmer #5") and the loss of the Palmer #5 as a producing well. Brigham believes the amount of damages incurred due to the loss of the Palmer #5 may exceed $5 million. Massey joined as additional defendants to the lawsuit other parties that had responsibility for the manufacture, importation or fabrication of the casing for its use in the Palmer #5. The case is currently in discovery. A trial has been set for August 2003. On February 20, 2002, Massey filed an Original Petition to Foreclose Lien in Brooks County, Texas. Massey's Petition claims Brigham breached its contract for failure to pay for the casing it furnished Brigham for the Palmer #5 (and that Brigham's claim is defective, forming the basis of the lawsuit described in the paragraph above). Massey's Petition claims Brigham owes Massey a total of $445,819. Brigham's Motion to Transfer Venue to Travis County, Texas, and Motion to Consolidate Massey's claim with Brigham's suit against Massey pending in Travis County, were recently granted. If Massey is successful in its claim, Massey would have the right to foreclose its lien against the well, associated equipment and Brigham's leasehold interest. At this point in time, Brigham cannot predict the outcome of either its Travis County case or Massey's claim. On July 11, 2002, an employee of a contractor on Brigham's Burkhart #1-R location, Matagorda County, Texas, was involved in a fatal accident. The United States Department of Labor Occupational Safety & Health Administration investigated the accident and issued three citations and imposed a total of 5 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) $168,000 in fines. Brigham is appealing the citations, but at this time, cannot predict the outcome of that appeal. On October 8, 2002, relatives of the contractor's employee filed a wrongful death action in the district court for Matagorda County, Texas, against Brigham and three of Brigham's contractors in connection with his accidental death on July 11, 2002. Plaintiffs are seeking unspecified both actual and punitive damages. Brigham cannot predict the outcome of this case, however Brigham believes it has sufficient insurance to cover the claim. 4. NET INCOME (LOSS) PER SHARE Basic earnings per share are computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. The computation of diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the earnings of Brigham. The following table reconciles the numerators and denominators of the basic and diluted earnings per common share computations for net income (loss) available to common stockholders for the three months ended March 31, 2003 and 2002:
THREE MONTHS ENDED MARCH 31, ----------------------- 2003 2002 ---------- ----------- (In thousands, except per share amounts) Basic EPS: Income (loss) available to common stockholders before cumulative change in accounting principle $ 5,248 $ (1,332) Cumulative change in accounting principle 268 - ---------- ----------- Income (loss) available to common stockholders $ 5,516 $ (1,332) ========== =========== Common shares outstanding 19,707 16,016 ========== =========== Basic EPS Income (loss) available to common stockholders before change in accounting principle $ 0.27 $ (0.08) Cumulative change in accounting principle 0.01 - ---------- ----------- $ 0.28 $ (0.08) ========== =========== Diluted EPS: Income (loss) available to common stockholders before cumulative change in accounting principle $ 5,248 $ (1,332) Cumulative change in accounting principle 268 - ---------- ----------- Income (loss) available to common stockholders 5,516 (1,332) Adjustments for assumed conversions: Dividends and accretion on mandatorily redeemable preferred stock (1) 890 - ---------- ----------- 890 - ---------- ----------- Income (loss) available to common stockholders before change in accounting principle-diluted 6,138 (1,332) Cumulative change in accounting principle 268 - ---------- ----------- Income (loss) available to common stockholders-diluted $ 6,406 $ (1,332) ========== =========== 6 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Common shares outstanding 19,707 16,016 Effect of dilutive securities: Warrants 744 - Mandatorily redeemable preferred stock 11,071 - Stock options 589 - ---------- ----------- Potentially dilutive common shares 12,404 - ---------- ----------- Adjusted common shares outstanding-diluted 32,111 16,016 ========== =========== Diluted EPS Income (loss) available to common stockholders before change in accounting principle $ 0.19 $ (0.08) Change in accounting principle 0.01 - ---------- ----------- $ 0.20 $ (0.08) ========== =========== (1) The amount of dividends included in dividends and accretion on mandatorily redeemable preferred stock includes only the dividends paid in kind on the $40 million of mandatorily redeemable preferred stock (2.0 million shares) that were issued with warrants whose exercise price is payable in either cash or in shares of mandatorily redeemable preferred stock.
