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 ended June 30, 1997
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 0-19279 34-1659910
- ---------------------------------------------- ------------------- ---------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
585 West Main Street, P.O. Box 629, 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
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 X No
------ ------
2
EVERFLOW EASTERN PARTNERS, L.P.
INDEX
DESCRIPTION PAGE NO.
----------- --------
Part I. Financial Information
-----------------------------
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 F-1
Consolidated Statements of Income
Three and Six Months Ended June 30, 1997 and 1996 F-3
Consolidated Statements of Partners' Equity
Six Months Ended June 30, 1997 and 1996 F-4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 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 6
Signature 7
2
3
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
-----------------------------------
June 30, December 31,
1997 1996
(Unaudited) (Audited)
----------- ---------
ASSETS
------
CURRENT ASSETS
Cash and equivalents $ 1,124,783 $ 739,370
Accounts receivable:
Production 706,062 2,195,525
Officers and employees 615,436 929,457
Joint venture partners 222,237 539,852
Other 179,739 82,824
------------- -------------
Total current assets 2,848,257 4,487,028
PROPERTY AND EQUIPMENT
Proved properties (successful efforts
accounting method) 99,919,413 98,321,815
Pipeline and support equipment 466,717 451,971
Corporate and other 1,065,581 1,025,175
------------- -------------
101,451,711 99,798,961
Less accumulated depreciation, depletion,
amortization and write down (54,152,349) (51,503,495)
------------- -------------
47,299,362 48,295,466
OTHER ASSETS 404,495 405,843
------------- -------------
$ 50,552,114 $ 53,188,337
============= =============
See notes to unaudited consolidated financial statements.
F-1
4
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
-----------------------------------
June 30, December 31,
1997 1996
(Unaudited) (Audited)
----------- ---------
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES
Current portion of long-term debt $ 18,800 $ 19,600
Accounts payable 1,827,772 1,246,050
Accrued expenses 139,979 298,980
----------- -----------
Total current liabilities 1,986,551 1,564,630
LONG-TERM DEBT 375,973 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 - 6,207,823 and
6,379,941 Units, respectively 47,398,936 46,471,094
GENERAL PARTNER'S EQUITY 512,654 488,379
----------- -----------
Total partners' equity 47,911,590 46,959,473
----------- -----------
$50,552,114 $53,188,337
=========== ===========
See notes to unaudited consolidated financial statements.
F-2
5
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended June 30, 1997 and 1996
-------------------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
REVENUES
Oil and gas sales $ 3,238,964 $ 2,311,441 $ 7,947,953 $ 6,789,661
Well management and operating 126,999 122,830 276,745 287,672
Other 1,481 1,187 2,690 2,804
----------- ----------- ----------- -----------
3,367,444 2,435,458 8,227,388 7,080,137
DIRECT COST OF REVENUES
Production costs 443,736 407,309 974,967 928,755
Well management and operating 79,085 75,455 151,301 149,129
Depreciation, depletion and amortization 962,460 968,949 2,615,390 2,666,877
----------- ----------- ----------- -----------
Total direct cost of revenues 1,485,281 1,451,713 3,741,658 3,744,761
GENERAL AND ADMINISTRATIVE
EXPENSE 462,981 528,450 949,804 1,039,764
----------- ----------- ----------- -----------
Total cost of revenues 1,948,262 1,980,163 4,691,462 4,784,525
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 1,419,182 455,295 3,535,926 2,295,612
OTHER INCOME (EXPENSE)
Interest income 13,055 9,822 23,155 15,797
Interest expense ( 27,368) ( 38,117) ( 98,469) ( 121,725)
---------- ---------- ---------- ----------
( 14,313) ( 28,295) ( 75,314) ( 105,928)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 1,404,869 427,000 3,460,612 2,189,684
PROVISION (CREDIT)
FOR INCOME TAXES
Current - - - -
Deferred - ( 30,000) - ( 60,000)
----------- ---------- ----------- ----------
- ( 30,000) - ( 60,000)
----------- ---------- ----------- ----------
NET INCOME $ 1,404,869 $ 457,000 $ 3,460,612 $ 2,249,684
=========== =========== =========== ===========
Allocation of Partnership Net Income
Limited Partners $ 1,389,837 $ 452,293 $ 3,423,583 $ 2,226,512
General Partner 15,032 4,707 37,029 23,172
----------- ----------- ----------- -----------
$ 1,404,869 $ 457,000 $ 3,460,612 $ 2,249,689
=========== =========== =========== ===========
Earnings per unit $ .22 $ .07 $ .54 $ .35
====== ===== ====== =====
See notes to unaudited consolidated financial statements.
