BELDEN & BLAKE CORP /OH/, S-3/A, 1995-06-26

BELDEN & BLAKE CORP /OH/
S-3/A, 1995-06-26
DRILLING OIL & GAS WELLS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1995

===============================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

------------------------

AMENDMENT NO. 1 TO FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------------

BELDEN & BLAKE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Ohio 34-1686642
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
JOSEPH M. VITALE, ESQ.
5200 Stoneham Road 5200 Stoneham Road
North Canton, Ohio 44720 North Canton, Ohio 44720
(216) 499-1660 (216) 499-1660
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (NAME, ADDRESS, INCLUDING ZIP CODE, AND
NUMBER, TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL INCLUDING AREA CODE, OF AGENT FOR SERVICE)
EXECUTIVE OFFICES)
</TABLE>

------------------------

Copies to:

<TABLE>
<S> <C>
ANTHONY E. EFREMOFF, ESQ. WILLIAM B. MASTERS, ESQ.
Black, McCuskey, Souers & Arbaugh Jones, Walker, Waechter,
1000 United Bank Plaza Poitevent, Carrere & Denegre, L.L.P.
220 Market Avenue South 201 St. Charles Avenue
Canton, Ohio 44702 New Orleans, Louisiana 70170
(216) 456-8341 (504) 582-8000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

===============================================================================
<PAGE> 2

CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM NO. FORM S-3 CAPTION PROSPECTUS CAPTION
- -------- --------------------------------------------- -------------------------------------
<C> <S> <C>

1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus....... Outside Front Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page; Table of
Contents

3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges................. Prospectus Summary; Risk Factors;
Business and Properties

4. Use of Proceeds.............................. Prospectus Summary; Use of Proceeds

5. Determination of Offering Price.............. Not Applicable

6. Dilution..................................... Not Applicable

7. Selling Security Holders..................... Not Applicable

8. Plan of Distribution......................... Prospectus Summary; Underwriting

9. Description of Securities to be Registered... Description of Capital Stock

10. Interests of Named Experts and Counsel....... Not Applicable

11. Material Changes............................. Prospectus Summary; Business and
Properties

12. Incorporation of Certain Information by
Reference.................................... Incorporation of Documents by
Reference

13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not applicable
</TABLE>
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JUNE 26, 1995

3,500,000 SHARES

[BELDEN & BLAKE CORPORATION LOGO]

COMMON STOCK
------------------------

All of the shares of Common Stock offered hereby are being sold by Belden &
Blake Corporation (the "Company"). The Common Stock is traded on the Nasdaq
National Market under the symbol "BELD." On June 20, 1995, the last reported
sale price of the Common Stock on the Nasdaq National Market was $16.25 per
share. See "Market Information."

SEE "RISK FACTORS" AT PAGE 8 FOR CERTAIN RISK FACTORS AND INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Per Share................................ $ $ $
- ----------------------------------------------------------------------------------------------------
Total(3)................................. $ $ $

- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
<FN>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."

(2) Before deducting expenses payable by the Company estimated to be
$ .

(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 525,000 shares of Common Stock on the same terms and
conditions as set forth above to cover over-allotments. If such option is
exercised in full, the total price to public, underwriting discount and
proceeds to company will be $ , $ and $ ,
respectively. See "Underwriting."
</TABLE>
------------------------
The shares of Common Stock are offered severally by the Underwriters as
specified herein, subject to receipt and acceptance by the Underwriters and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the shares of Common Stock will be made at the offices of
Johnson Rice & Company, L.L.C., New Orleans, Louisiana on or about ,
1995.
------------------------

JOHNSON RICE & COMPANY

MCDONALD & COMPANY
SECURITIES, INC.

SOUTHCOAST CAPITAL
CORPORATION

------------------------
The date of this Prospectus is , 1995.
<PAGE> 4

[Map of U.S. Petroleum Basins]
and
[Map showing location of oil and gas fields in the Appalachian and Michigan
Basins]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

Copies of any documents incorporated herein by reference (not including
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents) are available without charge to any person to
whom a copy of this Prospectus has been delivered upon written or oral request
to Joseph M. Vitale, Secretary, Belden & Blake Corporation, 5200 Stoneham Road,
North Canton, Ohio 44720, telephone (216) 499-1660.

2
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless otherwise indicated, the information in this Prospectus assumes that the
Underwriters' over-allotment option will not be exercised. Unless the context
otherwise requires, the term "Company" as used herein refers to Belden & Blake
Corporation, its subsidiaries and predecessor entities. See "Glossary of Oil and
Gas Terms" for definitions of certain terms used in this Prospectus.

THE COMPANY
GENERAL

The Company is actively engaged in the acquisition, exploration,
development, production, gathering and marketing of oil and gas in the
Appalachian and Michigan Basins. Founded in 1942, the Company operates
principally in the Appalachian Basin where it is now one of the largest oil and
gas companies in terms of reserves, acreage held and wells operated. In early
1995, the Company entered the Michigan Basin through the strategic acquisition
of Ward Lake Drilling, Inc. The Company recently entered into an agreement to
purchase certain oil and gas properties and assets from Quaker State Corporation
for $56 million, subject to adjustment.

On a pro forma basis (giving effect to the completed and pending
acquisitions described below), as of December 31, 1994, the Company operated
more than 7,600 oil and gas wells in Ohio, West Virginia, Pennsylvania, New York
and Michigan and had proved developed reserves totaling 178 Bcf of gas and 6
MMBbl of oil. These reserves had a present value before income taxes of
approximately $183 million and a reserve life of 9 years at December 31, 1994.
The Company's pro forma 1994 production was 19.9 Bcf of gas and .9 MMBbl of oil.
Its pro forma average wellhead price for natural gas was $2.44 per Mcf for the
Appalachian Basin properties and $2.02 per Mcf for the Michigan Basin
properties. Its pro forma average wellhead price for oil was $15.98 per Bbl.

On a pro forma basis, at December 31, 1994, the Company held leases or
options to acquire leases covering approximately 1,147,000 gross (1,049,000 net)
acres in the two basins. The Company also owned and operated approximately 2,550
miles of gas gathering systems with access to commercial and industrial gas
markets in Ohio, West Virginia, Pennsylvania, New York and Michigan. After
giving effect to the completed and pending acquisitions, the Company will market
approximately 80 MMcf of gas per day, approximately 70% of which will be derived
from its own production.

The Company has grown principally through the acquisition of producing
properties and related gas gathering facilities and exploration and development
of its own acreage. From 1992 through May 31, 1995, the Company acquired or
entered into agreements to acquire producing properties for $107 million with
168 Bcfe of proved developed reserves at an average cost of $0.64 per Mcfe and
spent $12.2 million to acquire and develop additional gas gathering facilities.
During the period from 1992 through 1994, the Company drilled 185 gross (131.3
net) wells at an aggregate cost of approximately $23 million for the net wells.
This drilling added 18.1 Bcfe to the Company's proved reserves. During 1995, the
Company intends to drill approximately 160 wells at an estimated cost of $20
million.

The Company's principal executive offices are located at 5200 Stoneham
Road, North Canton, Ohio 44720, and its telephone number is (216) 499-1660.

THE APPALACHIAN AND MICHIGAN BASINS

The Appalachian and Michigan Basins are similar in many respects. Both
basins have shallow (700-5,500 feet) blanket formations which yield relatively
low volume wells. Drilling success rates for companies drilling in these
formations have historically exceeded 90% with production generally lasting
longer than 20 years. In both basins economies of scale and cost containment are
essential to operating profitability. The shallow blanket formations in both
basins have been developed largely by small independent oil companies, resulting
in

3
<PAGE> 6

a highly fragmented operating environment. Both basins also have deeper
formations with greater reserve potential which the Company believes present
significant exploration and development opportunities for those operators with
the capital, technical expertise and acreage position needed to justify the use
of advanced exploration and production technologies.

BUSINESS STRATEGY

The Company's primary operating objective is to utilize its sizeable
acreage position, technical capability and financial resources to become a
dominant oil and gas producer and natural gas marketer in the Appalachian and
Michigan Basins. To accomplish this objective, the Company's specific business
strategy is to:

- make strategic acquisitions of producing oil and gas properties;

- expand production and reserves through a balanced portfolio of
developmental and exploratory drilling;

- improve profitability on production from existing and acquired
properties; and

- expand its gas gathering and marketing activities.

ACQUISITION OF QUAKER STATE PROPERTIES

On , 1995, the Company entered into an agreement to acquire
from Quaker State Corporation most of its oil and gas properties and related
assets in the Appalachian Basin (the "Quaker State Properties") for $56 million,
subject to adjustment. The Quaker State Properties include approximately 1,460
gross (1,100 net) wells with proved reserves of 2.2 MMBbl of oil and 46.8 Bcf of
gas at December 31, 1994, gas gathering systems, undeveloped oil and gas leases
and fee mineral interests covering approximately 250,000 acres, an extensive
geologic and geophysical database and other assets. Approximately $41.5 million
of the purchase price has been allocated to the 52.5 Bcfe of proved developed
reserves, $8.6 million to the gas gathering systems and the balance to other
assets. The Company has sufficient borrowing capacity under its existing credit
facility to finance the acquisition. See "Business and Properties."

OTHER RECENT ACQUISITIONS

Ward Lake Drilling, Inc. Effective in January 1995, the Company made its
initial entry into the Michigan Basin by acquiring Ward Lake Drilling, Inc.
("Ward Lake"), a privately-held exploration and production company headquartered
in Gaylord, Michigan for $15.1 million. Ward Lake operates and holds production
payment and working interests averaging 13.6% in approximately 500 Antrim Shale
gas wells in Michigan's lower peninsula and approximately 5,500 undeveloped
leasehold acres in the proximity of the wells. The wells had estimated proved
developed gas reserves of 98 Bcf (14 Bcf net to Ward Lake's interest) at
December 31, 1994. Approximately one-half of the purchase price was allocated to
proved developed reserves and the balance to other oil and gas and corporate
assets.

Other Acquisitions. Through May 31, 1995, the Company had acquired or
agreed to acquire, for approximately $19.4 million, working interests in 1,139
gross (919 net) oil and gas wells in Ohio, Pennsylvania and New York and
drilling rights on more than 250,000 acres in Ohio adjacent to properties
operated by the Company. Estimated proved developed reserves associated with the
wells totaled 21 Bcf of natural gas and .5 MMBbl of oil net to the Company's
interest at December 31, 1994.

4
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company................ 3,500,000 shares
Common Stock to be outstanding after the
Offering......................................... 10,606,246 shares
Use of Proceeds.................................... To acquire the Quaker State Properties
and to reduce outstanding balances under
the Company's credit facility which will
continue to be available for future
acquisitions and general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market Symbol...................... BELD
</TABLE>

SUMMARY AND PRO FORMA RESERVE AND ACREAGE DATA

The following tables set forth summary information with respect to
estimates of the Company's proved oil and gas reserves and approximate acreage
held at December 31, 1994. The information in the table with respect to proved
developed reserves is based on reserve reports of John G. Redic, Inc.,
independent petroleum engineers. The estimates of proved undeveloped reserves
were prepared by the Company's petroleum engineers. See "Business and
Properties."

<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------
RESERVE DATA: ACTUAL PRO FORMA(1)
-------- ------------
<S> <C> <C>
Proved developed reserves:
Gas (MMcf).......................................... 101,355 177,722
Oil (MBbl).......................................... 3,715 6,065
Combined (MMcfe).................................... 123,643 214,113
Proved undeveloped reserves:
Gas (MMcf).......................................... 21,636 30,742
Oil (MBbl).......................................... 399 757
Combined (MMcfe).................................... 24,029 35,282
Total proved reserves:
Combined (MMcfe).................................... 147,672 249,395

Estimated future net revenues: (IN THOUSANDS)
---------------------

Total............................................... $229,844 $350,229
Present value before income taxes (discounted at 10%
per annum)....................................... 116,471 192,496
</TABLE>

<TABLE>
<CAPTION>
ACTUAL PRO FORMA(1)
--------------------------------- -----------------------------------
DEVELOPED UNDEVELOPED DEVELOPED UNDEVELOPED
ACREAGE DATA: ACREAGE ACREAGE TOTAL ACREAGE ACREAGE TOTAL
--------- ----------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gross................... 318,000 226,000 544,000 436,000 711,000 1,147,000
Net..................... 313,000 221,000 534,000 392,000 657,000 1,049,000

<FN>
-----------------------

(1) Gives effect to the acquisition of the Quaker State Properties, Ward
Lake and other properties which the Company has acquired or agreed
to acquire through May 31, 1995 as if such transactions had been
completed at December 31, 1994.
</TABLE>

5
<PAGE> 8

SUMMARY AND PRO FORMA FINANCIAL INFORMATION AND OPERATING DATA

The following table presents selected historical and pro forma financial
and operating data for the Company. The pro forma data give effect to (i) the
acquisition of the Quaker State Properties, Ward Lake and other properties which
the Company has acquired or agreed to acquire through May 31, 1995 and (ii) this
offering and the application of the net proceeds therefrom as if such
transactions had occurred at January 1, 1994 in the case of the statement of
operations data and at December 31, 1994 in the case of the balance sheet data.
See "Use of Proceeds." The pro forma financial and operating data are not
necessarily indicative of the Company's results of operations or financial
position in the future or of what the Company's results of operations or
financial position would have been had the transactions been consummated during
the periods, or as of the dates, for which such pro forma financial information
is presented. The pro forma financial statements are based upon, and should be
read in conjunction with, the Pro Forma Combined Financial Statements and the
Consolidated Financial Statements, including the Notes thereto, appearing
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------------- -----------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
--------------------------- --------- ----------------- ---------
1992 1993 1994 1994 1994 1995 1995
------- ------- ------- --------- ------- ------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Oil and gas sales............................ $15,046 $26,631 $32,574 $61,450 $ 7,655 $ 9,207 $15,647
Gas marketing and gathering.................. 26,494 34,709 33,085 37,177 9,955 8,916 9,871
Oilfield sales and service................... 9,496 11,111 16,886 16,886 3,011 4,121 4,121
Interest and other........................... 1,514 647 559 1,303 86 181 181
------- ------- ------- ------- ------- ------- -------
52,550 73,098 83,104 116,816 20,707 22,425 29,820
Expenses
Production expense........................... 5,362 7,190 9,292 17,556 2,162 2,634 4,269
Cost of gas and gathering expense............ 24,922 30,736 29,134 29,134 8,863 7,902 7,902
Oilfield sales and service................... 7,529 10,598 16,297 16,297 3,002 4,210 4,210
Exploration expense.......................... 2,381 2,538 2,807 3,523 662 895 1,067
General and administrative expense........... 3,718 3,940 3,966 4,015 955 949 1,030
Interest expense............................. 2,200 3,199 3,587 6,175 924 1,163 1,644
Depreciation, depletion and amortization..... 4,853 9,703 12,021 22,611 2,835 3,499 6,103
------- ------- ------- ------- ------- ------- -------
50,965 67,904 77,104 99,311 19,403 21,252 26,225

Income before income taxes..................... 1,585 5,194 6,000 17,505 1,304 1,173 3,595
Provision for income taxes
Current.................................... 618 422 587 3,561 184 211 669
Deferred................................... (172) 1,552 1,570 2,460 313 223 536
------- ------- ------- ------- ------- ------- -------
446 1,974 2,157 6,021 497 434 1,205

Net income..................................... $ 1,139 $ 3,220 $ 3,843 $11,484 $ 807 $ 739 $ 2,390
======= ======= ======= ======= ======= ======= =======

Preferred dividends............................ $ -- $ 180 $ 180 $ 180 $ 45 $ 45 $ 45
Net income per common share.................... $ 0.48 $ 0.54 $ 0.52 $ 1.07 $ 0.11 $ 0.10 $ .22
Weighted average common shares outstanding..... 2,373 5,675 7,080 10,580 7,066 7,102 10,602
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1995
----------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................................................ $ 15,891 $ 12,716
Property and equipment, net................................................................ 137,501 206,810
Total assets............................................................................... 172,322 240,456
Long-term liabilities, less current portion................................................ 67,215 81,269
Shareholders' equity....................................................................... 82,089 134,169
</TABLE>

(Table continued on following page)
6
<PAGE> 9

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
------------------------------------ ---------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------------------ --------- --------------- ---------
1992 1993 1994 1994 1994 1995 1995
------ ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Production:
Oil (MBbl)........................................ 351 453 496 859 107 118 218
Gas (MMcf)........................................ 3,728 7,373 9,563 19,858 2,257 2,927 5,349
Average wellhead price:
Oil (per Bbl)..................................... $19.27 $17.15 $15.98 $ 15.98 $14.38 $16.70 $ 16.51
Gas (per Mcf)..................................... 2.22 2.55 2.58 2.40 2.71 2.47 2.25
Combined (per Mcfe)............................... 2.58 2.64 2.60 2.46 2.64 2.53 2.35

Production expense (per Mcfe)....................... 0.92 0.71 0.74 0.70 0.75 0.72 0.64

Operating margin (per Mcfe)(1)...................... 1.66 1.93 1.86 1.76 1.89 1.81 1.71
</TABLE>

- ---------------

(1) Average wellhead price per Mcfe less production expense per Mcfe.

7
<PAGE> 10

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be considered in evaluating an investment in the
shares of Common Stock offered hereby.

VOLATILITY OF OIL AND GAS PRICES AND MARKETS

The Company's revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for oil and natural gas, which
can be extremely volatile. Prices are affected by market supply and demand
factors as well as actions of state and local regulatory agencies, the United
States and foreign governments and international cartels. These external factors
and the volatile nature of the energy markets make it difficult to predict
future oil and gas prices. Prices of oil and natural gas are subject to wide
fluctuations, and there can be no assurance that future decreases in such prices
will not occur. It is possible that under some market conditions the production
and sale of oil and gas from some of the Company's properties may not be
economical. All of these factors are beyond the control of the Company. Any
significant or extended decline in prices for oil or gas could have a material
adverse effect on the Company's financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business and Properties."

NECESSITY TO REPLACE RESERVES

The Company's success, as is generally the case in the industry, will be
largely dependent on its ability to replace and expand its reserve base through
the acquisition of producing properties and the exploration for and development
of oil and gas reserves, both of which involve substantial risks. Without
successful acquisition or drilling ventures, the Company will be unable to
replace the reserves being depleted by production, and its assets and revenues
will decline. To increase reserves and production, the Company must continue its
exploration and development drilling programs, acquire additional properties or
undertake other reserve replacement activities. There can be no assurance that
the Company will be able to acquire such properties or develop reserves at costs
that will yield an acceptable return. Successful acquisition of producing
properties generally requires accurate assessments of recoverable reserves,
future oil and gas prices and operating costs, potential environmental and other
liabilities and other factors. Such assessments are necessarily inexact and
their accuracy inherently uncertain. In addition, there can be no assurance that
producing properties will continue to be available for purchase at prices which
will yield an acceptable rate of return. Exploration and development of oil and
gas reserves involves the risk that no commercially viable production will be
obtained or that the production will be insufficient to recover drilling and
completion costs.

UNCERTAINTY OF ESTIMATES OF RESERVES AND FUTURE NET REVENUES

Estimates of the Company's proved developed oil and gas reserves and future
net revenues therefrom appearing elsewhere herein are based on reserve reports
prepared by independent petroleum engineers, and the estimates of proved
undeveloped reserves were prepared by the Company's petroleum engineers. The
estimation of reserves requires substantial judgment on the part of the
petroleum engineers, resulting in imprecise determinations, particularly with
respect to new discoveries. Reserve data set forth in this Prospectus represent
only estimates. In addition, the present value of the estimated future net
revenues from proved reserves of the Company is based upon certain assumptions
regarding future production levels, prices and costs that may not prove correct
over time. The accuracy of any reserve estimate also depends on the quality of
available data as well as engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may result in revisions of such estimates. There can be no
assurance, however, that such prices will be realized or that the estimated
production volumes will be produced during the periods indicated. Any
significant variance from the assumptions used in the reserve report could
materially affect the quantity and value of the Company's reserves as compared
to the estimates set forth in this Prospectus. See "Business and
Properties -- Oil and Gas Reserves."

8
<PAGE> 11

ACQUISITION RISKS

The Company intends to continue acquiring oil and gas properties. It
generally is not feasible to review in detail every individual property involved
in an acquisition. Ordinarily, review efforts are focused on the higher-valued
properties, but even a detailed review of all properties and records may not
reveal existing or potential problems or permit the Company to become
sufficiently familiar with the properties to assess fully their deficiencies and
capabilities. Inspections may not always be performed on every well, and
environmental problems, such as ground water contamination, are not necessarily
observable even when an inspection is undertaken.

The Company frequently engages in bidding and negotiations for
acquisitions, some of which are substantial. If successful in this process, the
Company may be required to alter or increase its capitalization substantially
through the issuance of additional debt or equity securities or otherwise. These
changes in capitalization may significantly increase the leverage and decrease
the financial flexibility of the Company.

GAS MARKETING RISKS

The volatility of gas prices has resulted and could result in the
renegotiation of existing contracts to reduce the price paid for delivered gas
and other difficulties in the marketing of gas production. Gas production from
numerous wells across the nation has been shut-in or significantly curtailed
from time to time. Although the natural gas wells in which the Company holds
interests have not been subject to significant production curtailments, the
Company has experienced some price reductions under both new and existing
contracts. Any further deterioration in market conditions for natural gas could
have a material adverse effect on the Company's financial condition and results
of operations.

DRILLING HAZARDS

In addition to the risk that wells drilled will not be productive, hazards
such as unusual or unexpected geologic formations, pressures, down-hole fires,
mechanical failures, blow-outs, cratering and pollution are inherent in oil and
gas exploration. As the Company's exploration focus turns to the deeper
formations, the risks and costs of non-productive wells and mechanical problems
are greater than those experienced from drilling in shallower formations. As is
common in the oil and gas industry, the Company will not fully insure against
many risks associated with its business either because such insurance is not
available or because the cost thereof is considered prohibitive. Although the
Company has not incurred any material liabilities or losses resulting from such
drilling hazards not covered by insurance or in excess of insurance coverage,
there can be no assurance that it will not experience such liabilities or losses
in the future.

COMPETITION

The Company encounters substantial competition in acquiring properties and
drilling prospects, marketing oil and gas and operating its well services
business. Many competitors have financial and other resources which exceed those
of the Company. The ability of the Company to replace and expand its reserve
base in the future will depend on its ability to select and acquire suitable
producing properties and prospects for future drilling despite competition. See
"Business and Properties."

GOVERNMENTAL REGULATION

Oil and gas operations are subject to various federal, state and local
governmental requirements which may be changed from time to time in response to
economic or political conditions. Matters subject to regulation include
discharge permits for drilling operations, drilling and abandonment bonds,
reports concerning operations, spacing of wells, unitization and pooling of
properties and taxation. From time to time, regulatory agencies have imposed
price controls and limitations on production by restricting the rate of flow of
oil and gas wells below actual production capacity in order to conserve the
supplies of oil and gas. In addition, the production, handling, storage,
transportation and disposal of oil and gas, by-products thereof and other
substances and materials produced or used in connection with oil and gas
operations are subject to regulation under federal, state and local laws and
regulations primarily relating to the protection of human health and the
environment. These laws and regulations have continually imposed increasingly
strict requirements for water

9
<PAGE> 12

and air pollution control and solid waste management. To date, expenditures
related to compliance with these laws have not been significant. The Company
believes, however, that the trend of more expensive and stricter environmental
legislation and regulations will continue and such legislation may result in
additional cost to the Company in the future. See "Business and Properties."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,500,000 shares of
Common Stock offered hereby are estimated to be approximately $52.1 million
($60.0 million assuming full exercise of the Underwriters' over-allotment
option), based on an estimated offering price of $16.00 per share and after
deducting estimated underwriting discounts and commissions and expenses. The
Company will use such proceeds to acquire the Quaker State Properties and the
remaining amount, if any, will be used to reduce the balance outstanding under
the Company's revolving credit facility ($23 million as of May 31, 1995) which
will then be available to fund the Company's continuing acquisition program and
for general corporate purposes. Although the Company is continually evaluating
potential property acquisitions, it does not currently have contracts,
understandings or arrangements with respect to any material acquisitions other
than as disclosed herein. The Company's credit facility matures on March 31,
1999, and at May 31, 1995, the weighted average interest rate on the outstanding
balances was 8.56%.

