1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period March 31, 1997
or
[ ] Transition report pursuant to Section 13 of 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 I.D. No.)
incorporation or organization)
P.O. BOX 629, 585 WEST MAIN STREET, CANFIELD, OHIO 44406
--------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(330)533-2692
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports 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 to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
----- ------
2
EVERFLOW EASTERN PARTNERS, L.P.
INDEX
DESCRIPTION PAGE NO.
----------- --------
Part I. Financial Information
-----------------------------
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 F-1
Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1996 F-3
Consolidated Statements of Partners' Equity
Three Months Ended March 31, 1997 and 1996 F-4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 F-5
Notes to Unaudited Consolidated Financial
Statements F-6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
Part II. Other Information
--------------------------
Exhibits and Reports on Form 8-K 5
Signature 6
2
3
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
March 31, 1997 and December 31, 1996
------------------------------------
March 31, December 31,
1997 1996
(Unaudited) (Audited)
------------ ------------
ASSETS
------
CURRENT ASSETS
Cash and equivalents $ 1,239,787 $ 739,370
Accounts receivable:
Production 1,485,343 2,195,525
Officers and employees 819,741 929,457
Joint venture partners 431,197 539,852
Other 203,838 82,824
------------ ------------
Total current assets 4,179,906 4,487,028
PROPERTY AND EQUIPMENT
Proved properties (successful efforts
accounting method) 99,336,127 98,321,815
Pipeline and support equipment 475,471 451,971
Corporate and other 1,032,317 1,025,175
------------ ------------
100,843,915 99,798,961
Less accumulated depreciation, depletion
amortization and write down (53,177,533) (51,503,495)
------------ ------------
47,666,382 48,295,466
OTHER ASSETS 405,169 405,843
------------ ------------
$ 52,251,457 $ 53,188,337
============ ============
See notes to unaudited consolidated financial statements.
F-1
4
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
March 31, 1997 and December 31, 1996
------------------------------------
March 31, December 31,
1997 1996
(Unaudited) (Audited)
----------- -----------
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
CURRENT LIABILITIES
Current portion of long-term debt $ 18,400 $ 19,600
Accounts payable 1,362,842 1,246,050
Accrued expenses 301,712 298,980
----------- -----------
Total current liabilities 1,682,954 1,564,630
LONG-TERM DEBT 2,081,167 4,386,234
DEFERRED INCOME TAXES 278,000 278,000
COMMITMENTS AND CONTINGENCIES -- --
LIMITED PARTNERS' EQUITY, SUBJECT TO REPURCHASE
RIGHT
Authorized - 8,000,000 Units
Issued and outstanding - 6,379,941 47,707,959 46,471,094
GENERAL PARTNER'S EQUITY 501,377 488,379
----------- -----------
Total partners' equity 48,209,336 46,959,473
----------- -----------
$52,251,457 $53,188,337
=========== ===========
See notes to unaudited consolidated financial statements.
F-2
5
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1997 and 1996
------------------------------------------
(Unaudited)
1997 1996
---- ----
REVENUES
Oil and gas sales $ 4,708,989 $ 4,478,220
Well management and operating 149,746 164,842
Other 1,209 1,617
----------- -----------
4,859,944 4,644,679
DIRECT COST OF REVENUES
Production costs 531,231 521,446
Well management and operating 72,216 73,674
Depreciation, depletion and amortization 1,652,930 1,697,928
----------- -----------
Total direct cost of revenues 2,256,377 2,293,048
GENERAL AND ADMINISTRATIVE EXPENSE 486,823 511,314
----------- -----------
Total cost of revenues 2,743,200 2,804,362
----------- -----------
INCOME FROM OPERATIONS 2,116,744 1,840,317
OTHER INCOME (EXPENSE)
Interest income 10,100 5,975
Interest expense (71,101) (83,608)
----------- -----------
(61,001) (77,633)
----------- -----------
INCOME BEFORE INCOME TAXES 2,055,743 1,762,684
PROVISION (CREDIT) FOR INCOME TAXES
Current -- --
Deferred -- (30,000)
----------- -----------
-- (30,000)
----------- -----------
NET INCOME $ 2,055,743 $ 1,792,684
=========== ===========
Allocation of Partnership Net Income
Limited Partners 2,034,363 1,774,219
General Partner 21,380 18,465
----------- -----------
$ 2,055,743 $ 1,792,684
=========== ===========
Earnings per unit $.32 $.28
==== ====
See notes to unaudited consolidated financial statements.
F-3
6
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
Three Months Ended March 31, 1997 and 1996
------------------------------------------
(Unaudited)
1997 1996
---- ----
PARTNERS' EQUITY - JANUARY 1 $ 46,959,473 $ 46,207,378
Net income 2,055,743 1,792,684
Cash distributions ($.125 per Unit) (805,880) (812,518)
------------ ------------
PARTNERS' EQUITY - MARCH 31 $ 48,209,336 $ 47,187,544
============ ============
See notes to unaudited consolidated financial statements.
