<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 JUNE 30, 2000
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 X No
--- ---
There were 5,888,662 Units of limited partnership interest of the
Registrant as of August 11, 2000. 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 June 30, 2000.
<PAGE> 2
EVERFLOW EASTERN PARTNERS, L.P.
INDEX
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
----------- --------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999 F-1
Consolidated Statements of Income
Three and Six Months Ended June 30, 2000 and 1999 F-3
Consolidated Statements of Partners' Equity
Six Months Ended June 30, 2000 and 1999 F-4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999 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
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 7
Signature 8
</TABLE>
2
<PAGE> 3
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and December 31, 1999
-----------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 556,923 $ 2,684,605
Accounts receivable:
Production 1,080,302 2,040,298
Officers and employees 404,081 526,030
Joint venture partners 197,551 474,355
Short-term investments 5,616,392 1,513,273
Other 113,002 88,991
------------ ------------
Total current assets 7,968,251 7,327,552
PROPERTY AND EQUIPMENT
Proved properties (successful efforts
accounting method) 111,344,553 110,483,039
Pipeline and support equipment 507,472 507,472
Corporate and other 1,594,652 1,545,233
------------ ------------
113,446,677 112,535,744
Less accumulated depreciation, depletion,
amortization and write down (67,044,476) (64,521,335)
------------ ------------
46,402,201 48,014,409
OTHER ASSETS 29,676 81,025
------------ ------------
$ 54,400,128 $ 55,422,986
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
F-1
<PAGE> 4
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and December 31, 1999
-----------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES
Current portion of long-term debt $ 46,696 $ 54,493
Accounts payable 2,137,208 1,202,605
Accrued expenses 74,343 189,333
----------- -----------
Total current liabilities 2,258,247 1,446,431
LONG-TERM DEBT, NET OF CURRENT PORTION 615,563 637,796
DEFERRED INCOME TAXES 50,000 50,000
COMMITMENTS AND CONTINGENCIES - -
LIMITED PARTNERS' EQUITY, SUBJECT TO
REPURCHASE RIGHT
Authorized - 8,000,000 Units
Issued and outstanding - and 5,888,662
6,095,193 Units, respectively 50,896,382 52,708,525
GENERAL PARTNER'S EQUITY 579,936 580,234
----------- -----------
Total partners' equity 51,476,318 53,288,759
----------- -----------
$54,400,128 $55,422,986
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
F-2
<PAGE> 5
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended June 30, 2000 and 1999
-------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ----------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Oil and gas sales $ 3,217,287 $ 2,603,248 $ 7,669,054 $ 6,688,289
Well management and operating 110,036 110,300 242,404 244,524
Other 930 1,091 1,626 1,995
--------------- -------------- ----------- --------------
3,328,253 2,714,639 7,913,084 6,934,808
DIRECT COST OF REVENUES
Production costs 525,686 467,096 1,360,888 1,059,893
Well management and operating 25,071 74,950 58,615 146,138
Depreciation, depletion and amortization 980,269 915,416 2,497,102 2,401,224
Abandonment and write down of
oil and gas properties 75,000 25,000 150,000 50,000
--------------- -------------- ----------- --------------
Total direct cost of revenues 1,606,026 1,482,462 4,066,605 3,657,255
GENERAL AND ADMINISTRATIVE
EXPENSE 318,431 420,667 660,155 1,012,263
--------------- -------------- ----------- --------------
Total cost of revenues 1,924,457 1,903,129 4,726,760 4,669,518
--------------- -------------- ----------- --------------
INCOME FROM OPERATIONS 1,403,796 811,510 3,186,324 2,265,290
OTHER INCOME (EXPENSE)
Interest income 78,299 21,226 136,032 57,543
Interest expense ( 7,315) ( 26,105) ( 21,460) ( 72,574)
Gain on sale of property and equipment - 8,994 - 8,994
--------------- -------------- ----------- --------------
70,984 4,115 114,572 ( 6,037)
--------------- -------------- ----------- --------------
INCOME BEFORE INCOME TAXES 1,474,780 815,625 3,300,896 2,259,253
PROVISION FOR INCOME TAXES
Current - - - -
Deferred - - - -
--------------- -------------- ----------- --------------
- - - -
--------------- -------------- ----------- --------------
NET INCOME $ 1,474,780 $ 815,625 $ 3,300,896 $ 2,259,253
=============== ============== =========== ==============
Allocation of Partnership Net Income
Limited Partners $ 1,458,722 $ 806,854 $ 3,264,954 $ 2,234,958
General Partner 16,058 8,771 35,942 24,295
--------------- -------------- ----------- --------------
$ 1,474,780 $ 815,625 $ 3,300,896 $ 2,259,253
=============== ============== =========== ==============
Earnings per unit $ .24 $ .13 $ .54 $ .36
=============== ============== =========== ==============
</TABLE>
See notes to unaudited consolidated financial statements.
