The accompanying condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the disclosures normally required by GAAP, or those normally made in an Annual Report on Form 10-K, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto which are incorporated in Everflow Eastern Partners, L.P.’s annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 27, 2018.

The results of operations for the interim periods may not necessarily be indicative of the results to be expected for the full year.

Everflow Management Limited, LLC (“EML”), an Ohio limited liability company, is the general partner of Everflow and, as such, is authorized to perform all acts necessary or desirable to carry out the purposes and conduct of the business of Everflow. The members of EML are Everflow Management Corporation ("EMC"); two individuals who are officers and directors of EEI and employees of Everflow; one individual who is the Chairman of the Board of EEI; one individual who is an employee of Everflow; and one private limited liability company.

Everflow Management Limited, LLC (“EML”), an Ohio limited liability company, is the general partner of Everflow and, as such, is authorized to perform all acts necessary or desirable to carry out the purposes and conduct of the business of Everflow. The members of EML include Everflow Management Corporation ("EMC"), two individuals who are officers and directors of EEI, one individual who is the Chairman of the Board of EEI, a private limited liability company which also serves as Everflow’s largest limited partner, and an individual limited partner. EMC is an Ohio corporation formed in September 1990 and is the managing member of EML.

The Financial Accounting Standards Board established a framework for measuring fair value and expanded disclosures about fair value measurements by establishing a fair value hierarchy that prioritizes the inputs and defines valuation techniques used to measure fair value. The hierarchy gives highest priority to Level I inputs and lowest priority to Level III inputs. The three levels of the fair value hierarchy are described below:

Level I – Quoted prices are available in active markets for identical financial instruments as of the reporting date.

Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

Level III – Pricing inputs are unobservable for the financial instrument and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation.

The Company’s investments are carried at fair market value based on quoted prices available in active markets and are therefore classified as Level 1.

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The estimated liability is based on historical experience in dismantling, plugging and abandoning wells, estimated remaining lives of those wells based on reserves estimates, estimates of the external cost to dismantle, plug and abandon the wells in the future and federal and state regulatory requirements. The liability is discounted using an assumed credit-adjusted, risk-free interest rate.

Loss on disposal of property and equipment includes approximately $900 associated with non-cash settlements of asset retirement obligations during the three month period ended June 30, 2019. Gain on disposal of property and equipment includes approximately $5,100 associated with non-cash settlements of asset retirement obligations during the six month period ended June 30, 2019. Gain on disposal of property and equipment includes approximately $449,700 and $559,800 associated with non-cash settlements of asset retirement obligations during the three and six month periods ended June 30, 2018, respectively.

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company utilizes the sales method to account for gas production volume imbalances. Under this method, revenue is recognized only when gas is produced and sold on the Company’s behalf. The Company had no material gas imbalances at June 30, 2019 and December 31, 2018, respectively.

The Company participates (and may act as drilling contractor) with unaffiliated and affiliated joint venture partners, employees, including officers, and directors in the drilling, development and operation of jointly owned oil and gas properties. Each owner, including the Company, has an undivided interest in the jointly owned properties. Generally, the joint venture partners, employees and directors participate on the same drilling/development cost basis as the Company and, therefore, no revenue, expense or income is recognized on the drilling and development of the properties. Well management and operating revenues are derived from a variety of both verbal and written operating agreements with joint venture partners and are recognized monthly as services are provided and properties are managed and operated. Other revenues consist of miscellaneous revenues that are recognized at the time services are rendered, the Company has a contractual right to such revenue and collection is reasonably assured.

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following discussion is intended to assist in the understanding of the Company’s liquidity, capital resources and results of operations. It is suggested that this information be read in conjunction with the Company’s interim consolidated financial statements, the related notes to consolidated financial statements and the Company’s 20172018 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2018.2019.

Liquidity and Capital Resources

The following table summarizes the Company's financial position at SeptemberJune 30, 20182019 and December 31, 2017:2018:

Working capital of $27.3$29.3 million as of SeptemberJune 30, 20182019 represented an increase of $4.5 million$937,000 from December 31, 2017,2018, due primarily to an increaseincreases in cash and equivalents and investments, andas well as a decrease in accrued expenses.expenses; offset somewhat by a decrease in production accounts receivable and an increase in accounts payable. The increase in investments was primarily the result of additional purchases of shares in a mutual fund during the ninesix months ended SeptemberJune 30, 20182019 that invests primarily in investment grade, short-term fixed and floating rate debt securities. The decrease in accrued expenses is primarily the result of a decrease in the current portion of asset retirement obligations associated with oil and gas properties disposed of during the nine months ended September 30, 2018. In addition, all payroll and retirement contributions accrued at December 31, 2017 were2018 being paid during the ninesix months ended SeptemberJune 30, 2018.2019, offset somewhat by an accrued expense recognized at June 30, 2019 for the repurchase of Units in association with the Company’s 2019 Repurchase Right. The decrease in production accounts receivable is primarily the result of lower average natural gas and crude oil prices received on production during the current receivable period as compared to the prior comparable receivable period. The effect of lower average natural gas and crude oil prices received was offset somewhat by additional natural gas and crude oil volumes recognized from third party operators during the current receivable period as compared to the prior comparable receivable period. The increase in accounts payable is primarily the result of additional production and related other payables outstanding at June 30, 2019 as compared to the prior comparable reporting date.

