Company Quick10K Filing
Everflow Eastern Partners
Price1.00 EPS-2,357,201
Shares-0 P/E-0
MCap-0 P/FCF-0
Net Debt-12 EBIT2
TEV-12 TEV/EBIT-5
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-14
10-K 2019-12-31 Filed 2020-03-26
10-Q 2019-09-30 Filed 2019-11-13
10-Q 2019-06-30 Filed 2019-08-13
10-Q 2019-03-31 Filed 2019-05-13
10-K 2018-12-31 Filed 2019-03-27
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-10
10-Q 2018-03-31 Filed 2018-05-11
10-K 2017-12-31 Filed 2018-03-27
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-10
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-28
10-Q 2016-09-30 Filed 2016-11-10
10-Q 2016-06-30 Filed 2016-08-12
10-Q 2016-03-31 Filed 2016-05-11
10-K 2015-12-31 Filed 2016-03-25
10-Q 2015-09-30 Filed 2015-11-12
10-Q 2015-06-30 Filed 2015-08-12
10-Q 2015-03-31 Filed 2015-05-13
10-K 2014-12-31 Filed 2015-03-27
10-Q 2014-09-30 Filed 2014-11-12
10-Q 2014-06-30 Filed 2014-08-13
10-Q 2014-03-31 Filed 2014-05-13
10-K 2013-12-31 Filed 2014-03-26
10-Q 2013-09-30 Filed 2013-11-13
10-Q 2013-06-30 Filed 2013-08-13
10-Q 2013-03-31 Filed 2013-05-13
10-K 2012-12-31 Filed 2013-03-28
10-Q 2012-09-30 Filed 2012-11-13
10-Q 2012-06-30 Filed 2012-08-13
10-Q 2012-03-31 Filed 2012-05-11
10-K 2011-12-31 Filed 2012-03-27
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-12
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-29
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-13
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-31

EEPL 10Q Quarterly Report

Part I: Financial Information Item 1. Financial Statements Everflow Eastern Partners, L.P. Consolidated Balance Sheets September 30, 2019 and December 31, 2018
Note 1. Organization and Summary of Significant Accounting Policies
Note 2. Current Liabilities
Note 3. Partners' Equity
Note 4. Commitments and Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii: Other Information
Item 6. Exhibits
EX-31.1 ex_161933.htm
EX-31.2 ex_161934.htm
EX-32.1 ex_161935.htm

Everflow Eastern Partners Earnings 2019-09-30

Balance SheetIncome StatementCash Flow
655239261302012201420172020
Assets, Equity
4.5-0.4-5.3-10.2-15.1-20.02012201420172020
Rev, G Profit, Net Income
3.30.6-2.0-4.7-7.3-10.02012201420172020
Ops, Inv, Fin

10-Q 1 eepl20190930_10q.htm FORM 10-Q eepl20190930_10q.htm
 

 

Table of Contents



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2019

 

 

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             

 

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

 

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

 

  Large accelerated filer     ________ Accelerated filer                                               
  Non-accelerated filer       ________ Smaller reporting company                   X        
  Emerging growth company          ________  

 

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

 

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

 

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

  

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

None     

 

There were 5,492,967 Units of limited partnership interest of the registrant as of November 10, 2019. 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 September 30, 2019.

 

 

 

EVERFLOW EASTERN PARTNERS, L.P.

 

INDEX

 

  DESCRIPTION PAGE NO.
     

Part I.  

Financial Information

 
       
 

Item 1.

Financial Statements

 
       
   

Consolidated Balance Sheets September 30, 2019 and December 31, 2018

F-1
       
   

Consolidated Statements of Operations Three and Nine Months Ended September 30, 2019 and 2018

F-3
     

 

   

Consolidated Statements of Partners’ Equity Nine Months Ended September 30, 2019 and 2018

F-4
     

 

   

Consolidated Statements of Cash Flows Nine Months Ended September 30, 2019 and 2018

F-5
       
   

Notes to Unaudited Consolidated Financial Statements

F-6

       
 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

3
       
 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

7
       
 

Item 4.

Controls and Procedures

7

       

Part II.  

