Everflow Eastern Partners 10-Q 2024 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒           Quarterly report pursuant to Section 13 or 15(d)

           of the Securities Exchange Act of 1934

            For the quarterly period ended March 31, 2024

OR

☐           Transition report pursuant to Section 13 or 15(d)

           of the Securities Exchange Act of 1934

For the transition period from                     to                     .

Commission File Number 0-19279

EVERFLOW EASTERN PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

Delaware	34-1659910
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
585 West Main Street
P.O. Box 629
Canfield, Ohio	44406
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (330) 533-2692

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     ☒       No    ☐    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐    

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
	None

There were 4,746,686 Units of limited partnership interest of the registrant as of May 9, 2024. The Units generally do not have any voting rights, but, in certain circumstances, the Units are entitled to one vote per Unit.

Except as otherwise indicated, the information contained in this report is as of March 31, 2024.

EVERFLOW EASTERN PARTNERS, L.P.

INDEX

	DESCRIPTION		PAGE NO.
Part I.	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets March 31, 2024 and December 31, 2023	F-1
		Consolidated Statements of Operations Three Months Ended March 31, 2024 and 2023	F-3
		Consolidated Statements of Partners’ Equity Three Months Ended March 31, 2024 and 2023	F-4
		Consolidated Statements of Cash Flows Three Months Ended March 31, 2024 and 2023	F-5
		Notes to Unaudited Consolidated Financial Statements	F-6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6
	Item 4.	Controls and Procedures	6
Part II.	Other Information
	Item 6.	Exhibits	7
		Signature	8

2

EVERFLOW EASTERN PARTNERS, L. P.

CONSOLIDATED FINANCIAL REPORT

MARCH 31, 2024

Part I:  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

EVERFLOW EASTERN PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS

March 31, 2024 and December 31, 2023

	March 31,		December 31,
	2024		2023
	(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS
Cash and equivalents	$	9,522,261	$	9,586,524
Investments		27,292,640		26,965,697
Production accounts receivable		634,489		790,547
Other		510,861		510,861
Total current assets		37,960,251		37,853,629
PROPERTY AND EQUIPMENT
Proved properties (successful efforts accounting method)		134,738,585		135,663,041
Pipeline and support equipment		617,217		617,217
Corporate and other		2,131,815		2,131,815
Gross property and equipment		137,487,617		138,412,073
Less accumulated depreciation, depletion, amortization and write down		131,015,140		131,767,001
Net property and equipment		6,472,477		6,645,072
OTHER ASSETS		245,111		241,178
TOTAL ASSETS	$	44,677,839	$	44,739,879

See notes to unaudited consolidated financial statements.

F-1

EVERFLOW EASTERN PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS

March 31, 2024 and December 31, 2023

	March 31,		December 31,
	2024		2023
	(Unaudited)		(Audited)
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,764,186	$	2,776,546
Accrued expenses		460,080		1,011,724
Total current liabilities		3,224,266		3,788,270
OPERATIONAL ADVANCES		3,103,913		3,064,191
ASSET RETIREMENT OBLIGATIONS		16,882,399		16,652,494
COMMITMENTS AND CONTINGENCIES
LIMITED PARTNERS' EQUITY, SUBJECT TO REPURCHASE RIGHT
Authorized - 8,000,000 Units
Issued and outstanding - 4,746,686 Units		21,168,035		20,938,936
GENERAL PARTNER'S EQUITY		299,226		295,988
Total partners' equity		21,467,261		21,234,924
TOTAL LIABILITIES AND PARTNERS' EQUITY	$	44,677,839	$	44,739,879

See notes to unaudited consolidated financial statements.

F-2

EVERFLOW EASTERN PARTNERS, L.P. 