At March 31, 2003 and 2002, options and warrants to purchase 13,000 and 18.9 million shares of common stock, respectively, were outstanding but were not included in the computation of diluted income (loss) per share because the effects would have been antidilutive. 5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Brigham utilizes various commodity swap and option contracts to (i) reduce the effects of volatility in price changes on the oil and natural gas commodities it produces and sells, (ii) support its capital budgeting plans, and (iii) lock-in prices to protect the economics related to certain capital projects. At March 31, 2003, the fair value of hedging contracts included in other current assets was approximately $0.3 million and the fair value of hedging contracts included in other liabilities was approximately $3.1 million of which approximately $0.1 million was classified as noncurrent. For the three months ended March 31, 2003 and 2002, Brigham recognized cash settlement gains (losses) of $(3.3) million and $0.3 million which were recorded as an increase (reduction) of oil and natural gas sales. For the three months ended March 31, 2003 and 2002, ineffectiveness associated with Brigham's derivative commodity instruments designated as cash flow hedges increased (decreased) earnings by approximately $0.1 million and $0, respectively. These amounts are included in other income and expense. Based on market prices at March 31, 2003, approximately $(2.7) million of the balance in accumulated other comprehensive income (loss) would be expected to transfer to earnings during the next 12 months. Derivative instruments not qualifying as hedging contracts are recorded at fair value on the balance sheet. At each balance sheet date, the value of derivatives not qualifying as hedging contracts is adjusted to reflect current fair value and any gains or losses are recognized as other income or expense. At March 31, 2003 and 2002, the fair value of these derivatives included in other current liabilities was $0 and $0.6 million, respectively. For the three months ended March 31, 2003, and 2002, other income (expense) included $0 and $0.3 million, respectively, in non-cash losses related to changes in the fair values of these derivative contracts. There were no cash settlement payments made by Brigham to the counterparty for the three months ended March 31, 2003 and 2002. 7 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NATURAL GAS DERIVATIVE CONTRACTS The following table sets forth Brigham's outstanding natural gas hedging contracts and the weighted average NYMEX prices for those contracts as of March 31, 2003:
FIRST SECOND THIRD FOURTH OUTSTANDING QUARTER QUARTER QUARTER QUARTER AVERAGE -------- -------- -------- -------- ------------ 2003-Swap Contracts Volume (MMbtu) 819,000 598,000 414,000 610,333 Price per MMBtu $ 3.85 $ 3.87 $ 4.04 $ 3.90 2003-Floors Volume (MMbtu) 150,000 460,000 460,000 356,667 Price per MMBtu $ 4.50 $ 4.50 $ 4.50 $ 4.50 2004-Swap Contracts Volume (MMbtu) 295,750 227,500 138,000 92,000 188,313 Price per MMBtu $ 4.96 $ 4.25 $ 4.18 $ 4.36 $ 4.53
The following table sets forth the natural gas hedging contracts Brigham entered subsequent to March 31, 2003 and the weighted average NYMEX prices for those contracts:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- 2004-Collars Volume (MMbtu) 273,000 182,000 138,000 92,000 Ceiling price per Mmbtu $ 9.90 $ 5.45 $ 5.39 $ 5.62 Floor price per MMbtu $ 4.00 $ 4.00 $ 4.00 $ 4.00
OIL DERIVATIVE CONTRACTS The following table sets forth Brigham's outstanding oil hedging contracts and the weighted average NYMEX prices for those contracts as of March 31, 2003:
FIRST SECOND THIRD FOURTH OUTSTANDING QUARTER QUARTER QUARTER QUARTER AVERAGE -------- -------- -------- -------- ----------- 2003-Swap Contracts Volume (Bbl) 61,425 55,200 41,400 52,675 Price per Bbl $ 25.22 $ 23.77 $ 23.21 $ 24.18 2003-Collars Volume (Bbl) 22,750 - - Ceiling price per Bbl $ 22.56 $ - $ - Floor price per Bbl $ 18.00 $ - $ - 2004-Swap Contracts Volume (Bbl) 29,575 20,475 13,800 9,200 18,263 Price per Bbl $ 25.35 $ 24.52 $ 23.91 $ 23.80 $ 24.65
8 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Brigham reports average oil and natural gas prices and revenues including the net results of hedging activities. The following table sets forth Brigham's oil and natural gas prices including and excluding the hedging gains and losses and the increase or decrease in oil and natural gas revenues as a result of the hedging activities for the three month periods ended March 31, 2003 and 2002:
