<PAGE> 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 March 31, 1998
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 [ ]
<PAGE> 2
EVERFLOW EASTERN PARTNERS, L.P.
INDEX
DESCRIPTION PAGE NO.
- ----------- --------
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 .............................. F-1
Consolidated Statements of Income
Three Months Ended March 31, 1998 and 1997 ........................ F-3
Consolidated Statements of Partners' Equity
Three Months Ended March 31, 1998 and 1997 ........................ F-4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 ........................ 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
<PAGE> 3
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) (Audited)
------------- -------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash and equivalents .................... $ 157,967 $ 679,531
Accounts receivable:
Production ......................... 1,633,378 1,984,366
Officers and employees ............. 930,509 1,011,203
Joint venture partners ............. 307,802 278,641
Other ................................... 94,498 63,418
------------- -------------
Total current assets ............... 3,124,154 4,017,159
PROPERTY AND EQUIPMENT
Proved properties (successful
efforts accounting method) ......... 105,809,156 105,080,039
Pipeline and support equipment .......... 490,334 466,717
Corporate and other ..................... 1,132,586 1,115,969
------------- -------------
107,432,076 106,662,725
Less accumulated depreciation, depletion,
amortization and write down ........ (58,132,144) (56,422,935)
------------- -------------
49,299,932 50,239,790
OTHER ASSETS ................................. 658,733 503,157
------------- -------------
$ 53,082,819 $ 54,760,106
============= =============
</TABLE>
See notes to unaudited consolidated financial statements.
F-1
<PAGE> 4
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) (Audited)
----------- ------------
<S> <C> <C>
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
CURRENT LIABILITIES
Current portion of long-term debt .............. $ 28,492 $ 27,936
Revolving credit facility ...................... 1,000,000 4,100,000
Accounts payable ............................... 1,168,984 1,207,268
Accrued expenses ............................... 239,720 257,893
----------- -----------
Total current liabilities ................. 2,437,196 5,593,097
LONG-TERM DEBT, NET OF CURRENT PORTION .............. 451,286 461,207
DEFERRED INCOME TAXES ............................... 128,000 128,000
COMMITMENTS AND CONTINGENCIES ....................... -- --
LIMITED PARTNERS' EQUITY, SUBJECT TO
REPURCHASE RIGHT
Authorized - 8,000,000 Units
Issued and outstanding - 6,207,651 Units .. 49,530,627 48,058,020
GENERAL PARTNER'S EQUITY ............................ 535,710 519,782
----------- -----------
Total partners' equity ....................... 50,066,337 48,577,802
----------- -----------
$53,082,819 $54,760,106
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
F-2
<PAGE> 5
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
REVENUES
Oil and gas sales ........................... $ 4,968,779 $ 4,708,989
Well management and operating ............... 136,844 149,746
Other ............................................ 1,091 1,209
----------- -----------
5,106,714 4,859,944
DIRECT COST OF REVENUES
Production costs ............................ 564,383 531,231
Well management and operating ............... 64,526 72,216
Depreciation, depletion and amortization .... 1,695,466 1,652,930
----------- -----------
Total direct cost of revenues .......... 2,324,375 2,256,377
GENERAL AND ADMINISTRATIVE EXPENSE ............... 450,377 486,823
----------- -----------
Total cost of revenues ................. 2,774,752 2,743,200
----------- -----------
INCOME FROM OPERATIONS ........................... 2,331,962 2,116,744
OTHER INCOME (EXPENSE)
Interest income ............................. 12,650 10,100
Interest expense ............................ (71,733) (71,101)
----------- -----------
(59,083) (61,001)
----------- -----------
INCOME BEFORE INCOME TAXES ....................... 2,272,879 2,055,743
PROVISION FOR INCOME TAXES
Current ..................................... -- --
Deferred .................................... -- --
----------- -----------
-- --
----------- -----------
NET INCOME ....................................... $ 2,272,879 $ 2,055,743
=========== ===========
Allocation of Partnership Net Income
Limited Partners ............................ 2,248,559 2,034,363
General Partner ............................. 24,320 21,380
----------- -----------
$ 2,272,879 $ 2,055,743
=========== ===========
Earnings per unit ................................ $ .36 $ .32
===== =====
</TABLE>
See notes to unaudited consolidated financial statements.