After application of the net proceeds from this offering, the Company
anticipates that its debt agreements would allow it to borrow approximately an
additional $43 million. Under the agreements, the Company may incur additional
indebtedness under the credit facility in an amount up to a maximum of $200
million by borrowing an amount equal to 50% of the present value of any net
reserve additions as a result of producing property acquisitions or drilling.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

MARKET INFORMATION

The Common Stock has been traded on the Nasdaq National Market under the
symbol "BELD" since March 31, 1992. The following table sets forth the high and
low sales prices per share for the Common Stock for the periods indicated as
reported by the Nasdaq National Market.

<TABLE>
<CAPTION>
1993 HIGH LOW
---- ------ ------
<S> <C> <C>
First Quarter.............................................. $11.75 $ 9.75
Second Quarter............................................. 15.00 11.00
Third Quarter.............................................. 14.75 10.00
Fourth Quarter............................................. 14.75 9.75
</TABLE>

<TABLE>
<CAPTION>
1994 HIGH LOW
---- ------ ------
<S> <C> <C>
First Quarter.............................................. $13.25 $ 9.75
Second Quarter............................................. 13.00 12.00
Third Quarter.............................................. 14.75 11.50
Fourth Quarter............................................. 15.00 13.25
</TABLE>

<TABLE>
<CAPTION>
1995 HIGH LOW
---- ------ ------
<S> <C> <C>
First Quarter.............................................. $14.25 $11.50
Second Quarter (through May 31, 1995)...................... 17.00 13.75
</TABLE>

The last reported sale price of the Common Stock on the Nasdaq National
Market on June 20, 1995 was $16.25. As of March 31, 1995, there were 7,106,246
shares of Common Stock outstanding and approximately 2,050 record holders of the
Common Stock.

10
<PAGE> 13

The Company does not intend to pay any dividends on its Common Stock for
the foreseeable future. Any determination as to the payment of dividends on the
Common Stock in the future will be made by the Board of Directors and will
depend on a number of factors, including future earnings, capital requirements,
financial condition and future prospects of the Company as well as restrictions
in the Company's current or future financing agreements and such other factors
as the Board of Directors may deem relevant. The Company's debt agreements
restrict the payment of dividends to $7.8 million (at March 31, 1995) plus the
net cash proceeds from the sale of capital stock or warrants, rights or options
to purchase stock and 50% of future net income.

11
<PAGE> 14

CAPITALIZATION

The following table sets forth the unaudited capitalization of the Company
as of March 31, 1995 and as adjusted to give effect to this offering as set
forth under "Use of Proceeds." This information should be read in conjunction
with the Consolidated Financial Statements of the Company and the Notes thereto,
the Pro Forma Combined Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
MARCH 31, 1995
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, net of current portion
Senior notes........................................ $ 35,000 $ 35,000
Commercial bank revolving line of credit............ 23,000 26,920(1)
Convertible subordinated debentures................. 7,350 7,350
Other............................................... 652 652
Capitalized lease obligations....................... 553 553
-------- --------
Total long-term debt............................. 66,555 70,475
Shareholders' equity
Non-voting preferred stock, no par value; 5,000,000
shares authorized; none issued and outstanding... -- --
Voting convertible preferred stock, no par value;
3,000,000 shares authorized; 24,000 shares issued
and outstanding designated as $7.50 Series A,
$100 stated value per
share............................................ 2,400 2,400
Common stock, no par value; 12,000,000 shares
authorized; 7,106,246 shares issued and
outstanding and 10,606,246 shares issued and
outstanding as adjusted(2)....................... 711 1,061
Paid-in capital..................................... 70,629 122,359
Retained earnings................................... 8,574 8,574
Unearned portion of restricted stock................ (225) (225)
-------- --------
Total shareholders' equity....................... 82,089 134,169
-------- --------
Total capitalization............................. $148,644 $204,644
======== ========
</TABLE>

- ---------------

(1) At May 31, 1995, $23 million was outstanding under the Company's revolving
line of credit. The Company will continue to have the ability to borrow an
additional $43 million under its revolving credit facility. To the extent
that the purchase price of the Quaker State Properties is reduced, the
Company will apply the difference to reduce the balance outstanding under
the revolving line of credit. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business and Properties."

(2) At March 31, 1995, there were 535,870 shares of Common Stock reserved for
issuance pursuant to outstanding warrants, convertible subordinated
debentures and voting convertible preferred stock.

12
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto and the Selected Financial
Information included elsewhere in this report.

GENERAL

The Company is actively engaged in the acquisition, exploration,
development, production, gathering and marketing of oil and gas in the
Appalachian and Michigan Basins.

The Company utilizes the "successful efforts" method of accounting for its
oil and gas properties. Under this method, property acquisition and development
costs and productive exploration costs are capitalized while non-productive
exploration costs, which include geological and geophysical costs, dry holes,
expired leases and delay rentals, are expensed as incurred. Capitalized costs
related to proved properties are depleted using the unit-of-production method.
No gains or losses are recognized upon the disposition of oil and gas properties
except in extraordinary transactions. Sales proceeds are credited to the
carrying value of the properties. Maintenance and repairs are expensed, and
expenditures which enhance the value of properties are capitalized.

The Company's gas gathering and marketing operations consist of purchasing
gas at the wellhead and from interstate pipelines and selling gas to industrial
customers and local gas distribution companies. The cost of gas purchased from
the Company is the wellhead price stipulated by the operating or gas purchase
agreements relating to the wells and is included in "Cost of gas and gathering
expense."

The Company provides oilfield sales and service to its own operations and
to third parties. Oilfield sales and service provided to the Company's own
operations are provided at cost and all intercompany revenues and expenses are
eliminated in consolidation.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31,
1994

OIL AND GAS SALES. Oil and gas sales increased $1.6 million (20%) in the
first quarter of 1995 compared to the same period of 1994 due primarily to an
increase in oil and gas volumes sold and a higher average price paid for the
Company's oil. These increases more than offset a lower average price paid for
the Company's natural gas.

Oil volumes increased 10,870 Bbl (10%) from 106,801 Bbl in the first
quarter of 1994 to 117,671 Bbl in the first quarter of 1995 resulting in an
increase in oil sales of approximately $160,000. Gas volumes increased 670,849
Mcf (30%) from 2,256,577 Mcf in the first quarter of 1994 to 2,927,426 Mcf in
the first quarter of 1995 resulting in an increase in gas sales of approximately
$1.8 million. These volume increases were primarily due to the Company's 1995
acquisitions and production brought on stream by the Company's 1994 drilling
program.

The average price paid for the Company's oil increased from $14.38 per
barrel in the first quarter of 1994 to $16.70 per barrel in the first quarter of
1995 which increased oil sales by approximately $270,000. The average price paid
for the Company's natural gas decreased $.24 per Mcf to $2.47 per Mcf in the
first quarter of 1995 compared to the first quarter of 1994 which decreased gas
sales in the first quarter of 1995 by approximately $700,000.

GAS MARKETING AND GATHERING REVENUES. Gas marketing and gathering revenue
decreased $1.0 million (10%) in 1995 compared with 1994 due to a decrease in
volumes and selling price of gas purchased from third parties and resold.

OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue
increased $1.1 million (37%) from $3.0 million in the first quarter of 1994 to
$4.1 million in the first quarter of 1995. This increase was primarily due to an
increase of $825,767 in sales by Engine Power Systems, Inc. ("EPS") and due to
the sales generated by three oilfield service companies acquired by the Company
in September and October 1994.

13
<PAGE> 16

INTEREST AND OTHER REVENUE. Interest and other revenue increased $95,878
(111%) from $86,107 in the first quarter of 1994 to $181,985 in the first
quarter of 1995 primarily due to the recognition of income in 1995 from an
incentive production payment associated with certain properties operated by Ward
Lake.

PRODUCTION EXPENSE. Production expense increased $471,280 (22%) from $2.2
million in the first quarter of 1994 to $2.6 million in the first quarter of
1995. This increase was largely due to the increased production discussed above.
The average production cost decreased from $.75 per Mcfe in the first quarter of
1994 to $.72 per Mcfe in the first quarter of 1995. This decrease was primarily
due to the lower operating costs of the 1995 acquisitions completed through
March 31, 1995.

COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense in the
first quarter of 1995 decreased $1.0 million (11%) compared with the first
quarter of 1994 due to a decrease in volumes of gas purchased from third parties
and resold.

OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense
increased $1.2 million (40%) from $3.0 million in the first quarter of 1994 to
$4.2 million in the first quarter of 1995 primarily as a result of the increased
cost of goods sold associated with increased sales by EPS and the sales made by
the three oilfield service companies acquired by the Company in September and
October 1994.

EXPLORATION EXPENSE. Exploration expenses increased $233,225 (35%) from
$661,705 in the first quarter of 1994 to $894,930 in the first quarter of 1995
primarily due to higher levels of geological, geophysical and leasing activity
and $88,500 in dry hole costs in the first quarter of 1995.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
decreased from $954,858 in the first quarter of 1994 to $949,239 in the first
quarter of 1995, notwithstanding the continued growth of the Company.

INTEREST EXPENSE. Interest expense increased $239,280 (26%) from $923,710
in the first quarter of 1994 to $1.2 million in the first quarter of 1995. This
increase was primarily due to $20 million in bank borrowings in the first
quarter of 1995 to finance the acquisitions of Ward Lake and other properties.

DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased by $664,651 (23%) from $2.8 million in the first quarter
of 1994 to $3.5 million in the first quarter of 1995. This increase was
primarily due to additional depletion expense associated with the increased
production volumes described above.

INCOME BEFORE INCOME TAXES. Income before income taxes decreased $130,538
(10%) from $1.3 million in the first quarter of 1994 to $1.2 million in the
first quarter of 1995. The oil and gas operations segment increased operating
income $234,945 (10%) from $2.3 million in 1994 to $2.5 million in 1995. The
increase was attributable to the items discussed above. The oilfield sales and
service segment operating loss increased $222,081 from an operating loss of
$122,732 in 1994 to an operating loss of $344,813 in 1995. The losses were the
result of the seasonal nature of the businesses and the continued development of
EPS. Approximately $158,000 of the operating loss increase was attributable to
EPS. The operating loss of oilfield sales and services, exclusive of EPS,
increased $64,382 (48%) from $133,994 in 1994 to $198,376 in 1995.

NET INCOME. Net income for the first quarter of 1995 decreased $68,025 (8%)
from $807,241 in the first quarter of 1994 to $739,216 in the first quarter of
1995. This decrease in net income was primarily the result of the items
discussed above. Provision for income taxes decreased from $496,656 in the first
quarter of 1994 to $434,143 in the first quarter of 1995 due to the decrease in
income before income taxes and a decrease in the effective tax rate. Net income
on a per share basis decreased from $.11 per share in the first quarter of 1994
to $.10 per share in the first quarter of 1995. This decrease was primarily the
result of the factors discussed above.

1994 COMPARED TO 1993

OIL AND GAS SALES. Oil and gas sales increased $5.9 million (22%) in 1994
compared to 1993 due primarily to an increase in oil and gas volumes sold and a
higher average price paid for the Company's natural gas which more than offset a
lower average price paid for the Company's oil.

14
<PAGE> 17

Oil volumes increased 43,000 Bbl (10%) from 453,000 Bbl to 496,000 Bbl in
1994 resulting in an increase in oil sales of approximately $740,000. The
increase in oil volumes sold in 1994 was primarily due to the success of the
1994 drilling program and, to a lesser extent, 1994 acquisitions. Gas volumes
increased 2.2 Bcf (30%) from 7.4 Bcf in 1993 to 9.6 Bcf in 1994 resulting in an
increase in gas sales of approximately $5.6 million. The gas volume increase was
primarily due to the Company's 1994 acquisitions.

The average price paid for the Company's oil decreased from $17.15 per
barrel in 1993 to $15.98 per barrel in 1994 which reduced oil sales by
approximately $580,000. The average price paid for the Company's natural gas
increased $.03 per Mcf to $2.58 per Mcf in 1994 compared to 1993 resulting in
increased gas sales of approximately $190,000.

GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue
decreased $1.6 million (5%) from $34.7 million in 1993 $33.1 million in 1994 due
to a decrease in volumes and selling price of gas purchased from third parties
and resold.

OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue
increased $5.8 million (52%) from $11.1 million in 1993 to $16.9 million in 1994
due primarily to sales by the Company's wholly-owned subsidiaries, Magnolia
Compression Services, Inc. and Engine Power Systems, Inc., and the acquisition
of the assets of three oilfield service companies in 1994. Magnolia Compression
Services, Inc. was merged into Engine Power Systems, Inc. in December 1994.

INTEREST AND OTHER REVENUE. Interest and other revenue decreased $88,169
(14%) from $647,011 in 1993 to $558,842 in 1994 primarily because a gain was
recorded in 1993 on the sale of certain oil and gas properties and related
equipment in Pennsylvania and New York.

PRODUCTION EXPENSE. Production expense increased 29% from $7.2 million in
1993 to $9.3 million in 1994. The increase was primarily due to the increased
production discussed above. The average production cost per Mcfe increased from
$.71 in 1993 to $.74 in 1994. This increase was primarily due to the recognition
of initial workover expense on recently acquired wells designed to maximize
future production volume.

COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense
decreased $1.6 million (5%) from $30.7 million in 1993 to $29.1 million in 1994
due to a decrease in volumes of gas purchased from third parties and resold.

OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense
increased $5.7 million (54%) from $10.6 million in 1993 to $16.3 million in 1994
primarily as a result of the increased cost of goods sold associated with sales
made by the two subsidiaries and the 1994 acquisitions described above.

EXPLORATION EXPENSE. Exploration expense increased $269,484 (11%) from $2.5
million in 1993 to $2.8 million in 1994 primarily due to a lower level of
leasing activity resulting in less cost being capitalized in 1994.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased less than 1% in 1994 compared with 1993, notwithstanding the continued
growth of the Company.

INTEREST EXPENSE. Interest expense increased $388,223 (12%) from $3.2
million in 1993 to $3.6 million in 1994 primarily due to higher average debt
balances in 1994 incurred to finance acquisitions.

DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased $2.3 million (24%) from $9.7 million in 1993 to $12.0
million in 1994. This increase was primarily due to additional depletion expense
associated with the increased production volumes described above.

INCOME BEFORE INCOME TAXES. Income before income taxes increased $806,400
(16%) from $5.2 million in 1993 to $6.0 million in 1994. The oil and gas
operations segment increased operating income $1.5 million (20%) from $7.6
million in 1993 to $9.1 million in 1994. The increase was attributable to the
items discussed above. The oilfield sales and service segment operating income
decreased $214,345 from operating income of $125,658 in 1993 to an operating
loss of $88,687 in 1994. The decrease in the oilfield sales and service segment
was attributable to operating losses from Magnolia Compression Services, Inc.,
which was formed in 1993, and Engine Power Systems, Inc., which was acquired in
1994. The operating losses of these subsidiaries totaled $41,748 in 1993 and
$438,680 in 1994. The losses were the result of additional expenses incurred in
the

15
<PAGE> 18

initial development of these businesses. The operating income of oilfield sales
and services, exclusive of these activities, increased $182,587 (109%) from
$167,406 in 1993 to $349,993 in 1994.

NET INCOME. Net income increased $622,895 (19%) from $3.2 million in 1993
to $3.8 million in 1994. The increase in net income was primarily a result of
the Company's 1994 acquisitions as discussed in the items above. Provision for
income taxes increased from $2.0 million in 1993 to $2.2 million in 1994 due to
the increase in income before income taxes partially offset by a decrease in the
effective tax rate. Net income per common share decreased from $.54 per share in
1993 to $.52 per share in 1994. The decrease was primarily a result of the
factors discussed above combined with the increase in the average number of
common shares outstanding from 5,674,638 in 1993 to 7,080,227 in 1994. The
average number of shares outstanding increased primarily as a result of the
Company's sale of 3.45 million common shares in May 1993.

1993 COMPARED TO 1992

On March 31, 1992, the Company succeeded to a group of companies and assets
(and related liabilities) owned by Henry S. Belden IV. Also on that date,
pursuant to a Plan and Agreement of Consolidation, the Company acquired the
assets and assumed the liabilities of two affiliated entities in exchange for
shares of its common stock (the "Consolidation"). The Consolidation was
accounted for as a purchase, and the results of operations of the two affiliated
entities have been included from that date.

Prior to the Consolidation, the Company was engaged principally in managing
the assets and business activities of the two affiliated entities and certain
non-affiliated parties and in gas gathering and marketing. Accordingly, a
significant portion of the Company's income was derived from transactions with
the affiliated entities, including well operating fees, sales of oilfield
supplies and service and fees for accounting and related services. Prior to the
Consolidation, revenues from oilfield sales and service provided to the
affiliated entities were accounted for as third-party revenues.

OIL AND GAS SALES. Oil and gas sales increased $11.6 million (77%) in 1993
compared to 1992 due primarily to an increase in oil and gas volumes sold and a
higher average price paid for the Company's natural gas which more than offset a
lower average price paid for the Company's oil.

Oil volumes increased 102,000 Bbl (29%) from 351,000 Bbl to 453,000 Bbl and
gas volumes increased 3.7 Bcf (100%) from 3.7 Bcf in 1992 to 7.4 Bcf in 1993.
Increased oil and gas volumes were responsible for approximately $10.0 million
of the Company's increased oil and gas sales. These volume increases were due
primarily to the Consolidation which added approximately 2,000 net producing
wells in March 1992 and the acquisition of the Company's West Virginia
properties which added 501 net producing wells in December 1992.

The average price paid for the Company's oil decreased from $19.27 per
barrel in 1992 to $17.15 per barrel in 1993, which reduced oil sales by $1.0
million. The average price paid for the Company's natural gas increased $.33 per
Mcf to $2.55 per Mcf in 1993 compared to 1992 resulting in increased gas sales
in 1993 of approximately $2.6 million.

GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue
increased $8.2 million (31%) from $26.5 million in 1992 to $34.7 million in
1993. This increase was primarily attributable to the acquisition of additional
interests in the Company's Ohio gas gathering system as a result of the
Consolidation in March 1992, the acquisition of the Company's West Virginia gas
gathering systems in December 1992 and an increase in the volume of gas marketed
in 1993.

OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue
increased $1.6 million (17%) from $9.5 million in 1992 to $11.1 million in 1993
due primarily to an increase in sales by the Company's wholly-owned subsidiary,
Target Oilfield Pipe & Supply Company.

INTEREST AND OTHER REVENUE. Interest and other revenue decreased $867,673
(57%) from $1.5 million in 1992 to $647,011 in 1993 primarily as a result of the
elimination of administrative charges to two affiliated entities as a result of
the Consolidation.

PRODUCTION EXPENSE. Production expense increased from $5.4 million in 1992
to $7.2 million in 1993. This increase was largely due to increased production
resulting from the Consolidation and other acquisitions.

16
<PAGE> 19

Production expense per Mcfe decreased from $.92 per Mcfe in 1992 to $.71 per
Mcfe in 1993. This decrease was due to bearing 100% of the field production
costs in the first quarter of 1992, but receiving only its net revenue share of
production volumes. The high level of production expense borne by the Company in
1992 was offset by well operating fees charged to two affiliated entities and
non-affiliated parties.

COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense
increased from $24.9 million in 1992 to $30.7 million in 1993. This increase was
due to the acquisition of additional interests in the Company's Ohio gas
gathering systems as a result of the Consolidation, the acquisition of the
Company's gas gathering systems in West Virginia and an increase in the volume
of gas purchased for resale in 1993.

OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense
increased $3.1 million (41%) from $7.5 million in 1992 to $10.6 million in 1993
primarily as a result of the increased cost of goods sold associated with the
increase in oilfield supply and equipment sales.

EXPLORATION EXPENSE. Exploration expense increased $156,628 (7%) from 1992
to 1993 due to $157,000 in dry hole expense in 1993.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administration expense
increased from $3.7 million in 1992 to $3.9 million in 1993. The increase was
due primarily to loan fees and taxes incurred in 1993 and the elimination of
certain fee income that was used to offset general and administrative expenses
prior to the Consolidation.

INTEREST EXPENSE. Interest expense increased from $2.2 million in 1992 to
$3.2 million in 1993. This increase was primarily due to the assumption of the
debt of two affiliated entities as a result of the Consolidation and the
assumption of debt in acquiring the Company's West Virginia properties. These
increases were partially offset by the repayment of a substantial portion of
these debts in May and June of 1993.

DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased by $4.9 million (100%) in 1993 compared to 1992. This
increase was primarily due to additional depletion expense associated with the
higher production volumes resulting from the Consolidation and the Company's
acquisitions in 1992.

INCOME BEFORE INCOME TAXES. Income before income taxes increased $3.6
million (228%) from $1.6 million in 1992 to $5.2 million in 1993. The oil and
gas operations segment increased operating income $7.0 million from $622,840 in
1992 to $7.6 million in 1993. The increase was attributable to the items
discussed above. The operating income of the oilfield sales and service segment
decreased $1.5 million from operating income of $1.6 million in 1992 to $125,658
in 1993. In addition to the items discussed above, the decrease in the operating
income of the oilfield sales and service segment was attributable to an
operating loss of $41,748 in 1993 from Magnolia Compression Services, Inc. which
was formed in 1993. The operating income of oilfield sales and services,
exclusive of these activities, decreased $1.5 million from $1.6 million in 1992
to $167,406 in 1993.

NET INCOME. Net income for 1993 was $3.2 million compared to net income of
$1.1 million in 1992. This increase in net income was primarily a result of the
Consolidation and the addition of the Company's West Virginia properties as
discussed in the items above. Provision for income taxes increased from $446,121
in 1992 to $2.0 million in 1993 due to the increase in income before taxes as
well as an increase in the effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital is closely related to and dependent on the
current prices paid for its oil and gas.

The Company's current ratio at March 31, 1995 was 1.99 to 1.00. During the
first quarter of 1995, working capital increased $2.3 million from $13.6 million
to $15.9 million. The increase was primarily due to a $3.7 million increase in
cash due to the acquisition of Ward Lake's cash balances. The Company's
operating activities provided cash flow of $3.5 million during the first quarter
of 1995.

17
<PAGE> 20

On May 25, 1995, the Company's bank group amended its revolving bank
facility to accommodate the Quaker State Properties acquisition. The facility
was increased to $200 million and the borrowing base was split into two
tranches, a senior tranche designated Borrowing Base I and a subordinated
tranche designated Borrowing Base II. The Company's borrowing base is calculated
by the bank group and is based on the cash flows generated by its proved
developed reserves, gas gathering systems and other corporate assets. Generally,
the Company can expect to have the borrowing base increased by at least 50% of
the present value before income taxes (discounted at 10% per annum) of any
proved developed reserves added through acquisition or drilling.

Borrowing Base I was initially set at $81 million and the maturity date was
extended to March 31, 1999. Outstanding balances on this tranche bear interest
at the Company's choice of either: (1) the one, two or three-month LIBOR + 2%
(8.06% for the three-month LIBOR interest rate option at May 31, 1995) or (2)
the bank's prime rate (9% at May 31, 1995). These interest rates increase by
0.5% any time there are outstanding balances on Borrowing Base II.

Borrowing Base II was set at $22 million and will expire on October 15,
1997. If the Company uses the bank facility to finance the Quaker State
Properties acquisition, the Company is required to borrow $22 million on
Borrowing Base II and the balance on Borrowing Base I. Outstanding balances on
this tranche bear interest at the Company's choice of either of the interest
rate options mentioned above, except that the interest rates are increased by 1%
(i.e., LIBOR + 3% and prime + 1%). Borrowing Base II will not be included as
part of the Company's future borrowing capacity if it is not utilized to finance
the acquisition of the Quaker State Properties.

The amended agreement will continue to restrict the sale of assets to no
more than 15% of shareholders' equity in any one year and will require the
Company to maintain certain levels of net worth, working capital and debt
service coverage.

During 1993, the Company placed $35 million of 7% fixed-rate senior notes
with five insurance companies in a private placement. These notes, which are
interest-only for four years, mature on September 30, 2005. Equal annual
principal payments of $3,888,888 will be required on each September 30
commencing in 1997.