CONSOLIDATED STATEMENTS OF OPERATIONS 

Three Months Ended March 31, 2024 and 2023

(Unaudited) 

	2024			2023
REVENUES
Crude oil and natural gas sales	$	1,408,515		$	2,063,635
Well management and operating		124,607			142,171
Other		694			1,037
Total revenues		1,533,816			2,206,843
DIRECT COST OF REVENUES
Production costs		692,477			785,065
Well management and operating		75,126			85,501
Depreciation, depletion and amortization		110,145			270,800
Accretion expense		302,400			308,300
Total direct cost of revenues		1,180,148			1,449,666
GENERAL AND ADMINISTRATIVE EXPENSE		600,066			607,200
Total cost of revenues		1,780,214			2,056,866
INCOME (LOSS) FROM OPERATIONS		(246,398	)		149,977
OTHER INCOME
Investment income		396,668			272,137
Gain on disposal of property and equipment		82,067			-
Total other income		478,735			272,137
NET INCOME	$	232,337		$	422,114
Allocation of Partnership Net Income:
Limited Partners	$	229,099		$	416,781
General Partner		3,238			5,333
Net income	$	232,337		$	422,114
Net income per unit	$	0.05		$	0.08

See notes to unaudited consolidated financial statements.

F-3

EVERFLOW EASTERN PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY

Three Months Ended March 31, 2024 and 2023

(Unaudited)

	2024		2023
PARTNERS' EQUITY - BEGINNING OF PERIOD	$	21,234,924	$	26,825,519
Net income		232,337		422,114
PARTNERS' EQUITY - END OF PERIOD	$	21,467,261	$	27,247,633

See notes to unaudited consolidated financial statements.

F-4

EVERFLOW EASTERN PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2024 and 2023

(Unaudited)

	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	232,337		$	422,114
Adjustments to reconcile to net cash provided by operating activities:
Depreciation, depletion and amortization		132,845			291,300
Accretion expense		302,400			308,300
Unrealized loss on investments		27,051			225
Gain on disposal of property and equipment		(82,067	)		-
Changes in assets and liabilities:
Production accounts receivable		156,058			950,335
Other current assets		-			(1,600	)
Other assets		(3,933	)		-
Accounts payable		(12,360	)		182,728
Accrued expenses		(512,069	)		(535,113	)
Operational advances		39,722			18,420
Total adjustments		47,647			1,214,595
Net cash provided by operating activities		279,984			1,636,709
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments		(353,994	)		(239,191	)
Proceeds from disposal of property and equipment		9,747			-
Net cash used in investing activities		(344,247	)		(239,191	)
NET CHANGE IN CASH AND EQUIVALENTS		(64,263	)		1,397,518
CASH AND EQUIVALENTS - BEGINNING OF PERIOD		9,586,524			13,159,037
CASH AND EQUIVALENTS - END OF PERIOD	$	9,522,261		$	14,556,555

See notes to unaudited consolidated financial statements.

F-5

EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.         Organization and Summary of Significant Accounting Policies

A.          Interim Financial Statements - The interim consolidated financial statements included herein have been prepared by the management of Everflow Eastern Partners, L.P., without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations have been made.

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 25, 2024.

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

B.          Use of Estimates - The preparation of financial statements in conformity with GAAP 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. Actual results could differ from those estimates. Significant estimates impacting the Company’s financial statements include revenue and expense accruals and oil and gas reserve quantities. In the oil and gas industry, and especially as related to the Company’s natural gas sales, the processing of actual transactions generally occurs 60-90 days after the month of delivery of its product. Consequently, accounts receivable from production and oil and gas sales are recorded using estimated production volumes and market or contract prices. Differences between estimated and actual amounts are recorded in subsequent period’s financial results. As is typical in the oil and gas industry, a significant portion of the Company’s accounts receivable from production and oil and gas sales consists of unbilled receivables. Oil and gas reserve quantities are utilized in the calculation of depreciation, depletion and amortization and the impairment of oil and gas wells and also impact the timing and costs associated with asset retirement obligations. The Company’s estimates, especially those related to oil and gas reserves, could change in the near term and could significantly impact the Company’s results of operations and financial position.