F-4
7
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1997 and 1996
------------------------------------------
(Unaudited)
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,055,743 $ 1,792,684
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 1,674,038 1,712,280
Deferred income taxes -- (30,000)
Changes in assets and liabilities:
Accounts receivable 818,837 608,858
Other current assets (121,014) (42,393)
Other assets 674 3,777
Accounts payable 116,792 (40,142)
Accrued expenses 2,732 113,897
----------- -----------
Total adjustments 2,492,059 2,326,277
----------- -----------
Net cash provided by operating activities 4,547,802 4,118,961
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds received on receivables from officers and
employees 207,013 197,324
Advances disbursed to officers and employees (97,297) (43,712)
Purchase of property and equipment (1,044,954) (441,762)
----------- -----------
Net cash used by investing activities (935,238) (288,150)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (805,880) (812,518)
Proceeds from issuance of long-term debt -- 600,000
Payments on long-term debt (2,306,267) (3,702,845)
----------- -----------
Net cash used by financing activities (3,112,147) (3,915,363)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 500,417 (84,552)
CASH AND EQUIVALENTS AT BEGINNING
OF YEAR 739,370 426,743
----------- -----------
CASH AND EQUIVALENTS AT END OF
FIRST QUARTER $ 1,239,787 $ 342,191
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 77,784 $ 83,971
Income taxes -- --
See notes to unaudited consolidated financial statements.
F-5
8
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.
Information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
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
report on Form 10-K filed with the Securities and Exchange
Commission on March 27, 1997.
The results of operations for the interim periods may not
necessarily be indicative of the results to be expected for
the full year.
B. 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
exploration and development. 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 Company, an Ohio general partnership, is
the general partner of Everflow. Everflow Management Company
is authorized, in general, to perform all acts necessary or
desirable to carry out the purposes and conduct of the
business of Everflow. The partners of Everflow Management
Company are Everflow Management Corporation ("EMC"), three
individuals who are Officers and Directors of EEI, and Sykes
Associates, a limited partnership controlled by Robert F.
Sykes, the Chairman of the Board of EEI. EMC is an Ohio
corporation formed in September 1990 and is the managing
general partner of Everflow Management Company.
C. Principles of Consolidation - The consolidated financial
statements include the accounts of Everflow, EEI and EEI's
wholly owned subsidiaries, and investments in oil and gas
drilling and income partnerships (collectively, "the Company")
which are accounted for under the proportional consolidation
method. All significant accounts and transactions between the
consolidated entities have been eliminated.
D. Allocation of Income and Per Unit Data - Under the terms of
the limited partnership agreement, initially, 99% of revenues
and costs are
F-6
9
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 1. Organization and Summary of Significant Accounting Policies (Continued)
D. Allocation of Income and Per Unit Data (Continued)
allocated to the Unitholders (the limited partners) and 1% of
revenues and costs are allocated to the General Partner. Such
allocation has changed and will change in the future due to
Unitholders electing to exercise the Repurchase Right (see
Note 3).
Earnings per limited partner Unit have been computed based on
the weighted average number of Units outstanding, during the
period for each period presented. Average outstanding Units
for earnings per Unit calculations amounted to 6,379,941 and
6,433,044 for the three months ended March 31, 1997 and 1996,
respectively.
E. New Accounting Standard - In March 1995, the Financial
Accounting Standards Board issued a new standard (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets to be
Disposed Of." SFAS 121 requires that long-lived assets
(including oil and gas properties) and certain identifiable
intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. SFAS 121 is effective for financial statements
for fiscal years beginning after December 15, 1995. Everflow
adopted SFAS 121 in the first quarter of 1996 and utilizes a
field by field basis for assessing impairment of its oil and
gas properties. The effect of adopting SFAS 121 was not
material to the Company's financial position or results of
operations.
Note 2. Long-Term Debt
In January 1995, the Company entered into an agreement that replaced
all prior credit agreements. The credit agreement provides for a
revolving line of credit in the amount of $7,000,000, all of which is
available. The revolving line of credit provides for interest payable
quarterly at the lending bank's prime rate plus 1/8% with the principal
due at maturity, November 1, 1998. Borrowings under the facility are
unsecured; however, the Company has agreed, if requested by the bank,
to execute any supplements to the agreement including security and
mortgage agreements on the Company's assets. The agreement requires the
borrower to pay an engineering fee of $10,000 per year and commitment
fees of 3/8% per annum on the daily average of the difference between
the current available amount and the aggregate of loans outstanding.