THREE MONTHS ENDED MARCH 31, ---------------- 2003 2002 -------- ------ NATURAL GAS Average price per Mcf as reported (including hedging results) $ 5.53 $ 2.49 Average price per Mcf realized (excluding hedging results) $ 7.23 $ 2.24 Increase (decrease) in revenue (in thousands) $(2,506) $ 339 OIL Average price per Bbl as reported (including hedging results) $ 29.16 $19.93 Average price per Bbl realized (excluding hedging results) $ 32.88 $20.25 Decrease in revenue (in thousands) $ (828) $ (50)
6. ASSET RETIREMENT OBLIGATIONS On January 1, 2003, Brigham adopted the provisions of Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"). SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. Brigham has asset retirement obligations associated with the future plugging and abandonment of proved properties and related facilities. Prior to the adoption of SFAS 143, Brigham assumed salvage value approximated plugging and abandonment costs. As such, estimated salvage value was not excluded from depletion and plugging and abandonment costs were not accrued for over the life of the oil and gas properties. The adoption of SFAS 143 resulted in a January 1, 2003 cumulative effect adjustment to record (i) a $1.4 million increase in the carrying values of proved properties, (ii) a $0.8 million decrease in accumulated depletion of oil and natural gas properties and (iii) a $1.9 million increase in noncurrent abandonment liabilities. The net impact of items (i) through (iii) was to record a gain of $0.3 million as a cumulative effect adjustment of a change in accounting principle in Brigham's consolidated statements of operations upon adoption on January 1, 2003. 9 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following pro forma data summarizes Brigham's net income (loss) and net income (loss) per share as if Brigham had adopted the provisions of SFAS 143 on January 1, 2002, including an associated pro forma asset retirement obligation on that date of $1.8 million:
THREE MONTHS ENDED MARCH 31, ------------------------ 2003 2002 ----------- ----------- (In thousands, except per share amounts) Net income (loss), as reported $ 5,516 $ (1,332) Pro forma adjustments to reflect retroactive adoption of SFAS 143 (268) 184 Pro forma adjustments to reflect accretion expense - (32) =========== =========== Pro forma net income (loss) $ 5,248 $ (1,180) =========== =========== Net income (loss) per share: Basic - as reported $ 0.28 $ (0.08) =========== =========== Basic - pro forma $ 0.27 $ (0.07) =========== =========== Diluted - as reported $ 0.20 $ (0.08) =========== =========== Diluted - pro forma $ 0.19 $ (0.07) =========== ===========
Brigham has no assets that are legally restricted for purposes of settling asset retirement obligations. The following table summarizes Brigham's asset retirement obligation transactions recorded in accordance with the provisions of SFAS 143 during the three months ended March 31, 2003:
THREE MONTHS ENDED MARCH 31, 2003 -------------------- (In thousands) Beginning asset retirement obligations upon adoption at January 1, 2003 $ 1,931 Accretion expense 34 -------------------- Ending asset retirement obligations $ 1,965 ====================
10 BRIGHAM EXPLORATION COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 7. STOCK BASED COMPENSATION Brigham accounts for employee stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Accordingly, Brigham has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Had compensation cost for Brigham's stock options been determined based on the fair market value at the grant dates of the awards consistent with the methodology prescribed by SFAS 123 as amended by SFAS 148, Brigham's net income (loss) and net income (loss) per share for the three month periods ended March 31, 2003 and 2002 would have been the pro forma amounts indicated below:
THREE MONTHS ENDED MARCH 31, ------------------------ 2003 2002 ----------- ----------- (In thousands, except per share amounts) Net income (loss) available to common stockholders - basic: As reported $ 5,516 $ (1,332) Add back: Stock compensation expense previously included in net income 11 3 Effect of total employee stock-based compensation expense, determined under fair value method for all awards (101) (71) ----------- ----------- Pro forma $ 5,426 $ (1,400) =========== =========== Net income (loss) available to common stockholders - diluted: As reported $ 6,406 $ (1,332) Add back: Stock compensation expense previously included in net income 11 3 Effect of total employee stock-based compensation expense, determined under fair value method for all awards (101) (71) ----------- ----------- Pro forma $ 6,316 $ (1,400) =========== =========== Net income per share: Basic: As reported $ 0.28 $ (0.08) Pro forma 0.28 (0.09) Diluted: As reported $ 0.20 $ (0.08) Pro forma 0.20 (0.09)