The note agreement limits the Company's senior debt to 50% of the Company's
discounted present value (at 10%) of its oil and gas reserves plus the net book
value of its gas gathering systems. Other terms and covenants are substantially
the same as those contained in the $200 million revolving credit facility.

The Company currently expects to spend approximately $20 million during
1995 on its drilling activities and approximately $4.4 million for other capital
expenditures. The Company's acquisition program is expected to be financed with
any available cash flow over $24.4 million and with its available bank credit
line. The Company believes that its existing sources of working capital are
sufficient to satisfy all currently anticipated working capital requirements.

The level of the Company's cash flow in the future will depend on a number
of factors including the demand and price levels for oil and gas, its ability to
acquire additional producing properties and the scope and success of its
drilling activities. The Company intends to finance such activities principally
through its available cash flow, through additional borrowings and, to the
extent necessary, the issuance of additional common or preferred stock.

INFLATION AND CHANGES IN PRICES

During 1992, the price received for the Company's crude oil fluctuated from
a low of $16.00 per barrel to a high of $20.75 per barrel with an average price
of $19.27 per barrel. During 1993, the price paid for the Company's crude oil
fell from a high of $19.00 per barrel at the beginning of the year to a low of
$13.50 per barrel at year-end with an average price of $17.15 per barrel. During
1994, the price paid for the Company's crude oil increased from $13.50 per
barrel to a high of $18.00 per barrel, then decreased to $15.50 per barrel at
year-end with an average price of $15.98 per barrel. The average price of the
Company's natural gas increased from $2.22 per Mcf in 1992 to $2.55 per Mcf in
1993 to $2.58 per Mcf in 1994. In the first quarter of 1995, the

18
<PAGE> 21

average price of the Company's natural gas was $2.47 per Mcf and the average
price of the Company's oil was $16.70 per barrel.

The price of oil and gas has a significant impact on the Company's results
of operations. Oil and gas prices fluctuate based on market conditions and,
accordingly, cannot be predicted. As a result of increased competition among
drilling contractors and suppliers and reduced levels of drilling, costs to
drill, complete and service wells have remained relatively constant in recent
years.

19
<PAGE> 22

BUSINESS AND PROPERTIES
OVERVIEW

On a pro forma basis (giving effect to the acquisition of the Quaker State
Properties, Ward Lake and other acquisitions completed through, or pending at,
May 31, 1995), as of December 31, 1994, the Company operated more than 7,600 oil
and gas wells in Ohio, West Virginia, Pennsylvania, New York and Michigan and
had proved developed reserves totaling 178 Bcf of gas and 6 MMBbl of oil. These
reserves had a present value before income taxes of approximately $183 million
and a reserve life of 9 years at December 31, 1994. The Company's pro forma 1994
production was 19.9 Bcf of gas and .9 MMBbl of oil. Its pro forma average
wellhead price for natural gas was $2.44 per Mcf for the Appalachian Basin
properties and $2.02 per Mcf for the Michigan Basin properties. Its pro forma
average wellhead price for oil was $15.98 per Bbl.

THE APPALACHIAN AND MICHIGAN BASINS

The Appalachian Basin is the oldest and geographically one of the largest
oil and gas producing regions in the United States. Although the Appalachian
Basin has sedimentary formations indicating the potential for oil and gas
reservoirs to depths of 30,000 feet or more, oil and gas is currently produced
primarily from shallow blanket formations at depths of 1,000 to 5,500 feet.
Drilling success rates of the Company and others drilling in these formations
historically have exceeded 90% with production generally lasting longer than 20
years.

The combination of long-lived production and high drilling success rates at
these shallower depths has resulted in a highly fragmented, extensively drilled,
low technology operating environment in the Appalachian Basin. As of December
31, 1994, there were over 10,000 independent operators of record and
approximately 180,000 producing oil and gas wells in Ohio, West Virginia,
Pennsylvania and New York. There has been only limited testing or development of
the formations below the existing shallow production in the Appalachian Basin.
Fewer than 1,500 wells have been drilled to a depth greater than 7,500 feet, and
fewer than 100 wells have been drilled to a depth greater than 12,500 feet in
the entire Appalachian Basin. As a result, the Company believes that there are
significant exploration and development opportunities in these less developed
formations for those operators with the capital, technical expertise and ability
to assemble the large acreage positions needed to justify the use of advanced
exploration and production technologies.

The Michigan Basin is similar in many respects to the Appalachian Basin.
The Company's production is derived from the shallow (700 to 1,700 feet) blanket
Antrim Shale formation which has not been extensively developed. Success rates
for companies drilling to this formation have exceeded 90%, with production
often lasting as long as 20 years. The Michigan Basin also contains deeper
formations with greater reserve potential

20
<PAGE> 23

(primarily the Niagaran Carbonate) that have been more extensively explored than
the Antrim Shale. The Michigan Basin has over 280 operators of record, most of
which are private companies, and more than 9,600 producing wells. Because the
production rate from Antrim Shale wells is relatively low, cost containment is a
crucial aspect of operations. In contrast to the shallow blanket formations in
the Appalachian Basin, the operating environment in the Antrim Shale is more
capital intensive because of the low natural pressures and the high water
content of the formation. In addition, there are more major oil and gas
companies active in the Michigan Basin than in the Appalachian Basin.

The proximity of the Appalachian and Michigan Basins to large commercial
and industrial natural gas markets has generally resulted in wellhead gas prices
that since 1985 have ranged from $.43 to $1.21 per Mcf in the Appalachian Basin
and $0.22 to $1.66 per Mcf in the Michigan Basin above national wellhead prices.
In 1994, prices in the Appalachian and Michigan Basins averaged $0.44 and $0.22
per Mcf, respectively, above national wellhead prices. The Company's average
wellhead gas price in 1994 was $0.84 per Mcf above the average national wellhead
price.

BUSINESS STRATEGY

The Company's primary operating objective is to become a dominant oil and
gas producer and natural gas marketer in the Appalachian and Michigan Basins. To
accomplish this objective, the Company's specific business strategy is to:

- make strategic acquisitions of producing oil and gas properties;

- expand production and reserves through a balanced portfolio of
developmental and exploratory drilling;

- improve profitability on production from existing and acquired
properties; and

- expand its gas gathering and marketing activities.

This strategy is intended to enable the Company to utilize its sizeable
acreage position, technological capability and financial resources to take
advantage of (i) the increased availability of producing properties for sale in
the Appalachian and Michigan Basins as capital constrained operators seek
liquidity or operating capital and (ii) the significant exploration and
development opportunities in the deeper and potentially more productive
formations in the Appalachian and Michigan Basins.

ACQUISITION OF PRODUCING PROPERTIES

Strategy. The Company's acquisition strategy focuses on producing
properties that (i) the Company already owns an interest in and operates or that
are strategically located in relation to its existing operations, (ii) can be
increased in value through operating cost reductions, advanced production
technology, mechanical improvements, recompleting or reworking wells and the use
of enhanced and secondary recovery techniques, (iii) provide development
drilling opportunities or enhance the Company's acreage position, (iv) have the
potential for increased revenues from gas production through the Company's gas
marketing capabilities or (v) are of sufficient size to allow the Company to
operate efficiently in new areas. Using these criteria, the Company employs a
disciplined approach to acquisition analysis that requires input and approval
from all key areas of the Company. These areas include field operations,
exploration and production, finance, gas marketing, land management and
environmental compliance. Although the Company reviews in excess of 50
acquisition opportunities per year, this disciplined approach can result in
uneven annual spending on acquisitions. The following table sets forth
information pertaining to acquisitions completed during the period 1992 through
May 31, 1995 and acquisitions pending at that date (including the Quaker State
Properties acquisition).

21
<PAGE> 24

<TABLE>
<CAPTION>
PROVED DEVELOPED RESERVES
------------------------------
NUMBER OF PURCHASE OIL GAS COMBINED COST
PERIOD TRANSACTIONS PRICE(1) (MBBL) (MMCF) (MMCFE) PER MCFE
- ------ ------------ -------------- ------ ------ -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1992.................... 5 $ 23,733 466 41,477 44,241 $0.54
1993.................... 8 3,883 119 4,121 4,835 0.80
1994.................... 11 20,274 223 26,877 28,215 0.72
1995(2)................. 5 58,687 2,351 76,367 90,470 0.65
</TABLE>

- ---------------

(1) Represents portion of purchase price allocated to proved developed reserves.

(2) On a pro forma basis through May 31, 1995.

Quaker State Properties Acquisition. The Company entered into an agreement
with Quaker State Corporation dated , 1995 to purchase the
Quaker State Properties for $56 million, subject to adjustment. The assets to be
acquired include:

- proved developed reserves of approximately 41.2 Bcf of natural gas
and 1.9 million Bbl of oil at December 31, 1994;

- proved undeveloped reserves of approximately 5.6 Bcf of natural gas
and .3 million Bbl of oil at December 31, 1994;

- interests in approximately 1,460 gross (1,100 net) wells, 95% of
which are operated by Quaker State Corporation;

- 250 miles of gas gathering systems in Pennsylvania, New York, Ohio
and West Virginia that are tied directly to interstate natural gas
transmission systems;

- operating rights under joint operating agreements and the contract
administration or operating fees chargeable to third parties
thereunder; and

- undeveloped leases and fee mineral interests covering approximately
250,000 net acres and Quaker State Corporation's extensive geologic
and geophysical database.

Approximately $41.5 million of the purchase price has been allocated to the
52.5 Bcfe of proved developed reserves, $8.6 million to the gas gathering
systems and the balance to other assets.

The agreement provides that the closing will occur on or about July 31,
1995 or as soon as practicable thereafter, but in no event later than September
15, 1995 with the purchase price to be adjusted for the amount of net production
revenues after January 1, 1995. Accordingly, for the period from January 1, 1995
to the closing date, the net revenues (gross production income, reduced by
production taxes, lease operating and allocated general and administrative
expenses, capital expenditures and other similar expenses) will be credited
against the purchase price for purposes of the agreement and financial
reporting. The purchase price will be further adjusted for, among other things,
any wells which are excluded as a result of title or other defects.

Completion of the acquisition of the Quaker State Properties is subject to
a number of conditions, including verification of title to the properties,
satisfaction or waiver of preferential rights to purchase the properties held by
third parties, obtaining necessary consents to assignment of the properties to
the Company and customary "due diligence" reviews relating to the properties.
Although the Company believes that the acquisition of the Quaker State
Properties will be completed, there can be no assurance that the conditions
precedent to consummating the acquisition will be satisfied or waived. The
acquisition is not contingent on the consummation of this offering since the
Company has sufficient borrowing capacity under its credit facility to finance
the purchase.

Ward Lake Acquisition. Effective in January 1995, the Company made its
initial entry into the Michigan Basin by acquiring Ward Lake, a privately-held
exploration and production company headquartered in Gaylord, Michigan, for $15.1
million. Ward Lake operates and holds production payment and working interests
averaging 13.6% in approximately 500 Antrim Shale gas wells in Michigan's lower
peninsula and

22
<PAGE> 25

approximately 5,500 undeveloped leasehold acres in the proximity of the wells.
The wells had estimated proved developed gas reserves of 98 Bcf (14 Bcf net to
Ward Lake's interest) at December 31, 1994. Approximately one-half of the
purchase price represented payment for the proved developed reserves, with the
balance associated with other oil and gas and corporate assets. The Company is
currently attempting to acquire additional working interests in the wells.

The Company's rationale for entering the Michigan Basin was based on its
geologic and operational similarities to the Appalachian Basin and its
geographic proximity to the Company's operations in the Appalachian Basin.
Geologically, the Michigan Basin resembles the Appalachian Basin with shallow
blanket formations and deeper formations with greater reserve potential.
Operationally, economies of scale and cost containment are essential to
operating profitability. The Michigan Basin's operating environment is also
highly fragmented with substantial acquisition opportunities. The Company's
management has had prior experience operating in the Michigan Basin in that the
Company's President and Chief Operating Officer was in charge of Shell Oil
Company's production operations in Michigan from August 1, 1977 to July 31,
1981. The Company's primary objective in acquiring Ward Lake was to allow the
Company to pursue opportunities in the Michigan Basin with an established
operating company that provided the necessary critical mass to operate
efficiently.

Other Recent Acquisitions. In May 1995 the Company acquired or agreed to
acquire, for approximately $19.4 million, working interests in 1,139 gross (919
net) oil and gas wells in Ohio, Pennsylvania and New York and drilling rights on
more than 250,000 acres in Ohio adjacent to producing properties operated by the
Company. Estimated proved developed reserves associated with the wells acquired
totaled 21 Bcf of natural gas and .5 MMBbl of oil net to the Company's interest
at December 31, 1994.

The principal effects on the Company of the addition of the Quaker State
Properties (assuming consummation of the purchase), Ward Lake and the other
properties which the Company has acquired or agreed to acquire through May 31,
1995 are shown in the following table:

<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------------
QUAKER WARD LAKE
STATE AND OTHER PRO FORMA PERCENTAGE
COMPANY PROPERTIES ACQUISITIONS COMBINED INCREASE
------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Proved reserves (MMcfe)............. 147,672 60,237 41,486 249,395 69%
1994 production (MMcfe)............. 12,539 8,399 4,077 25,015 100%
Reserve life (years)................ 11.8 7.2 10.2 10.0 (15)%
Gathering systems (miles)........... 1,900 250 400 2,550 34%
Leasehold acreage (net)............. 534,000 255,000 260,000 1,049,000 96%
</TABLE>

OIL AND GAS OPERATIONS AND PRODUCTION

Operations. The Company serves as the operator of substantially all of the
wells in which it holds working interests. The Company seeks to maximize the
value of its properties through operating efficiencies associated with economies
of scale and through operating cost reductions, advanced production technology,
mechanical improvements and the use of enhanced and secondary recovery
techniques.

Through its production field offices in Ohio, West Virginia, Pennsylvania,
New York and Michigan, the Company continuously reviews its properties,
especially recently acquired properties, to determine what actions can be taken
to reduce operating costs and/or improve production. The Company has reduced
field level costs through improved operating practices such as computerized
production scheduling and the use of hand-held computers to gather field data.
On acquired properties, further efficiencies may be realized through
improvements in production scheduling and reductions in oilfield labor. Actions
that may be taken to improve production include modifying surface facilities and
redesigning down-hole equipment. In 1989 and 1990, the Company participated in
the development of an advanced plunger lift system (the "JetStar"), a tool that
is designed to improve production on certain low-volume gas wells. As of
December 31, 1994, a total of 217 JetStar systems have been installed on Company
operated wells at a cost of approximately $5,600 per well, resulting in an
average net increase in production to the Company of 8 Mcf per well per day
during the first year following installation.

23
<PAGE> 26
Production. The following table sets forth certain historical and pro forma
information regarding oil and gas production from the Company's properties. The
pro forma information gives effect to the acquisition of the Quaker State
Properties, Ward Lake and other properties which the Company has acquired or
agreed to acquire through May 31, 1995 as if such transactions had occurred at
January 1, 1994.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------------- -----------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
-------------------------- --------- ---------------- ---------
1992 1993 1994 1994 1994 1995 1995
------ ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Production:
Oil (MBbl).............. 351 453 496 859 107 118 218
Gas (MMcf).............. 3,728 7,373 9,563 19,858 2,257 2,927 5,349
Average wellhead price:
Oil (per Bbl)........... $19.27 $17.15 $15.98 $ 15.98 $14.38 $16.70 $ 16.51
Gas (per Mcf)........... 2.22 2.55 2.58 2.40 2.71 2.47 2.25
Combined (per Mcfe)..... 2.58 2.64 2.60 2.46 2.64 2.53 2.35
Production expense (per
Mcfe)................... 0.92 0.71 0.74 0.70 0.75 0.72 0.64
Operating margin (per
Mcfe)(1)................ 1.66 1.93 1.86 1.76 1.89 1.81 1.71
</TABLE>
- ---------------
(1) Average wellhead price per Mcfe less production expense per Mcfe.

Wells and Acreage. The following tables summarize the Company's productive
wells and acreage on a pro forma basis at December 31, 1994 giving effect to the
acquisition of the Quaker State Properties, Ward Lake and the other properties
which the Company has acquired or agreed to acquire through May 31, 1995:

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
PRO FORMA
-------------------------------------------------------
OIL WELLS GAS WELLS TOTAL
--------------- --------------- ---------------
GROSS NET GROSS NET GROSS NET
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
WELLS:
Appalachian Basin..................... 1,697 1,427 5,497 4,502 7,194 5,929
Michigan Basin........................ -- -- 504 81 504 81
----- ----- ----- ----- ----- -----
Total............................... 1,697 1,427 6,001 4,583 7,698 6,010
===== ===== ===== ===== ===== =====
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
PRO FORMA
-----------------------------------------------------------------------
DEVELOPED ACREAGE UNDEVELOPED ACREAGE TOTAL ACREAGE
------------------- ------------------- -----------------------
GROSS NET GROSS NET GROSS NET
------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ACREAGE:
Appalachian Basin...... 411,000 388,000 705,000 651,000 1,116,000 1,039,000
Michigan Basin......... 25,000 4,000 6,000 6,000 31,000 10,000
------- ------- ------- ------- --------- ---------
Total................ 436,000 392,000 711,000 657,000 1,147,000 1,049,000
======= ======= ======= ======= ========= =========
</TABLE>

EXPLORATION AND DEVELOPMENT

The Company's exploration and development activities include development
drilling in shallow blanket formations and development and exploratory drilling
in the deeper formations of the Appalachian and Michigan Basins. The Company's
strategy is to develop a balanced portfolio of drilling prospects that includes
lower risk wells with a high probability of success and higher risk wells with
greater economic potential.

The Company has an extensive inventory of acreage on which to conduct its
exploration and development activities. Upon completion of the acquisitions
pending at May 31, 1995 (including the Quaker State Properties), the Company
expects to have approximately 1,147,000 gross (1,049,000 net) acres in its
inventory.

24
<PAGE> 27

In 1995, the Company plans to spend approximately $14.1 million to drill
approximately 116 wells to shallow blanket formations in its five state
operating area, including approximately 35 wells to be drilled in the Michigan
Basin. The Company also plans to spend approximately $6.1 million to drill 44
wells to the less developed formations, including 33 wells to the Knox formation
in 1995. Through May 31, 1995, the Company had drilled 14 wells to the shallow
blanket formations, with 14 completed or in the process of being completed as
producing wells. Through the same date, the Company had drilled 12 wells to the
deeper formations, with five completed or in the process of being completed as
producing wells.

The Company believes that its diversified portfolio approach to its
drilling activities results in more consistent and predictable economic results
than might be experienced with a less diversified or higher risk drilling
program profile.

Shallow Blanket Formations. In general, the shallow blanket formations
found in the Appalachian and Michigan Basins are widespread in extent, and
hydrocarbon accumulations are not dependent upon local stratigraphic or
structural trapping. Drilling success rates exceed 90%. The principal risk of
such wells is uneconomic recoverable reserves.

The shallow blanket formations in the Appalachian Basin are relatively
tight reservoirs that produce 20% to 30% of their recoverable reserves in the
first year and 40% to 50% of their total recoverable reserves in the first three
years, with steady declines in subsequent years. Average well lives range from
15 years to 25 years or more.

The Antrim Shale formation, the principal shallow blanket formation in the
Michigan Basin, is characterized by high formation water production in the early
years of a well's productive life, with water production decreasing over time.
Antrim Shale wells typically produce at rates of 100 Mcf to 125 Mcf per day for
several years, with modest declines thereafter. Gas production often increases
in the early years as the producing formation becomes de-watered. Average well
lives are 20 years or more.

Certain typical characteristics of the shallow blanket formations to be
drilled by the Company in 1995 are described below:

<TABLE>
<CAPTION>
AVERAGE AVERAGE GROSS
AVERAGE DRILLING AND RESERVES
WELL DEPTHS COMPLETION PER WELL
LOCATION ------------- COSTS PER WELL ----------------
-------------------------------- (IN FEET) --------------- (IN MMCFE)
(IN THOUSANDS)
<S> <C> <C> <C>
Ohio............................ 3,000 - 5,500 $ 110 - 135 135
West Virginia................... 1,500 - 6,000 140 - 160 225
Pennsylvania.................... 1,100 - 1,500 30 - 40 30
New York........................ 3,000 - 3,500 100 - 110 100
Michigan........................ 700 - 1,700 200 - 220 425
</TABLE>

Less Developed Formations. The Appalachian Basin has productive and
potentially productive sedimentary formations to depths of 30,000 feet or more,
but the combination of long-lived production and high drilling success rates in
the shallow formations has impaired the development of the deeper formations in
the basin. The Company believes it possesses the technological expertise and the
acreage position needed to explore the deeper formations in a cost effective
manner.

The less developed formations in the Appalachian Basin include the Knox
sequence of sandstones and dolomites which includes the Rose Run, Beekmantown
and Trempeleau productive zones, at depths ranging from 3,000 feet to 8,000
feet. The geographical boundaries of the Knox sequence, which lies approximately
2,000 feet below the blanket Clinton Sandstone, are generally well defined in
Ohio with less definition in New York. Nevertheless, the Knox group has been
only lightly explored, with fewer than 1,500 wells drilled to this sequence of
formations during the past 10 years.

The Company began testing the Knox sequence in 1989 by selecting certain
wells that were targeted to be completed to the Clinton formation and drilling
them an additional 2,000 feet to 2,500 feet to test the Knox formations. In
1991, the Company began using seismic analysis and other geophysical tools to
select drilling locations specifically targeting the Knox formations. Since
1991, the Company has added to its technical staff

25
<PAGE> 28

to enhance its ability to develop drilling prospects in the Knox and other less
developed formations in the Appalachian Basin and the deeper formations in the
Michigan Basin. The following table shows the Company's drilling results in the
Knox sequence.

<TABLE>
<CAPTION>
WELLS
WELLS DRILLED COMPLETED(1) AVERAGE GROSS
-------------- -------------- RESERVES PER
PERIOD GROSS NET GROSS NET WELL
--------------------------- ----- ---- ----- ---- -------------------
(MMCFE)(2)
<S> <C> <C> <C> <C> <C>
1989-1990.................. 18 14.5 5 4.0 465
1991....................... 11 10.3 5 4.7 170
1992....................... 15 12.5 8 6.4 285
1993....................... 30 20.2 16 8.8 360
1994....................... 25 14.2 17 9.8 389
1995(3).................... 9 4.2 5 1.7 N/A

<FN>
- ---------------

(1) Completed as producing wells in the Knox formations. Of the 52 gross
wells that were not commercially productive in the Knox formations,
18 were completed as producing wells in the shallower Clinton
Sandstone formation.

(2) Average reserves per well reflect production through December 31,
1994 plus estimated proved developed reserves at that date.

(3) Through May 31, 1995.
</TABLE>

The Company's historical experience is that the average Knox well produces
20% to 25% of its recoverable reserves in the first year of production and
approximately 50% of its recoverable reserves in the first three years with a
steady decline thereafter. Knox sequence wells have an expected productive life
ranging from 15 to 25 years.

As shown in the following table, the Company's production from Knox
formation wells has increased steadily as additional wells have been drilled.

<TABLE>
<CAPTION>
KNOX FORMATION WELLS AND
PRODUCTION
-------------------------
1992 1993 1994
--- ----- -----
<S> <C> <C> <C>
Number of Wells in Production:
Gross............................................. 16 23 41
Net............................................... 13.7 20.6 29.7
Annual Production (net):
Oil (MBbl)........................................ 4.7 13.9 67.1
Gas (MMcf)........................................ 340 731 1,041
Combined (MMcfe).................................. 368 814 1,444
</TABLE>

The Company is well positioned to exploit the undeveloped potential of the
Knox formations. On a pro forma basis giving effect to the acquisitions
completed through, and pending at, May 31, 1995, it holds leases on
approximately 648,000 net acres overlying potential Knox drilling locations. The
Company plans to drill 40 wells to the Knox formations in 1995.