F-3
<PAGE> 6
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
PARTNERS' EQUITY - JANUARY 1 ................. $ 48,577,802 $ 46,959,473
Net income .............................. 2,272,879 2,055,743
Cash distributions ($.125 per Unit) ..... (784,344) (805,880)
------------ ------------
PARTNERS' EQUITY - MARCH 31 .................. $ 50,066,337 $ 48,209,336
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
F-4
<PAGE> 7
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................... $ 2,272,879 $ 2,055,743
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation, depletion
and amortization ...................... 1,709,209 1,674,038
Changes in assets
and liabilities:
Accounts receivable ................ 321,827 818,837
Other current assets ............... (31,080) (121,014)
Other assets ....................... (155,576) 674
Accounts payable ................... (38,284) 116,792
Accrued expenses ................... (18,173) 2,732
----------- -----------
Total adjustments ............... 1,787,923 2,492,059
----------- -----------
Net cash provided by
operating activities ...... 4,060,802 4,547,802
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds received on receivables from officers
and employees ............................... 160,277 207,013
Advances disbursed to officers and employees ... (79,583) (97,297)
Purchase of property and equipment ............. (769,351) (1,044,954)
----------- -----------
Net cash used by
investing activities ...... (688,657) (935,238)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions .................................. (784,344) (805,880)
Proceeds from issuance of debt, including
revolver activity ........................... -- --
Payments on debt, including revolver activity .. (3,109,365) (2,306,267)
----------- -----------
Net cash used by
financing activities ...... (3,893,709) (3,112,147)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ............................... (521,564) 500,417
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR ........................................ 679,531 739,370
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
FIRST QUARTER ................................. $ 157,967 $ 1,239,787
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest .................................... $ 83,943 $ 77,784
Income taxes ................................ -- --
</TABLE>
See notes to unaudited consolidated financial statements.
F-5
<PAGE> 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, 1998.
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
<PAGE> 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 6,207,651 and 6,379,941 for the three
months ended March 31, 1998 and 1997, respectively.
E. New Accounting Standards - In February 1997, SFAS 128, "Earnings per
Share" and SFAS 129, "Disclosure of Information About Capital
Structure," were issued. SFAS 128 establishes new standards for
computing and reporting earnings per share. SFAS 129 requires an
entity to explain the pertinent rights and privileges of outstanding
securities. The effect of adoption of the new standards was not
significant.
In June 1997, SFAS 130, "Reporting Comprehensive Income," was issued.
SFAS 130 established new standards for reporting comprehensive income
and its components and is effective for fiscal years beginning after
December 15, 1997. The Company's comprehensive income does not differ
materially from net income.
In June 1997, the Financial Accounting Standards Board issued SFAS
131, "Disclosure About Segments of an Enterprise and Related
Information." SFAS 131 Changes the standards for reporting financial
F-7
<PAGE> 10
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 1. Organization and Summary of Significant Accounting Policies (Continued)
E. New Accounting Standards (Continued)
results by operating segments, related products and services,
geographical areas and major customers. The Company must adopt SFAS
131 no later than December 31, 1998. The Company believes that the
effect of adoption will not be material.
Note 2. Credit Facilities and 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. The Company anticipates renewing the facility on a year to year
basis to minimize debt origination, carrying and interest costs
associated with long-term bank commitments. The previous credit
agreement contained generally the same terms, except that interest was
payable at prime plus 1/8% and the facility was considered long-term.
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: (i) loan balance not to exceed the
borrowing base of $7,000,000; (ii) tangible net worth of at least
$40,000,000; and (iii) 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. Two of the notes, which
have an aggregate balance of $381,537 and $388,979 at March 31, 1998 and
December 31, 1997, respectively, bear interest at 8.22% per annum until
October 6, 1998 and then a variable rate of .5% above prime until
maturity. A third note, which has a balance of $98,241 and $100,164 at
March 31, 1998 and December 31, 1997, respectively, bears interest at
8.41% per annum until June 25, 2000 and then a variable rate of .5%
above prime until maturity. The notes require aggregate payments of
principal and interest of approximately $5,600 per month.
F-8
<PAGE> 11
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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
upon the December 31, 1997 calculation, is $4.99 per Unit, net of the
distributions ($.125 per Unit each) made in January and April 1998.
F-9
<PAGE> 12
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 3. Partners' Equity (Continued)
Units repurchased pursuant to the Repurchase Right for each of the four
years in the period ended December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Calculated Units
Price for Less # of Outstanding
Repurchase Premium Interim Net Units Following
Year Right Offered Distributions Price Paid Repurchased Repurchase
---- ---------- ------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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 $5.210 172,290 6,207,651
</TABLE>
Note 4. Commitments and Contingencies
Everflow paid a quarterly dividend in April 1998 of $.125 per Unit to
Unitholders of record on March 31, 1998. 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 Pennsylania, 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 attrractive 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
F-10
<PAGE> 13
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 4. Commitments and Contingencies (Continued)
predict what effect, if any, current and future regulations may have on
the operations of the Company.
Note 5. Significant Events
The Company intends to explore and evaluate the advisability of seeking
a purchaser for the Company, including the engagement of an investment
banker to assist in the process.