11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following updates information as to the Company's financial condition provided in our 2002 Annual Report on Form 10-K, and analyzes the changes in the results of operations between the three month period ended March 31, 2003, and the comparable period of 2002. For definitions of commonly used gas and oil terms as used in this Form 10-Q, please refer to the "Glossary of Oil and Gas Terms" provided in our 2002 Annual Report on Form 10-K. Overview Our operating performance for the first quarter of 2003 was highlighted by our sixth consecutive quarterly increase in production volumes. Average daily production for the first quarter 2003 was a record high 31.2 MMcfed. In addition to the increase in production volumes, we also benefited from a favorable commodity price environment as higher demand associated with colder than normal winter temperatures, combined with historical low inventory levels, resulted in unusually high commodity prices during the first quarter of 2003. This increase in production volumes combined with the unusually high commodity prices during the first quarter 2003 had a favorable impact on our first quarter 2003 financial results. For the first quarter 2003, we reported net income to common stockholders of $5.5 million, or $0.20 per diluted share, on total revenues of $14.7 million. Net income for the first quarter 2003 included a $268,000 ($0.01 per diluted share) benefit from the cumulative effect of change in accounting principle associated with the adoption of Statement of Accounting Principles No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143") on January 1, 2003. See Note 6 to Consolidated Financial Statements included in Item 1 of this quarterly report. This compares to a reported net loss of $1.3 million, or $0.08 per diluted share on revenue of $6.4 million for the first quarter last year. FINANCIAL CONDITION AND LIQUIDITY Cash provided by operations was our primary source of cash during the first quarter 2003. Cash provided by operating activities was used to fund the costs associated with drilling, land acquisition and 3-D seismic acquisition, processing and interpretation, and to reduce the level of borrowings under our new senior credit facility. Cash provided by operations, along with the availability under our new senior credit facility, are projected to be sufficient to fund our budgeted capital expenditures for the remainder of 2003. Cash flow provided by operating activities Cash flow from operations before changes in working capital for the first quarter 2003 was $10.9 million compared to $3.4 million in the first quarter last year. This increase is primarily the result of higher commodity prices and increased production volumes. Working capital We had negative working capital of $2.7 million at March 31, 2003, compared to negative working capital of $688,000 at December 31, 2002. Current assets increased by 12% in the first quarter of 2003 and current liabilities increased 18%. The net increase in current assets during the first quarter was primarily due to a $4.0 million increase in accounts receivable caused by higher natural gas prices in March 2003, to a $840,000 increase in other current assets caused by a $310,000 increase in assets recorded under the provisions of SFAS No. 133 and a $530,000 increase in gas imbalance receivables related to four wells in the Triple Crown and Floyd Fault Block Fields. The increase in current assets was partially offset by a $1.9 million decrease in deposits related to our derivative contracts at December 31, 2002. The primary reasons for the increase in current liabilities were a $2.9 million increase in our liabilities related to royalties payable, a $1.5 million increase in our accounts payable liability and a $3.4 million increase in our gas imbalance payable related to production from ten wells in the Home Run Field. These increases were partially offset by a $740,000 decrease in accrued drilling costs and a $600,000 decrease in advances received from other parties for oil and gas activities. Changes in accounts payable, accrued drilling costs, advances paid and other current assets and liabilities since December 31, 2002 are due primarily to the timing of expenditures and receipts. 12 Proceeds from the exercise of employee stock options Proceeds from the exercise of employee stock options in the first quarter of 2003 totaled $432,000. Senior credit facility In March 2003, we replaced our senior credit facility with a new senior credit facility that provides for a maximum $80 million in commitments and an initial borrowing base of $70 million and matures in March 2006. Borrowings under the new credit facility are secured by substantially all of our oil and natural gas properties and other tangible assets and bear interest at either the base rate of Societe Generale or London Interbank Offered Rate (LIBOR), at our option, plus a margin that varies according to facility usage. Interest is paid quarterly. The