10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2007

or

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

For the transition period from                      to                     

Commission File Number: 0-20100

BELDEN & BLAKE CORPORATION

(Exact name of registrant as specified in its charter)

Ohio	34-1686642
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
First City Tower
1001 Fannin Street, Suite 800
Houston, Texas	77002
(Address of principal executive offices)	(Zip Code)

(713) 659-3500

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

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

Large Accelerated filer o     Accelerated Filer o     Non-accelerated Filer þ

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of April 30, 2007, Belden & Blake Corporation had outstanding 1,534 shares of common stock, without par value, which is its only class of stock.

BELDEN & BLAKE CORPORATION

INDEX

		Page
PART I Financial Information
Item 1.	Financial Statements (unaudited)
Balance Sheets as of March 31, 2007 and December 31, 2006			1
Statements of Operations: Three months ended March 31, 2007 and 2006			2
Statements of Cash Flows: Three months ended March 31, 2007 and 2006			3
Notes to Financial Statements			4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		12
Item 4.	Controls and Procedures		15
PART II Other Information
Item 1.	Legal Proceedings		15
Item 1A.	Risk Factors		15
Item 3.	Defaults upon Senior Securities		15
Item 4.	Submission of Matters to a Vote of Security Holders		15
Item 6.	Exhibits		16
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BELDEN & BLAKE CORPORATION

BALANCE SHEETS

(unaudited, in thousands, except share data)

	March 31,			December 31,
	2007			2006
ASSETS
Current assets
Cash and cash equivalents	$	5,987		$	5,927
Accounts receivable, net		18,239			19,855
Inventories		1,110			885
Deferred income taxes		18,185			12,607
Other current assets		611			510
Fair value of derivatives		348			378
Total current assets		44,480			40,162
Property and equipment, at cost
Oil and gas properties (successful efforts method)		698,526			692,576
Gas gathering systems		1,305			1,305
Land, buildings, machinery and equipment		2,778			3,031
		702,609			696,912
Less accumulated depreciation, depletion and amortization		61,187			52,564
Property and equipment, net		641,422			644,348
Goodwill		90,076			90,076
Fair value of derivatives		72			193
Other assets		2,194			2,244
	$	778,244		$	777,023
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities
Accounts payable	$	2,494		$	2,259
Accrued expenses		17,157			21,554
Current portion of long-term liabilities		294			408
Fair value of derivatives		46,328			27,576
Total current liabilities		66,273			51,797
Long-term liabilities
Bank and other long-term debt		99,952			95,454
Senior secured notes		164,896			165,106
Subordinated promissory note — related party		25,000			25,000
Asset retirement obligations and other long-term liabilities		20,693			20,627
Fair value of derivatives		178,611			160,011
Deferred income taxes		106,467			115,325
Total long-term liabilities		595,619			581,523
Shareholder’s equity
Common stock: without par value; 3,000 shares authorized and 1,534 shares issued		—			—
Paid in capital		125,000			125,000
Retained earnings		12,713			41,262
Accumulated other comprehensive loss		(21,361	)		(22,559	)
Total shareholder’s equity		116,352			143,703
	$	778,244		$	777,023

See accompanying notes.

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BELDEN & BLAKE CORPORATION

STATEMENTS OF OPERATIONS

(unaudited, in thousands)

	Three months			Three months
	ended March 31,			ended March 31,
	2007			2006
Revenues
Oil and gas sales	$	26,802		$	40,938
Gas gathering and marketing		2,620			3,750
Other		168			105
		29,590			44,793
Expenses
Production expense		5,803			5,791
Production taxes		551			709
Gas gathering and marketing		2,204			3,283
Exploration expense		725			174
General and administrative expense		1,927			3,238
Depreciation, depletion and amortization		8,559			9,312
Accretion expense		311			292
Derivative fair value (gain) loss		42,156			7,290
		62,236			30,089
Operating (loss) income		(32,646	)		14,704
Other expense
Interest expense		5,897			5,773
(Loss) Income before income taxes		(38,543	)		8,931
(Benefit) Provision for income taxes		(15,244	)		3,543
Net (loss) income	$	(23,299	)	$	5,388

See accompanying notes.