The Company funds its operations with cash generated by operations and/or existing cash and equivalent balances. The Company has had no borrowings since 2003 and no principal indebtedness was outstanding as of November 9, 2018.

The Company’s cash flow provided by operations before the change in working capital was $4.0$2.8 million during the ninesix months ended SeptemberJune 30, 2018, an increase2019, a decrease of $854,000$140,000 as compared to $3.2$2.7 million of cash flow provided by operations before the change in working capital during the prior comparable period. Changes in working capital from operations other than cash and equivalents decreasedincreased cash by $273,000$197,000 during the ninesix months ended SeptemberJune 30, 2018.2019. Cash flows provided by operating activities was $3.7$3.0 million for the ninesix months ended SeptemberJune 30, 2018.2019.

Management of the Company believes cash flows and existing cash and equivalents should be sufficient to meet the current funding requirements of ongoing operations, capital investments to develop and/or purchase oil and gas properties and the repurchase of Units pursuant to the 2019 repurchase right. The Company has not paid a cash distribution since October 2015.2020 Repurchase Right.

The Company has multiple contracts with Dominion Field Services (“Dominion”) which obligate Dominion to purchase, and the Company to sell and deliver, certain quantities of natural gas production from the Company’s oil and gas properties throughout the contract periods. Management believes the Company can meet its delivery commitments based on estimated production.

Results of Operations

The following table and discussion is a review of the results of operations of the Company for the three and ninesix month periods ended SeptemberJune 30, 20182019 and 2017.2018. All items in the table are calculated as a percentage of total revenues. This table should be read in conjunction with the discussions of select items below:

Revenues for the three and nine month periodsperiod ended SeptemberJune 30, 2018 increased $1.4 million, respectively,2019 decreased $506,000, or 21%, as compared to the prior comparable periods. The increasesperiod. Revenues for the six month period ended June 30, 2019 increased $182,000, or 4%, as compared to the prior comparable period. Both revenue variances were primarily the result of increasesvariances in crude oil and natural gas sales.sales from the current period in comparison to the prior comparable periods.

Crude oil and natural gas sales increased $1.4 million,decreased $506,000, or 108%22%, during the three months ended SeptemberJune 30, 20182019 as compared to the prior comparable period. The decrease was primarily the result of less natural gas and crude oil volumes produced, as well as lower average natural gas and crude oil prices received, during the three months ended June 30, 2019 as compared to the prior comparable period. Crude oil and natural gas sales increased $1.4 million,$179,000, or 26%4%, during the ninesix months ended SeptemberJune 30, 2018 as compared to the prior comparable period. The increases were primarily the result of recognition of $956,000 of crude oil and natural gas sales reported by a third party operator significantly in arrears during the three and nine months ended September 30, 2018, respectively. The increases were also impacted by increases in crude oil volumes produced and crude oil prices received during the three and nine months ended September 30, 2018 as compared to the prior comparable periods. The increase in crude oil and natural gas sales during the three months ended September 30, 2018 as compared to the prior comparable period was also the result of an increase in natural gas volumes produced and an increase in natural gas prices received during the three months ended September 30, 20182019 as compared to the prior comparable period. The increase inwas primarily the result of higher average natural gas volumes producedprices received during the three month periodsix months ended SeptemberJune 30, 20182019 as compared to the prior comparable period, offset somewhat by the effect of lower average crude oil prices received during the six month period ended June 30, 2019 as compared to the prior comparable period.

Production costs increased $146,000, or 12%, during the six months ended June 30, 2019 as compared to the prior comparable period. The increase was primarily the result of additional costs associated with less Company operated properties being voluntarily shut-in during the three monthssix month period ended SeptemberJune 30, 20182019, as well as higher ad valorem taxes and additional production costs recognized in association with third party operated properties during the six month period ended June 30, 2019, each as compared to the prior comparable period.