collateral value and borrowing base are redetermined semi-annually. The unused portion of the committed borrowing base is subject to an annual commitment fee of 0.5%. During the first quarter 2003, we repaid $4.0 million of borrowings outstanding under our new senior credit facility. As of March 31, 2003, we had $56 million of borrowings outstanding and $14 million in additional borrowing capacity under our new senior credit facility. The interest rate on our new senior credit facility as of March 31, 2003 was 3.55688%. We were in compliance with all covenants at March 31, 2003. Capital Expenditures Our capital-spending budget for 2003 is $39.3 million. The majority of our planned 2003 expenditures will be directed towards drilling our prospect inventory in a continued effort to focus resources on our primary objective of growing production volumes and cash flow. For 2003, we expect to spend approximately $27.9 million to drill 41 wells with an average working interest of 36%. Capitalizing on the prior exploration successes at the Home Run, Mills Ranch, Triple Crown, Floyd Fault Block and Providence Fields, approximately 60% of our 2003 drilling expenditures are dedicated to development drilling. Capital spending for the first quarter 2003 and first quarter 2002 was as follows:
THREE MONTHS ENDED MARCH 31, ---------------------------------- 2003 2002 ---------------- ---------------- (IN THOUSANDS) Drilling $ 5,201 $ 5,166 Land and G&G 1,252 344 Capitalized G&A and interest 1,739 1,319 Proceeds from participants and sales (151) (200) ---------------- ---------------- Net capital expenditures on oil & gas activities $ 8,041 $ 6,629 ---------------- ---------------- Other property and equipment 98 91 ---------------- ---------------- Total net capital expenditures $ 8,139 $ 6,720 ================ ================
Actual capital spending may vary and is subject to changing market condition. The 2003 capital expenditure budget was developed using certain assumed price levels for the sales of crude oil and natural gas and forecasted production growth. Changes in commodity prices or variances from forecasted production growth could impact our cash flows from operations and funds available for reinvestment. For example, shortfalls in budgeted cash flows from operations could result in the reduction of the our capital spending program, increases in borrowing under our new senior credit facility, issuance of additional equity or debt securities or divestments of properties. We evaluate our level of capital spending throughout the year based upon drilling results, commodity prices and cash flows from operations. 13
THREE MONTHS ENDED MARCH 31, ---------------------------------- 2003 2002 ---------------- ---------------- Production (in thousands): Natural gas (MMcf) 1,472 1,344 Oil (MBbls) 233 155 Natural gas equivalent (MMcfe) 2,808 2,273 % Natural gas 52% 59% Average sales prices per unit (after hedging) Natural gas (per Mcf) $ 5.53 $ 2.49 Oil (per Bbl) 29.16 19.93 Natural gas equivalent (per Mcfe) 5.21 2.83 Costs and expenses per Mcfe: Lease operating $ 0.35 $ 0.38 Production taxes 0.33 0.16 General and administrative 0.41 0.42 Depletion of oil and natural gas properties 1.46 1.38
Comparison of the three-month periods ended March 31, 2003 and 2002 Production. Our net equivalent production volumes for the first quarter 2003 were 2.8 Bcfe (31.2 MMcfed) compared to 2.3 Bcfe (25.3 MMcfed) for the same period of 2002. The 24% increase in our production volume was due to organic production growth from wells that were drilled and completed in the fourth quarter of 2002 and the first quarter of 2003. New production related to these recently completed wells was partially offset by the natural decline of existing production. Natural gas represented 52% of our total production in the first quarter of 2003 compared to 59% last year. Revenue from the sale of oil and natural gas. Higher commodity prices and increased production volumes during the first quarter 2003 resulted in a 128% increase in revenue from the sale of oil and natural gas over revenue for the same quarter last year. Revenue from the sale of oil and natural gas for the first quarter 2003 was $14.6 million compared to $6.4 million last year. Approximately 80% of the increase in revenue was the result of an 84% increase in our average realized sales price and the remaining 20% was the result of increased production volumes. Revenue from the sale of oil and natural gas for the first quarter 2003 included a loss of $3.3 million related to the cash settlement on hedging transactions compared to a gain of $289,000 during the first quarter last year. Lease operating expenses. An increase in ad valorem taxes resulted in an overall increase in our lease operating expenses for the first quarter 2003.