2

BELDEN & BLAKE CORPORATION

STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Three months			Three months
	ended March 31,			ended March 31,
	2007			2006
Cash flows from operating activities:
Net (loss) income	$	(23,299	)	$	5,388
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion and amortization		8,559			9,417
Accretion expense		311			292
Amortization of derivatives and other noncash hedging activities		44,434			3,106
Exploration expense		161			174
Deferred income taxes		(15,244	)		3,543
Other non-cash expense		354			—
Change in operating assets and liabilities, net of effects of acquisition and disposition of businesses:
Accounts receivable and other operating assets		1,515			3,023
Inventories		(155	)		238
Accounts payable and accrued expenses		(4,448	)		1,570
Net cash provided by operating activities		12,188			26,751
Cash flows from investing activities:
Proceeds from property and equipment disposals		—			3,320
Exploration expense		(161	)		(174	)
Additions to property and equipment		(6,234	)		(8,141	)
Increase in other assets		(57	)		(18	)
Net cash used in investing activities		(6,452	)		(5,013	)
Cash flows from financing activities:
Repayment of senior secured facility — term loan		—			—
Proceeds from revolving line of credit		4,500			13,000
Repayment of revolving line of credit		—			(12,000	)
Repayment of long-term debt and other obligations		(2	)		(4	)
Settlement of derivative liabilities recorded in purchase accounting		(4,924	)		(9,947	)
Dividends		(5,250	)		(6,500	)
Net cash used in financing activities		(5,676	)		(15,451	)
Net increase in cash and cash equivalents		60			6,287
Cash and cash equivalents at beginning of period		5,927			8,172
Cash and cash equivalents at end of period	$	5,987		$	14,459

See accompanying notes.

3

BELDEN & BLAKE CORPORATION

NOTES TO FINANCIAL STATEMENTS
(unaudited)

March 31, 2007

(1) Basis of Presentation

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

     The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the period ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ended December 31, 2007. For further information, refer to the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2006. Certain reclassifications have been made to conform to the current presentation.

(2) Derivatives and Hedging

     From time to time, we may enter into a combination of futures contracts, commodity derivatives and fixed-price physical commodity contracts to manage our exposure to natural gas, crude oil or interest rate price volatility and support our capital expenditure plans. Our derivative financial instruments take the form of swaps or collars. At March 31, 2007, our derivative contracts were comprised of natural gas swaps, crude oil swaps and interest rate swaps, which were placed with major financial institutions that we believe are a minimal credit risk. Qualifying interest rate derivative financial instruments are designated as cash flow hedges. Since July 1, 2006, our oil and gas derivative financial instruments are no longer designated as cash flow hedges. Changes in fair value of the derivative instruments that are cash flow hedges are recognized in other comprehensive income (loss) until such time the hedged items impact earnings. The changes in fair value of non-qualifying derivative contracts will be reported in expense in the consolidated statements of operations as derivative fair value loss.

     During the first quarters of 2007 and 2006, net losses of $2.2 million ($1.3 million after tax) and $9.9 million ($6.0 million after tax), respectively, were reclassified from accumulated other comprehensive income to earnings. The fair value of open hedges in accumulated other comprehensive income decreased $2.2 million ($1.3 million after tax) in the first quarter of 2007 and decreased $30.5 million ($18.5 million after tax) in the first quarter of 2006. At March 31, 2007, the estimated net loss in accumulated other comprehensive income that is expected to be reclassified into earnings within the next 12 months is approximately $5.4 million. At March 31, 2007, we have partially hedged our exposure to the variability in future cash flows through December 2013.