26
<PAGE> 29

In addition, the Company has also tested the Niagaran Carbonate, Onondaga
Limestone and Oriskany Sandstone formations. Certain typical characteristics of
the deeper formations to be drilled by the Company in 1995 are described below:

<TABLE>
<CAPTION>
AVERAGE
RANGE OF OR DRILLING COSTS
AVERAGE ----------------- AVERAGE GROSS
WELL DEPTH DRY COMPLETED RESERVES PER
FORMATION LOCATION ----------- HOLE WELL WELL
----------------------------- -------- ---- --------- ----------------
(IN FEET) (IN THOUSANDS) (IN MMCFE)
<S> <C> <C> <C> <C> <C>
Knox Formations.............. OH, NY 3,000-8,000 $110 $ 220 360
Niagaran Carbonate........... MI 4,500 350 580 1,500
Onondaga Limestone........... PA 5,500 100 175 400
Oriskany Sandstone........... PA 9,000 360 770 1,000
</TABLE>

Drilling Results. The following table sets forth drilling results
(excluding Michigan) with respect to wells drilled during the past three years.

<TABLE>
<CAPTION>
SHALLOW BLANKET
FORMATIONS(1) LESS DEVELOPED FORMATIONS(2)
-------------------------- ----------------------------
1992 1993 1994 1992 1993 1994
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Productive
Gross...................................... 4 42 58 8 16(3) 22(4)
Net........................................ 4 31.4 45.6 6.4 8.8 12.7
Dry
Gross...................................... 0 2 2 7 14 10
Net........................................ 0 0.7 0.4 5.1 11.4 4.8
Reserves discovered -- net (MMcfe)(5).......... 97 3,019 4,813 1,821 3,173 5,196
Approximate cost (in thousands)................ $170 $4,847 $5,762 $3,343 $3,413 $5,509
</TABLE>

- ---------------

(1) Consists of wells drilled to the Berea and Clinton Sandstone formations in
Ohio, the Berea Sandstone, Devonian Brown Shale, Ravencliff Sandstone and
Big Lime Limestone formations in West Virginia, and the Glade and Clarendon
Sandstone formations in Pennsylvania.

(2) Consists of wells drilled to the Trenton Limestone and Knox formations in
Ohio and the Oriskany Sandstone and Onondaga Limestone formations in
Pennsylvania.

(3) Two additional wells which were dry in the Knox formations were subsequently
completed in the shallower Clinton formation.

(4) One additional well which was dry in the Knox formations was subsequently
completed in the shallower Clinton formation.

(5) Reflects production through December 31, 1994 plus estimated proved
developed reserves at that date.

Since 1987, drilling programs managed by Ward Lake focused exclusively on
the Antrim Shale formation and resulted in the following: 506 wells drilled; 2
dry holes; $64.5 million in drilling expenditures; and 161 Bcf of reserves
discovered.

GAS GATHERING AND MARKETING

Gas Gathering. On a pro forma basis giving effect to the acquisition of the
Quaker State Properties, Ward Lake and other properties which the Company has
acquired or agreed to acquire through May 31, 1995, the Company operates
approximately 2,550 miles of natural gas gathering lines in Ohio, West Virginia,
Pennsylvania, New York and Michigan which are tied directly to various
interstate natural gas transmission systems. The interconnections with these
interstate pipelines afford the Company potential marketing access to most East
Coast gas markets.

Gas Marketing. The major industrial centers of Akron, Canton, Cleveland and
Pittsburgh are all located in close proximity to the Company's operations and
provide a large potential market for direct natural gas

27
<PAGE> 30

sales. At present, the Company markets directly to approximately 150 customers
in a five-state area. The Company focuses its gas marketing efforts on small to
mid-sized industrial customers that require more service and have the potential
to generate higher margins than large industrial users.

The Company sells the gas it produces to its commercial and industrial
customers, local distribution companies and on the spot market. In addition to
its own production, the Company buys gas from other producers and third parties
and resells it. As the operator of wells in which it has an interest and wells
owned by third parties, at May 31, 1995, the Company controlled approximately
112 MMcf of gas per day of which approximately 30% consisted of its own
production. At that date, the Company was collecting marketing fees on 56 MMcf
per day. Gas sold to end users is usually sold pursuant to contracts which
extend for periods of one to three years at fixed prices. Gas sold to local
distribution companies is generally sold under one-year or longer contracts
either at fixed prices or prices indexed to the local distribution companies'
cost of gas. The following table shows the type of buyer for the Company's own
gas production and gas purchased from others in 1994.

<TABLE>
<CAPTION>
GAS PURCHASED
COMPANY PRODUCED GAS FROM THIRD PARTIES
-------------------------- --------------------------
PURCHASER MMCF PERCENT OF TOTAL MMCF PERCENT OF TOTAL
- ---------------------------------------------- ----- ---------------- ----- ----------------
<S> <C> <C> <C> <C>
End users..................................... 3,900 40.6% 6,600 95.7%
Local distribution companies
Fixed price................................. 2,900 30.2% -- --
Indexed..................................... 1,400 14.6% -- --
Spot markets.................................. 1,400 14.6% 300 4.3%
----- ------ ----- ------
Total.................................... 9,600 100.0% 6,900 100.0%
===== ============ ===== ============
</TABLE>

OILFIELD SERVICE AND SUPPLIES

The Company has provided its own oilfield services for more than 30 years
in order to assure quality control and operational and administrative support to
its exploration and production operations. In 1992, a separate service division
was organized which provides the Company and third party customers with
necessary oilfield services such as well workovers, well completions, JetStar
conversions, brine hauling and disposal and oil trucking. During the last half
of 1994, the Company acquired for $3.1 million substantially all the assets of
two Ohio-based oilfield servicing companies and a brine hauling and disposal
company operating primarily in Ohio. These acquisitions make the Company's
service division the largest oilfield service company in Ohio.

Target Oilfield Pipe & Supply Company, a subsidiary of the Company,
operates retail sales outlets in the Appalachian Basin from which it sells a
broad range of equipment, including pipe, tanks, fittings, valves, pumping units
and JetStar plunger lift systems. The Company originally entered the oilfield
supply business to ensure the quality and availability of supplies for its own
operations. In 1994, third party sales accounted for approximately 70% of total
sales. In the first quarter of 1994, the Company acquired the assets and
liabilities of Engine Power Systems, Inc., a distributor of Waukesha natural
gas-fueled engines and gas-powered electric generation equipment, in exchange
for 31,656 restricted shares of the Company's common stock.

The Company plans to expand its oilfield service and supplies business
through continued growth in its market area.

OIL AND GAS RESERVES

The following table sets forth information with respect to the Company's
proved developed and proved undeveloped oil and gas reserves as of December 31,
1992, 1993 and 1994 and pro forma information with respect to such reserves at
December 31, 1994 giving effect to the acquisition of the Quaker State
Properties, Ward Lake and other properties which the Company has acquired or
agreed to acquire through May 31, 1995. The information with respect to proved
developed reserves is based on reserve reports of John G. Redic, Inc.,

28
<PAGE> 31

independent petroleum engineers. See "Experts". The estimates of proved
undeveloped reserves were prepared by the Company's petroleum engineers.

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------
ACTUAL PRO FORMA
---------------------------------- ---------
1992 1993 1994 1994
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Proved developed reserves:

Gas (MMcf).................................... 79,158 74,578 101,355 177,722
Oil (MBbl).................................... 4,163 3,145 3,715 6,065
Combined (MMcfe).............................. 104,136 93,445 123,643 214,113
Proved undeveloped reserves:(1)
Gas (MMcf).................................... N/A 19,687 21,636 30,742
Oil (MBbl).................................... N/A 388 399 757
Combined (MMcfe).............................. N/A 22,017 24,029 35,282
Total proved reserves:
Combined (MMcfe)(1)........................... 104,136 115,462 147,672 249,395
</TABLE>
- ---------------
(1) Prior to 1993, the Company did not estimate its proved undeveloped reserves
because the effect on total proved reserves was considered insignificant.

The following table sets forth the estimated future net revenues from the
above proved reserves and pro forma proved reserves of the Company and the
present value of such future net revenues as of December 31, 1994 determined in
accordance with the rules and regulations of the Commission.

<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------------ ------------
<S> <C> <C>
Estimated future net revenues:
Total................................................. $229,844,389 $350,229,318
Present value before income taxes (discounted at 10%
per annum)......................................... 116,470,945 192,496,113
</TABLE>

Estimated future net revenues represent estimated future gross revenues
from the production and sale of proved reserves, net of estimated production
costs (including production taxes, ad valorem taxes and operating costs) and
development costs. Estimated future net revenues were calculated on the basis
of prices and costs estimated to be in effect at December 31, 1994 without
escalation, except where changes in prices were fixed and readily determinable
under existing contracts. The pro forma proved reserves and estimated future
net revenues were calculated based upon assumptions of prices and operating
expenses that the Company believes would have been applicable if all such
proved reserves had been owned by the Company as of December 31, 1994. The
estimates of proved reserves and estimated future net revenues set forth above
and elsewhere in this Prospectus attributable to the Quaker State Properties
differ from those contained in the Statements of Revenues and Direct Operating
Expenses for the Quaker State Properties included elsewhere herein. The
estimates set forth above reflect the Company's anticipated lease operating
expenses on a state-by-state basis based on its historical experience, while
the estimates contained in the Statements of Revenues and Direct Operating
Expenses reflect the historical level of lease operating expenses incurred by
Quaker State Corporation.

The present values shown above should not be construed as the current
market value of the Company's proved reserves. The 10% discount factor used to
calculate present value, which is specified by the Securities and Exchange
Commission (the "Commission"), is not necessarily the most appropriate discount
rate, and present value, no matter what discount rate is used, is materially
affected by assumptions as to timing of future production, lease operating
expenses and capital expenditures, which may prove to be inaccurate. In
addition, the calculation of future net revenues does not take into account the
effect of various cash outlays, including, among other things, general and
administrative costs and interest expense. See "Risk Factors -- Uncertainty of
Reserve Estimates."

EMPLOYEES

As of May 31, 1995, the Company had 447 full-time employees, including 312
field employees, 13 petroleum engineers, five geologists and one geophysicist.

29
<PAGE> 32

COMPETITION AND CUSTOMERS

The oil and gas industry is highly competitive. Competition is particularly
intense with respect to the acquisition of producing properties and the sale of
oil and gas production. There is competition among oil and gas producers as well
as with other industries in supplying energy and fuel to users.

The competitors of the Company in oil and gas exploration, development,
production and marketing include major integrated oil and gas companies as well
as numerous independent oil and gas companies, individual proprietors, natural
gas pipelines and their affiliates and natural gas marketers and brokers. Many
of these competitors possess and employ financial and personnel resources
substantially in excess of those available to the Company. Such competitors may
be able to pay more for desirable prospects or producing properties and may be
able to evaluate, bid for and purchase a greater number of properties or
prospects than the financial or personnel resources of the Company will permit.
The ability of the Company to add to its reserves in the future will be
dependent on its ability to exploit its current developed and undeveloped lease
holdings and its ability to select and acquire suitable producing properties and
prospects for future exploration and development.

The only customer which accounted for 10% or more of the Company's
consolidated revenues for the year ended December 31, 1992 was Witco
Corporation, sales to which totaled $5,313,193. The only customer which
accounted for 10% or more of the Company's consolidated revenues during the
years ended December 31, 1993 and 1994 was Ravenswood Aluminum Corporation
("RAC"), sales to which totaled $8,616,069 and $9,600,612, respectively. The
Company's contract with RAC, its principal gas purchaser in West Virginia,
requires it to deliver 10 billion Btus (approximately 9.5 MMcf) of gas per day
through 1998. At present, the Company is supplying this contract requirement by
delivering approximately 5.9 billion Btus of its own gas production, 3.3 billion
Btus of production from royalty and joint working interest owners in wells in
which the Company holds an interest and 0.8 billion Btus of gas purchased from
third parties.

The contract price at which gas is delivered to this customer for 1995 is
$3.61 per MMBtu. The RAC contract also provides for a discount from the contract
price if gas is available under the same terms and conditions from an
arms-length third party at a price of less than 70% of the contract price. The
discount is equal to one-half of the difference between the lower available
price and the contract price and applies to volumes of gas for plant
requirements in excess of 6,000 MMBtus per day. During 1994, RAC unilaterally
took discounts totaling $334,000 and through March 31, 1995 has taken additional
discounts totaling $315,000. The Company has contested RAC's interpretation of
the contract and may initiate legal action to recover part or all of the
discounts taken.

To protect itself against an interruption or reduction in the income stream
under the RAC contract, the Company required the seller of the properties
subject to the RAC contract to partially secure the delivered gas price the
Company would receive under the contract with a declining letter of credit
issued by Citibank, N.A. and Chase Manhattan Bank, N.A. in the original amount
of $10.7 million, approximately $6.9 million of which is available for drawing
in 1995. The Company is entitled to draw against the letter of credit annually
if it receives less than a specified minimum average delivered price on gas
delivered to RAC under the contract. Under the terms of the letter of credit,
the Company was reimbursed approximately $165,000 directly by the seller for the
1994 discounts and expects to be reimbursed for a significant portion of any
discounts taken in 1995.

REGULATION

Regulation of Production. In all states in which the Company is engaged in
oil and gas exploration and production, its activities are subject to
regulation. Such regulations may extend to requiring drilling permits, spacing
of wells, the prevention of waste and pollution, the conservation of natural gas
and oil, and other matters. Such regulations may impose restrictions on the
production of natural gas and oil by reducing the rate of flow from individual
wells below their actual capacity to produce with the result that the amount of
timing of the Company's revenues could be adversely affected. Moreover, future
changes in local, state or federal laws and regulations could adversely affect
the operations of the Company.

30
<PAGE> 33

Legislation affecting the oil and gas industry is under constant review for
amendment or expansion, frequently increasing the regulatory burden. Numerous
departments and agencies, both federal and state, are also authorized by statute
to issue, and have issued, rules and regulations that are often costly to comply
with and carry substantial penalties for non-compliance. In addition, production
operations are affected by changing tax and other laws relating to the petroleum
industry, by constantly changing administrative regulations and possible
interruption or termination by governmental authorities. Although the Company
believes that it is in material compliance with all such laws and regulations,
there is no assurance that new regulations or new interpretations of existing
laws and regulations will not increase substantially the cost of compliance or
otherwise adversely affect the Company's exploration for and production,
gathering and marketing of oil and gas.

Environmental Regulation. The Company's operations are subject to numerous
laws and regulations governing the discharge of materials into the environment
or otherwise relating to environmental protection. These laws and regulations
may require the acquisition of a permit before drilling commences, restrict the
types, quantities and concentration of various substances that can be released
into the environment in connection with drilling and production activities,
limit or prohibit drilling activities on certain lands lying within wilderness,
wetlands and other protected areas, and impose substantial liabilities for
pollution resulting from the Company's operations. Moreover, the recent trend
toward stricter standards in environmental legislation and regulation is likely
to continue. For instance, legislation has been proposed in Congress from time
to time that would reclassify certain oil and gas exploration and production
wastes as "hazardous wastes" which would make the reclassified wastes subject to
much more stringent handling, disposal and clean-up requirements. If such
legislation were to be enacted, it could have a significant impact on the
operating costs of the Company, as well as the oil and gas industry in general.
State initiatives to further regulate the disposal of oil and gas wastes are
also pending in certain states, and these various initiatives could have a
similar impact on the Company. Management believes that the Company is in
substantial compliance with current applicable environmental laws and
regulations and that continued compliance with existing requirements will not
have a material adverse impact on the Company. See "Risk Factors -- Governmental
Regulation."

The Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without regard
to fault or the legality of the original conduct, on certain classes of persons
that are considered to have contributed to the release of a "hazardous
substance" into the environment. These persons include the owner or operator of
the disposal site or sites where the release occurred and companies that
disposed or arranged for the disposal of the hazardous substances found at the
site. Persons who are or were responsible for releases of hazardous substances
under CERCLA may be subject to joint and several liability for the costs of
cleaning up the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment.

Regulation of Sales and Transportation. The Federal Energy Regulatory
Commission (the "FERC") regulates the transportation and sale for resale of
natural gas in interstate commerce pursuant to the Natural Gas Act of 1938 (the
"NGA") and the Natural Gas Policy Act of 1978 (the "NGPA"). In the past, the
federal government has regulated the prices at which oil and gas could be sold.
Currently, sales by producers of natural gas and all sales of crude oil and
condensate in natural gas liquids can be made at uncontrolled market prices, but
Congress could reenact price controls at any time.

Commencing in the mid-1980s, the FERC issued a series of orders designed to
create a more competitive environment in the natural gas marketplace by
promulgating open-access transportation on natural gas pipelines. The central
themes of these orders and other implementing regulations since 1985 have formed
the basis of the FERC's attempts, in Order No. 636, to continue this evolving
legislative and regulatory process. Order No. 636, issued in April 1992, as
amended by Order No. 636-A (issued in August 1992) and Order No. 636-B (issued
in November 1992), is a continuation of the FERC's efforts to improve the
competitive structure of the pipeline industry and maximize the consumer
benefits of a competitive wellhead gas market. The FERC has required pipelines
to "unbundle" or separate their traditional merchant sales services from their
transportation and storage services and to provide comparable transportation and
storage services with respect to all gas supplies whether purchased from the
pipeline or from other merchants such as marketers or

31
<PAGE> 34

producers. The pipelines must now separately state the applicable rates for each
unbundled service (i.e., for the gas commodity, transportation and storage). It
is unclear what impact increased competition within the natural gas industry
under Order No. 636 will have on the Company's activities. Although Order No.
636, assuming that it is upheld in its entirety, could provide the Company with
additional market access and more fairly apply transportation service rates,
Order No. 636 could also subject the Company to more restrictive pipeline
imbalance tolerances and greater penalties for violation of those tolerances.
The FERC has issued final orders on virtually all Order No. 636 pipeline
restructuring proceedings. Appeals of Order No. 636, as well as orders in the
individual pipeline restructuring proceedings, are currently pending, and the
Company cannot predict the ultimate outcome of court review. This review may
result in reversal, in whole or in part, of Order No. 636.

In December 1992, the FERC issued Order No. 547 governing the issuance of
blanket marketer sales certificates to all natural gas sellers other than
interstate pipelines. Order No. 547 applies to non-first sales that remain
subject to the FERC's NGA jurisdiction. The FERC intends Order No. 547, in
tandem with Order No. 636, to foster a competitive market for natural gas by
giving natural gas purchasers access to multiple supply sources at market-driven
prices. Order No. 547 may increase competition in markets in which the Company's
natural gas is sold.

Commencing in May 1994, the FERC has issued a series of orders in
individual cases that delineate its gathering policy as a result of the comments
received. Among other matters, the FERC slightly narrowed its statutory tests
for establishing gathering status and reaffirmed that it does not have
jurisdiction over natural gas gathering facilities and services and that such
facilities and services are properly regulated by state authorities. As a
result, natural gas gathering may receive greater regulatory scrutiny by state
agencies. In addition, the FERC has approved several transfers by interstate
pipelines of gathering facilities to unregulated gathering companies, including
affiliates. This could allow such companies to compete more effectively with
independent gatherers. The FERC's orders delineating its new gathering policy
are subject to possible court appeals.

The FERC has recently announced its intention to reexamine certain of its
transportation related policies, including the appropriate manner for setting
rates for new interstate pipeline construction and the manner in which
interstate pipelines release transportation capacity under Order No. 636. While
any resulting FERC action would affect the Company only indirectly, these
inquiries are intended to further enhance competition in natural gas markets.

The Company's natural gas gathering operations may be or may become subject
to safety and operational regulations relating to the design, installation,
testing, construction, operation, replacement and management of facilities.
Pipeline safety issues have recently become the subject of increasing focus in
various political and administrative arenas at both the state and federal
levels. For example, federal legislation addressing pipeline safety issues was
considered in the most recent Congressional session, which, if enacted, would
have included a federal "one call" notification system and certain new
construction specifications applicable to certain new construction. The Company
cannot predict what effect, if any, the adoption of additional pipeline safety
legislation might have on its operations, but yet does not believe that any
adverse effect would be material.

Additional proposals and proceedings that might affect the oil and gas
industry are pending before the Congress, the FERC and the courts. The Company
cannot predict when or whether any such proposals may become effective. In the
past, the natural gas industry has been very heavily regulated. There is no
assurance that the current regulatory approach pursued by the FERC will continue
indefinitely into the future. Notwithstanding the foregoing, it is not
anticipated that compliance with existing federal, state and local laws, rules
and regulations will have a material adverse effect upon the capital
expenditures, earnings or competitive position of the Company.

SEASONAL NATURE OF BUSINESS

Historically the demand for natural gas decreases during the summer months
and increases during the winter months. Mild winters in recent years have
lessened this fluctuation. In addition, pipelines and customers have begun to
effectively utilize natural gas storage capacity by purchasing some of their
winter requirements in the summer at reduced prices, further reducing seasonal
gas price fluctuations.

32
<PAGE> 35

LITIGATION

On February 17, 1994, the Estate of Judith C. Bookman filed a complaint in
the Court of Common Pleas of Portage County, Ohio against Harold D. Miller, Inc.
and the Company seeking the recovery of $5,110,000 in compensatory damages and
$2,000,000 in punitive damages for the death of Judith C. Bookman in an
automobile accident involving a tractor-trailer owned and operated by
co-defendant Harold D. Miller, Inc. The co-defendant is an independent
contractor who was transporting oilfield supplies to one of the Company's well
sites at the time of the accident. The Company intends to vigorously defend
itself, and to seek third party indemnification, against these claims. Any
liability of the Company with respect to this action would be covered by
insurance except for any punitive damages awarded. The Company has filed a
motion for summary judgment, and management of the Company believes that the
Company will not incur any material liability to the plaintiff in this lawsuit.

At the present time the Company is involved in several lawsuits arising in
the ordinary course of business. The Company believes that the result of such
proceedings, individually or in the aggregate, will not have a material adverse
effect on the Company's financial position or results of the operations.

33
<PAGE> 36

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Johnson Rice & Company, L.L.C., McDonald & Company
Securities, Inc. and Southcoast Capital Corporation are acting as
Representatives, has severally agreed to purchase from the Company the
respective number of shares of Common Stock set forth opposite its respective
name below:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Johnson Rice & Company, L.L.C........................................
McDonald & Company Securities, Inc. .................................
Southcoast Capital Corporation.......................................

-------------
Total...................................................... 3,500,000
=============
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the shares offered (other
than the over-allotment option described below) hereby if any are purchased.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share to
other brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may, from time to
time, be varied by the Representatives.

The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to an aggregate of 525,000
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, each Underwriter has
severally agreed to purchase approximately the same percentage thereof which the
number of shares of Common Stock purchased by it shown in the table above bears
to the 3,500,000 shares of Common Stock offered hereby. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the 3,500,000 shares of Common Stock offered hereby.

The Company and Henry S. Belden IV have agreed that they will not, without
the prior written consent of the Representatives, sell, transfer, assign or
otherwise dispose of any shares of Common Stock or any rights to purchase or
acquire Common Stock without the prior consent of the Representatives (which may
be granted or withheld in their discretion) prior to the expiration of 180 days
from the date of this Prospectus.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933 or
to contribute to payments that the Underwriters may be required to make in
respect thereof.

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 12,000,000 shares of
Common Stock, without par value, 5,000,000 shares of Class I Serial Preferred
Stock, without par value ("Class I Preferred") and 3,000,000 shares of Class II
Serial Preferred Stock, without par value ("Class II Preferred"). As of May 31,

34
<PAGE> 37

1995, 7,106,246 shares of Common Stock and 24,000 shares of Class II Preferred
were outstanding and no shares of Class I Preferred were outstanding.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of shareholders (except for certain matters
involving only the rights of holders of the Class I Preferred or the Class II
Preferred). The Code of Regulations of the Company provides for a classified
Board of Directors with staggered three year terms. Shareholders have no right
to cumulate their votes in the election of directors and have no preemptive or
other rights to subscribe for additional shares. All outstanding shares of
Common Stock are, and those offered hereby, will be, validly issued, fully paid
and nonassessable. Holders of Common Stock are entitled to receive pro rata such
dividends as the Board of Directors may declare from funds legally available
therefor, subject to the preferential rights of the Class I Preferred and the
Class II Preferred. If and for so long as any shares of Class I Preferred or
Class II Preferred are issued and outstanding, no dividend may be declared or
paid on the Common Stock until all accrued and unpaid dividends on the Class I
Preferred and/or the Class II Preferred have been provided for or paid. Upon the
liquidation or distribution of the Company, the assets legally available for
distribution to shareholders are distributable ratably among the holders of
Common Stock, subject to the preferential distribution rights of any outstanding
shares of the Class I Preferred or the Class II Preferred.