F-11
<PAGE> 14
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, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(Amounts in Thousands) Amount % Amount %
------- --- -------- ---
<S> <C> <C> <C> <C>
Working capital ...................... $ 687 1% $ (1,576) (3)%
Property and equipment (net) ......... 49,300 98 50,240 102
Other ................................ 658 1 503 1
------- --- -------- ---
Total ........................... $50,645 100% $ 49,167 100%
======= === ======== ===
Long-term debt ....................... $ 451 1% 461 1%
Deferred income taxes ................ 128 -- 128 ---
Partners' equity ..................... 50,066 99 48,578 99
------- --- -------- ---
Total ........................... $50,645 100% $ 49,167 100%
======= === ======== ===
</TABLE>
Working capital surplus of $687 thousand as of March 31, 1998 represented
an increase of $2.3 million from December 31, 1997. The Company paid down $3.1
million of debt during the quarter ended March 31, 1998. 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, 1998.
The Company's cash flow from operations before the change in working
capital increased $252 thousand, or 7%, during the three months ended March 31,
1998 as compared to the same period in 1997. Changes in working capital other
than cash and cash equivalents increased cash by $79 thousand and $818 thousand
during the three months ended March 31, 1998 and 1997, respectively. The
reductions in accounts receivable of $322 thousand and $819 thousand at March
31, 1998 and 1997, respectively, compared to December 31, 1997 and 1996 are
primarily the result of lower production receivables.
Other assets increased $156 thousand and accounts payable decreased $38
thousand during the three months ended March 31, 1998. Accounts payable
increased $117 thousand during the three months ended March 31, 1997. Reductions
in production revenues payable between 1997 and 1998 due to the Company's
purchase of interests in the Company's
3
<PAGE> 15
properties previously owned by an affiliate was the primary reason for this
decrease during the three months ended March 31, 1998 compared to the same
period in 1997.
Cash flows provided by operating activities was $4.1 million for the three
months ended March 31, 1998. Cash was used to purchase property and equipment,
pay a quarterly distribution and reduce 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 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. Although the existing revolving credit facility matures on May
31, 1998, the Company anticipates renewing the facility prior to maturity.
In the fall of 1997, 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. The Company anticipates these pricing adjustments should increase
cash flows from operations during 1998.
There have been a number of transactions involving the purchase and sale of
oil and gas properties in the Appalachian Basin recently. Management of the
Company intends to explore and evaluate the advisability of seeking a purchaser
for the Company, including the engagement of an investment banker to assist in
the process.
4
<PAGE> 16
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, 1998 and 1997. 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:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------
1998 1997
---- ----
<S> <C> <C>
Revenues:
Oil and gas sales ................................... 97% 97%
Well management and operating ....................... 3 3
--- ---
Total Revenues ................................. 100% 100%
Expenses:
Production costs .................................... 11% 11%
Well management and operating ....................... 1 2
Depreciation, depletion and amortization ............ 33 34
General and administrative .......................... 9 10
Other ............................................... 1 1
--- ---
Total Expenses ................................. 55 58
--- ---
Earnings ................................................. 45% 42%
=== ===
</TABLE>
Revenues for the three months ended March 31, 1998 increased $247 thousand,
or 5%, compared to the same period in 1997. This increase was due to an increase
in oil and gas sales during the first three months of 1998, as compared to the
same period in 1997.
Oil and gas sales increased $260 thousand, or 6%, during the three months
ended March 31, 1998 compared to the same period in 1997. Higher gas prices
during the first quarter of 1998, due to a $.59 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 1997.
Well management and operating revenues decreased $13 thousand, or 9%,
during the three months ended March 31, 1998 compared to the same period in
1997. Well management and operating costs decreased $8 thousand, or 11%, during
the three months ended March 31, 1998 compared to the same period in 1997. These
decreases were the result of the Company's purchase of additional working
interests in operated properties in which the Company already had a significant
interest.
5
<PAGE> 17
Production costs increased $33 thousand, or 6%, during the three months
ended March 31, 1998 compared to the same period in 1997. Additional producing
properties were responsible for this increase between 1997 and 1998.
Depreciation, depletion and amortization increased $43 thousand, or 3%,
during the three months ended March 31, 1998 compared to the same period in
1997. The increase in depreciation, depletion and amortization is the result of
increased production from producing oil and gas properties.
General and administrative expenses decreased $36 thousand, or 7%, during
the first quarter of 1998 compared to the first quarter of 1997. This decrease
was the result of lower overhead costs during the first quarter of 1998.
The Company reported net income of $2.3 million, an increase of $217
thousand, or 11%, during the three months ended March 31, 1998 compared to the
same period in 1997. The increase in oil and gas sales was primarily responsible
for this increase in net income. Net income represented 45% and 42% of total
revenue during the three months ended March 31, 1998 and 1997, 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
None
(b) No reports on Form 8-K were filed with the Commission
during the Company's first quarter.
6
<PAGE> 18
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, 1998 By: /s/William A. Siskovic
------------------------------------
William A. Siskovic
Vice President and Principal
Financial and Accounting Officer
(Duly Authorized Officer)
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