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     The following table reflects the natural gas and crude oil volumes and the weighted average prices under derivative contracts (including settled derivative contracts) at March 31, 2007:

	Natural Gas Swaps				Crude Oil Swaps
			NYMEX
			Price per				NYMEX
	Bbtu		Mmbtu		Mbbls		Price per Bbl
Quarter Ending
June 30, 2007		2,687		4.75		57		31.07
September 30, 2007		2,686		4.71		57		30.73
December 31, 2007		2,686		4.91		56		30.44
		8,059	$	4.79		170	$	30.75
Year Ending
December 31, 2008		10,126		4.64		208		29.96
December 31, 2009		9,529		4.43		191		29.34
December 31, 2010		8,938		4.28		175		28.86
December 31, 2011		8,231		4.19		157		28.77
December 31, 2012		7,005		4.09		138		28.70
December 31, 2013		6,528		4.04		127		28.70

Bbl — Barrel	Mmbtu — Million British thermal units
Mbbls — Thousand barrels	Bbtu — Billion British thermal units

     At March 31, 2007, we had interest rate swaps in place for $80 million of our outstanding debt under our revolving credit facility through September 16, 2008. The swaps provide 1-month LIBOR fixed rates at 4.285% on $40 million and 5.160% on $40 million, plus the applicable margin. The fair value of these interest rate swaps was an asset of $285,000 at March 31, 2007.

(3) Industry Segment Financial Information

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

(4) Supplemental Disclosure of Cash Flow Information

	Three months			Three months
	ended March 31,			ended March 31,
(in thousands)	2007			2006
Cash paid during the period for:
Interest	$	9,628		$	9,822
Income taxes		—			—
Non-cash investing and financing activities:
Non-cash additions to property and equipment		(286	)		954

(5) Contingencies

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

(6) Comprehensive Income

     Comprehensive income includes net income and certain items recorded directly to shareholder’s equity and classified as other comprehensive income. The table below summarizes comprehensive

5

income and provides the components of the change in accumulated other comprehensive income for the three-month periods ended March 31, 2007 and 2006.

	Three months			Three months
	ended March			ended March
	31, 2007			31, 2006
Comprehensive income (loss):
Net (loss) income	$	(23,299	)	$	5,388
Other comprehensive income (loss), net of tax:
Unrealized gain in derivative fair value		117			18,460
Reclassification adjustment for derivative (loss) gain reclassified into earnings		(1,315	)		5,997
Change in accumulated other comprehensive (loss) income		(1,198	)		24,457
Comprehensive (loss) income	$	(24,497	)	$	29,845

(7) Related Party Transactions

     We have a joint operating agreement with EnerVest Operating LLC (“EnerVest Operating”). We recorded expenses of approximately $1.4 million for operating overhead fees, $1.9 million for field labor, vehicles and district office expense, $107,000 for drilling overhead fees and $356,000 for drilling labor costs in the first quarter of 2007 related to this agreement. We have a subordinated promissory note in favor of our parent, Capital C in the maximum amount of $94 million. The amount due under the note at March 31, 2007 was $25 million. In lieu of cash payments, we have the option to make interest payments on the note by borrowing additional amounts against the note. We made cash interest payments of $616,000 in the first quarters of 2006 and 2007 to Capital C.

(8) New Accounting Standards

     In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109” (“FIN 48”), which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return, including issues relating to financial statement recognition and measurement. FIN 48 provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained if the position were to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50 percent likely to be recognized upon ultimate settlement with the taxing authority, is recorded. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. Consistent with the requirements of FIN 48, we adopted FIN 48 on January 1, 2007. The adoption of FIN 48 did not have a material impact on our consolidated financial statements.

     FIN 48 requires us to evaluate whether any material tax position it has taken will more likely than not be sustained upon examination by the appropriate taxing authority. As we believe that all such material tax positions taken by us are supportable by existing laws and related interpretations, there are no material uncertain tax positions to consider in accordance with FIN 48.

     Since we have no unrecognized tax benefits as of March 31, 2007, there is no potential impact on our effective tax rate.

     To the extent penalties and interest would be assessed on any underpayment of income tax, such amounts have been accrued and classified as a component of income tax expense in the financial statements. This is an accounting policy election made by us that is a continuation of our historical policy and will continue to be consistently applied in the future. As of March 31, 2007, we have not accrued any interest and penalties related to unrecognized tax benefits.

     We do not anticipate a significant change in the balance of unrecognized tax benefits within the next 12 months.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, to provide guidance for using fair value to measure assets and liabilities. SFAS No. 157 establishes a fair value hierarchy and clarifies the principle that fair value should be based on assumptions market participants would use when pricing the asset or liability. SFAS No. 157 also requires expanded disclosure of the effect on earnings for items measured using unobservable data. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We will adopt SFAS No. 157 on January 1, 2008 and do not expect the adoption to have a material impact on our consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been selected are reported in earnings. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different

6

measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS No. 159 on January 1, 2008, and we have not yet determined the impact, if any, on our consolidated financial statements.