The transfer agent and registrar for the Company's Common Stock is
Registrar & Transfer Company, Cranford, New Jersey.

PREFERRED STOCK

The Class I Preferred and the Class II Preferred may be issued in one or
more series by the Board of Directors without further shareholder authorization.
All shares of Class I Preferred are non-voting shares (except as to certain
matters or in certain events) and all shares of Class II Preferred are voting
shares entitled to one vote for each share on all matters submitted to
shareholders. Otherwise, the shares of Class I Preferred and Class II Preferred
shall have such designations, dividend rates, redemption rights, liquidation
rights, conversion rights and restrictions as determined by the Board of
Directors with respect to the issuance of each particular series.

In the event of a default in the payment of six quarterly dividends on any
series of Class I Preferred or Class II Preferred, the holders of shares of such
class, voting separately as a class, will be entitled to elect two members of
the Board of Directors of the Company until all dividends in default on the
shares of such class have been paid. In addition, the consent of the holders of
at least a majority of the Class I Preferred or the Class II Preferred will be
required to adopt any amendment to the Articles of Incorporation or the Code of
Regulations of the Company which would adversely affect the powers, rights or
preferences of such class or authorize any class of shares ranking prior to the
shares of such class. Under certain circumstances, the holders of Class I
Preferred and the holders of Class II Preferred will have separate class voting
rights in connection with the approval of any merger, sale, consolidation or
reorganization of the Company.

Of the 3,000,000 shares of authorized Class II Preferred, 24,000 shares
designated $7.50 Series A have been issued and were outstanding as of May 31,
1995. The shares of the $7.50 Series A have a stated value of $100 per share and
are entitled to cumulative dividends at the annual rate of $7.50 per share. In
the event of any voluntary or involuntary liquidation or dissolution of the
Company, the holders of the outstanding shares of such series are entitled to be
paid the stated value of such shares as of the date of such liquidation or
dissolution plus any accrued and unpaid dividends thereon to such date, subject
to the prior preferential rights of any shares of stock senior to the $7.50
Series A. The shares of the $7.50 Series A are subject to redemption at $100 per
share at any time by the Company and are, at the option of the holders,
convertible into Common Stock at any time after five years from December 31,
1992 at a conversion price of $15.00 per share of Common Stock.

35
<PAGE> 38

PROVISIONS RELATING TO BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITIONS

Under the Company's Articles of Incorporation, the sale of all or
substantially all the assets of the Company, the merger or consolidation of the
Company with or into another corporation (other than a 90% owned subsidiary) or
other business combination involving the issuance of more than one-sixth of the
Company's outstanding voting stock requires the affirmative vote of the holders
of two-thirds of the Company's outstanding voting stock, unless the sale, merger
or business combination is with a person or entity owning more than 10% of the
Company's outstanding voting stock. Such transactions with any person or entity
owning more than 10% of the Company's outstanding voting stock require the
affirmative vote of the holders of not less than 75% of the Company's
outstanding voting stock (excluding those shares owned by such person or entity)
unless (i) the Board of Directors of the Company has approved the transaction by
vote of at least two-thirds of the Continuing Directors (generally the incumbent
directors and their successors that are recommended for election or elected by
the incumbent directors), or (ii) certain specified "fair price" provisions are
satisfied. Under the fair price criteria, the consideration received by the
holders of the Company's Common Stock in such transaction must be at least equal
to the highest per share price paid by such 10% holder in acquiring any of its
holdings of such Common Stock and must be in cash or the same form of
consideration used by such 10% holder to acquire the largest percentage of such
Common Stock owned by such holder. These provisions are intended to assure that
all shareholders receive a fair price in the event of certain business
transactions initiated by a holder of 10% or more of the Company's voting stock.

The Articles of Incorporation of the Company provide that the Board of
Directors, in evaluating a business combination or a proposal by another
person(s) or entity to make a tender or exchange offer, may consider in addition
to the adequacy of the amount to be paid in connection with any such
transaction, certain specified factors and any other factors the Board deems
relevant. Among the specified factors the Board may consider are the social and
economic effects of the transaction on the Company and its subsidiaries,
employees, customers, creditors and other elements of the communities in which
the Company and its subsidiaries operate or are located; the business and
financial condition and earnings prospects of the acquiring party or parties;
and the competence, experience and integrity of the acquiring party or parties
and its or their management.

In addition, the Articles of Incorporation require the approval by a
majority of disinterested shareholders, given at a special meeting of
shareholders, prior to the consummation of any acquisition of shares which could
result in the acquirer obtaining control of more than one-fifth of the Company's
voting stock or result in increasing the ownership of a holder of at least
one-fifth of such stock to one-third or more, or result in increasing the
ownership of the holder of at least one-third of such stock to one-half or more.
These provisions are similar to those contained in the Ohio Control Share
Acquisition Act.

Certain other provisions of the Articles of Incorporation and Code of
Regulations, which are described below, may have the effect, alone or in
combination with each other or with the existence of authorized but unissued
shares of capital stock, of rendering more difficult or discouraging an
acquisition of the Company deemed undesirable by the Board of Directors.

LEGAL MATTERS

The validity of the Common Stock offered hereby is being passed upon for
the Company by Black, McCuskey, Souers & Arbaugh, Canton, Ohio. Certain legal
matters related to the offering will be passed upon for the Underwriters by
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., New Orleans,
Louisiana.

EXPERTS

The information appearing in this Prospectus regarding estimates of proved
developed reserves as of December 31, 1994 attributable to the oil and gas
properties of the Company and the estimated future net revenues to be derived
therefrom are derived from reserve reports and reserve report audits prepared or
performed by John G. Redic, Inc., independent petroleum engineers, and have been
included herein in reliance upon such firm as experts with respect to such
matters.

36
<PAGE> 39

The consolidated financial statements of the Company at December 31, 1994
and 1993 and for each of the three years in the period ended December 31, 1994
appearing in this Prospectus and the Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

The statements of revenues and direct operating expenses of the Quaker
State Properties for the years ended December 31, 1994 and 1993 appearing in
this Prospectus and the Registration Statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.

The financial statements of Ward Lake Drilling, Inc. as of and for the year
ended December 31, 1994 included in Form 8-K dated February 10, 1995, as
amended, and incorporated by reference herein and in the Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated by reference herein and
in the Registration Statement in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. For further information, reference is hereby
made to the Registration Statement and to the exhibits and schedules filed
therewith. All of these documents may be inspected without charge at the
Commission's principal office in Washington, D.C., and copies thereof may be
obtained from the Commission at the prescribed rates or may be examined without
charge at the public reference facilities of the Commission.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the regional offices of the Commission at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, New York, New York 10048. Copies of such materials can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.

INCORPORATION OF DOCUMENTS BY REFERENCE

The following documents previously filed with the Commission pursuant to
the Securities Exchange Act of 1934 are hereby incorporated by reference in this
Prospectus: (1) the Annual Report on Form 10-K of the Company for the year ended
December 31, 1994; (2) the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995; and (3) the Company's Current Report on Form 8-K
dated February 10, 1995, as amended.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 subsequent to the date hereof and
prior to the termination of this offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing thereof. Any
statement contained in a document, all or a portion of which is incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified shall not be deemed to constitute a part of
this Prospectus except as so modified, and any statement so superseded shall not
be deemed to constitute part of this Prospectus.

37
<PAGE> 40

GLOSSARY OF OIL AND GAS TERMS

The following are abbreviations and definitions of terms commonly used in
the oil and gas industry and in this Prospectus. All information in this
Prospectus relating to oil and gas reserves and the estimated future net cash
flows attributable to such oil and gas reserves are estimates and have been
calculated in accordance with the rules and regulations of the Commission or, in
the case of pro forma reserve estimates, based upon prices and operating
expenses that the Company believes would have been applicable if all such
reserves had been owned by the Company as of the determination and, except as
otherwise indicated, give no effect to federal or state income taxes otherwise
attributable to future net revenues from the sale of oil and gas.

"Mcf" means thousand cubic feet.

"MMcf" means million cubic feet.

"Bcf" means billion cubic feet.

"Bbl" means barrel or barrels.

"MBbl" means thousand barrels.

"MMBbl" means million barrels.

"Mcfe" means a thousand cubic feet of natural gas equivalent, which is
determined using the ratio of six Mcf of natural gas to one barrel of crude oil,
condensate or natural gas liquids so that one barrel of oil is referred to as
six Mcf of natural gas equivalent or "Mcfe."

"MMcfe" means million cubic feet of natural gas equivalent.

"Bcfe" means a billion cubic feet of natural gas equivalent, which is
determined using the ratio of six Mcf of natural gas to one barrel of crude oil,
condensate or natural gas liquids.

"Btus" means British Thermal Units.

"Dry hole" means a well which is not productive of oil and/or gas in paying
quantities.

"Gross" oil and gas wells or "gross" acres are the total number of wells or
acres in which the Company has an interest, without regard to the size of that
interest.

"Net" oil and gas wells or "net" acres are determined by multiplying gross
wells or acres by the Company's working interest in those wells or acres.

"Production expense" means the cost incurred in lifting oil and gas to the
surface and storing it in the field, including the cost of labor, fuel and
supplies and costs needed to operate developed wells and related equipment, make
repairs and pay property taxes and insurance premiums.

"Proved reserves" refer to those estimated quantities of crude oil, natural
gas, and natural gas liquids which, upon analysis of geologic and engineering
data, appear with reasonable certainty to be recoverable in the future from
known oil and gas reservoirs under existing economic and operating conditions.
Proved reserves are limited to those quantities of oil and gas which can be
expected, with little doubt, to be recoverable commercially at current prices
and costs, under existing regulatory practices and with existing conventional
equipment and operating methods.

"Proved developed reserves" include only those proved reserves expected to
be recovered from existing completion intervals in existing wells.

"Proved undeveloped reserves" include those reserves expected to be
recovered from new wells on proved undrilled acreage or from existing wells
where a relatively major expenditure is required for recompletion.

"Recompletion" means redrilling the same well bore to reach a new reservoir
after production from the original reservoir has been abandoned.

"Reserves" means natural gas and crude oil, condensate and natural gas
liquids, on a net revenue interest basis, found to be commercially recoverable.

A-1
<PAGE> 41

"Reserve life" means the quotient, expressed in years, obtained by dividing
proved reserves as of a given date by production during the immediately
preceding twelve month period from the wells to which such reserves are
attributable.

"Undeveloped acreage" means acreage on which wells have not been drilled or
completed for commercial production, whether or not such acreage contains proved
reserves.

A-2
<PAGE> 42
<TABLE>

BELDEN & BLAKE CORPORATION

INDEX TO FINANCIAL STATEMENTS

<CAPTION>
PAGE
----
<S> <C>
BELDEN & BLAKE CORPORATION
Consolidated Balance Sheets as of March 31, 1995 (unaudited) and December
31, 1994................................................................. F-2
Consolidated Statements of Operations for the three months ended March 31,
1995 and 1994 (unaudited)................................................ F-4
Consolidated Statements of Shareholders' Equity for the years ended December
31, 1993 and 1994 and the three months ended March 31, 1995
(unaudited).............................................................. F-5
Consolidated Statements of Cash Flows for the three months ended March 31,
1995 and 1994 (unaudited)................................................ F-6
Notes to Consolidated Financial Statements.................................. F-7
Report of Independent Auditors.............................................. F-8
Consolidated Balance Sheets as of December 31, 1994 and 1993................ F-9
Consolidated Statements of Operations for the years ended December 31, 1994,
1993 and 1992............................................................ F-11
Consolidated Statements of Shareholders' Equity for the years ended December
31, 1994, 1993 and 1992.................................................. F-12
Consolidated Statements of Cash Flows for the years ended December 31, 1994,
1993 and 1992............................................................ F-13
Notes to Consolidated Financial Statements.................................. F-14

QUAKER STATE PROPERTIES
Report of Independent Auditors.............................................. F-30
Statements of Revenues and Direct Operating Expenses for the years ended
December 31, 1994 and 1993 and the unaudited three months ended March 31,
1995 and 1994............................................................ F-31
Notes to Statements of Revenues and Direct Operating Expenses............... F-32

PRO FORMA COMBINED BELDEN & BLAKE CORPORATION (UNAUDITED)
Pro Forma Condensed Combined Balance Sheet as of March 31, 1995
(Unaudited).............................................................. F-35
Pro Forma Combined Statement of Operations for the year ended December 31,
1994 (Unaudited)......................................................... F-36
Pro Forma Combined Statement of Operations for the three months ended March
31, 1995 (Unaudited)..................................................... F-37
Notes to Unaudited Pro Forma Combined Financial Statements.................. F-38
</TABLE>

F-1
<PAGE> 43

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................ $ 7,363,820 $ 3,649,005
Accounts receivable, net................................. 14,956,973 13,068,663
Inventories.............................................. 5,847,373 6,676,884
Deferred income taxes.................................... 1,756,521 1,741,093
Other current assets..................................... 2,054,710 956,699
------------ ------------
Total current assets............................. 31,979,397 26,092,344
Property and equipment
Oil and gas properties (successful efforts method)....... 143,274,016 122,279,367
Gas gathering systems.................................... 18,244,915 18,120,365
Land, buildings, machinery and equipment................. 20,128,974 19,564,247
------------ ------------
181,647,905 159,963,979
Less accumulated depreciation, depletion and
amortization.......................................... 44,146,780 40,788,899
------------ ------------
Property and equipment, net...................... 137,501,125 119,175,080
Other assets............................................... 2,841,467 2,905,371
------------ ------------
$172,321,989 $148,172,795
============ ============
</TABLE>

The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes generally required by generally accepted accounting principles for
complete financial statements.

See accompanying notes.

F-2
<PAGE> 44

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable......................................... $ 4,709,696 $ 3,593,811
Accrued expenses......................................... 10,960,944 8,440,315
Current portion of long-term liabilities................. 417,403 447,257
------------ ------------
Total current liabilities........................ 16,088,043 12,481,383
Long-term liabilities
Senior notes............................................. 35,000,000 35,000,000
Convertible subordinated debentures...................... 7,350,000 7,350,000
Bank and other long-term debt............................ 23,651,813 4,239,682
Capitalized lease obligations............................ 553,287 645,314
Other.................................................... 660,279 623,162
------------ ------------
Total long-term liabilities...................... 67,215,379 47,858,158
Deferred income taxes...................................... 6,929,774 6,691,408
Shareholders' equity
Common stock without par value; $.10 stated value per
share; authorized 12,000,000 shares; issued and
outstanding 7,106,246 and 7,084,737 shares............ 710,625 708,474
Preferred stock without par value; $100 stated value per
share; authorized 8,000,000 shares; issued and
outstanding 24,000 shares............................. 2,400,000 2,400,000
Paid in capital.......................................... 70,629,419 70,378,839
Retained earnings........................................ 8,573,699 7,879,483
Unearned portion of restricted stock..................... (224,950) (224,950)
------------ ------------
Total shareholders' equity....................... 82,088,793 81,141,846
------------ ------------
$172,321,989 $148,172,795
============ ============
</TABLE>

See accompanying notes.

F-3
<PAGE> 45

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Revenues
Oil and gas sales............................................... $ 9,206,656 $ 7,654,882
Gas marketing and gathering..................................... 8,915,885 9,954,646
Oilfield sales and service...................................... 4,120,760 3,011,073
Interest and other.............................................. 181,985 86,107
----------- -----------
22,425,286 20,706,708

Expenses
Production expense.............................................. 2,633,514 2,162,234
Cost of gas and gathering expense............................... 7,901,476 8,863,083
Oilfield sales and service...................................... 4,210,353 3,002,447
Exploration expense............................................. 894,930 661,705
General and administrative expense.............................. 949,239 954,858
Interest expense................................................ 1,162,990 923,710
Depreciation, depletion and amortization........................ 3,499,425 2,834,774
----------- -----------
21,251,927 19,402,811
----------- -----------
Income before income taxes........................................ 1,173,359 1,303,897
Provision for income taxes...................................... 434,143 496,656
----------- -----------
Net income........................................................ $ 739,216 $ 807,241
=========== ============
Net income per common share....................................... $ 0.10 $ 0.11
=========== ============
Weighted average common shares outstanding........................ 7,101,705 7,066,447
=========== ============
</TABLE>

See accompanying notes.

F-4
<PAGE> 46

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
UNEARNED
COMMON COMMON PREFERRED PAID IN RETAINED RESTRICTED
SHARES STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
--------- -------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1993................... 3,355,241 $335,524 $2,400,000 $25,550,711 $1,176,536 $(440,000) $29,022,771
Stock issued...................... 60,000 6,000 491,150 497,150
Stock issued...................... 168,000 16,800 1,658,702 1,675,502
Stock issued...................... 3,450,000 345,000 41,817,720 42,162,720
Net income........................ 3,220,026 3,220,026
Preferred stock dividend.......... (180,000) (180,000)
Employee stock bonus.............. 22,325 2,232 237,762 239,994
Restricted stock grant............ 108,999 110,000 218,999
Other............................. (2,485) (248) 248 --
--------- --------- ---------- ----------- ----------- ---------- -----------
December 31, 1993................. 7,053,081 705,308 2,400,000 69,865,292 4,216,562 (330,000) 76,857,162

Stock issued...................... 31,656 3,166 384,622 387,788
Net income........................ 3,842,921 3,842,921
Preferred stock dividend.......... (180,000) (180,000)
Restricted stock grant............ 128,925 105,050 233,975
--------- --------- ---------- ----------- ----------- ---------- -----------
December 31, 1994................. 7,084,737 708,474 2,400,000 70,378,839 7,879,483 (224,950) 81,141,846

Net income (unaudited)............ 739,216 739,216
Preferred stock dividend
(unaudited)..................... (45,000) (45,000)
Employee stock bonus
(unaudited)..................... 21,509 2,151 250,580 252,731
--------- --------- ---------- ----------- ----------- ---------- -----------

March 31, 1995 (unaudited)........ 7,106,246 $710,625 $2,400,000 $70,629,419 $8,573,699 $(224,950) $82,088,793
========= ========= ========== =========== =========== ========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE> 47

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................ $ 739,216 $ 807,241
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization.............................. 3,499,425 2,834,774
(Gain) loss on disposal of property and equipment..................... (132,604) 49,348
Deferred income taxes................................................. 222,938 312,936
Deferred compensation and stock grants................................ 289,585 --
Change in operating assets and liabilities, net of effects of
purchases of businesses:
Accounts receivable.............................................. 2,807,042 49,142
Inventories...................................................... 932,301 (281,071)
Other current assets............................................. (1,026,522) 192,578
Accounts payable and accrued expenses............................ (3,798,023) 322,695
----------- -----------
Net cash provided by operating activities...................... 3,533,358 4,287,643
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired........................... (11,832,404) (15,330,021)
Proceeds from property and equipment disposals............................ 177,284 88,261
Additions to property and equipment....................................... (1,964,698) (4,350,099)
Decrease in other assets.................................................. 15,993 27,135
----------- -----------
Net cash used in investing activities.......................... (13,603,825) (19,564,724)
Cash flows from financing activities:
Proceeds from revolving line of credit and long-term debt................. 22,000,000 100,000
Repayment of long-term debt............................................... (8,081,170) (308,489)
Repayment of capital lease obligations.................................... (88,548) (64,823)
Preferred stock dividends................................................. (45,000) (45,000)
----------- -----------
Net cash provided by (used in) financing activities............ 13,785,282 (318,312)
----------- -----------
Net increase (decrease) in cash and cash equivalents........................ 3,714,815 (15,595,393)
Cash and cash equivalents at beginning of period............................ 3,649,005 22,244,231
----------- -----------
Cash and cash equivalents at end of the period.............................. $ 7,363,820 $ 6,648,838
============ ============
Cash paid during the period for:
Interest.................................................................. $ 1,322,173 $ 930,613
Income taxes.............................................................. 151,517 4,475
Non-cash investing and financing activities:
Acquisition of assets in exchange for debt................................ 5,460,230 --
Acquisition of assets in exchange for stock............................... -- 387,788
</TABLE>

See accompanying notes.

F-6
<PAGE> 48

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

MARCH 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(1) BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Belden &
Blake Corporation and its subsidiaries (the "Company") 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 three-month period ended March 31, 1995 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes included in Belden & Blake Corporation and
Subsidiaries' annual report on Form 10-K for the year ended December 31, 1994.

(2) ACQUISITIONS

In March 1995, the Company entered into an agreement to purchase all the
producing properties of The East Ohio Gas Company for $6.5 million. The assets
to be acquired include a 100% working interest in 378 natural gas wells and
drilling rights on more than 250,000 acres of adjacent properties. A substantial
majority of the wells to be acquired are adjacent to properties currently being
operated by the Company. The wells had estimated proved reserves of 8.5 Bcf of
natural gas and 80,000 Bbl of oil at December 31, 1994. The purchase is subject
to the satisfaction of certain due diligence matters, consent requirements and
other conditions. The pro forma results, if reported, would not be materially
different from results of operations as reported.

In January 1995, the Company purchased Ward Lake Drilling, Inc. ("Ward
Lake"), a privately-held exploration and production company headquartered in
Gaylord, Michigan, for $15.1 million. The purchase was funded by borrowings
under the Company's existing credit facility. Ward Lake operates and holds a
production payment interest and working interests averaging 13.6% in
approximately 500 Antrim Shale gas wells located in Michigan's lower peninsula.
The purchase also included approximately 5,500 undeveloped leasehold acres that
Ward Lake owns in Michigan.

At December 31, 1994, the wells had estimated proved developed natural gas
reserves totaling 98 Bcf gross (13.7 Bcf net). Approximately one half of the
purchase price represented payment for the proved reserves, with the balance
associated with other oil and gas and corporate assets. A joint election was
made by the Company and the selling shareholders to treat the stock purchase of
Ward Lake as an asset purchase for tax purposes.

The table below presents the unaudited actual results of operations for the
three months ended March 31, 1995 and the pro forma results of operations for
the three months ended March 31, 1994 as if the acquisition of the Ward Lake
properties had occurred on January 1, 1994.

<TABLE>
<CAPTION>
ACTUAL PRO FORMA
1995 1994
--------- ---------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Total revenues............................... $22,425 $21,778
Net income................................... 739 900
Net income per common share.................. $ .10 $ .12
Weighted average common shares outstanding... 7,102 7,066
</TABLE>

F-7
<PAGE> 49

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors
Belden & Blake Corporation

We have audited the accompanying consolidated balance sheets of Belden &
Blake Corporation as of December 31, 1994 and 1993, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Belden & Blake
Corporation at December 31, 1994 and 1993, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Cleveland, Ohio
March 7, 1995

F-8
<PAGE> 50

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1994 AND 1993

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................ $ 3,649,005 $ 22,244,231
Accounts receivable, net................................. 13,068,663 10,586,108
Inventories.............................................. 6,676,884 3,875,529
Deferred income taxes.................................... 1,741,093 1,068,502
Other current assets..................................... 956,699 1,499,404
------------ ------------
Total current assets............................. 26,092,344 39,273,774
Property and equipment
Oil and gas properties (successful efforts method)....... 122,279,367 92,057,489
Gas gathering systems.................................... 18,120,365 17,741,220
Land, buildings, machinery and equipment................. 19,564,247 13,239,728
------------ ------------
159,963,979 123,038,437
Less accumulated depreciation, depletion and
amortization.......................................... 40,788,899 29,229,820
------------ ------------
Property and equipment, net...................... 119,175,080 93,808,617
Other assets............................................... 2,905,371 2,091,537
------------ ------------
$148,172,795 $135,173,928
============ ============
</TABLE>

F-9
<PAGE> 51

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1994 AND 1993

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable......................................... $ 3,593,811 $ 3,531,300
Accrued expenses......................................... 8,440,315 6,258,792
Current portion of long-term liabilities................. 447,257 633,819
------------ ------------
Total current liabilities........................ 12,481,383 10,423,911
Long-term liabilities
Senior notes............................................. 35,000,000 35,000,000
Convertible subordinated debentures...................... 7,350,000 7,350,000
Bank and other long-term debt............................ 4,239,682 192,740
Capitalized lease obligations............................ 645,314 973,505
Other.................................................... 623,162 --
------------ ------------
Total long-term liabilities...................... 47,858,158 43,516,245
Deferred income taxes...................................... 6,691,408 4,376,610
Shareholders' equity
Common stock without par value; $.10 stated value per
share; authorized 12,000,000 shares; issued and
outstanding 7,084,737 and 7,053,081 shares............ 708,474 705,308
Preferred stock without par value; $100 stated value per
share; authorized 8,000,000 shares; issued and
outstanding 24,000 shares............................. 2,400,000 2,400,000
Paid in capital.......................................... 70,378,839 69,865,292
Retained earnings........................................ 7,879,483 4,216,562
Unearned portion of restricted stock..................... (224,950) (330,000)
------------ ------------
Total shareholders' equity....................... 81,141,846 76,857,162
------------ ------------
$148,172,795 $135,173,928
============ ============
</TABLE>

See accompanying notes.