F-3
6
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
Six Months Ended June 30, 1997 and 1996
---------------------------------------
(Unaudited)
1997 1996
---- ----
EQUITY - JANUARY 1 $ 46,959,473 $ 46,207,378
Net income 3,460,612 2,249,684
Cash distributions ($.25 per Unit) ( 1,611,760) ( 1,625,036)
Repurchase Right - Units tendered ( 896,735) ( 238,964)
-------------- --------------
EQUITY - JUNE 30 $ 47,911,590 $ 46,593,062
============== ==============
See notes to unaudited consolidated financial statements.
F-4
7
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1997 and 1996
---------------------------------------
(Unaudited)
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,460,612 $ 2,249,684
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 2,648,854 2,696,457
Deferred income taxes - ( 60,000)
Changes in assets and liabilities:
Accounts receivable 1,807,078 1,600,888
Other current assets ( 96,915) 17,461
Other assets 1,348 5,970
Accounts payable ( 315,013) ( 283,308)
Accrued expenses ( 159,001) ( 131,176)
------------- -------------
Total adjustments 3,886,351 3,846,292
------------- -------------
Net cash provided by operating activities 7,346,963 6,095,976
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds received on receivables from officers and
employees 444,995 447,757
Advances disbursed to officers and employees ( 130,974) ( 121,877)
Purchase of property and equipment ( 1,652,750) ( 1,673,510)
------------- -------------
Net cash used by investing activities ( 1,338,729) ( 1,347,630)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions ( 1,611,760) ( 1,625,036)
Proceeds from issuance of long-term debt - 1,500,000
Payments on long-term debt ( 4,011,061) ( 4,808,649)
------------- -------------
Net cash used by financing activities ( 5,622,821) ( 4,933,685)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 385,413 ( 185,339)
CASH AND EQUIVALENTS AT BEGINNING
OF YEAR 739,370 426,743
------------- -------------
CASH AND EQUIVALENTS AT END OF
SECOND QUARTER $ 1,124,783 $ 241,404
============= =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 119,528 $ 155,239
Income taxes - -
See notes to unaudited consolidated financial statements.
F-5
8
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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.
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)
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 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 for
the three and six months ended June 30, 1997, and 6,433,044
for the three and six months ended June 30, 1996.
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 has
determined it will utilize 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.
F-7
10
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 2. Long-Term Debt
In June 1997, 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
LIBOR plus 175 basis points with the principal due at maturity, May 31,
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 contains restrictive covenants requiring the
Company to maintain the following: (1) loan balance not to exceed the
borrowing base of $7,000,000; (2) tangible net worth of at least
$40,000,000; (3) a total debt to tangible net worth ratio of not more
than 0.5 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.
The Company purchased a building and funded its cost, including
improvements, in part, through mortgage notes. The notes, which have an
aggregate balance of $394,773 and $405,834 at June 30, 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
F-8
11
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 3. Partners' Equity (Continued)
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 Investor's 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 upon the December 31, 1996 calculation was $5.21 per Unit, net of
the distributions ($.125 per Unit each) made in January and April 1997.
Units repurchased pursuant to the Repurchase Right, for each of the
last five years, are as follows:
Calculated Units Out-
Price for Less # of standing
Repurchase Premium Interim Net Units Following
Year Right Offered Distributions Price Paid Repurchased Repurchase
---- ---------- ------- ------------- ---------- ----------- ----------
1993 $4.60 $ - $.250 $4.350 40,002 6,541,524
1994 $4.80 $ - $.250 $4.550 26,958 6,514,566
1995 $4.72 $.28 $.375 $4.625 81,522 6,433,044
1996 $4.48 $.27 $.250 $4.500 53,103 6,379,941
1997 $5.46 $ - $.250 $5.210 172,118 6,207,823
F-9
12
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 4. Commitments and Contingencies
Everflow paid a quarterly dividend in July 1997 of $.125 per Unit to
Unitholders of record on June 30, 1997. The distribution amounted to
approximately $784,000.
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-10
13
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 June
30, 1997 and December 31, 1996:
June 30, 1997 December 31, 1996
------------- -----------------
(Amounts in Thousands) Amount % Amount %
------ --- ------ ---
Working capital $ 862 2% $ 2,922 6%
Property and equipment (net) 47,299 97 48,295 93
Other 405 1 406 1
------ --- ------ ---
Total $ 48,566 100% $ 51,623 100%
====== === ====== ===
Long-term debt $ 376 1% 4,386 8%
Deferred income taxes 278 1 278 1
Partners' equity 47,912 98 46,959 91
------ --- ------ ---
Total $ 48,566 100% $ 51,623 100%
====== === ====== ===
Working capital surplus of $862 thousand as of June 30, 1997
represented a decrease of approximately $2.1 million from December 31, 1996. The
primary reason for this decrease in working capital was due to the Company's
production receivable being substantially lower at June 30, 1997 versus December
31, 1996. Seasonal gas production is responsible for this occurrence. The
Company paid down $4.0 million of long-term debt during the six months ended
June 30, 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 Company's
quarterly distributions in July and October, when cash generated from operations
should decrease due to production restrictions. The Company borrowed $1.0
million during July 1997, under the Company's existing credit facility, for the
repurchase of Units pursuant to the Repurchase Right, the payment of a quarterly
distribution and the funding of the development of oil and gas properties.