THREE MONTHS ENDED MARCH 31, -------------------------------- 2003 2002 --------------- --------------- (IN THOUSANDS) Lease operating expense $ 809 $ 802 Ad valorem taxes 165 69 --------------- --------------- Total lease operating expenses $ 974 $ 871 =============== ===============
Production taxes. A 137% increase in our average pre-hedge sales price combined with increased production volumes resulted in a 166% increase in production taxes for the first quarter of 2003. Production taxes for the first quarter 2003 were $938,000 compared to $353,000 in the first quarter last year. Production taxes for the first quarter 2003 were 5.2% of revenue before gains and losses from hedging, compared to 5.7% in the first quarter of 2002. 14 General and administrative expenses. Increases in employee payroll and benefit expense, outside consultant fees, fees paid to our auditors, other office expenses, corporate insurance and fees paid to our board of directors resulted in an 18% increase in general and administrative expenses for the first quarter 2003. General and administrative expenses for the first quarter 2003 were $1.1 million compared to $964,000 in the first quarter last year. An increase in production volumes resulted in a decrease in our general and administrative expense per unit of production. For the first quarter of 2003, general and administrative expenses per unit of production were $0.41 per Mcfe compared to $0.42 per Mcfe last year. Depletion of oil and natural gas properties. Increased production volumes combined with an increase in our per unit depletion rate resulted in a 31% increase in our depletion expense. Higher production volumes accounted for approximately 77% of the increase in depletion expense while the increase in our per unit depletion rate accounted for 23% of the increase. The increase in our per unit depletion rate is primarily due to additional future development cost related to our Floyd Fault Block discovery at year end 2002. Interest expense. A lower average outstanding debt balance for the first quarter of 2003 relative to the first quarter of 2002 resulted in a decrease in our interest expense.
THREE MONTHS ENDED MARCH 31, ---------------------------------- 2003 2002 ---------------- ---------------- (IN THOUSANDS) Interest on senior credit facility $ 636 $ 911 Interest on senior subordinated facility (1) 583 510 Commitment fees 4 3 Amortization of deferred loan and debt issuance cost 253 286 Other general interest expense 15 11 Capitalized interest expense (209) (300) ---------------- ---------------- Net interest expense $ 1,282 $ 1,421 ================ ================ Weighted average debt outstanding $ 81,502 $ 94,228 Average interest rate on outstanding indebtedness (2) 6.1% 6.1% (1) Fifty percent of interest expense on senior subordinated notes facility will be or was paid in kind. (2) Calculated using the sum of the interest expense on our senior credit facility, senior subordinated notes facility and commitment fees for the period divided by the average debt outstanding for the quarter.
Other income (expense). Other income (expense) includes non-cash gains (losses) resulting from the change in fair market value of oil and gas derivative hedge contracts, cash gains (losses) on the settlement of these contracts and non-cash gains (losses) related to charges for ineffective hedges. Other income (expense) included:
THREE MONTHS ENDED MARCH 31, --------------------------------- 2003 2002 --------------- ---------------- (IN THOUSANDS) Non-cash gain (loss) on change in fair market value of non-hedge derivative contracts $ - $ (251) Non-cash charge for ineffective hedges 111 - Cash gain (loss) on settlement of non-hedge derivative contracts - 3 --------------- ---------------- $ 111 $ 248 =============== ================
15 Dividends and accretion of redeemable preferred stock: We are required to pay dividends on our Series A and Series B preferred stock. At our option, these dividends may be paid in cash at a rate of 6% per annum or paid in kind through the issuance of additional shares of preferred stock in lieu of cash at a rate of 8% per annum. We elected to pay dividends in kind during the first quarter of 2003 and the first quarter of 2002.
THREE MONTHS ENDED MARCH 31, -------------------------------- 2003 2002 --------------- --------------- (IN THOUSANDS) Dividends $ 894 $ 643 Accretion of redeemable preferred stock 101 55 --------------- --------------- $ 995 $ 698 =============== =============== Additional preferred shares issued Series A 34,823 32,171 Series B 9,890 -
OTHER MATTERS Derivative Contracts We regularly enter into commodity derivative contracts to reduce the impact on operations of fluctuations in oil and gas prices. All such contracts are entered into solely to hedge prices and limit volatility. The contracts, which are generally placed with major financial institutions or with counterparties which management believes to be of high credit quality, may take the form of swaps, collars or floors. The table below summarizes our total natural gas production volumes subject to derivative transactions during the first quarter 2003 and 2002 and the weighted average NYMEX reference price for those volumes.