F-6

EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.         Organization and Summary of Significant Accounting Policies

C.          Organization - Everflow Eastern Partners, L.P. (“Everflow”) is a Delaware limited partnership which was organized in September 1990 to engage in the business of oil and gas acquisition, exploration, development and production. Everflow was formed to consolidate the business and oil and gas properties of Everflow Eastern, Inc. (“EEI”) and subsidiaries and the oil and gas properties owned by certain limited partnership and working interest programs managed or sponsored by EEI (“EEI Programs” or the “Programs”).

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"), three individuals who are officers and directors of EEI, which includes the Chairman of the Board and one individual who is a director of EEI. EMC is an Ohio corporation formed in September 1990 and is the managing member of EML.

D.          Principles of Consolidation - The consolidated financial statements include the accounts of Everflow, its wholly-owned subsidiaries, including EEI, and interests with joint venture partners (collectively, the “Company”), which are accounted for under the proportional consolidation method. All significant accounts and transactions between the consolidated entities have been eliminated.

E.          Cash and Equivalents - The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains, at various financial institutions, cash and equivalents which may exceed federally insured amounts and which may, at times, significantly exceed balance sheet amounts due to float. 

F.          Investments – The Company’s investments consist of shares held in a mutual fund that invests primarily in investment grade, U.S. dollar denominated short-term fixed and floating rate debt securities. The mutual fund seeks current income while seeking to maintain a low volatility of principal.

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:

F-7

EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.         Organization and Summary of Significant Accounting Policies

F.           Investments (continued)

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.

G.          Operational Advances - The Company collects and maintains funds on behalf of joint venture partners who own working interests in wells of which the Company manages for their anticipated share of future plugging and abandonment costs. As of March 31, 2024 and December 31, 2023, cash and equivalents include $3,103,913 and $3,064,191, respectively, of operational advances. Operational advances held on behalf of employees, including officers, and directors were approximately $945,300 and $941,700 as of March 31, 2024 and December 31, 2023, respectively.

H.          Asset Retirement Obligations - GAAP requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. For the Company, these obligations include dismantlement, plugging and abandonment of oil and gas wells and associated pipelines and equipment. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The liability is accreted to its then present value each period, and the capitalized cost is depleted over the estimated useful life of the related asset.

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.

F-8

EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.         Organization and Summary of Significant Accounting Policies

I.           Revenue Recognition – Revenues from contracts with customers are recognized when performance obligations are satisfied in accordance with contractual terms.

For the sale of crude oil and natural gas from operated properties, the Company generally considers each unit (BBL or MCF) to be a separate performance obligation. The transaction price may consist of fixed and variable consideration, in which the variable amount is determinable each production period and is recognized as revenue upon pickup/delivery of the crude oil or natural gas, which is the point in time that the customer obtains control of the crude oil or natural gas and the Company's performance obligation is satisfied.

Crude oil and natural gas sales derived from third party operated wells are recognized under similar terms as sales of crude oil and natural gas from operated properties and revenue is recognized at a point in time when the product is delivered, the purchaser obtains control and the Company's performance obligation is satisfied.

Crude oil and natural gas sales represent the Company's share of revenues, net of royalties and other revenue interests owned by other parties. When settling crude oil and natural gas on behalf of royalty owners or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis.

Based on the Company's judgment, the Company's performance obligations have been satisfied and an unconditional right to consideration exists at March 31, 2024 and December 31, 2023; therefore, the Company recognized amounts due from contracts with customers as production accounts receivable within the Company’s consolidated balance sheets at March 31, 2024 and December 31, 2023.

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 March 31, 2024 and December 31, 2023.

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.

F-9

EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.         Organization and Summary of Significant Accounting Policies

J.            Income Taxes - Everflow is not a tax-paying entity and the net taxable income or loss, other than the taxable income or loss allocable to EEI, which is a C corporation owned by Everflow, will be allocated directly to its respective partners. The Company is not able to determine the net difference between the tax bases and the reported amounts of Everflow’s assets and liabilities due to separate elections that were made by owners of the working interests and limited partnership interests that comprised the Programs.