The agreement contains restrictive covenants requiring the Company to
maintain the following: (1) loan balance not to exceed the borrowing
base of $7,000,000 and redetermined semiannually; (2) tangible net
worth of at least $30,000,000; (3) a total debt to tangible net worth
ratio of not more than 0.7 to 1.0. In addition, there are restrictions
on mergers, sales and acquisitions, the incurrence of additional debt
and the pledge or mortgage of the Company's assets.
F-7
10
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 2. Long-Term Debt (Continued)
The Company purchased a building and funded its cost, including
improvements, in part, through mortgage notes. The notes, which have an
aggregate balance of $399,567 and $405,834 at March 31, 1997 and
December 31, 1996, respectively, bear interest at 8.22% per annum until
October 6, 1998 and then a variable rate of .5% above prime until
maturity. The notes require aggregate payments of principal and
interest of $4,353 per month. Maturities on the notes are expected to
be as follows: 1997 - $19,600; 1998 - $21,300; 1999 - $23,000; 2000 -
$25,000; 2001 - $27,200; thereafter - $289,734.
Note 3. Partners' Equity
Units represent limited partnership interests in Everflow. The Units
are transferable subject only to the approval of any transfer by
Everflow Management Company 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 have an
opportunity to require Everflow to repurchase their Units pursuant to
the Repurchase Right.
Under the terms of the limited partnership agreement, initially, 99% of
revenues and costs are allocated to the Unitholders (the limited
partners) and 1% of revenues and costs are allocated to the General
Partner. Such allocation has changed and will change in the future due
to Unitholders electing to exercise the Repurchase Right.
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 he elects to exercise the
Repurchase Right and have Everflow acquire certain or all of his Units.
The price to be paid for any such Units will be 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 will be equal to 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 all 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 so 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 Repurchase Right,
based
F-8
11
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 3. Partners' Equity (Continued)
upon the December 31, 1996 calculation, is $5.21 per Unit, net of the
distributions ($.125 per Unit each) made in January and April 1997.
Units repurchased pursuant to the Repurchase Right for each of the four
years in the period ended December 31, 1996, are as follows:
Per Unit
------------------------------------------------------------
Calculated Units
Price for Less Outstanding
Repurchase Premium Interim Net # of Units Following
Year Right Offered Distributions Price Paid Repurchased Repurchase
---- ---------- ------- ------------- ---------- ----------- ----------
1993 $ 4.60 $ - $ .25 $ 4.35 40,002 6,541,524
1994 $ 4.80 $ - $ .25 $ 4.55 26,958 6,514,566
1995 $ 4.72 $ .28 $ .375 $ 4.625 81,522 6,433,044
1996 $ 4.48 $ .27 $ .25 $ 4.50 53,103 6,379,941
Note 4. Commitments, Contingencies and Risks
Everflow paid a quarterly dividend in April 1997 of $.125 per Unit to
Unitholders of record on March 31, 1997. The distribution amounted to
approximately $806,000.
EEI is the general partner in certain oil and gas partnerships. As
general partner, EEI shares in unlimited liability to third parties
with respect to the operations of the partnerships and may be liable to
limited partners for losses attributable to breach of fiduciary
obligations.
The Company operates exclusively in the United States, almost entirely
in Ohio and Pennsylvania, in the exploration, development and
production of oil and gas.
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, and the highly competitive 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, additional borrowings or additional equity funds. 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.
F-9
12
Part I: Financial Information
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The following table summarizes the Company's financial position at March
31, 1997 and December 31, 1996:
March 31, 1997 December 31, 1996
------------------------- -------------------------
(Amounts in Thousands) Amount % Amount %
---------------------- ------ - ------ -
Working capital $ 2,497 5% $ 2,922 6%
Property and equipment (net) 47,666 94 48,295 93
Other 405 1 406 1
------------- --- ------------- ---
Total $ 50,568 100% $ 51,623 100%
============= === ============= ===
Long-term debt $ 2,081 4% 4,386 8%
Deferred income taxes 278 1 278 1
Partners' equity 48,209 95 46,959 91
------------- --- ------------- ---
Total $ 50,568 100% $ 51,623 100%
============= === ============= ===
Working capital surplus of $2.5 million as of March 31, 1997
represented a decrease of $425 thousand or 15%, from December 31, 1996. The
Company paid down $2.3 million of long-term debt during the quarter ended March
31, 1997. Management of the Company believes it can maintain a reduced level of
long-term debt until such time as additional borrowings are required to fund the
ongoing development of oil and gas properties and the repurchase of Units
pursuant to the Repurchase Right expected to expire June 30, 1997.