F-3
<PAGE> 6
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
Six Months Ended June 30, 2000 and 1999
---------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
PARTNERS' EQUITY - JANUARY 1 $ 53,288,759 $ 52,171,076
Net income 3,300,896 2,259,253
Cash distributions ( 3,851,433) ( 2,339,863)
Repurchase Right - Units tendered ( 1,261,904) ( 447,822)
------------- -------------
PARTNERS' EQUITY - JUNE 30 $ 51,476,318 $ 51,642,644
=============== =================
</TABLE>
See notes to unaudited consolidated financial statements.
F-4
<PAGE> 7
EVERFLOW EASTERN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2000 and 1999
---------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,300,896 $ 2,259,253
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 2,523,141 2,431,450
Abandonment and write down of
oil and gas properties 150,000 50,000
(Gain) loss on sale of property and equipment - ( 8,994)
Changes in assets and liabilities:
Accounts receivable 1,236,800 1,234,923
Short-term investments ( 4,103,119) 2,221,056
Other current assets ( 24,011) ( 30,038)
Other assets 51,349 ( 18,652)
Accounts payable ( 327,301) ( 697,104)
Accrued expenses ( 114,990) ( 295,350)
-------------- --------------
Total adjustments ( 608,131) 4,887,291
-------------- --------------
Net cash provided by operating activities 2,692,765 7,146,544
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds received on receivables from officers and
employees 204,043 463,851
Advances disbursed to officers and employees ( 82,094) ( 51,620)
Purchase of property and equipment ( 1,060,933) ( 2,179,684)
Proceeds on sale of property and equipment - 25,000
-------------- --------------
Net cash used by investing activities ( 938,984) ( 1,742,453)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions ( 3,851,433) ( 2,339,863)
Proceeds from issuance of debt, including
revolver activity - 2,000,000
Payments on debt, including revolver activity ( 30,030) ( 3,717,488)
-------------- --------------
Net cash used by financing activities ( 3,881,463) ( 4,057,351)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS ( 2,127,682) 1,346,740
-------------- --------------
CASH AND EQUIVALENTS AT BEGINNING
OF YEAR 2,684,605 294,158
-------------- --------------
CASH AND EQUIVALENTS AT END OF
SECOND QUARTER $ 556,923 $ 1,641,258
============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 21,266 $ 83,065
Income taxes - -
</TABLE>
See notes to unaudited consolidated financial statements.
<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.
Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles 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.
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 29, 2000.
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").
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)
B. Organization (Continued)
Everflow Management Limited, LLC, an Ohio limited
liability company, is the general partner of
Everflow. Everflow Management Limited, LLC is
authorized, in general, to perform all acts necessary
or desirable to carry out the purposes and conduct of
the business of Everflow. The members of Everflow
Management Limited, LLC are Everflow Management
Corporation ("EMC"), two 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 member of Everflow Management Limited, LLC.
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 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 will change
in the future due to Unitholders electing to exercise
the Repurchase Right (see Note 4).
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 6,095,193 for the three
and six months ended June 30, 2000 and 6,172,537 for
the three and six months ended June 30, 1999.
E. New Accounting Standards - In June 1998, SFAS 133,
"Accounting for Derivative Instruments and Hedging
Activities," was issued.
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)
SFAS 133 establishes accounting and reporting
standards for derivative instruments and hedging
activities. SFAS 133, as amended by SFAS 137, is
effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The effect of adoption
of the standard is expected to have no material
effect on the Company's financial statements. In
December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") 101,
"Revenue Recognition in Financial Statements." SAB
101 summarizes the staff's views and provides
guidance on applying generally accepted accounting
principles to revenue recognition. SAB 101, as
amended by SAB 101A and SAB 101B, must be adopted no
later than the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. The Company has
not determined the effects, if any, the SAB may have
on its financial statements.