THREE MONTHS ENDED MARCH 31, -------------------------------- 2003 2002 --------------- --------------- NATURAL GAS SWAPS: Volumes (MMbtu) 832,500 675,000 Average price ($/MMbtu) $ 3.632 $ 2.900 NATURAL GAS CAPS: Volumes (MMbtu) - 900,000 Average price ($/MMbtu) $ - $ 2.700
The table below summarizes our total crude oil production volumes subject to derivative transactions during the first quarter 2003 and 2002 and the weighted average NYMEX reference price for those volumes.
THREE MONTHS ENDED MARCH 31, -------------------------------- 2003 2002 --------------- --------------- CRUDE OIL SWAPS: Volumes (Bbls) 67,500 - Average price ($/Bbls) $ 25.29 $ - CRUDE OIL COLLARS: Volumes (MMbtu) 22,500 44,250 Floor $ 18.00 $ 18.00 Ceiling $ 22.56 $ 22.29
16 Effects of Inflation and Changes in Prices Our results of operations and cash flows are affected by changing oil and gas prices. If the price of oil and natural gas increases (decreases), there could be a corresponding increase (decrease) in revenues as well as the operating costs that we are required to bear for operations. Inflation has had a minimal effect on us. Environmental and Other Regulatory Matters Our business is subject to certain federal, state and local laws and regulations relating to the exploration for and the development, production and marketing of oil and natural gas, 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 we believe we are in substantial compliance with all applicable laws and regulations, the requirements imposed by laws and regulations are frequently changed and subject to interpretation, and we cannot predict the ultimate cost of compliance with these requirements or their effect on our operations. Any suspensions, terminations or inability to meet applicable bonding requirements could materially adversely affect our financial condition and operations. Although significant expenditures may be required to comply with governmental laws and regulations applicable to us, compliance has not had a material adverse effect on our earnings or competitive position. Future regulations may add to the cost of, or significantly limit, drilling activity. New Accounting Pronouncements In June 2001, the Financial Accounting Standards Board issued Statement of Financial Standards No. 143, "Asset Retirement Obligations" which establishes accounting requirements for retirement obligations associated with tangible long-lived assets including the timing of the liability recognition, initial measurement of the liability, allocation of asset retirement cost to expense, subsequent measurement of the liability and financial statement disclosures. SFAS 143 requires that an asset retirement cost be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic, rational method. The adoption of SFAS 143 resulted in a January 1, 2003 cumulative effect adjustment to record (i) a $1.4 million increase in the carrying values of proved properties, (ii) a $0.8 million decrease in accumulated depletion of oil and natural gas properties and (iii) a $1.9 million increase in noncurrent abandonment liabilities. The net impact of items (i) through (iii) was to record a gain of $0.3 million as a cumulative effect adjustment of a change in accounting principle in our consolidated statements of operations upon adoption on January 1, 2003. Forward Looking Information We or our 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 we anticipate drilling during 2003 and our financial position, business strategy and other plans and objectives for future operations. Although we believe that the expectations reflected in these forward looking statements are reasonable, there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected effects on our business or operations. Among the factors that could cause actual results to differ materially from our 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 us or our project participants, government regulations and other factors set forth among the risk factors noted in this report, in the description of our business in Item 1 of our Form 10-K report for the year ended December 31, 2002 (see page 1 of our 2002 Form 10-K) or in our Management's Discussion Analysis of Financial Condition in Item 7 of our Form 10-K report for the year ended December 31, 2002 (see page 23 of our 2002 Form 10-K). All subsequent oral and written forward looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. We assume no obligation to update any of these statements. 17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The following quantitative and qualitative disclosures about market risk are supplementary to the quantitative and qualitative disclosures provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002. As such, the information contained herein should be read in conjunction with the related disclosures in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002. DERIVATIVE CONTRACTS The table below summarizes the derivative contracts which we were a party to at March 31, 2003, the total natural gas and crude oil production volumes subject to those contacts, the weighted average NYMEX reference price for those volumes and the unrealized gain (loss) for those contracts.