F-10
<PAGE> 52

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE 1)

YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Oil and gas sales............................ $32,574,114 $26,630,871 $15,045,865
Gas marketing and gathering.................. 33,085,304 34,709,298 26,493,619
Oilfield sales and service................... 16,885,669 11,111,188 9,495,556
Interest and other........................... 558,842 647,011 1,514,684
----------- ----------- -----------
83,103,929 73,098,368 52,549,724

Expenses
Production expense........................... 9,292,349 7,189,822 5,361,578
Cost of gas and gathering expense............ 29,133,553 30,736,165 24,921,427
Oilfield sales and service................... 16,296,539 10,598,571 7,529,089
Exploration expense.......................... 2,807,278 2,537,794 2,381,166
General and administrative expense........... 3,965,754 3,939,983 3,717,954
Interest expense............................. 3,587,207 3,198,984 2,199,767
Depreciation, depletion and amortization..... 12,021,258 9,703,458 4,853,358
----------- ----------- -----------
77,103,938 67,904,777 50,964,339
----------- ----------- -----------
Income before income taxes..................... 5,999,991 5,193,591 1,585,385
Provision for income taxes................... 2,157,070 1,973,565 446,121
----------- ----------- -----------
Net income..................................... $ 3,842,921 $ 3,220,026 $ 1,139,264
========== ========== ==========
Net income per common share.................... $ 0.52 $ 0.54 $ 0.48
========== ========== ==========
Weighted average common shares outstanding..... 7,080,227 5,674,638 2,373,114
========== ========== ==========
</TABLE>

See accompanying notes.

F-11
<PAGE> 53

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NOTE 1)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
UNEARNED
COMMON OWNER'S PREFERRED COMMON PAID IN RETAINED RESTRICTED
SHARES EQUITY STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
--------- --------- ---------- -------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1992...... $(787,079) $ (787,079)
Stock issued per
consolidation
agreement.......... 2,780,241 824,351 $278,024 $20,887,661 21,990,036
Net income (loss).... (37,272) $1,176,536 1,139,264
Stock issued......... 555,000 55,500 3,857,250 3,912,750
Preferred stock
issued (24,000
shares)............ $2,400,000 2,400,000
Restricted stock
grant.............. 657,800 $ (440,000) 217,800
Employee stock
bonus.............. 20,000 2,000 148,000 150,000
--------- --------- ---------- -------- ----------- ---------- --------- -----------
December 31, 1992.... 3,355,241 -- 2,400,000 335,524 25,550,711 1,176,536 (440,000) 29,022,771
Stock issued......... 60,000 6,000 491,150 497,150

Stock issued......... 168,000 16,800 1,658,702 1,675,502
Stock issued......... 3,450,000 345,000 41,817,720 42,162,720
Net income........... 3,220,026 3,220,026
Preferred stock
dividend........... (180,000) (180,000)
Employee stock
bonus.............. 22,325 2,232 237,762 239,994
Restricted stock
grant.............. 108,999 110,000 218,999
Other................ (2,485) (248) 248 --
--------- --------- ---------- -------- ----------- ---------- --------- -----------
December 31, 1993.... 7,053,081 -- 2,400,000 705,308 69,865,292 4,216,562 (330,000) 76,857,162

Stock issued......... 31,656 3,166 384,622 387,788
Net income........... 3,842,921 3,842,921
Preferred stock
dividend........... (180,000) (180,000)
Restricted stock
grant.............. 128,925 105,050 233,975
--------- --------- ---------- -------- ----------- ---------- --------- -----------
December 31, 1994.... 7,084,737 $ -- $2,400,000 $708,474 $70,378,839 $7,879,483 $ (224,950) $81,141,846
========= ========= ========== ======== =========== ========== ========= ===========
</TABLE>

See accompanying notes.

F-12
<PAGE> 54

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 1)

YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 3,842,921 $ 3,220,026 $ 1,139,264
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization........... 12,021,258 9,703,458 4,853,358
Loss (gain) on disposal of property and
equipment....................................... 90,865 (117,841) (11,693)
Deferred income taxes.............................. 1,569,547 1,551,935 (172,398)
Deferred compensation and stock grants............. 358,639 458,993 367,800
Change in operating assets and liabilities, net of
effects of purchases of businesses:
Accounts receivable........................... (2,186,365) (4,942,658) 206,818
Inventories................................... (2,327,553) (1,392,832) (195,397)
Other current assets.......................... 564,239 (1,007,539) 688,499
Accounts payable and accrued expenses......... 1,775,371 1,912,173 (212,926)
------------ ------------ ------------
Net cash provided by operating activities... 15,708,922 9,385,715 6,663,325
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired........ (17,968,534) (559,919) (4,993,964)
Proceeds from property and equipment disposals......... 437,845 1,388,357 1,134,551
Additions to property and equipment.................... (19,843,872) (13,465,314) (5,066,329)
Decrease (increase) in other assets.................... 88,428 (971,057) (1,151,469)
------------ ------------ ------------
Net cash used in investing activities....... (37,286,133) (13,607,933) (10,077,211)
Cash flows from financing activities:
Proceeds from revolving line of credit and long-term
debt................................................. 6,100,000 5,025,000 26,500,000
Proceeds from senior note placement.................... -- 35,000,000 --
Repayment of long-term debt............................ (2,640,277) (59,202,764) (24,071,133)
Repayment of capital lease obligations................. (297,738) (146,371) (131,662)
Preferred stock dividends.............................. (180,000) (180,000) --
Proceeds from sale of common stock..................... -- 46,222,500 4,162,500
Common stock placement cost............................ -- (3,562,630) (249,750)
------------ ------------ ------------
Net cash provided by financing activities... 2,981,985 23,155,735 6,209,955
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents..... (18,595,226) 18,933,517 2,796,069
Cash and cash equivalents at beginning of year........... 22,244,231 3,310,714 514,645
------------ ------------ ------------
Cash and cash equivalents at end of the year............. $ 3,649,005 $ 22,244,231 $ 3,310,714
============ ============ ============
</TABLE>

See accompanying notes.

F-13
<PAGE> 55

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(1) ORGANIZATION AND NATURE OF BUSINESS

On March 31, 1992, Belden & Blake Corporation (the "Company") succeeded to
a group of companies and assets (and related liabilities) (the "Belden
Interests") owned by Henry S. Belden IV ("HSB IV"). Also on that date, pursuant
to a Plan and Agreement of Consolidation, the Company acquired the assets and
assumed the liabilities of Belden & Blake Energy Company, a publicly-traded
master limited partnership (the "Partnership"), and Belden & Blake International
Limited, a Bermuda registered corporation ("BBI"), in exchange for shares of its
common stock (the "Consolidation"). The Consolidation was accounted for as a
purchase, and the results of operations of the Partnership and BBI have been
included from that date.

Since March 31, 1992, the Company's principal business has been the
acquisition, exploration, development and production of oil and gas reserves,
and the gathering and marketing of natural gas. The Company currently conducts
operations in Michigan, New York, Ohio, Pennsylvania and West Virginia.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Financial Presentation

The accompanying consolidated financial statements include the financial
statements of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

Inventories

Inventories of material, pipe and supplies are valued at average cost.
Crude oil and natural gas inventories are stated at average cost.

Property and Equipment

The Company utilizes the "successful efforts" method of accounting for its
oil and gas properties. Under this method, property acquisition and development
costs and certain productive exploration costs are capitalized while
non-productive exploration costs, which include geological and geophysical
costs, dry holes, expired leases and delay rentals, are expensed as incurred.
Capitalized costs related to proved properties are depleted using the
unit-of-production method. No gains or losses are recognized upon the
disposition of oil and gas properties except in extraordinary transactions.
Sales proceeds are credited to the carrying value of the properties. Maintenance
and repairs are expensed, and expenditures which enhance the value of properties
are capitalized.

Additional depreciation, depletion and amortization is recorded to the
extent that the aggregate net carrying value of producing oil and gas properties
exceeds the corresponding undiscounted future pretax net cash flows relating to
estimated proved oil and gas reserves computed in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") 69, "Disclosures About
Oil and Gas Producing Activities".

Unproved oil and gas properties are stated at cost and consist of
undeveloped leases. These costs are assessed periodically to determine whether
their value has been impaired, and if impairment is indicated, the costs are
charged to expense.

Gathering systems are stated at cost. Depreciation expense is computed
using the straight-line method over 15 years.

Property, plant and equipment are stated at cost. Depreciation of non-oil
and gas properties, including capital leases, is computed using the
straight-line method over the useful lives of the assets. When assets other than
oil and gas properties are retired or otherwise disposed of, the cost and
related accumulated depreciation

F-14
<PAGE> 56

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

are removed from the accounts, and any resulting gain or loss is reflected in
income for the period. The cost of maintenance and repairs is charged to income
as incurred, and significant renewals and betterments are capitalized.

Other Assets

Other assets include deferred financing costs which are amortized over the
term of the financing acquired.

Net Income Per Common Share

Net income per common share is computed by subtracting preferred dividends
from net income and dividing the difference by the weighted average number of
common and common equivalent shares outstanding. Outstanding options and
warrants are included in the computation of net income per common share when
their effect is dilutive.

Cash Equivalents

For purposes of the statements of cash flows, cash equivalents are defined
as all highly liquid debt instruments purchased with an initial maturity of
three months or less.

Revenue Recognition

Oilfield sales and service revenues are recognized after the goods or
services have been provided. Oil and gas marketing revenues are recognized when
title passes. Oil and gas production revenue is recognized as production and
delivery take place. Administrative service revenues are recognized as fees are
earned.

Income Taxes

The Company uses the liability method of accounting for income taxes in
accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes."
The provision for income taxes gives effect to certain items that are included
in the financial statements in different years than they were included in the
tax returns of the Company and its predecessors. The differences are primarily
intangible drilling costs and depreciation. Deferred income taxes are provided
for the temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Deferred taxes also are recognized for operating losses that are
available to offset future taxable income and tax credits that are available to
offset future federal income taxes.

Reclassifications

Certain reclassifications have been made in the 1993 and 1992 Statements of
Operations to conform to the presentation in 1994.

(3) THE CONSOLIDATION

As described in Note 1, the Company acquired the assets and assumed the
liabilities of the Partnership and BBI on March 31, 1992 in a transaction
accounted for as a purchase. The results of operations of the Partnership and
BBI are included in the Company's operations from that date.

The following table presents the actual consolidated results of operations
for the years ended December 31, 1994 and 1993 and the unaudited pro forma
consolidated results of operations for the year ended December 31, 1992 as if
the Consolidation discussed in Note 1 had occurred on January 1, 1992. These pro

F-15
<PAGE> 57

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results that would have occurred had the
Consolidation occurred as of that date.

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
CONSOLIDATED
ACTUAL (UNAUDITED)
------------------- ------------
1994 1993 1992
------- ------- ------------
<S> <C> <C> <C>
Revenues
Oil and gas sales.............................. $32,574 $26,631 $ 19,294
Gas marketing and gathering.................... 33,085 34,709 28,547
Oilfield sales and service..................... 16,886 11,111 7,242
Interest and other............................. 559 647 759
------- ------- -------
83,104 73,098 55,842
Expenses
Production expense............................. 9,292 7,189 5,261
Cost of gas and gathering expense.............. 29,134 30,736 26,606
Oilfield sales and service..................... 16,297 10,599 7,175
Exploration expense............................ 2,807 2,538 2,371
General and administrative expense............. 3,966 3,940 3,350
Interest expense............................... 3,587 3,199 2,596
Depreciation, depletion and amortization....... 12,021 9,703 5,961
------- ------- -------
77,104 67,904 53,320
------- ------- -------
Income before income taxes....................... 6,000 5,194 2,522
Provision for income taxes..................... 2,157 1,974 698
------- ------- -------
Net income....................................... $ 3,843 $ 3,220 $ 1,824
======= ======= =======
Net income per common share...................... $ .52 $ .54 $ .65
======= ======= =======
Weighted average common shares outstanding....... 7,080 5,675 2,797
======= ======= =======
</TABLE>

(4) ACQUISITIONS

In September and October 1994, the Company acquired substantially all of
the assets of two well servicing companies and a brine hauling and disposal
company operating primarily in Ohio and Pennsylvania for $3.1 million. The
assets acquired in these transactions included eleven salt water disposal wells,
along with various oilfield service equipment.

In February 1994, the Company acquired certain assets and assumed certain
liabilities of the former Engine Power Systems in exchange for 31,656 restricted
shares of the Company's common stock valued at $12.25 per share. The newly
formed Engine Power Systems, Inc. ("EPS") operates as a wholly-owned subsidiary
of the Company. EPS is a distributor of, and provides parts and service for,
Waukesha natural gas-fueled engines in Ohio, western Pennsylvania, West Virginia
and Kentucky. EPS is engaged in engine sales, application engineering and system
packaging for power generation, co-generation, gas compression, air compression
and various other applications. EPS also sells and rents electric generator
sets.

F-16
<PAGE> 58

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

In addition to the TGX acquisition discussed below, the Company completed a
number of small acquisitions of oil and gas properties in 1994 which, in the
aggregate, added the equivalent of approximately 7.5 Bcf of natural gas to the
Company's proved developed reserve base. The reserves added were acquired for
$4.9 million or an average cost of $.65 per equivalent Mcf of gas.

The operations of the above businesses are included in the consolidated
earnings of the Company from their respective acquisition dates and are not
material to the Company's operations.

In January 1994, the Company purchased substantially all of TGX
Corporation's Appalachian Basin assets for $15.5 million. The assets acquired
included 1,034 gross (910 net) gas and oil wells on approximately 121,000 acres
located in northeastern Ohio and southwestern New York and 15,000 undeveloped
acres and related inventory, real estate and oilfield equipment. At December 31,
1993, the properties acquired had estimated proved reserves of 22.0 Bcf of
natural gas and 28,700 Bbls of oil. Discounted future net cash flows (at 10%
discount) before income taxes were $17.4 million. After provision for future
income taxes, the standardized measure of discounted future net cash flows is
estimated to be $13.6 million, excluding proved undeveloped reserves and
expected operational enhancements to existing properties.

The pro forma table below presents the actual results of operations for the
year ended 1994 and the unaudited pro forma consolidated results of operations
for the year ended 1993 as if the acquisition of the TGX properties had occurred
on January 1, 1993.

<TABLE>
<CAPTION>
ACTUAL PRO FORMA
1994 1993
------- ---------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Total revenues.................................................. $83,104 $ 77,862
Net income...................................................... 3,843 3,705
Net income per common share..................................... $ .52 $ .62
</TABLE>

In June 1994, the Company purchased TGX's option to participate in a 50%
working interest in wells drilled on the 15,000 undeveloped acres described
above for $750,000. Also in June 1994, the Company purchased additional working
interests in 81 wells in New York from TGX for $621,000.

On December 31, 1992, the Company acquired approximately 67,000 undeveloped
acres from Witco Corporation. The Company also acquired certain waterflood
production facilities, oilfield equipment and related real estate interests. The
undeveloped acreage and other assets are located in Pennsylvania and Ohio in
areas where the Company has existing operations. In exchange for the acreage and
other assets, the Company issued 24,000 shares of Class II Serial Preferred
Stock -- $7.50 Series A.

In December 1992, the Company purchased all the outstanding stock of two
subsidiaries from Presidio Exploration, Inc. for $4.6 million, and the
assumption, on a non-recourse basis, of $28 million of existing bank debt of the
companies acquired. The acquisition was accounted for as a purchase, and
accordingly, the assets and liabilities are included in the consolidated
financial statements effective December 31, 1992.

On December 8, 1992, the Company purchased for $1.5 million additional
working interests in 1,037 producing oil and gas wells that it operates.

F-17
<PAGE> 59

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(5) DETAILS OF BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1994 1993
------------ -----------
<S> <C> <C>
ACCOUNTS RECEIVABLE
Accounts receivable.................................... $ 7,399,001 $ 5,927,489
Allowance for doubtful accounts........................ (169,754) (92,885)
Oil and gas production receivable...................... 5,709,880 4,751,504
Current portion of notes receivable.................... 129,536 --
------------ -----------
$ 13,068,663 $10,586,108
============ ===========
INVENTORIES
Oil.................................................... $ 1,187,120 $ 1,295,281
Natural gas............................................ 1,375,077 371,937
Material, pipe and supplies............................ 4,114,687 2,208,311
------------ -----------
$ 6,676,884 $ 3,875,529
============ ===========
PROPERTY AND EQUIPMENT, GROSS
OIL AND GAS PROPERTIES
Non-producing properties............................... $ 5,057,900 $ 3,582,080
Producing properties................................... 117,221,467 88,475,409
------------ -----------
$122,279,367 $92,057,489
============ ===========
LAND, BUILDINGS, MACHINERY AND EQUIPMENT
Land, buildings and improvements....................... $ 5,632,887 $ 3,231,694
Machinery and equipment................................ 13,931,360 10,008,034
------------ -----------
$ 19,564,247 $13,239,728
============ ===========
ACCRUED EXPENSES
Accrued expenses....................................... $ 2,775,027 $ 2,442,533
Accrued income taxes................................... 298,097 --
Ad valorem and other taxes............................. 1,269,681 708,000
Bank overdraft......................................... 1,291,439 629,639
Compensation and related benefits...................... 1,513,835 1,148,180
Undistributed production revenue....................... 1,292,236 1,330,440
------------ -----------
$ 8,440,315 $ 6,258,792
============ ===========
</TABLE>

F-18
<PAGE> 60

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(6) LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1994 1993
----------- -----------
<S> <C> <C>
Senior notes............................................ $35,000,000 $35,000,000
Convertible subordinated debentures..................... 7,350,000 7,350,000
Revolving line of credit................................ 4,000,000 --
Other................................................... 345,678 494,260
----------- -----------
46,695,678 42,844,260

Less current portion.................................... 105,996 301,520
----------- -----------
Long-term debt.......................................... $46,589,682 $42,542,740
========== ==========
</TABLE>

On May 5, 1992, the Company entered into a three-year revolving credit
agreement with a group of banks. On November 15, 1993, the facility was amended
to accommodate the issuance of the Company's senior notes. The facility amount
was increased from $30 million to $100 million and is now unsecured. Outstanding
balances under the agreement bear interest at the Company's choice of either:
(1) the one, three, or six-month LIBOR plus 2% (9.00% for the six-month LIBOR
interest rate option at December 31, 1994) or (2) the bank's prime rate plus
1/4% (8.75% at December 31, 1994). On July 22, 1994, the banks extended the
maturity date on the facility to March 31, 1998. Borrowings under the credit
agreement are limited to the borrowing base as established semi-annually by the
bank group. The borrowing base at December 31, 1994 was $30 million.

On January 5, 1993, the Company entered into an interest rate swap
agreement covering $22 million of the outstanding balance of an acquisition loan
that was paid off in 1993. The interest rate on this portion of the loan was
fixed at 7.95% for three years. The notional amount covered by this swap
agreement declined to $18 million in 1994 and was scheduled to decline to $15
million in 1995. On August 31, 1994, the Company closed out this swap agreement.
The Company had no derivative financial instruments at December 31, 1994.

During 1993, the Company placed $35 million of 7% fixed-rate senior notes
with five insurance companies in a private placement. These notes, which are
interest-only for four years, mature on September 30, 2005. Equal principal
payments of $3,888,888 will be required on each September 30 commencing in 1997.

The $7,350,000 of convertible subordinated debentures have a fixed interest
rate of 9.25% and mature on June 30, 2000. The debentures are currently
convertible by the debenture holders at the rate of one share of the Company's
common stock for each $20.30 of principal.

The debt agreements contain various covenants restricting payment of
dividends on common stock to $5 million plus 50% of cumulative net income,
restricting sales of assets to 15% of shareholders' equity in any one year and
requiring the maintenance of certain levels of net worth, working capital and
other financial ratios.

At December 31, 1994, the aggregate long-term debt maturing in the next
five years is as follows: $106,000 (1995); $35,000 (1996); $3,907,000 (1997);
$7,907,000 (1998) and $3,907,000 (1999) and $30,833,000 (2000 and thereafter).

F-19
<PAGE> 61

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(7) LEASES

The Company leases certain computer equipment, vehicles and office space
under noncancelable agreements with lease periods of one to five years. Rent
expense amounted to $741,575, $1,082,130, and $1,058,816 for the years ended
December 31, 1994, 1993, and 1992, respectively.

The Company also leases certain computer equipment accounted for as capital
leases. Property and equipment includes $1.4 million and $1.6 million of
computer equipment under capital leases at December 31, 1994 and 1993,
respectively. Accumulated depreciation for such equipment includes approximately
$690,000 and $337,000 at December 31, 1994 and 1993, respectively.

Future minimum commitments under leasing arrangements at December 31, 1994
were as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
YEARS ENDING DECEMBER 31 LEASES LEASES
------------------------ -------- ----------
<S> <C> <C>
1995......................................................... $447,000 $ 397,000
1996......................................................... 218,000 365,000
1997......................................................... 12,000 289,000
1998......................................................... 11,000 32,000
1999 and thereafter.......................................... 12,000 7,000
-------- ----------
Total minimum rental payments................................ $700,000 1,090,000
========
Less amount representing interest............................ 103,425
----------
Present value of net minimum rental payments................. 986,575
Less current portion......................................... 341,261
----------
Long-term capitalized lease obligations...................... $ 645,314
==========
</TABLE>

(8) SHAREHOLDERS' EQUITY

On March 27, 1992, the Company succeeded to the Belden Interests and
acquired in the Consolidation all of the assets and assumed all of the
liabilities of the Partnership and BBI in exchange for 2,780,241 shares of its
common stock, of which 882,030 shares were distributed to the holders of units
of limited partnership interest in the Partnership (other than HSB IV) in
liquidation of the Partnership, 821,950 shares were distributed to the
shareholders of BBI in liquidation of BBI, and 1,076,261 shares were distributed
to HSB IV.

Outstanding warrants for the purchase of 13,801 shares of the Company's
common stock at a price of $21.74 per share are exercisable by the holder in
whole or part any time prior to February 15, 1997.

The 9.25% convertible subordinated debentures due June 30, 2000, are
currently convertible at the rate of one share of common stock for each $20.30
of principal.

On December 31, 1992, the Company issued 24,000 shares of Class II Serial
Preferred Stock with a stated value of $100 per share. In preference to shares
of common stock, each share is entitled to cumulative cash dividends of $7.50
per year, payable quarterly. The Preferred Stock is subject to redemption at
$100 per share at any time by the Company and is convertible into common stock,
at the holder's election, at any time after five years from the date of issuance
at a conversion price of $15.00 per common share. Holders of the Preferred Stock
are entitled to one vote per preferred share.

The Company has reserved a total of 535,870 shares of common stock for the
conversion of the convertible subordinated debentures and the Class II Serial
Preferred Stock and the exercise of the outstanding warrants referred to above.

F-20
<PAGE> 62

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

On December 21, 1992, the Company issued in a private placement 555,000
shares of common stock at the price of $7.50 per share.

On December 22, 1992, an additional 20,000 shares of the Company's common
stock were awarded to the employees as bonuses.

On January 25, 1993, the Company issued 60,000 shares of common stock in a
private placement at $8.50 per share.

On May 5, 1993, the Company issued 168,000 shares of common stock for
additional interests in certain oil and gas properties.