Note 2. Short-Term Investments
Short-term investments consist of marketable corporate debt
securities which are classified as trading. The fair values of
the investments approximate cost.
Note 3. Credit Facilities and Long-Term Debt
In May 1999, the Company entered into an agreement that
replaced its prior credit agreement. The 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, 2001.
The Company anticipates renewing the facility every other year
to minimize debt origination, carrying and interest costs
associated with long-term bank commitments. 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
F-8
<PAGE> 11
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 3. Credit Facilities and Long-Term Debt (Continued)
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 have an aggregate balance of $662,259 and $692,289 at
June 30, 2000 and December 31, 1999, respectively, and at June
30, 2000 bear interest at fixed (converting in certain
subsequent years to variable) rates ranging from 6.51% - 8.41%
and a weighted average rate of 7.34%. The notes at June 30,
2000 require aggregate payments of principal and interest of
$8,637 per month.
The Company is exposed to market risk from changes in interest
rates since it, at times, funds its operations through
long-term and short-term borrowings. The Company's primary
interest rate risk exposure results from floating rate debt
with respect to the Company's revolving credit.
Note 4. Partners' Equity
Units represent limited partnership interests in Everflow. The
Units are transferable subject only to the approval of any
transfer by Everflow Management Limited, LLC 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 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 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
F-9
<PAGE> 12
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 4. Partners' Equity (Continued)
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
will be equal 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 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, 1999
calculation, is $6.11 per Unit, net of the distributions
($.625 per Unit in total) made in January and April 2000.
Units repurchased pursuant to the Repurchase Right for each of
the last five years are as follows:
<TABLE>
<CAPTION>
Calculated Units
Price for Less # of Out-standing
Repurchase Premium Interim Net Units Following
Year Right Offered Distributions Price Paid Repurchased Repurchase
---- ---------- ------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1996 $4.48 $.27 $.250 $4.500 53,103 6,379,941
1997 $5.46 $ - $.250 $5.210 172,290 6,207,651
1998 $5.24 $ - $.250 $4.990 35,114 6,172,537
1999 $6.16 $ - $.375 $5.790 77,344 6,095,193
2000 $6.73 $ - $.625 $6.110 206,531 5,888,662
</TABLE>
Note 5. Commitments and Contingencies
Everflow paid a quarterly dividend in July 2000 of $.375 per
Unit to Unitholders of record on June 30, 2000. The
distribution amounted to approximately $2,233,000.
F-10
<PAGE> 13
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 5. Commitments and Contingencies (Continued)
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, the
volatility and seasonality of oil and gas production and
prices, 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-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 June
30, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
--------------------- --------------------
(Amounts in Thousands) Amount % Amount %
------ --- ------ ---
<S> <C> <C> <C> <C>
Working capital $ 5,710 11% $ 5,881 11%
Property and equipment (net) 46,402 89 48,015 89
Other 30 - 81 -
------ --- ------ ---
Total $ 52,142 100% $ 53,977 100%
====== === ====== ===
Long-term debt $ 616 1% 638 1%
Deferred income taxes 50 - 50 -
Partners' equity 51,476 99 53,289 99
------ --- ------ ---
Total $ 52,142 100% $ 53,977 100%
====== === ====== ===
</TABLE>
Working capital surplus of $5.7 million as of June 30, 2000 represented
a decrease of approximately $171 thousand from December 31, 1999. The decrease
was the result of decreases in cash and equivalents, accounts receivable and an
increase in accounts payable. The decrease was offset by an increase in
short-term investments.
In May 1999, the Company modified its revolving credit facility. The
facility provides for a revolving line of credit in the amount of $7.0 million,
all of which is available. The revolving line of credit provides for interest
payable quarterly at LIBOR plus 175 basis points with principal due at maturity,
May 31, 2001. The Company anticipates renewing the facility every other year to
minimize debt origination, carrying and interest costs associated with long-term
bank commitments. Management of the Company believes this revolving credit
facility is sufficient to allow the Company to continue to fund the development
of oil and gas properties, repurchase Units pursuant to the Repurchase Right and
make quarterly Cash Distributions.