The Company's cash flow from operations before the change in working
capital increased $255 thousand, or 7%, during the three months ended March 31,
1997 as compared to the same period in 1996. Changes in working capital other
than cash and cash equivalents increased cash by $818 thousand and $644 thousand
during the three months ended March 31, 1997 and 1996, respectively. The
reductions in accounts receivable of $819 thousand and $608 thousand at March
31, 1997 and 1996, respectively, compared to December 31, 1996 and 1995 are the
result of lower production receivables and reduced accounts receivable balances
from joint venture partners. Accrued expenses increased $3 thousand during the
three months ended March 31, 1997 and increased $114 thousand during the three
months ended March 31, 1996. The reason for these changes is the result of
timing differences for accrued payroll expenses.
Cash flows provided by operating activities was $4.5 million for the
three months ended March 31, 1997. Cash was used to purchase property and
equipment, pay a quarterly distribution and reduce long-term debt.
Additional borrowings for operations may be required during the summer
months due to the seasonal nature of the gas purchase agreements with The East
Ohio Gas Company entered into beginning in 1991. Seasonal price reductions and
production restrictions during
3
13
the summer months reduce operating revenues and consequently cash flows from
operations during such periods.
Management of the Company believes the existing revolving credit
facility of $7,000,000, together with cash generated by operations should be
sufficient to meet the funding requirements of ongoing operations, capital
investments to develop oil and gas properties and the repurchase of Units
pursuant to the Repurchase Right.
In the fall of 1996, the Company received an increase in the price
received for natural gas pursuant to the pricing adjustments contained in the
Company's Intermediate Term Adjustable Price Gas Purchase Agreements with The
East Ohio Gas Company. These pricing adjustments should increase the Company's
cash flows from operations during 1997.
Results of Operations
The following table and discussion is a review of the results of
operations of the Company for the three months ended March 31, 1997 and 1996.
All items in the table are calculated as a percentage of total revenues. This
table should be read in conjunction with the discussions of each item below:
Three Months
Ended March 31,
---------------
1997 1996
---- ----
Revenues:
Oil and gas sales 97% 96%
Well management and operating 3 4
--- ---
Total Revenues 100% 100%
Expenses:
Production costs 11% 11%
Well management and operating 2 2
Depreciation, depletion and amortization 34 36
General and administrative 10 11
Other 1 2
Income taxes - (1)
--- ---
Total Expenses 58 61
--- ---
Net Income 42% 39%
=== ===
Revenues for the three months ended March 31, 1997 increased $215
thousand, or 5%, compared to the same period in 1996. This increase was
primarily due to an increase in oil and gas sales during the first three months
of 1997, as compared to the same period in 1996.
Oil and gas sales increased $231 thousand, or 5%, during the three
months ended March 31, 1997 compared to the same period in 1996. Higher gas
prices during the first quarter of 1997, due to a $.47 pricing adjustment
received in the Company's Intermediate Term Adjustable Price Gas Purchase
Agreements with The East Ohio Gas Company, were responsible for this increase
compared to this same period in 1996.
Well management and operating revenues decreased $15 thousand, or 9%,
during the three months ended March 31, 1997 compared to the same period in
1996. Well management
5
14
and operating costs decreased $1 thousand, or 2%, during the three months ended
March 31, 1997 compared to the same period in 1996.
Production costs increased $10 thousand, or 2%, during the three months
ended March 31, 1997 compared to the same period in 1996. Additional producing
properties were responsible for this increase between 1996 and 1997.
Depreciation, depletion and amortization decreased $45 thousand, or 3%,
during the three months ended March 31, 1997 compared to the same period in
1996. The decrease in depreciation, depletion and amortization is the result of
increased reserves from producing oil and gas properties.
General and administrative expenses decreased $24 thousand, or 5%,
during the first quarter of 1997 compared to the first quarter of 1996. This
decrease was the result of lower overhead costs during the first quarter of
1997.
The Company reported net income of $2.1 million, an increase of $263
thousand, or 15%, during the three months ended March 31, 1997 compared to the
same period in 1996. The increase in oil and gas sales was primarily responsible
for this increase in net income. Net income represented 42% and 39% of total
revenue during the three months ended March 31, 1997 and 1996, respectively.
Except for historical financial information contained in this Form
10-Q, the statements made in this report are forward-looking statements. Factors
that may cause actual results to differ materially from those in the forward
looking statement include price adjustments pursuant to the Company's
Intermediate Term Adjustable Price Gas Purchase Agreements with The East Ohio
Gas Company, price fluctuations in the gas market in the Appalachian Basin and
the weather in the Northeast Ohio area.
Part II. Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) No reports on Form 8-K were filed with the
Commission during the Company's first quarter.
5
15
SIGNATURE
Pursuant to the requirement 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 COMPANY,
General Partner
By: EVERFLOW MANAGEMENT CORPORATION
Managing General Partner
May 12, 1997 By: /s/William A. Siskovic
----------------------------------------------
William A. Siskovic
Vice President and Principal Financial and
Accounting Officer
(Duly Authorized Officer)
6