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

Forward-Looking Information

     The information in this document includes forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Statements preceded by, followed by or that otherwise include the statements “should,” “believe,” “expect,” “anticipate,” “intend,” “will,” “continue,” “estimate,” “plan,” “outlook,” “may,” “future,” “projection,” “likely,” “possible,” “would,” “could” and variations of these statements and similar expressions are forward-looking statements as are any other statements relating to developments, events, occurrences, results, efforts or impacts. These forward-looking statements are based on current expectations and projections about future events. Forward-looking statements and the business prospects of Belden & Blake are subject to a number of risks and uncertainties which may cause our actual results in future periods to differ materially from the forward-looking statements contained herein. These risks and uncertainties include, but are not limited to, our access to capital, the market demand for and prices of oil and natural gas, our oil and gas production and costs of operation, results of our future drilling activities, the uncertainties of reserve estimates, general economic conditions, new legislation or regulatory changes, changes in accounting principles, policies or guidelines and environmental risks. These and other risks are described in our Annual Report on Form 10-K for the year ended December 31, 2006, under the Heading “Risk Factors” and in our other filings with the Securities and Exchange Commission (“SEC”). We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions, or otherwise.

Results of Operations

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

7

	Three months ended March 31,
	2007		2006
Production
Gas (Mmcf)		3,295		3,537
Oil (Mbbls)		91		98
Total production (Mmcfe)		3,843		4,126
Average price (1)
Gas (per Mcf)	$	6.61	$	9.92
Oil (per Bbl)		55.16		59.48
Mcfe		6.97		9.92
Average costs (per Mcfe)
Production expense	$	1.51	$	1.40
Production taxes		0.14		0.17
Depletion		2.21		2.22
Operating margin (per Mcfe)		5.32		8.35

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

	Three months ended March 31,
	2007		2006
Gas (per Mcf)	$	7.27	$	6.47
Oil (per Bbl)		55.16		59.48
Mcfe		7.55		6.96

Mmcf — Million cubic feet	Mbbls — Thousand barrels	Mmcfe — Million cubic feet of natural gas equivalent
Mcf — Thousand cubic feet	Bbl — Barrel	Mcfe — Thousand cubic feet of natural gas equivalent
Operating margin (per Mcfe) — average price less production expense and production taxes

First Quarters of 2007 and 2006 Compared

Revenues

     Net operating revenues decreased from $44.7 million in the first quarter of 2006 to $29.4 million in the first quarter of 2007. The decrease was due to lower oil and gas sales revenues of $14.1 million and lower gas gathering and marketing revenues of $1.1 million.

     Gas volumes sold decreased approximately 242,000 Mcf (7%) from 3.5 Bcf (billion cubic feet) in the first quarter of 2006 to 3.3 Bcf in the first quarter of 2007 resulting in a decrease in gas sales revenues of approximately $2.4 million. Oil volumes sold decreased approximately 7,000 Bbls (7%) from 98,000 Bbls in the first quarter of 2006 to 91,000 Bbls in the first quarter of 2007 resulting in a decrease in oil sales revenues of approximately $400,000. The lower oil volumes were primarily due to normal production declines which were partially offset by production from new wells drilled in 2007. The lower gas volumes were primarily due to the sale of a group of Oriskany wells on March 31, 2006 and normal production declines partially offset by production from new wells drilled in 2006.

     The average price realized for our natural gas decreased $3.31 per Mcf from $9.92 in the first quarter of 2006 to $6.61 per Mcf in the first quarter of 2007, which decreased gas sales revenues by approximately $10.9 million. As a result of our qualified hedging and derivative financial instrument activities, gas sales revenues were lower by $2.2 million ($0.67 per Mcf) in the first quarter of 2007 and higher by $4.2 million ($1.18 per Mcf) in the first quarter of 2006 than if our gas price was not effected by derivative financial instruments. The average price realized for our oil decreased from $59.48 per Bbl

8

in the first quarter of 2006 to $55.16 per Bbl in the first quarter of 2007, which decreased oil sales revenues by approximately $400,000.