The Company's cash flow from operations before the change in working
capital increased $1.2 million, or 26%, during the six months ended June 30,
2000 as compared to the same period in 1999. Changes in working capital other
than cash and equivalents
3
<PAGE> 15
decreased cash by $3.3 million during the six months ended June 30, 2000. The
increase in short-term investments of $4.1 million at June 30, 2000 compared to
December 31, 1999 is primarily the result of higher investments in marketable
corporate debt securities at June 30, 2000.
Cash flows provided by operating activities was $2.7 million for the
six months ended June 30, 2000. Cash was used to purchase property and
equipment, pay quarterly distributions and reduce debt.
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 has explored the possible sale of the
Company. Although management may, from time to time, continue to engage in
discussions concerning a potential sale, management does not intend to pursue
actively a sale of the Company at the present time. Management will continue to
evaluate this and other alternatives in attempting to maximize Unitholder value.
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 and six months ended June 30, 2000 and
1999. 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 Six Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales 97% 96% 97% 96%
Well management and operating 3 4 3 4
---- ---- ---- ----
Total Revenues 100% 100% 100% 100%
Expenses:
Production costs 16% 17% 17% 15%
Well management and operating 1 3 1 2
Depreciation, depletion and amortization 29 34 31 35
Abandonment and write down of
Oil and gas properties 2 1 2 1
General and administrative 10 15 8 14
Other ( 2) - ( 1) -
Income taxes - - - -
---- ---- ---- ----
Total Expenses 56 70 58 67
==== ==== ==== ====
Net income 44% 30% 42% 33%
==== ==== ==== ====
</TABLE>
Revenues for the three and six months ended June 30, 2000 increased
$614 thousand and $978 thousand, respectively, compared to the same periods in
1999. This increase was due primarily to an increase in oil and gas sales during
the three and six months ended June 30, 2000 compared to the same periods in
1999.
Oil and gas sales increased $614 thousand, or 24%, during the three
months ended June 30, 2000 compared to the same period in 1999. Oil and gas
sales increased $981 thousand, or 15%, during the six months ended June 30, 2000
compared to the same six month period in 1999. These increases are the result of
higher production volumes and oil prices during the three and six months ended
June 30, 2000 compared to the same periods in 1999.
Production costs increased $59 thousand, or 13%, during the three
months ended June 30, 2000 and increased $301 thousand, or 28%, during the six
months ended June 30, 2000 compared to the same periods in 1999. These increases
are the result of increased production volumes during the three and six months
ended June 30, 2000 compated to the same periods in 1999.
5
<PAGE> 17
Depreciation, depletion and amortization expenses increased $65
thousand, or 7%, and $96 thousand, or 4%, during the three and six months ended
June 30, 2000 compared with the same periods in 1999. These increases are the
result of increased production levels during 2000.
General and administrative expenses decreased $102 thousand, or 24%,
and $352 thousand, or 35%, during the three and six months ended June 30, 2000
compared with the same periods in 1999. The primary reason for this decrease is
due to reduced personnel costs resulting from the Company's decision to decrease
its level of activity in the development of oil and gas properties.
Net other income showed an increase of $67 thousand and $120 thousand
during the three and six months ended June 30, 2000 compared to the same periods
in 1999. An increase in interest income and decrease in interest expense as a
result of increased cash levels and reduced debt levels was primarily
responsible for these increases.
The Company reported net income of $1,475 thousand, an increase of $659
thousand, or 81%, during the three months ended June 30, 2000 compared to the
same period in 1999. The Company reported net income of $3,301 thousand, an
increase of $1,042 thousand, or 46%, during the six months ended June 30, 2000
compared to the same period in 1999.
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, the number of Units tendered pursuant to
the Repurchase Right and the ability to locate economically productive oil and
gas prospects for development by the Company.
6
<PAGE> 18
Part II. Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) On July 7, 2000, the Registrant filed a current
report on Form 8-K
7
<PAGE> 19
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 LIMITED, LLC,
General Partner
By: EVERFLOW MANAGEMENT CORPORATION
Managing Member
By: /s/William A. Siskovic
----------------------------------------
August 11, 2000 William A. Siskovic
Vice President and Principal Accounting
Officer (Duly Authorized Officer)
8