The Company believes that it has appropriate support for any tax positions taken and, as such, does not have any uncertain tax positions that are material to the financial statements. 

K.          Allocation of Income and Per Unit Data - Under the terms of the limited partnership agreement, initially, 99% of revenues and costs were allocated to the Unitholders (the limited partners) and 1% of revenues and costs were allocated to the General Partner. Such allocation has changed and may change in the future due to Unitholders electing to exercise the Repurchase Right and select officers and employees electing to exercise options (see Note 3).

Net income per limited partner Unit have been computed based on the weighted average number of Units outstanding during each period presented.

L.          New Accounting Standards - The Company has reviewed recently issued accounting standards in order to determine their effects, if any, on the consolidated financial statements. Based on that review, the Company believes that none of these standards will have a significant effect on current or future earnings or results of operations.

F-10

EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2.                  Current Liabilities

The Company’s current liabilities consist of the following on March 31, 2024 and December 31, 2023:

	March 31,		December 31,
	2024		2023
Accounts Payable:
Production and related other	$	2,685,672	$	2,698,368
Other		78,514		78,178
Total accounts payable	$	2,764,186	$	2,776,546
Accrued Expenses:
Payroll and retirement plan contributions	$	162,513	$	746,841
Other general and administrative		150,600		12,800
Current portion of asset retirement obligations		138,000		216,000
Federal, state and local taxes		8,967		36,083
Total accrued expenses	$	460,080	$	1,011,724

Note 3.                  Partners’ Equity

Units represent limited partnership interests in Everflow. The Units are transferable subject to the approval of EML and to the laws governing the transfer of securities. The Units are not listed for trading on any securities exchange nor are they quoted in the automated quotation system of a registered securities association. However, Unitholders may have an opportunity to require Everflow to repurchase their Units pursuant to the Repurchase Right.

F-11

EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3.                  Partners’ Equity (Continued)

The partnership agreement provides that Everflow will repurchase for cash up to 10% of the then outstanding Units, to the extent Unitholders offer Units to Everflow for repurchase pursuant to the Repurchase Right. The Repurchase Right entitles any Unitholder, between May 1 and June 30 of each year, to notify Everflow that the Unitholder elects to exercise the Repurchase Right and have Everflow acquire certain or all Units. The price to be paid for any such Units is calculated based upon the audited financial statements of the Company as of December 31 of the year prior to the year in which the Repurchase Right is to be effective and independently prepared reserve reports. The price per Unit equals 66% of the adjusted book value of the Company allocable to the Units, divided by the number of Units outstanding at the beginning of the year in which the applicable Repurchase Right is to be effective less interim cash distributions received by a Unitholder. The adjusted book value is calculated by adding partners’ equity, the Standardized Measure of Discounted Future Net Cash Flows and the tax effect included in the Standardized Measure and subtracting from that sum the carrying value of oil and gas properties (net of undeveloped lease costs). If more than 10% of the then outstanding Units are tendered during any period during which the Repurchase Right is to be effective, the Investors’ Units tendered shall be prorated for purposes of calculating the actual number of Units to be acquired during any such period. The price associated with the 2024 Repurchase Right, based upon the December 31, 2023 calculation, is $1.46 per Unit, net of a $0.20 per Unit distribution made in April 2024.

In June 2023, the Company repurchased 526,433 Units pursuant to the Repurchase Right at the price of $6.36 per Unit. In June 2022, the Company repurchased 121,354 Units pursuant to the Repurchase Right at a price of $2.51 per Unit. In June 2021, the Company repurchased 137,455 Units pursuant to the Repurchase Right at a price of $0.36 per Unit.

The Company has an Option Repurchase Plan (the “Option Plan”) which permits the grant of options to select officers and employees to purchase certain Units acquired by the Company pursuant to the Repurchase Right. The purpose of the Option Plan is to assist the Company to attract and retain officers and other key employees and to enable those individuals to acquire or increase their ownership interest in the Company in order to encourage them to promote the growth and profitability of the Company. The Option Plan is designed to align directly the financial interests of the participants with the financial interests of the Unitholders. The Company granted 30,000 options to officers and key employees in June 2023, 2022 and 2021, respectively. All options granted were exercised on the same date.