     The operating margin from oil and gas sales (oil and gas sales revenues less production expense and production taxes) on a per unit basis decreased from $8.35 per Mcfe in the first quarter of 2006 to $5.32 per Mcfe in the first quarter of 2007. The average price decreased $2.95 per Mcfe and production expense increased by $0.11 per Mcfe while production taxes decreased by $0.03 per Mcfe in the first quarter of 2007 compared to the first quarter of 2006.

     The decrease in gas gathering and marketing revenues was due to an $896,000 decrease in gas marketing revenues and a $234,000 decrease in gas gathering revenues. The lower gas gathering and marketing revenues were primarily due to lower gas prices in the first quarter of 2007 compared to the first quarter of 2006.

Costs and Expenses

     Production expense was $5.8 million in the first quarter of 2006 and the first quarter of 2007. The average production cost increased from $1.40 per Mcfe in the first quarter of 2006 to $1.51 per Mcfe in the first quarter of 2007. Production expense in the first quarter of 2006 included $332,000 ($0.08 per Mcfe) for the cost associated with the selling of purchased oil inventory as a result of purchase accounting for the Transaction. Production expenses in the first quarter of 2007 were higher due primarily to increases in labor and oilfield services costs and well workovers.

     Production taxes decreased $158,000 from $709,000 in the first quarter of 2006 to $551,000 in the first quarter of 2007. Average per unit production taxes decreased from $0.17 per Mcfe in the first quarter of 2006 to $0.14 per Mcfe in the first quarter of 2007. The decreased production taxes are primarily due to lower oil and gas prices in Michigan, where production taxes are based on a percentage of revenues, excluding the effects of hedging.

     Exploration expense increased $551,000 from $174,000 in the first quarter of 2006 to $725,000 in the first quarter of 2007. This increase is primarily due to the noncash write-off of costs related to undeveloped leases that expired during the first quarter of 2007.

     General and administrative expense decreased $1.3 million (40%) from $3.2 million in the first quarter of 2006 to $1.9 million in the first quarter of 2007 primarily due to costs associated with the transition of accounting and administrative functions to EnerVest’s Charleston, West Virginia office and costs incurred related to accounting services which were recorded in the first quarter of 2006.

     Depreciation, depletion and amortization decreased by $753,000 from $9.3 million in the first quarter of 2006 to $8.6 million in the first quarter of 2007. This decrease was primarily due to a decrease in depletion expense. Depletion expense decreased $644,000 (7%) from $9.2 million in the first quarter of 2006 to $8.5 million in the first quarter of 2007 primarily due to lower volumes. Depletion per Mcfe decreased slightly from $2.22 per Mcfe in the first quarter of 2006 to $2.21 per Mcfe in the first quarter of 2007.

     Derivative fair value (gain) loss was a loss of $7.3 million in the first quarter of 2006 compared to a loss of $42.2 million in the first quarter of 2007. The derivative fair value (gain) loss reflects the changes in fair value of certain derivative instruments that are not designated or do not qualify as cash flow hedges and the ineffective portion of natural gas swaps through June 30, 2006.

     Interest expense increased $124,000 from $5.8 million in the first quarter of 2006 to $5.9 million in the first quarter of 2007. This increase was due to an increase in outstanding debt partially offset by lower blended interest rates.

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     Income tax expense decreased $18.8 million from an expense of $3.5 million in the first quarter of 2006 to a benefit of $15.2 million in the first quarter of 2007. The decrease was primarily due to a decrease in income before income taxes.

Liquidity and Capital Resources

Cash Flows

     The primary sources of cash in the first quarter of 2007 were funds generated from operations. Funds used during this period were primarily used for operations, development expenditures, interest expense and dividends. Our liquidity and capital resources are closely related to and dependent upon the current prices paid for our oil and natural gas.

     Our operating activities provided cash flows of $12.2 million during the first quarter of 2007 compared to $26.8 million in the first quarter of 2006. The decrease of $14.6 million was primarily due to lower cash received for oil and gas sales revenues (net of hedging), and changes in working capital items of $7.9 million.