2003 2004 ------------------------------- ----------------------------------------- SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER --------- --------- --------- --------- --------- --------- -------- NATURAL GAS SWAPS: Volumes (MMbtu) 819,000 598,000 414,000 295,750 227,500 138,000 92,000 Average price ($/MMBtu) $ 3.846 $ 3.867 $ 4.039 $ 4.963 $ 4.252 $ 4.180 $ 4.360 Unrealized gain (loss) (in thousands) $ (1,016) $ (744) $ (474) $ (74) $ (47) $ (25) $ (17) NATURAL GAS FLOORS: Volumes (MMbtu) 150,000 460,000 460,000 - - - - Average price ($/MMBtu) $ 4.500 $ 4.500 $ 4.500 $ - $ - $ - $ - Unrealized gain (loss) (in thousands) $ 35 $ 108 $ 108 $ - $ - $ - $ - CRUDE OIL SWAPS: Volumes (Bbls) 61,425 55,200 41,400 29,575 20,475 13,800 9,200 Average price ($/Bbl) $ 25.22 $ 23.77 $ 23.21 $ 25.35 $ 24.52 $ 23.91 $ 23.80 Unrealized gain (loss) (in thousands) $ (229) $ (175) $ (118) $ 2 $ (3) $ (5) $ (2) CRUDE OIL COLLARS: Volumes (Bbls) 22,750 - - - - - - Floor price ($/Bbl) $ 18.00 $ - $ - $ - $ - $ - $ - Ceiling price ($/Bbl) $ 22.56 $ - $ - $ - $ - $ - $ - Unrealized gain (loss) (in thousands) $ (150) $ - $ - $ - $ - $ - $ -
See Note 5 of the Notes to the Consolidated Financial Statements for derivative contracts we entered subsequent to March 31, 2003. 18 ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. Within 90 days prior to the filing date of this report, our principal executive officer (CEO) and principal financial officer (CFO) carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based on this evaluation, the CEO and CFO believe that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure; and that Brigham's disclosure controls and procedures are effective. (b) Changes in internal controls. There have been no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the evaluation referred to in Item 4. (a), above, nor have there been any corrective actions with regard to significant deficiencies or material weaknesses. 19 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As discussed in Note 3 of Notes to the Consolidated Financial Statements included in Part I. Financial Information, Brigham is party to various legal actions arising in the ordinary course of business and does not expect these matters to have a material adverse effect on its financial condition, results of operations or cash flow. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 99.1 Certification accompanying Quarterly Report pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 executed by Ben M. Brigham, Chief Executive Officer and Chairman of the Board of the Company 99.1 Certification accompanying Quarterly Report pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 executed by Eugene B. Shepard, Jr., Senior Vice President and Chief Financial Officer of the Company (b) Reports on Form 8-K: We submitted a report on Form 8-K on March 6, 2003, to announce we had issued a press release announcing financial results for the fourth quarter and year ended December 31, 2002. The Form 8-K included a copy of the press release that provided this announcement. 20 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 14, 2003. BRIGHAM EXPLORATION COMPANY By: /s/ BEN M. BRIGHAM ---------------------------------- Ben M. Brigham Chief Executive Officer, President and Chairman of the Board By: /s/ EUGENE B SHEPHERD, JR. ---------------------------------- Eugene B. Shepherd, Jr. Chief Financial Officer 21 CERTIFICATIONS I, Bud M. Brigham, Chief Executive Officer of Brigham Exploration Company (the "Registrant"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of Brigham Exploration Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15-d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions and about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 /s/ Bud M. Brigham - ------------------------------------------------------------ Bud M. Brigham Chief Executive Officer, President and Chairman of the Board 22 CERTIFICATIONS I, Eugene B. Shepherd, Jr., Chief Financial Officer of Brigham Exploration Company (the "Registrant"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of Brigham Exploration Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15-d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions and about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 /s/ Eugene B. Shepherd, Jr. - ------------------------------------------------------------ Eugene B. Shepherd, Jr. Chief Financial Officer 23 EX-99.1 3 doc2.txt 010283.001479 Dallas 1468418.1 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Brigham Exploration Company (the "Company") on Form 10-Q for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ben M. Brigham, President, Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 14, 2003 ________________________________ Ben M. Brigham, President, Chief Executive Officer and Chairman of the Board EX-99.2 4 doc3.txt EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Brigham Exploration Company (the "Company") on Form 10-Q for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Eugene B. Shepherd, Jr., Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 14, 2003 ________________________________ Eugene B. Shepherd, Jr. Senior Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----