In May 1993, the Company sold 3,450,000 shares of common stock in a public
offering at $13.25 per share. Net proceeds to the Company after underwriting
discounts and offering costs were approximately $42.2 million.

In December 1994, the Company awarded 21,509 shares of common stock to
employees as profit sharing bonuses. These shares were issued in January 1995.
On December 30, 1993, the Company awarded and issued 22,325 shares of common
stock to employees as profit sharing bonuses.

In February 1994, the Company issued 31,656 restricted shares of common
stock valued at $12.25 per share in exchange for certain acquired assets and
assumed liabilities of the former Engine Power Systems.

In May 1994 and March 1993, non-statutory stock options to purchase 183,000
and 87,000 common shares, respectively, of the Company's stock were granted to
certain executive officers and employees under the Company's Stock Option Plan.
The exercise price of options may not be less than the fair market value of a
share of common stock on the date of grant. Options granted in 1994 and 1993
expire in 2004 and 2003, respectively, unless cessation of employment causes
earlier termination. The options become exercisable in 25% increments over a
four-year period beginning one year from date of grant. At the date of grant,
the exercise price of the options equaled the market price of $12.375 per share
on May 27, 1994 and $10.00 per share on March 17, 1993.

On May 27, 1994, the shareholders approved the Non-Employee Directors Stock
Option Plan. In May 1994 and March 1993 non-statutory stock options to purchase
10,000 and 8,000 common shares of the Company's stock were granted under the
Plan. Additional options for 2,000 shares will be granted each year to each
non-employee director. The exercise price of options under the Plan is equal to
the fair market value on the date of grant. Options expire on the tenth
anniversary of the grant date. The options become exercisable on the anniversary
of the grant date at a rate of one third of the shares each year. The exercise
price of the options granted on May 27, 1994 and March 17, 1993 were $12.375 per
share and $10.00 per share, respectively. As of December 31, 1994, 102,000
shares were available for grant under the Plan.

The Company's Articles of Incorporation include certain anti-takeover
provisions. The provisions grant the Board of Directors the authority to issue
and fix the terms of preferred stock as well as the ability to take certain
other actions that could have the effect of discouraging unsolicited takeover
attempts. In addition, the Company has entered into contracts with its officers
that provide for severance payments, in certain circumstances, in the event that
their employment is terminated following a change in control. The senior notes
may, at the noteholder's discretion, be accelerated and become due and payable
upon a change in control of the Company.

(9) RESTRICTED STOCK GRANT AND BONUS PLAN

During May 1992, HSB IV contributed a total of 119,600 shares of the
Company's common stock to fund the Company's Restricted Stock Grant and Bonus
Plan, as amended (the "Plan"). The shares contributed by HSB IV were used to
make restricted stock grant and bonus awards to employees of the Company.

F-21
<PAGE> 63

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The shares of common stock awarded to an employee under the Plan are fully
paid and nonassessable and are represented by a certificate or certificates
registered in the employee's name. The employee has all the rights of a
shareholder with respect to such shares, including the right to vote the shares
and receive all dividends paid with respect to such shares.

Certain shares awarded are subject to forfeiture and to restrictions
prohibiting their sale, transfer, pledge or other disposition until the
restrictions are released. Such shares will be released from such restrictions
at the rate of 25% for each full year of employment completed by the employee
after the date of the award and will be fully vested after four full years of
continued employment, except that the shares will immediately vest and be
released from restrictions in the event of the death, retirement at normal
retirement age or permanent disability of the employee. The employee will
forfeit all rights to shares not previously released from restrictions in the
event of the termination of his or her employment with the Company for any
reason other than death, retirement at normal retirement age or permanent
disability or in the event of a change in control of the Company. The ownership
of all forfeited shares shall revert to HSB IV or his estate.

Unearned compensation was charged for the market value of the restricted
shares on the date of grant and is amortized over the restricted period. The
unamortized unearned compensation value is shown as a reduction of shareholders'
equity in the accompanying consolidated balance sheet.

(10) INCOME TAXES

The provision (benefit) for income taxes in the Consolidated Statements of
Operations includes the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------
1994 1993 1992
---------- ---------- --------
<S> <C> <C> <C>
CURRENT
Federal....................................... $ 397,815 $ 262,219 $581,000
State......................................... 189,708 159,411 37,519
---------- ---------- ---------
587,523 421,630 618,519
DEFERRED
Federal....................................... 1,423,871 1,356,994 (155,174)
State......................................... 145,676 194,941 (17,224)
---------- ---------- ---------
1,569,547 1,551,935 (172,398)
---------- ---------- ---------
TOTAL................................. $2,157,070 $1,973,565 $446,121
========== ========== =========
</TABLE>

The effective tax rate differs from the U.S. federal statutory tax rate, as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------
1994 1993 1992
---- ----- ------
<S> <C> <C> <C>
Statutory federal income tax rate........................ 34.0% 34.0% 34.0%
Increases (reductions) in taxes resulting from:
State income taxes, net of federal tax benefit........ 3.7 4.5 1.6
Statutory depletion................................... (2.6) -- (14.5)
Expenses which provided no tax benefit................ .7 .2 6.4
Other, net............................................ .2 (.7) 0.6
----
-
----- -----
Effective income tax rate for the year................ 36.0% 38.0% 28.1%
===== ===== =====
</TABLE>

F-22
<PAGE> 64

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Significant components of the Company's deferred income tax liabilities and
assets are as follows:

<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1994 1993
----------- -----------
<S> <C> <C>
Deferred income tax liabilities:
Property and equipment, net................................. $ 9,859,291 $ 7,350,666
Production accruals and accounts receivable................. 135,109 211,351
Other, net.................................................. 77,829 21,228
---------- ----------
Total deferred income tax liabilities.................... 10,072,229 7,583,245
Deferred income tax assets:
Accrued expenses............................................ 1,558,738 929,159
Inventories................................................. 216,992 291,127
Net operating loss carryforwards............................ 1,580,049 1,938,381
Tax credit carryforwards.................................... 1,355,953 865,715
Depletion carryforwards..................................... 157,035 --
Other, net.................................................. 253,147 250,755
---------- ----------
Total deferred income tax assets......................... 5,121,914 4,275,137
---------- ----------
Net deferred income tax liability........................ $ 4,950,315 $ 3,308,108
========== ==========
Long-term liability......................................... $ 6,691,408 $ 4,376,610
Current asset............................................... (1,741,093) (1,068,502)
---------- ----------
Net deferred income tax liability........................ $ 4,950,315 $ 3,308,108
========== ==========
</TABLE>

At December 31, 1994, the Company had approximately $4,200,000 of net
operating loss carryforwards and $800,000 of statutory depletion carryforwards
available for federal income tax reporting purposes. Substantially all of the
net operating loss and statutory depletion carryforwards are limited as to their
annual utilization as a result of prior ownership changes. In addition, the
Company has approximately $69,000 of investment tax credit carryforwards, the
annual utilization of which is also subject to limitations under the provisions
of the Internal Revenue Code. The Company has alternative minimum tax credit
carryforwards of approximately $1,287,000 which have no expiration date. The net
operating loss carryforwards, if unused, will expire from 2000 to 2009 and the
investment tax credit carryforward, if unused, will expire from 1998 to 2000.
There is no expiration date for the utilization of statutory depletion
carryforwards.

(11) RETIREMENT PLANS

The Company has a 401(k) salary reduction plan covering substantially all
of the employees of the Company. Under the plan, an amount equal to 2% of
participants' compensation is contributed by the Company to the plan each year.
Eligible employees may also make voluntary plan contributions which the Company
matches $.25 for every $1.00 contributed up to 6% of an employee's annual
compensation. Retirement plan expense for the years ended December 31, 1994,
1993 and 1992 was $286,446, $251,305 and $235,588, respectively.

The Company established non-qualified deferred compensation plans in 1994
which permit certain key employees and directors to elect to defer a portion of
their compensation.

F-23
<PAGE> 65

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(12) RELATED PARTY TRANSACTIONS

Prior to the Consolidation, HSB IV and an affiliated company that was part
of the Belden Interests were general partners in the Partnership, a
publicly-traded master limited partnership, and HSB IV was a shareholder of BBI.
The Belden Interests provided substantially all developmental services, well
maintenance, supplies and other services to the Partnership and BBI and charged
these entities various fees. In 1992, the Belden Interests charged affiliates
$302,000 for well operator's fees, $786,000 for general and administrative fees
which included costs associated with final tax reporting and wind-up of the
Partnership and BBI, and $188,000 for other fees and services. Due to the
consolidation discussed in Notes 1 and 3, these amounts represent only the first
three months of 1992.

In 1993, the Company acquired 6.1 acres of land from HSB IV for $339,000.
Also in 1993, the Company purchased all the assets of Southgate Petroleum
Corporation, of which HSB IV was the sole shareholder, for $348,000. These
assets consisted of heavy equipment, undeveloped acreage and operating rights.

(13) COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal actions arising in the normal
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the financial position
of the Company.

(14) CONCENTRATIONS OF CREDIT RISK

The Company operates primarily in the oil and gas industry. Sales of oil
and gas are ultimately made to refineries, gas utilities and industrial
consumers in Ohio, West Virginia, New York and Pennsylvania. The Company is also
a distributor of a broad range of oilfield equipment and supplies. Its customers
include other independent oil and gas companies, dealers and operators
throughout Ohio, West Virginia, New York and Pennsylvania. Credit limits,
ongoing credit evaluation and account monitoring procedures are utilized to
minimize the risk of loss. Collateral is generally not required. Expected losses
are provided for currently and actual losses have been within management's
expectations.

(15) MAJOR CUSTOMERS

Oil and gas sales and gas marketing and gathering revenue from one customer
that exceeded 10% of total revenue during the years ended December 31, 1994 and
1993 amounted to $9,600,612 and $8,616,069, respectively. Oil and gas sales to
one customer that exceeded 10% of total revenue during the year ended December
31, 1992 amounted to $5,313,193.

(16) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------
1994 1993 1992
---------- ---------- -----------
<S> <C> <C> <C>
Cash paid during the year for:
Interest........................................ $3,145,724 $3,206,786 $ 2,218,447
Income taxes.................................... 90,018 775,713 174,245
Non-cash investing and financing activities:
Acquisition of assets in exchange for long-term
liabilities.................................. $ 527,094 $1,006,068 $28,007,065
Acquisition of assets in exchange for stock..... 387,788 1,680,000 2,400,000
Assets and liabilities of the Partnership and
BBI in exchange for common stock............. -- -- 23,980,706
Sale of assets in exchange for note
receivable................................... 689,289 -- --
</TABLE>

F-24
<PAGE> 66

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(17) SUPPLEMENTARY INFORMATION ON OIL AND GAS ACTIVITIES

The following disclosures are presented in accordance with the Financial
Accounting Standards Board's (FASB) Statement of Financial Accounting Standards
No. 69 (SFAS 69). The following table sets forth costs incurred including pro
rata consolidated amounts attributable to the Company.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------
1994 1993 1992
----------- ---------- -----------
<S> <C> <C> <C>
Costs incurred
Acquisition
Proved properties........................... $20,274,350 $3,883,204 $62,606,242
Unproved properties......................... 1,744,345 621,789 1,751,818
Developmental.................................. 9,141,520 6,364,665 2,203,963
Exploratory.................................... 2,129,696 1,895,216 1,308,900
</TABLE>

PROVED OIL AND GAS RESERVES (UNAUDITED)

The Company's proved developed and undeveloped reserves are all located
within the United States. Proved undeveloped reserves have been included
beginning in 1993. The Company cautions that there are many uncertainties
inherent in estimating proved reserve quantities and in projecting future
production rates and the timing of development expenditures. In addition,
estimates of new discoveries are more imprecise than those of properties with a
production history. Accordingly, these estimates are expected to change as
future information becomes available. Material revisions of reserve estimates
may occur in the future, development and production of the oil and gas reserves
may not occur in the periods assumed, and actual prices realized and actual
costs incurred may vary significantly from those used. Proved reserves represent
estimated quantities of natural gas, crude oil and condensate that geological
and engineering data demonstrate, with reasonable certainty, to be recoverable
in future years from known reservoirs under economic and operating conditions
existing at the time the estimates were made. Proved developed reserves are
proved reserves expected to be recovered through wells and equipment in place
and under operating methods being utilized at the time the estimates were made.

The estimates of proved developed reserves have been reviewed by the
Company's independent petroleum engineers. The estimates of proved undeveloped
reserves were prepared by the Company's petroleum engineers.

F-25
<PAGE> 67

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The following table sets forth changes in estimated proved and proved
developed reserves for the three years ended December 31, 1994.

<TABLE>
<CAPTION>
OIL GAS
(BBL) (MCF)
----------- -----------
<S> <C> <C>
DECEMBER 31, 1991........................................... 621,253 5,400,038
Extensions and discoveries.................................. 33,653 1,907,956
Purchase of reserves in place............................... 3,883,508 75,110,695
Sales of reserves in place.................................. (17,845) (91,080)
Revisions of previous estimates............................. (6,284) 557,120
Production.................................................. (351,262) (3,726,728)
--------- -----------
DECEMBER 31, 1992........................................... 4,163,023 79,158,001
Extensions and discoveries.................................. 182,957 5,198,126
Purchase of reserves in place............................... 119,216 4,121,079
Sales of reserves in place.................................. (52,072) (9,557)
Revisions of previous estimates............................. (815,743) (6,516,472)
Inclusion of proved undeveloped reserves(1)................. 388,342 19,687,024
Production.................................................. (452,844) (7,373,252)
--------- -----------
DECEMBER 31, 1993........................................... 3,532,879 94,264,949
Extensions and discoveries.................................. 242,365 8,554,382
Purchase of reserves in place............................... 222,981 26,876,534
Sale of reserves in place................................... (11,178) (1,022,027)
Revisions of previous estimates............................. 622,462 3,880,633
Production.................................................. (496,039) (9,562,862)
--------- -----------
DECEMBER 31, 1994........................................... 4,113,470 122,991,609
========= ===========
PROVED DEVELOPED RESERVES
December 31, 1993........................................... 3,144,537 74,577,925
========= ===========
December 31, 1994........................................... 3,714,671 101,355,451
========= ===========

<FN>
- ---------------
(1) Prior to 1993, the Company did not estimate its proved undeveloped reserves
because the effect on total proved reserves was insignificant. In 1994 and
1993, the Company acquired properties with significant undeveloped reserve
potential and plans to develop these undeveloped locations. As a result, the
Company elected to include its proved undeveloped reserves in 1993 and
subsequent years to more accurately present its total proved reserves.
</TABLE>

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES (UNAUDITED)

The following tables, which present a standardized measure of discounted
future net cash flows and changes therein relating to proved oil and gas
reserves, are presented pursuant to SFAS 69. In computing this data, assumptions
other than those required by the FASB could produce different results.
Accordingly, the data should not be construed as representative of the fair
market value of the Company's proved oil and gas reserves. The following
assumptions have been made:

- Future revenues were based on year-end oil and gas prices. Future price
changes were included only to the extent provided by existing contractual
agreements.

- Production and development costs were computed using year-end costs
assuming no change in present economic conditions.

F-26
<PAGE> 68

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

- Future net cash flows were discounted at an annual rate of 10%.

- Future income taxes were computed using the approximate statutory tax
rate and giving effect to available net operating losses, tax credits and
statutory depletion.

The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves at December 31, 1994, 1993 and 1992 is presented
below:

<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Estimated future cash inflows (outflows)
Revenues from the sale of oil and gas... $ 395,610,738 $ 315,270,912 $ 292,051,715
Production and development costs........ (165,766,349) (132,313,945) (114,367,184)
------------- ------------- -------------
Future net cash flows before income
taxes................................... 229,844,389 182,956,967 177,684,531
Future income taxes....................... (54,762,015) (39,955,545) (29,155,723)
------------- ------------- -------------
Future net cash flows..................... 175,082,374 143,001,422 148,528,808
10% timing discount....................... (85,228,387) (71,915,400) (71,989,247)
------------- ------------- -------------
Standardized measure of discounted future
net cash flows.......................... $ 89,853,987 $ 71,086,022 $ 76,539,561
============= ============= =============
</TABLE>

The principal sources of changes in the standardized measure of future net
cash flows for the three years ended December 31, 1994 are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Beginning of year........................... $ 71,086,022 $ 76,539,561 $ 6,609,864
Sale of oil and gas, net of production
costs..................................... (23,287,185) (19,451,432) (9,672,623)
Extensions and discoveries, less related
estimated future development and
production costs.......................... 14,317,120 9,667,774 3,228,728
Purchase of reserves in place less estimated
future production costs................... 20,715,526 4,806,990 81,670,287
Sale of reserves in place less estimated
future production costs................... (635,406) (179,749) (153,002)
Revisions of previous quantity estimates.... 4,971,843 (9,772,684) 765,204
Inclusion of proved undeveloped reserves.... -- 6,611,352 --
Net changes in prices and production
costs..................................... 93,790 (2,564,031) 4,059,860
Change in income taxes...................... (8,851,583) (4,443,113) (13,356,703)
Accretion of 10% timing discount............ 8,943,892 9,087,098 820,310
Changes in production rates (timing) and
other..................................... 2,499,968 784,256 2,567,636
------------- ------------- -------------
End of year................................. $ 89,853,987 $ 71,086,022 $ 76,539,561
============= ============= =============
</TABLE>

F-27
<PAGE> 69

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(18) INDUSTRY SEGMENT FINANCIAL INFORMATION

The table below presents certain financial information regarding the
Company's industry segments. Intersegment sales are billed on an intercompany
basis at prices for comparable third party goods and services.

<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
Oil and gas operations...................... $ 65,659,418 $ 61,340,169 $ 41,539,484
Oilfield sales and service.................. 21,204,781 14,382,414 11,888,315
Intersegment sales.......................... (4,319,112) (3,271,226) (2,392,759)
------------ ------------ ------------
$ 82,545,087 $ 72,451,357 $ 51,035,040
=========== =========== ===========
OPERATING INCOME (LOSS)
Oil and gas operations...................... $ 9,117,043 $ 7,619,906 $ 622,840
Oilfield sales and service(1)............... (88,687) 125,658 1,647,628
------------ ------------ ------------
$ 9,028,356 $ 7,745,564 $ 2,270,468
=========== =========== ===========
IDENTIFIABLE ASSETS
Oil and gas operations...................... $132,537,620 $128,352,821 $ 98,010,238
Oilfield sales and service.................. 15,635,175 6,821,107 4,242,841
------------ ------------ ------------
$148,172,795 $135,173,928 $102,253,079
=========== =========== ===========
DEPRECIATION, DEPLETION AND AMORTIZATION
EXPENSE
Oil and gas operations...................... $ 11,343,441 $ 9,316,499 $ 4,534,519
Oilfield sales and service.................. 677,817 386,959 318,839
------------ ------------ ------------
$ 12,021,258 $ 9,703,458 $ 4,853,358
=========== =========== ===========
CAPITAL EXPENDITURES
Oil and gas operations...................... $ 33,955,736 $ 15,976,914 $ 80,850,149
Oilfield sales and service.................. 4,445,681 1,014,612 238,021
------------ ------------ ------------
$ 38,401,417 $ 16,991,526 $ 81,088,170
=========== =========== ===========

<FN>
- ---------------
(1) The 1994 amount includes operating losses of $438,680 attributable to the
operations of Magnolia Compression Services, Inc. and Engine Power Systems,
Inc. which were primarily the result of expenses incurred in the initial
development of these businesses. The 1992 amount includes operating income
generated by the Belden Interests from sales and services to the Partnership
and BBI during the first quarter of 1992.
</TABLE>

F-28
<PAGE> 70

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The results of operations for the four quarters of 1994 and 1993 are shown
below.

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1994
Sales and other operating
revenues........................ $20,620,601 $20,417,568 $21,435,564 $20,071,354
Gross profit...................... 3,096,358 3,849,597 3,309,537 2,738,618
Net income........................ 807,241 1,104,926 1,079,937 850,817
Net income per common share....... .11 .15 .15 .11

1993
Sales and other operating
revenues........................ $19,237,590 $16,425,888 $17,291,240 $19,496,639
Gross profit...................... 3,207,398 3,094,093 2,845,065 2,538,991
Net income........................ 656,510 865,447 1,004,185 693,884
Net income per common share....... .18 .17 .14 .09
</TABLE>

(20) SUBSEQUENT EVENTS

Effective in January 1995, the Company purchased Ward Lake Drilling, Inc.
("Ward Lake"), a privately-held exploration and production company headquartered
in Gaylord, Michigan, for $15.1 million. The purchase was funded by borrowings
under the Company's existing credit facility. Ward Lake operates and holds a
production payment interest and working interests averaging 13.6% in
approximately 500 Antrim Shale gas wells located in Michigan's lower peninsula.
The purchase also included approximately 5,500 undeveloped leasehold acres that
Ward Lake owns in Michigan.

At December 31, 1994, the wells had estimated proved natural gas reserves
totaling 98 Bcf gross (13.7 net). Gross production from the wells is expected to
total approximately 37 million cubic feet of gas per day in 1995. Approximately
one half of the purchase price represented payment for the proved reserves, with
the balance associated with the operating rights and other corporate assets.

In March 1995, the Company entered into an agreement to purchase all the
producing properties of The East Ohio Gas Company for $6.5 million. The assets
to be acquired include a 100% working interest in 378 natural gas wells and
drilling rights on more than 250,000 acres of adjacent properties. A substantial
majority of the wells acquired are adjacent to properties currently being
operated by the Company. The wells had estimated proved reserves of 8.5 Bcf of
natural gas and 80,000 Bbls of oil at December 31, 1994. Production from the
wells is expected to total approximately 1.9 million cubic feet equivalent per
day in 1995. The purchase is subject to the satisfaction of certain due
diligence matters, consent requirements and other conditions.

F-29
<PAGE> 71

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Belden & Blake Corporation

We have audited the accompanying Statements of Revenues and Direct
Operating Expenses for the years ended December 31, 1994 and 1993 (the
"Statements") of certain oil and gas properties subject to a letter of intent to
enter into a definitive sales agreement dated May 23, 1995 between Quaker State
Corporation and Belden & Blake Corporation, (the "Quaker State Properties").
These Statements are the responsibility of Belden & Blake Corporation's
management based on data supplied by Quaker State Corporation. Our
responsibility is to express an opinion on these Statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the Statements. We believe that
our audits provide a reasonable basis for our opinion.

The accompanying Statements of Revenues and Direct Operating Expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in a Registration Statement on
Form S-3 to be filed by Belden & Blake Corporation and are not intended to be a
complete presentation of the Quaker State Properties' revenues and expenses.

In our opinion, the Statements referred to above present fairly, in all
material respects, the revenues and direct operating expenses described in Note
1 of the Quaker State Properties for the years ended December 31, 1994 and 1993,
in conformity with generally accepted accounting principles.

Cleveland, Ohio
May 31, 1995

ERNST & YOUNG LLP

F-30
<PAGE> 72

QUAKER STATE PROPERTIES

STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THREE MONTHS ENDED MARCH 31 YEARS ENDED DECEMBER 31
--------------------------- ---------------------------
1995 1994 1994 1993
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales................... $5,381,788 $5,791,439 $20,257,404 $19,657,993
Gas gathering....................... 826,285 760,292 2,863,747 2,579,519
---------- ---------- ----------- -----------
Total Revenues........................ 6,208,073 6,551,731 23,121,151 22,237,512
Direct operating expenses............. 1,680,707 1,739,599 6,527,950 7,566,458
---------- ---------- ----------- -----------
Revenues in excess of direct operating
expenses............................ $4,527,366 $4,812,132 $16,593,201 $14,671,054
========== ========== =========== ===========
</TABLE>

See accompanying notes.

F-31
<PAGE> 73

QUAKER STATE PROPERTIES
NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES

(INFORMATION SUBSEQUENT TO DECEMBER 31, 1994 AND PERTAINING TO THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1994 IS UNAUDITED)

BASIS OF PRESENTATION

The accompanying statements present the revenues and direct operating
expenses of certain oil and gas property interests and related gas gathering
systems which are subject to a letter of intent to enter into a definitive sales
agreement dated May 23, 1995 between Quaker State Corporation (Quaker State) as
seller and Belden & Blake Corporation (Belden & Blake) as buyer. These
properties (the "Quaker State Properties") are located in New York,
Pennsylvania, Ohio and West Virginia.