All Units repurchased pursuant to the Repurchase Right are retired except for those Units issued through the exercise of options pursuant to the Option Plan. There were 4,746,686 outstanding Units following the Company’s repurchase of Units and issuance of options in June 2023. There were no instruments outstanding at March 31, 2024 or 2023 that would potentially dilute net income per Unit.

F-12

EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4.                  Commitments and Contingencies

The Company operates exclusively in Ohio and Pennsylvania of the United States in the business of oil and gas acquisition, exploration, development and production. The Company operates in an environment with many financial risks, including, but not limited to, the ability to acquire additional economically recoverable oil and gas reserves, the inherent risks of the search for, development of and production of oil and gas, the ability to sell oil and gas at prices which will provide attractive rates of return, the volatility and seasonality of oil and gas production and prices, and the highly competitive and, at times, seasonal nature of the industry and worldwide economic conditions. The Company’s ability to expand its reserve base and diversify its operations is also dependent upon the Company’s ability to obtain the necessary capital through operating cash flow, borrowings or equity offerings. Various federal, state and governmental agencies are considering, and some have adopted, laws and regulations regarding environmental protection which could adversely affect the proposed business activities of the Company. The Company cannot predict what effect, if any, current and future regulations may have on the operations of the Company.

The Company has multiple contracts with a gas purchaser which obligate the gas purchaser 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.

F-13

Item 2.                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 25, 2024.

Liquidity and Capital Resources

The following table summarizes the Company's financial position at March 31, 2024 and December 31, 2023:

	March 31, 2024					December 31, 2023
	Amount		%			Amount		%
	(Amounts in Thousands)					(Amounts in Thousands)
Working capital	$	34,736		84	%	$	34,065		83	%
Property and equipment (net)		6,472		16			6,645		17
Other		245		-			241		-
Total	$	41,453		100	%	$	40,951		100	%
Long-term liabilities	$	19,986		48	%	$	19,716		48	%
Partners' equity		21,467		52			21,235		52
Total	$	41,453		100	%	$	40,951		100	%

Working capital of $34.7 million as of March 31, 2024 represented an increase of $671,000 from December 31, 2023, due primarily to an increase in investments, as well as a decrease in accrued expenses, offset somewhat by a decreases in cash and equivalents and production accounts receivable. The increase in investments is primarily the result of additional purchases of shares in a mutual fund during the three months ended March 31, 2024 that invests primarily in investment grade, short-term fixed and floating rate securities. The decrease in accrued expenses is primarily the result of all payroll and retirement plan contributions accrued at December 31, 2023 being paid during the three months ended March 31, 2024. The decrease in production accounts receivable is primarily the result of lower average natural gas prices received and less natural gas volumes produced, offset somewhat by an increase in average crude oil prices received and a decrease in production costs during the current receivable production period as compared to the prior comparable period. The decreases in natural gas volumes produced and production costs are primarily the result of additional Company operated properties being shut-in during the current receivable period that were otherwise producing during the prior comparable receivable period.

The Company generally funds its operations with cash generated by operations and/or existing cash and equivalent balances. The Company has had no borrowings in 2024 or 2023 and no principal indebtedness was outstanding as of May 9, 2024. The Company’s cash flow provided by operations before the change in working capital was $621,000 during the three month period ended March 31, 2024, a decrease of $379,000 as compared to $1.0 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 decreased cash by $341,000 during the three month period ended March 31, 2024. Cash flows provided by operating activities was $280,000 for the three month period ended March 31, 2024.

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, the repurchase of Units pursuant to the 2024 Repurchase Right, and the payment of future cash distributions, including a Unitholder distribution amounting to approximately $963,000 in April 2024.

The Company has multiple contracts with a gas purchaser which obligate the gas purchaser 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.