The Company's cash flow from operations before the change in working
capital increased $1.2 million, or 25%, during the six months ended June 30,
1997 as compared to the same period in 1996. Changes in working capital other
than cash and equivalents increased cash by $1.2 million during both the six
months ended June 30, 1997 and 1996.
3
14
The reductions in accounts receivable of $1.8 million and $1.6 million at June
30, 1997 and 1996, respectively, compared to December 31, 1996 and 1995 are the
result of lower production revenues receivable and reduced accounts receivable
balances from joint venture partners. Accounts payable, exclusive of the
payable associated with the Repurchase Right of $896,735 and $238,964 at June
30, 1997 and 1996, decreased $315 thousand and $283 thousand during the six
months ended June 30, 1997 and 1996, respectively. The reason for these changes
is the result of lower production revenues payable in the summer months due to
production restrictions associated with seasonal gas purchase agreements.
Accrued expenses decreased $159 thousand and $131 thousand during the six
months ended June 30, 1997 and 1996, respectively. The primary reason for these
changes is the result of timing differences for accrued payroll expenses.
Cash flows provided by operating activities was $7.3 million for the
six months ended June 30, 1997. Cash was used to purchase property and
equipment, pay quarterly distributions and reduce long-term debt.
Additional borrowings for operations may be required during the third
quarter due to the seasonal nature of the gas purchase agreements with The East
Ohio Gas Company. Seasonal price reductions and production restrictions during
the summer months will 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 should be sufficient to meet the funding requirements of
ongoing operations, capital investments to develop oil and gas properties, the
repurchase of Units pursuant to the Repurchase Right and the payment of
quarterly distributions.
In the fall of 1996, the Company received a significant 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 have and should continue to
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 and six months ended June 30, 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:
4
15
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Oil and gas sales 96% 95% 97% 96%
Well management and operating 4 5 3 4
Other - - - -
--- --- --- ---
Total Revenues 100% 100% 100% 100%
Expenses:
Production costs 13% 17% 12% 13%
Well management and operating 2 3 2 2
Depreciation, depletion and amortization 29 40 32 38
General and administrative 14 21 11 15
Other - 1 1 1
Income taxes - ( 1) - ( 1)
--- --- --- ---
Total Expenses 58 81 58 68
=== === === ===
Earnings 42% 19% 42% 32%
=== === === ===
Revenues for the three and six months ended June 30, 1997 increased
$932 thousand and $1,147 thousand, respectively, compared to the same periods in
1996. This increase was due primarily to an increase in oil and gas sales during
the three and six months ended June 30, 1997 compared to the same periods in
1996.
Oil and gas sales increased $928 thousand, or 40%, during the three
months ended June 30, 1997 compared to the same period in 1996. Oil and gas
sales increased $1,158 thousand, or 17%, during the six months ended June 30,
1997 compared to the same six month period in 1996. These increases are the
result of increased production and higher gas prices during 1997 due to pricing
adjustments contained in the East Ohio Gas Company contracts.
Production costs increased slightly and depreciation, depletion and
amortization remained relatively stable during the three and six months ended
June 30, 1997 compared to the same periods in 1996.
General and administrative expenses decreased $65 thousand, or 12%, and
$90 thousand, or 9%, during the three and six months ended June 30, 1997,
respectively, compared with the same periods in 1996. The primary reasons for
these decreases were due to decreases in employee compensation and benefits.
The Company reported net income of $1,405 thousand, an increase of $948
thousand, or 207%, during the three months ended June 30, 1997 compared to the
same period in 1996. The Company reported net income of $3,461 thousand, an
increase of $1,211 thousand, or 54%, during the six months ended June 30, 1997
compared to the same period in 1996.
5
16
Increases in oil and gas production and sales resulting from gas price
adjustments were primarily responsible for these increases in net income.
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
10.1 Loan Modification Agreement dated June 16, 1997
between Bank One, N.A., Bank One Texas, N.A. and
Everflow Eastern, Inc. and Everflow Eastern Partners,
L.P.
(b) On July 3, 1997, the Registrant filed a current report on Form
8-K
6
17
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
By: /s/William A. Siskovic
-----------------------------------------------
August 12, 1997 William A. Siskovic
Vice President and Principal Accounting Officer
(Duly Authorized Officer)
7