     Cash flows used in investing activities were $6.5 million in the first quarter of 2007 compared to $5.0 million in the first quarter of 2006. The increase was primarily due to a decrease in proceeds from asset disposals of $3.3 million, partially offset by a $1.9 million decrease in capital expenditures in the first quarter of 2007.

     Cash flows used in financing activities decreased in the first quarter of 2007 primarily due to a $5.0 million decrease in the settlement of derivative liabilities and a $3.5 million increase in borrowings from the revolving line of credit.

     Our current ratio at March 31, 2007 was 0.67 to 1. During the first quarter of 2007, the working capital decreased $15.5 million from a deficit of $11.6 million at December 31, 2006 to a deficit of $27.1 million at March 31, 2007. The decrease was primarily due to an increase in the current liability related to the fair value of derivatives of $18.7 million and a decrease in accounts receivable of $1.6 million which was partially offset by an increase in the current deferred tax asset of $5.6 million, and a decrease in accrued expenses and accounts payable of $4.4 million.

Capital Expenditures

     During the first quarter of 2007, we spent approximately $6.5 million on our drilling activities and other capital expenditures. In the first quarter of 2007, we drilled 26 gross (25.5 net) development wells, all of which were successfully completed as producers in the target formation.

     We currently expect to spend approximately $29 million during 2007 on our drilling activities and other capital expenditures. We intend to finance our planned capital expenditures through our cash on hand, available operating cash flow and borrowings under our revolving credit facility. At March 31, 2007, we had cash of $6.0 million and approximately $12.6 million available under our revolving facility. The level of our future cash flow will depend on a number of factors including the demand for and price levels of oil and gas, the scope and success of our drilling activities and our ability to acquire additional producing properties. There can be no assurance that the future drilling of our proved undeveloped locations will provide adequate liquidity in the future.

Financing and Credit Facilities

     At March 31, 2007, we had a $390 million credit facility (“Amended Credit Agreement”) comprised of a five-year $350 million revolving facility with a borrowing base of $113.4 million,

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of which $99.9 million was outstanding at March 31, 2007. This facility is for working capital requirements and general corporate purposes, including the issuance of letters of credit; and a five year $40 million letter of credit facility that may be used only to provide credit support for our obligations under the hedge agreement and other hedge transactions. Borrowings under the Amended Credit Agreement bear interest (i) at the greater of the prime rate or an adjusted federal funds rate, plus an applicable margin ranging from 0% to 0.625% based on the aggregate principal amount outstanding under the Amended Credit Agreement, or, (ii) at our option, the Eurodollar base rate plus an applicable margin ranging from 1.125% to 2.125% based on the aggregate principal amount outstanding under the Amended Credit Agreement. The full amount borrowed under the Amended Credit Agreement will mature on August 16, 2010.

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

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

     At March 31, 2007, the interest rate under our base rate option was 8.625%. Under our one-month LIBOR option, the rate was 7.195%. At March 31, 2007, we had $40.9 million of outstanding letters of credit. At March 31, 2007, there was $99.9 million outstanding under the revolving credit agreement. We had $12.6 million of borrowing capacity under our revolving facility available for general corporate purposes. The borrowing base is subject to redetermination semi-annually and at certain other times as provided by the Amended Credit Agreement. As of March 31, 2007, we were in compliance with all financial covenants and requirements under the existing credit facilities.

     In connection with the Transaction, we executed a Subordinated Promissory Note (“Note”) in favor of Capital C in the maximum principal amount of $94 million. Under the Note, Capital C loaned us $25 million. The Note accrues interest at a rate of 10% per annum and matures on August 16, 2012. We received a fairness opinion from an unrelated financial services firm with respect to the terms of the Note. Interest payments on the Note are due quarterly. In lieu of cash payments, we have the option to make interest payments on the Note by borrowing additional amounts against the Note. The Note has no prepayment penalty or premium and may be prepaid in whole or in part at any time. The Note is expressly subordinate to our senior debt, which includes obligations under the Amended Credit Agreement, the J. Aron Swap and notes issued under an indenture dated July 7, 2004 with BNY Midwest Trust Company, as indenture trustee.