The revenues and direct operating expenses included in these Statements
relate solely to the oil and gas properties subject to the sales agreement
indicated above. Only the actual costs of maintaining the producing properties
and gathering systems are included in direct operating expenses. Charges for
general and administrative expenses, depreciation, depletion and amortization
and federal and state income taxes are not included in direct operating
expenses. The historical revenues in excess of direct operating expenses for the
Quaker State Properties presented herein are not believed by Belden & Blake to
be representative of future operations.

Historical financial statements prepared in accordance with generally
accepted accounting principles ("GAAP") do not exist for the Quaker State
Properties. A practicable determination of the historical general and
administrative expenses and other indirect expenses which were attributable to
the properties acquired would not be indicative of the level of such expenses to
be incurred by Belden & Blake. The depletion and depreciation and interest
charges of Quaker State associated with the Quaker State Properties would be
based on Quaker State's historical costs and borrowings and are not relevant to
the ongoing financial reporting of Belden & Blake since the properties will be
depleted over future periods based upon Belden & Blake's acquisition costs. The
presentation herein of historical financial statements reflecting financial
position, results of operations and cash flows required by GAAP was not
practicable in these circumstances. Accordingly, the statements of revenues and
direct operating expenses are presented in lieu of the financial statements
required under Rule 3-05 of Securities and Exchange Commission Regulation S-X.

2. CONCENTRATIONS OF CREDIT AND MAJOR CUSTOMERS

Sales of oil and gas are ultimately made to refineries (principally Quaker
State), gas utilities, industrial consumers, and natural gas brokers. Revenues
from individual customers that exceeded 10% of total revenue were as follows:

<TABLE>
<CAPTION>
THREE MONTHS YEARS ENDED
ENDED MARCH 31 DECEMBER 31
------------------------ ------------------------
CUSTOMER 1995 1994 1994 1993
- --------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
A (Quaker State)............................. $1,346,000 $ 821,000 $4,766,000 $4,065,000
B (utility).................................. 695,000 770,000 2,821,000 --
C (industrial consumer)...................... 759,000 849,000 2,966,000 --
D (natural gas broker)....................... 982,000 1,571,000 4,353,000 2,184,000
E (industrial consumer)...................... -- -- -- 2,574,000
</TABLE>

F-32
<PAGE> 74

QUAKER STATE PROPERTIES

NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

3. SUPPLEMENTAL INFORMATION (UNAUDITED)

Net indirect well operating costs allocated by Quaker State to the Quaker
State Properties amounted to approximately $230,000 and $180,000 for the three
months ended March 31, 1995 and 1994, and $760,000 and $650,000 for the years
ended December 31, 1994 and 1993, respectively.

Exploration and development costs amounted to approximately $500,000 and
$459,000 for the three months ended March 31, 1995 and 1994, and $2,600,000 and
$1,952,000 for the years ended December 31, 1994 and 1993, respectively.

The oil and gas reserve information presented below is based on reports
prepared as of December 31, 1994 based on prices received and direct operating
expenses incurred by Quaker State as of that date. Reserve studies were not
prepared as of December 31, 1993 and 1992. Accordingly, reserve quantities and
amounts as of December 31, 1993 and 1992 have been computed by adjusting the
December 31, 1994 reserves for actual 1994 and 1993 production and new
discoveries.

There are many uncertainties inherent in estimating proved reserve
quantities and in projecting future production rates and the timing of
development expenditures. In addition, estimates of new discoveries are more
imprecise than those of properties with a production history. Accordingly, these
estimates are expected to change as future information becomes available.
Material revisions of reserve estimates may occur in the future, development and
production of the oil and gas reserves may not occur in the periods assumed, and
actual prices realized and actual costs incurred may vary significantly from
those used. Proved reserves represent estimated quantities of natural gas, crude
oil and condensate that geological and engineering data demonstrate, with
reasonable certainty, to be recoverable in future years from known reservoirs
under economic and operating conditions existing at the time the estimates were
made. Proved developed reserves are proved reserves expected to be recovered
through wells and equipment in place and under operating methods being utilized
at the time the estimates were made.

Net quantities of proved developed reserves of oil and gas for the Quaker
State Properties are set forth in the table below:

<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
OIL RESERVES (IN BBL):
Oil reserves, beginning of period........................ 1,783,751 2,064,489
Extensions, discoveries and other additions.............. 67,992 77,685
Production............................................... (313,509) (358,423)
---------- ----------
Proved developed oil reserves, end of period............. 1,538,234 1,783,751
========== ==========
GAS RESERVES (IN MCF):
Gas reserves, beginning of period........................ 39,728,565 41,794,329
Extensions, discoveries and other additions.............. 4,655,438 3,170,526
Production............................................... (6,518,378) (5,236,290)
---------- ----------
Proved developed gas reserves, end of period............. 37,865,625 39,728,565
========== ==========
</TABLE>

The following tables, which present a standardized measure of discounted
future net cash flows and changes therein relating to proved developed oil and
gas reserves, are presented pursuant to Statement of Financial Accounting
Standards No. 69 (SFAS 69). In computing this data, assumptions other than those
required by the Financial Accounting Standards Board could produce different
results. Accordingly, the data should not be construed as representative of the
fair market value of the Quaker State Properties' proved oil and gas reserves.
This information is presented to allow a reasonable comparison of reserve values
using

F-33
<PAGE> 75

QUAKER STATE PROPERTIES

NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES -- CONTINUED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

3. SUPPLEMENTAL INFORMATION (UNAUDITED) -- CONTINUED
standardized measurement criteria and should be used only for that purpose.
Belden & Blake's investment and operating decisions were based on different cost
assumptions from those used herein. The following assumptions have been made:

- Future revenues were based on year-end oil and gas prices. Future price
changes were included only to the extent provided by existing contractual
agreements.

- Production and development costs were computed using year-end costs
assuming no change in present economic conditions.

- Future net cash flows were discounted at an annual rate of 10%.

- Future general and administrative expenses and income taxes were not
considered in the calculations.

<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Future oil and gas revenues............................ $101,420,480 $110,323,833
Future production costs................................ (41,998,626) (45,685,540)
------------ ------------
Future net cash flows.................................. 59,421,854 64,638,293
10% timing discount.................................... (17,109,549) (18,611,537)
------------ ------------
Standardized measure of discounted future net cash
flows (before income taxes).......................... $ 42,312,305 $ 46,026,756
=========== ===========
</TABLE>

The following are the principal sources of change in the standardized
measure of discounted future net cash flows:

<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Beginning of year...................................... $ 46,026,756 $ 48,943,204
Sales of oil and gas produced, net of costs............ (13,729,454) (12,091,535)
Extensions, discoveries, and improved recovery, less
related costs........................................ 5,412,327 4,280,767
Accretion of 10% timing discount....................... 4,602,676 4,894,320
------------ ------------
End of year............................................ $ 42,312,305 $ 46,026,756
=========== ===========
</TABLE>

F-34
<PAGE> 76

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)

MARCH 31, 1995
(IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
COMPANY ADJUSTMENTS COMBINED
-------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Current assets................................... $ 31,979 $ (1,175)h $ 30,804
Net property and equipment (successful efforts
method)........................................ 137,501 69,309 h 206,810
Other assets..................................... 2,842 2,842
-------- -------- --------
$172,322 $ 68,134 $240,456
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities.............................. $ 16,088 $ 2,000 h $ 18,088
Long-term liabilities............................ 67,215 14,054 h 81,269
Deferred income taxes............................ 6,930 6,930
Shareholders' equity............................. 82,089 52,080 h 134,169
-------- -------- --------
$172,322 $ 68,134 $240,456
======== ======== ========
</TABLE>

See accompanying notes.

F-35
<PAGE> 77

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)

FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
QUAKER STATE OTHER PRO FORMA PRO FORMA
COMPANY PROPERTIES WARD LAKE ACQUISITIONS ADJUSTMENTS COMBINED
------- ------------ --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Oil and gas sales................... $32,574 $ 20,257 $ 3,540 $5,079 $ $ 61,450
Gas marketing and gathering......... 33,085 2,864 1,228 37,177
Oilfield sales and service.......... 16,886 3,050 659 (3,709)a 16,886
Interest and other.................. 559 744 1,303
------- ------------ --------- ------ ----------- ------------
83,104... 23,121 7,334 6,966 (3,709) 116,816

Expenses
Production expense.................. 9,292 6,528 3,361 2,400 (4,025)b 17,556
Cost of gas and gathering expense... 29,134 29,134
Oilfield sales and service.......... 16,297 16,297
Exploration expense................. 2,807 28 688c 3,523
General and administrative
expense........................... 3,966 1,835 (1,786)d 4,015
Interest expense.................... 3,587 420 2,168e 6,175
Depreciation, depletion and
amortization...................... 12,021 757 9,833f 22,611
------- ------------ --------- ------ ----------- ------------
77,104... 6,528 6,401 2,400 6,878 99,311
------- ------------ --------- ------ ----------- ------------
Income before income taxes............ 6,000 16,593 933 4,566 (10,587) 17,505
Provision for income taxes
Current......................... 588 2,973g 3,561
Deferred........................ 1,569 891g 2,460
------- ------------ --------- ------ ----------- ------------
2,157 -- -- -- 3,864 6,021
------- ------------ --------- ------ ----------- ------------
Net income............................ $3,843 $ 16,593 $ 933 $4,566 $ (14,451) $ 11,484
======== ============ ========== =========== =========== ===========
Net income per common share........... $ 0.52 $ 1.07
======== ===========
Weighted average common shares
outstanding......................... 7,080 10,580
======== ===========
</TABLE>

See accompanying notes.

F-36
<PAGE> 78

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 1995
(IN THOUSANDS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
QUAKER STATE OTHER PRO FORMA PRO FORMA
COMPANY PROPERTIES ACQUISITIONS ADJUSTMENTS COMBINED
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Oil and gas sales................................ $9,207 $5,382 $1,058 $ $ 15,647
Gas marketing and gathering...................... 8,916 826 129 9,871
Oilfield sales and service....................... 4,121 157 (157)a 4,121
Interest and other............................... 181 181
------- ------ ------ ------- -------
22,425 6,208 1,344 (157) 29,820
Expenses
Production expense............................... 2,634 1,681 532 (578)b 4,269
Cost of gas and gathering expense................ 7,902 7,902
Oilfield sales and service....................... 4,210 4,210
Exploration expense.............................. 895 172c 1,067
General and administrative expense............... 949 81d 1,030
Interest expense................................. 1,163 481e 1,644
Depreciation, depletion and amortization......... 3,499 2,604f 6,103
------- ------ ------ ------- -------
21,252 1,681 532 2,760 26,225
------- ------ ------ ------- -------
Income before income taxes......................... 1,173 4,527 812 (2,917) 3,595
Provision for income taxes
Current...................................... 211 458g 669
Deferred..................................... 223 313g 536
------- ------ ------ ------- -------
434 -- -- 771 1,205
------- ------ ------ ------- -------
Net income......................................... $ 739 $4,527 $ 812 $(3,688) $ 2,390
======= ====== ====== ======= =======
Net income per common share........................ $ 0.10 $ 0.22
======= =======
Weighted average common shares outstanding......... 7,102 10,602
======= =======
</TABLE>

See accompanying notes.

F-37
<PAGE> 79

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION

The Company recently entered into an agreement for the acquisition from
Quaker State Corporation of certain of its oil and gas properties and related
assets in New York, Ohio, Pennsylvania and West Virginia (the "Quaker State
Properties") for $56 million. The Quaker State Properties include approximately
1,460 gross (1,111 net) wells with proved reserves of 2.2 MMBbl of oil and 46.8
Bcf of gas at December 31, 1994; gas gathering systems totaling approximately
250 miles in length; undeveloped oil and gas leases and fee mineral interests
covering approximately 250,000 acres; an extensive geologic and geophysical data
base and other assets.

In January 1995 the Company purchased Ward Lake Drilling, Inc. ("Ward
Lake"), a privately-held exploration and production company headquartered in
Gaylord, Michigan, for $15.1 million. The purchase was funded by borrowings
under the Company's existing credit facility. Ward Lake operates and holds
either a production payment interest or a working interest averaging 13.6% in
approximately 500 Antrim Shale gas wells located in Michigan's lower peninsula.
The purchase also included approximately 5,500 undeveloped leasehold acres that
Ward Lake owns in Michigan.

Through May 31, 1995 the Company has completed two other acquisitions and
entered into an agreement with respect to a third acquisition (the "Other
Acquisitions") pursuant to which it acquired or will acquire for approximately
$19.4 million working interests in 1,139 gross (919 net) oil and gas wells in
Ohio, Pennsylvania and New York, and the drilling rights on more than 250,000
acres in Ohio adjacent to properties operated by the Company. Estimated proved
developed reserves associated with the wells totaled 21 Bcf of natural gas and
.5 MMBbl of oil net to the Company's interest at December 31, 1994.

The unaudited pro forma combined statements of operations present the pro
forma results of operations of the Company as if the acquisitions of the Quaker
State Properties, Ward Lake , and the Other Acquisitions had occurred on January
1, 1994. The unaudited pro forma combined statements of operations also include
the sale of Common Stock offered hereby and the repayment of certain debt as if
such transactions occurred on January 1, 1994. The pro forma condensed combined
balance sheet is presented on a pro forma basis as if the acquisitions and sale
of Common Stock offered hereby had occurred on March 31, 1995. The unaudited pro
forma combined financial statements would not necessarily be indicative of the
actual results had the above discussed transactions been consummated at January
1, 1994 or that may be obtained in the future. These unaudited pro forma
combined financial statements should be read in conjunction with the financial
statements of the Company and the related notes thereto included in this
Registration Statement/Prospectus.

2. PRO FORMA ADJUSTMENTS

The amounts provided in the unaudited pro forma combined financial
statements for the Company, the Quaker State Properties and Ward Lake, have been
derived from the audited financial statements of the respective companies at and
for the year ended December 31, 1994 and the unaudited financial statements for
the three months ended March 31, 1995. The amounts provided in the unaudited pro
forma consolidated financial statements for the Other Acquisitions have been
derived from the records of the former owners or operators of the properties and
are presented on an aggregate basis.

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE
ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
1994 1995
---------------- -------------

a) Adjustment to present certain well operating revenues (pumper and
administrative fees) as a reduction of production expenses, so as to
conform with the Company's existing presentation policy:

<S> <C> <C>
Ward Lake............................. $ (3,049,694) N/A
Other Acquisitions.................... (659,647) $ (156,533)
---------------- -------------
$ (3,709,341) $ (156,533)
================ =============
</TABLE>

F-38
<PAGE> 80

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

b) Adjustment to record the decrease in lease operating expenses due to
downsizing operations, including closing of one district office and
three operating facilities and reducing the number of employees by
twenty-four. Included in this adjustment is the reduction of
compensation and fringe benefits associated with continuing employees to
reflect the Company's existing wage and benefits package. The closed
facilities will be merged with existing Company facilities.

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE
ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
1994 1995
---------------- -------------
<S> <C> <C>
Quaker State Properties............... $ (1,326,991) $ (380,455)
</TABLE>

Adjustment to recognize additional production expense associated with
pay increases granted at the time of acquisition.

Adjustment to record the decrease in lease operating expenses due to
downsizing operations, including closing operating facilities and
combining them with existing Company facilities, and reduction of
compensation and fringe benefits associated with continuing employees to
reflect the Company's existing wage and benefits package.

<TABLE>
<S> <C> <C>
Other Acquisitions.................... (189,596) (41,017)
</TABLE>

Reclassification of certain general and administrative expenses to
production expenses, so as to conform to the Company's existing
presentation policy.

Adjust certain well operating revenues (pumper and administrative fees)
as a reduction of production expenses, so as to conform with the
Company's existing presentation policy:

<TABLE>
<S> <C> <C>
Ward Lake............................. (3,049,694) N/A
Other Acquisitions.................... (659,647) (156,533)
---------------- -------------
$ (4,024,755) $ (578,005)
================ =============
</TABLE>

c) Adjustment to reflect the cost of technical staff (accountants,
geologist, geophysicist, etc.) and their related support costs.

<TABLE>
<S> <C> <C>
Quaker State Properties............... $ 688,400 $ 172,100
================ =============
</TABLE>

d) Adjustment to reflect the increase (decrease) in general and
administrative expenses:

<TABLE>
<S> <C> <C>
Quaker State Properties............... $ 49,800 $ 81,200
</TABLE>

Reclassification of certain general and administrative expenses to
production expenses, so as to comply with the Company's existing
presentation policy.

Adjustment to reflect reduced general and administrative expenses
associated with the closing of one administrative office and the
discontinuing of the employment of Ward Lake's executive group and
support staff.

e) Adjustment to reflect the increase in interest expense associated with
additional debt incurred by the Company in connection with the
acquisitions:

<TABLE>
<S> <C> <C>
Quaker State Properties............... $ 253,000 $ 87,000
Ward Lake............................. 687,223 N/A
Other Acquisitions.................... 1,228,000 394,000
---------------- -------------
$ 2,168,223 $ 481,000
================ =============
</TABLE>

F-39
<PAGE> 81

BELDEN & BLAKE CORPORATION AND SUBSIDIARIES

f) Adjustment to record additional depletion, depreciation and amortization
associated with the property, equipment and other assets acquired:

<TABLE>
<S> <C> <C>
Quaker State Properties............... $ 7,605,770 $ 2,253,865
Ward Lake............................. 413,760 N/A
Other Acquisitions.................... 1,813,404 350,490
---------------- -------------
$ 9,832,934 $ 2,604,355
================ =============
</TABLE>

g) Adjustment to income taxes based on consolidated pro forma income:

<TABLE>
<S> <C> <C>
Current............................... $ 2,972,839 $ 457,822
Deferred.............................. 891,158 312,852
---------------- -------------
$ 3,863,997 $ 770,674
================ =============
</TABLE>

h) To record the acquisitions and the issuance of common stock.

F-40
<PAGE> 82

(map showing location of the Company's recent acquisitions)

(cross section diagram of the Appalachian Basin)
<PAGE> 83

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
Use of Proceeds....................... 10
Market Information.................... 10
Capitalization........................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business and Properties............... 20
Underwriting.......................... 34
Description of Capital Stock.......... 34
Legal Matters......................... 36
Experts............................... 36
Available Information................. 37
Incorporation of Documents by
Reference........................... 37
Glossary of Oil and Gas Terms......... A-1
Index to Financial Statements......... F-1
</TABLE>

3,500,000 SHARES

BELDEN & BLAKE

[LOGO]

CORPORATION

COMMON STOCK
------------------------
P R O S P E C T U S
------------------------
, 1995

JOHNSON RICE & COMPANY

MCDONALD & COMPANY
SECURITIES, INC.

SOUTHCOAST CAPITAL
CORPORATION
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 84

PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses in connection with the offering are as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............................... $ 22,380
NASD filing fee and expenses................................................ 6,940
Nasdaq additional listing fee............................................... 17,500
Printing and engraving...................................................... 168,500
Legal fees and expenses..................................................... 95,000
Accounting fees and expenses................................................ 140,000
Engineering fees and expenses............................................... 17,500
Blue Sky fees and expenses, including legal fees............................ 7,500
Miscellaneous............................................................... 25,000
--------
Total.................................................................. $ 500,320
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Code of Regulations of the Registrant provides for indemnification of
directors, officers and employees of the Registrant to the fullest extent
permitted by the General Corporation Law of the State of Ohio.

Section 1701.13 of the General Corporation Law of the State of Ohio permits
indemnification of any director, officer or employee with respect to any
proceeding against such person provided that: (a) such person acted in good
faith, (b) such person reasonably believed that the conduct was in or not
opposed to the best interests of the corporation and (c) in the case of a
criminal proceeding, such person had no reasonable cause to believe that the
conduct was unlawful. Indemnification may be made against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with the proceeding, provided
that if the proceeding is one by or in the right of the corporation,
indemnification may only be made against reasonable expenses (including
attorneys' fees) and may not be made with respect to any proceeding in which the
director, officer or employee has been adjudged to be liable to the corporation
except to the extent that the court in which the proceeding was brought shall
determine, upon application, that such person is, in view of all the
circumstances, entitled to indemnity for such expenses as the court shall deem
proper. The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, does not, by
itself, create a presumption that the director, officer or employee did not meet
the requisite standard of conduct required for indemnification to be permitted.

Section 1701.13 of the General Corporation Law of the State of Ohio further
provides that indemnification thereunder may not be made by the corporation
unless authorized after a determination has been made that such indemnification
is proper, with that determination to be made by (a) the Board of Directors by
the majority of a quorum consisting of directors not parties to the proceeding,
(b) if such quorum is not obtainable, or even obtainable but a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, (c) by the shareholders or (d) by the court in which the proceeding was
brought.

Section 1701.13 of the General Corporation Law of the State of Ohio also
provides that indemnification thereunder is not exclusive of any other rights to
which those seeking indemnification may be entitled under the Articles of
Incorporation, Code of Regulations or any agreement, vote of shareholders or
disinterested directors or otherwise. The Company has purchased directors and
officers liability insurance which provides additional protection for directors,
officers and employees of the Company.

II-1
<PAGE> 85

ITEM 16. EXHIBITS

An Exhibit Index appears at page II-4.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of their registration statement as of the time it was declared effective.

(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the registrant of expenses paid or
incurred by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.

II-2
<PAGE> 86

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NORTH CANTON, STATE OF OHIO ON JUNE 22, 1995.

BELDEN & BLAKE CORPORATION

By: /s/ HENRY S. BELDEN IV
Henry S. Belden IV,
Chairman of the Board
and Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ----------------------------------- ------------------

<S> <C> <C>
/s/ HENRY S. BELDEN IV Chairman of the Board, Chief June 22, 1995
- ---------------------------------------- Executive Officer and Director ------------------
Henry S. Belden IV (Principal Executive Officer) Date

/s/ RONALD E. HUFF Senior Vice President, Chief June 22, 1995
- ---------------------------------------- Financial Officer and Director ------------------
Ronald E. Huff (Principal Financial and Accounting Date
Officer)
/s/ MAX L. MARDICK President, Chief Operating Officer June 22, 1995
- ---------------------------------------- and Director ------------------
Max L. Mardick Date

/s/ JOSEPH M. VITALE Senior Vice President, Legal, June 22, 1995
- ---------------------------------------- General Counsel, Secretary and ------------------
Joseph M. Vitale Director Date

/s/ PAUL R. BISHOP* Director June 22, 1995
- ---------------------------------------- ------------------
Paul R. Bishop Date

/s/ THEODORE V. BOYD* Director June 22, 1995
- ---------------------------------------- ------------------
Theodore V. Boyd Date
Director
- ---------------------------------------- ------------------
Gary R. Petersen Date
Director
- ---------------------------------------- ------------------
David P. Quint Date
Director
- ---------------------------------------- ------------------
Raymond D. Saunders Date

/s/ GEORGE M. SMART* Director June 22, 1995
- ---------------------------------------- ------------------
George M. Smart Date

*By /s/ JOSEPH M. VITALE
-----------------------------------
Joseph M. Vitale
Attorney-in-fact

</TABLE>

II-3
<PAGE> 87

EXHIBIT INDEX

<TABLE>
<CAPTION>
LOCATION IN
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION COPY
- ----------- ----------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Underwriting Agreement
4.1 Amended and Restated Debenture Agreement between the Company and
Petercam Securities -- incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on Form S-4 (Registration
No. 33-43209)
4.2 Warrant Assumption Agreement between Belden & Blake Corporation
and Belden & Blake Energy Company -- incorporated by reference to
Exhibit 4.4 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992
4.3 Note Purchase Agreement dated as of November 15, 1993 among the
Company, The Canton Oil & Gas Company, Peake Operating Company
and Peake Energy, Inc. and the purchasers listed on Annex I
thereto -- incorporated by reference to Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993
5.1 Opinion of Black, McCuskey, Souers & Arbaugh as to the legality
of the securities being registered
23.1 Consent of Ernst & Young LLP
23.2 Consent of John G. Redic, Inc.
23.3 Consent of Black, McCuskey, Souers & Arbaugh (included in their
opinion filed as Exhibit 5.1)
24 Power of Attorney

</TABLE>

- ---------------

All Exhibits have been filed previously.

II-4