Production costs increased $739,000,Other income decreased $381,000, or 185%70%, during the three monthsmonth period ended SeptemberJune 30, 20182019 as compared to the prior comparable period. Production costs increased $773,000,Other income decreased $347,000, or 48%, during the nine monthssix month period ended SeptemberJune 30, 2018 as compared to the prior comparable period. The increases were primarily the result of recognition of $637,000 of production costs reported by a third party operator significantly in arrears during the three and nine months ended September 30, 2018, respectively. The increases were also impacted by the effect of less Company operated properties being voluntarily shut-in during the three and nine month periods ended September 30, 2018 as compared to the prior comparable periods.

Depreciation, depletion and amortization (“DD&A”) decreased $107,000, or 48%, during the three months ended September 30, 2018 as compared to the prior comparable period. DD&A decreased $204,000, or 34%, during the nine months ended September 30, 20182019 as compared to the prior comparable period. The primary reason for the decreases iswas the result of less depletable basesgain recognized on the disposal of oilproperty and gasequipment. The Company had a substantial decrease in the number of properties available to depletedisposed during the three and ninesix month periods ended SeptemberJune 30, 20182019 as compared to the prior comparable periods. Less depletable basesThe majority of oilthe gains on disposal of property and gas properties is primarily the result of DD&A, write down/impairment and abandonment of properties recognized in prior fiscal periods.

Other income increased $148,000, or 263%,equipment during the three monthsand six month periods ended September 30,June 2018 as compared to prior comparable period. Otherwere associated with settlements of the properties’ related asset retirement obligations. The effect of less gain recognized on the disposal of property and equipment was offset somewhat by additional interest and dividend income increased $582,000, or 167%,recognized during the nine monthsthree and six month periods ended SeptemberJune 30, 20182019 as compared to the prior comparable period. The primary reasons for the increases were the result of increases in interest and dividend income and gain on disposal of property and equipment.periods. The increase in interest and dividend income was primarily the result of additional investments held and the related dividends yielded on investments during the three and ninesix month periods ended SeptemberJune 30, 20182019 as compared to the prior comparable periods. The increase in gain on disposal of property and equipment was primarily the result of additional oil and gas properties disposed of during the three and nine month periods ended September 30, 2018 as compared to the prior comparable periods. The majority of the gains on disposal of property and equipment during the three and nine month periods ended September 30, 2018 were associated with settlements of the properties’ related asset retirement obligations. The increase in other income from the nine month period ending September 30, 2018 as compared to the prior comparable period was offset somewhat by a decrease in gain on sale of other assets. The decrease in gain on sale of other assets was primarily the result of less other assets sold during the nine month period ending September 30, 2018 as compared to the prior comparable period.

The Company reported net income of $1.0$806,000 and $1.6 million and $131,000 during the three months ended SeptemberJune 30, 20182019 and 2017,2018, respectively, representing 38%42% and 9%67% of total revenues during the three month periods ended SeptemberJune 30, 20182019 and 2017,2018, respectively. The Company reported net income of $3.4 million and $2.0 million during the nine months ended September 30, 2018 and 2017, respectively, representing 47% and 34% of total revenues during the nine month periods ended September 30, 2018 and 2017, respectively. The increasesdecrease in net income werewas primarily the result of increasesdecreases in crude oil and natural gas sales and other income. The Company reported net income of $2.2 million and a$2.4 million during the six months ended June 30, 2019 and 2018, respectively, representing 45% and 52% of total revenues during the six month periods ended June 30, 2019 and 2018, respectively. The decrease in DD&A,net income was primarily the result of an increase in production costs and decrease in other income, offset somewhat by an increase in production costs.crude oil and natural gas sales.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The critical accounting policies that affect the Company’s more complex judgments and estimates are described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

2018.

Forward-Looking Statements

Except for historical financial information contained in this Form 10-Q, the statements made in this report are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). In addition, words such as “expects,” “anticipate,” “intends,” “plans,” “believes,” “estimates,” variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ materially from those in the forward-looking statements include price fluctuations in the gas market in the Appalachian Basin, actual oil and gas production and the ability to locate economically productive oil and gas prospects for development by the Company. In addition, any forward-looking statements speak only as of the date on which such statement is made and the Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

This information has been omitted, as the Company qualifies as a smaller reporting company.

(a)     Disclosure Controls and Procedures. As of the end of the period covered by this report, management performed, with the participation of our Principal Executive Officer (the “CEO”) and Principal Financial and Accounting Officer (the “CFO”), an evaluation of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15 (the “evaluation”). Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures. Based on the evaluation, management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

The certifications of the Company’s CEO and CFO are attached as Exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q and include, in paragraph 4 of such certifications, information concerning the Company’s disclosure controls and procedures and internal control over financial reporting. Such certifications should be read in conjunction with the information contained in this Item 4., including the information incorporated by reference to our filing on Form 10-K for the year ended December 31, 2017,2018, for a more complete understanding of the matters covered by such certifications.

(b)     Changes in internal control over financial reporting. No change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

SIGNATURE

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

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