New Accounting Standards

     In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109” (“FIN 48”), which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return, including issues relating to financial statement recognition and measurement. FIN 48 provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained if the position were to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50 percent likely to be recognized upon ultimate settlement with the taxing authority, is recorded. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an

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adjustment to opening retained earnings. Consistent with the requirements of FIN 48, we adopted FIN 48 on January 1, 2007. The adoption of FIN 48 did not have a material impact on our consolidated financial statements.

     FIN 48 requires us to evaluate whether any material tax position it has taken will more likely than not be sustained upon examination by the appropriate taxing authority. As we believe that all such material tax positions taken by us are supportable by existing laws and related interpretations, there are no material uncertain tax positions to consider in accordance with FIN 48.

     Since we have no unrecognized tax benefits as of March 31, 2007, there is no potential impact on our effective tax rate.

     To the extent penalties and interest would be assessed on any underpayment of income tax, such amounts have been accrued and classified as a component of income tax expense in the financial statements. This is an accounting policy election made by us that is a continuation of our historical policy and will continue to be consistently applied in the future. As of March 31, 2007, we have not accrued any interest and penalties related to unrecognized tax benefits.

     We do not anticipate a significant change in the balance of unrecognized tax benefits within the next 12 months.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, to provide guidance for using fair value to measure assets and liabilities. SFAS No. 157 establishes a fair value hierarchy and clarifies the principle that fair value should be based on assumptions market participants would use when pricing the asset or liability. SFAS No. 157 also requires expanded disclosure of the effect on earnings for items measured using unobservable data. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We will adopt SFAS No. 157 on January 1, 2008 and do not expect the adoption to have a material impact on our consolidated financial statements.

          In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been selected are reported in earnings. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS No. 159 on January 1, 2008, and we have not yet determined the impact, if any, on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

          The interest rate risk relates to existing debt under our revolving facility as well as any new debt financing needed to fund capital requirements. We may manage our interest rate risk through the use of interest rate swaps to hedge the interest rate exposure associated with the credit agreement, whereby a portion of our floating rate exposure is exchanged for a fixed interest rate. A portion of our long-term debt consists of senior secured notes where the interest component is fixed. At March 31, 2007, we had interest rate swaps in place covering $80 million of our outstanding balance on the revolving credit agreement. The fair value of these interest rate swaps was an asset of $285,000 at March 31, 2007. If market interest rates for short-term borrowings increased 1%, the increase in interest expense in the quarter would be approximately $50,000. This sensitivity analysis is based on our financial structure at March 31, 2007.

          The commodity price risk relates to natural gas and crude oil produced, held in storage and marketed. Our financial results can be significantly impacted as commodity prices fluctuate widely in response to changing market forces. From time to time, we may enter into a combination of futures contracts, commodity derivatives and fixed-price physical contracts to manage our exposure to commodity price volatility. We employ a policy of partially hedging oil and gas production selling NYMEX-based commodity derivative contracts which are placed with major financial institutions that we believe are minimal credit risks. The contracts may take the form of futures contracts, swaps or options. At March 31, 2007, we had derivatives covering a portion of our oil and gas production from 2007 through 2013. Our oil and gas sales revenues included a net pre-tax gain of $4.2 million in the first three months of 2006 and a net pre-tax loss of $2.2 million in the first three months of 2007 on our qualified hedging activities.

          We determined that as of August 15, 2005, our oil derivatives no longer qualify for cash flow hedge accounting and as of July 1, 2006, our gas derivatives no longer qualify for cash flow hedge accounting. From those dates forward, changes in the fair value of the oil and gas derivatives are recorded in derivative fair value gain/loss. Deferred gains or losses on the gas derivatives are recognized

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as increases or decreases to gas sales revenues during the same periods in which the underlying forecasted transactions impact earnings. If gas prices decreased $0.75 per Mcf, our gas sales revenues for the quarter would decrease by approximately $2.5 million. If the price of crude oil decreased $6.00 per Bbl, our oil sales revenues for the quarter would decrease by approximately $548,000. The impact of these price decreases on our cash flows would be significantly less than these amounts due to our oil and gas derivatives. Price decreases of $0.75 per Mcf and $6.00 per Bbl would decrease cash flows from the sale of oil and gas for the quarter by approximately $664,000 after considering the effects of the derivative contracts in place as of March 31, 2007. This sensitivity analysis is based on our first quarter 2007 oil and gas sales volumes.