3

Results of Operations

The following table and discussion is a review of the results of operations of the Company for the three month periods ended March 31, 2024 and 2023. 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:

	Three Months
	Ended March 31,
	2024			2023
Revenues:
Crude oil and natural gas sales		92	%		94	%
Well management and operating and other		8			6
Total revenues		100	%		100	%
Expenses:
Production costs		45			36
Well management and operating		5			4
Depreciation, depletion and amortization		7			12
Accretion expense		20			14
General and administrative expense		39			27
Total expenses		116	%		93	%
Other income		31	%		12	%
Net income		15	%		19	%

Revenues for the three month period ended March 31, 2024 decreased $673,000, or 30%, as compared to the prior comparable period. The decrease was primarily the result of a decrease in crude oil and natural gas sales.

Crude oil and natural gas sales decreased $655,000, or 32%, during the three month period ended March 31, 2024 as compared to the prior comparable period. The decrease was primarily the result of lower average natural gas prices received and less natural gas volumes produced during the three month period ended March 31, 2024 as compared to the prior comparable period. The decrease in natural gas volumes produced during the three month period ended March 31, 2024 as compared to the prior comparable period was primarily the result of Company operated properties being voluntarily shut-in during the three month period ended March 31, 2024 that were not shut-in during the prior comparable period.

Production costs decreased $93,000, or 12%, during the three month period ended March 31, 2024 as compared to the prior comparable period, due primarily to decreased costs associated with Company operated properties as more Company operated properties were voluntarily shut-in during the three month period ended March 31, 2024 as compared to the prior comparable period.

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Depreciation, depletion and amortization (“DD&A”) decreased $161,000, or 59%, during the three month period ended March 31, 2024 as compared to the prior comparable period. The primary reasons for the decrease is a decrease in natural gas volumes produced and the Company’s oil and gas properties having less depletable basis available during the three month period ended March 31, 2024 as compared to the prior comparable period, offset somewhat by lower projected natural gas and crude oil reserves during the three month period ended March 31, 2024 as compared to the prior comparable period. The decrease in natural gas volumes produced during the three month period ended March 31, 2024 as compared to the prior comparable period was primarily the result of Company operated properties being voluntarily shut-in during the three month period ended March 31, 2024 that were not shut-in during the prior comparable period. The decrease in projected natural gas and crude oil reserves is primarily the result of lower benchmark natural gas prices indexed throughout the first three months of 2024 as compared to the benchmark prices indexed throughout the prior comparable period.

Other income increased $207,000, or 76%, during the three month period ended March 31, 2024 as compared to the prior comparable period, due primarily to increases in investment income and gain on disposal of property and equipment. The increase in investment income was primarily due to higher average investment balances held and higher dividend rates yielded during the three month period ended March 31, 2024 as compared to the prior comparable period.

The Company reported net income of $232,000 and $422,000 during the three month periods ended March 31, 2024 and 2023, respectively, representing 15% and 19% of total revenues during the three month periods ended March 31, 2024 and 2023, respectively. The decrease in net income was primarily the result of a decrease in crude oil and natural gas sales, offset somewhat by decreases in production costs and DD&A and an increase in other income during the three month period ended March 31, 2024 as compared to the prior comparable period.

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, 2023.

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.

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Item 3.                  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4.                  CONTROLS AND PROCEDURES

(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, 2023, 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.

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Part II:                  OTHER INFORMATION

Item 6.                  EXHIBITS

Exhibit 31.1	Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	Inline XBRL Taxonomy Definition Linkbase Document
104	Cover page Interactive Data File (formatted as Inline XBRL and combined in Exhibit 101)

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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.

	EVERFLOW EASTERN PARTNERS, L.P.
	By:	everflow management limited, llc
		General Partner
	By:	everflow management corporation
		Managing Member
Dated: May 9, 2024	By:	/s/ Michael W. Rathburn
		Michael W. Rathburn
		Vice President, Secretary-Treasurer and
		Principal Financial and Accounting Officer
		(Duly Authorized Officer)

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