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The following table reflects the natural gas and crude oil volumes and the weighted average prices under financial hedges (including settled hedges) at April 30, 2007:

	Natural Gas Swaps				Crude Oil Swaps
			NYMEX
			Price per				NYMEX
	Bbtu		Mmbtu		Mbbls		Price per Bbl
Quarter Ending
June 30, 2007		2,687		4.75		57		31.07
September 30, 2007		2,686		4.71		57		30.73
December 31, 2007		2,686		4.91		56		30.44
		8,059	$	4.79		170	$	30.75
Year Ending
December 31, 2008		10,126		4.64		208		29.96
December 31, 2009		9,529		4.43		191		29.34
December 31, 2010		8,938		4.28		175		28.86
December 31, 2011		8,231		4.19		157		28.77
December 31, 2012		7,005		4.09		138		28.70
December 31, 2013		6,528		4.04		127		28.70

Bbl — Barrel	Mmbtu — Million British thermal units
Mbbls — Thousand barrels	Bbtu — Billion British thermal units

     The fair value of our oil and gas swaps was a net liability of approximately $224.8 million as of March 31, 2007.

     At March 31, 2007, we had interest rate swaps in place on $80 million of our outstanding debt under the revolving credit facility through September 16, 2008. The swaps provide a 1-month LIBOR fixed rates at 4.285% on $40 million and 5.160% on $40 million, plus the applicable margin. At March 31, 2007, the fair value of the interest rate swaps represented a net unrealized gain of approximately $285,000.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     We have established and maintain a system of disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this report, the principal executive officer and principal financial officer of Belden & Blake Corporation have concluded that our disclosure controls and procedures as of March 31, 2007 were effective, at a reasonable assurance level, in ensuring that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

Change in Internal Controls Over Financial Reporting

     There have not been any changes in our internal controls over financial reporting that occurred during the quarterly period ended March 31, 2007 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors

     As of the date of this filing, there have been no changes from the risk factors previously disclosed in our “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006.

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

Item 3. Defaults upon Senior Securities.

     None.

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

     None.

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Item 6. Exhibits.

          (a) Exhibits

The exhibits listed below are filed or furnished as part of this report:

+31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

+31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

+32 .1 Section 1350 Certification of Chief Executive Officer

+32.2 Section 1350 Certification of Chief Financial Officer

+ Filed herewith.

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SIGNATURES

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

	BELDEN & BLAKE CORPORATION
Date: May 14, 2007	By:	/s/ Mark A. Houser
		Mark A. Houser, Chief Executive Officer, Chairman of the Board of Directors and Director
Date: May 14, 2007	By:	/s/ James M. Vanderhider
		James M. Vanderhider, President, Chief
		Financial Officer and Director (Principal Financial Officer)

17

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark A. Houser, certify that:

1.	I have reviewed this report on Form 10-Q for the quarterly period ended March 31, 2007 of Belden & Blake Corporation;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)), for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2007	By:	/s/ Mark A. Houser
		Mark A. Houser, Chief Executive Officer, Chairman
		of the Board of Directors and Director

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James M. Vanderhider, certify that:

1.	I have reviewed this report on Form 10-Q for the quarterly period ended March 31, 2007 of Belden & Blake Corporation;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)), for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2007	By:	/s/ James M. Vanderhider
		James M. Vanderhider, President and Chief
		Financial Officer and Director

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Belden & Blake Corporation (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the knowledge of the undersigned:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 14, 2007	By:	/s/ Mark A. Houser
		Mark A. Houser, Chief Executive Officer, Chairman
		of the Board of Directors and Director

This certification accompanies the Form 10-Q and shall not be treated as having been filed as part of the Form 10-Q.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Belden & Blake Corporation (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the knowledge of the undersigned:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 14, 2007	By:	/s/ James M. Vanderhider
		James M. Vanderhider, President and Chief
		Financial Officer and Director

This certification accompanies the Form 10-Q and shall not be treated as having been filed as part of the Form 10-Q.