Other Information

 
       
 

Item 6.

Exhibits

8

       
   

Signature

9

 

 

 

Part I: FINANCIAL INFORMATION

 

Item 1. FINANCIAL STATEMENTS

 

EVERFLOW EASTERN PARTNERS, L.P.

 

CONSOLIDATED BALANCE SHEETS

 

September 30, 2019 and December 31, 2018

 

   

September 30,

   

December 31,

 
   

2019

   

2018

 
   

(Unaudited)

   

(Audited)

 

ASSETS

               
                 

CURRENT ASSETS

               

Cash and equivalents

  $ 11,649,472     $ 12,566,868  

Investments

    20,004,505       17,064,136  

Production accounts receivable

    1,045,864       1,661,669  

Other

    8,150       64,681  

Total current assets

    32,707,991       31,357,354  
                 

PROPERTY AND EQUIPMENT

               

Proved properties (successful efforts accounting method)

    174,803,277       175,062,777  

Pipeline and support equipment

    786,011       762,440  

Corporate and other

    2,090,250       2,094,423  

Gross property and equipment

    177,679,538       177,919,640  
                 

Less accumulated depreciation, depletion, amortization and write down

    168,836,853       168,754,778  

Net property and equipment

    8,842,685       9,164,862  
                 

OTHER ASSETS

    127,028       125,796  
                 

TOTAL ASSETS

  $ 41,677,704     $ 40,648,012  

 

See notes to unaudited consolidated financial statements.

 

 

EVERFLOW EASTERN PARTNERS, L.P.

 

CONSOLIDATED BALANCE SHEETS

 

September 30, 2019 and December 31, 2018

 

   

September 30,

   

December 31,

 
   

2019

   

2018

 
   

(Unaudited)

   

(Audited)

 

LIABILITIES AND PARTNERS' EQUITY

               
                 

CURRENT LIABILITIES

               

Accounts payable

  $ 2,152,464     $ 1,869,885  

Accrued expenses

    763,011       1,084,347  

Total current liabilities

    2,915,475       2,954,232  
                 

DEFERRED INCOME TAXES

    40,700       40,700  
                 

OPERATIONAL ADVANCES

    2,437,898       2,135,632  
                 

ASSET RETIREMENT OBLIGATIONS

    16,985,986       16,807,486  
                 

COMMITMENTS AND CONTINGENCIES

               
                 

LIMITED PARTNERS' EQUITY, SUBJECT TO REPURCHASE RIGHT

               
Authorized - 8,000,000 Units                

Issued and outstanding - 5,492,967 and 5,549,355 Units, respectively

    19,064,764       18,486,440  
                 

GENERAL PARTNER'S EQUITY

    232,881       223,522  

Total partners' equity

    19,297,645       18,709,962  
                 

TOTAL LIABILITIES AND PARTNERS' EQUITY

  $ 41,677,704     $ 40,648,012  

 

See notes to unaudited consolidated financial statements.

 

 

 

EVERFLOW EASTERN PARTNERS, L.P.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three and Nine Months Ended September 30, 2019 and 2018

 

(Unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
                                 
   

2019

   

2018

   

2019

   

2018

 

REVENUES

                               

Crude oil and natural gas sales

  $ 1,309,638     $ 2,642,422     $ 5,838,935     $ 6,992,525  

Well management and operating

    117,264       120,591       412,125       413,356  

Other

    2,096       1,817       6,342       5,630  

Total revenues

    1,428,998       2,764,830       6,257,402       7,411,511  
                                 

DIRECT COST OF REVENUES

                               

Production costs

    557,408       1,138,454       1,941,890       2,377,360  

Well management and operating

    70,241       73,320       245,095       244,267  

Depreciation, depletion and amortization

    146,422       116,860       373,234       400,478  

Accretion expense

    68,300       79,100       214,900       246,500  

Total direct cost of revenues

    842,371       1,407,734       2,775,119       3,268,605  
                                 

GENERAL AND ADMINISTRATIVE EXPENSE

    545,825       518,493       1,641,789       1,628,461  

Total cost of revenues

    1,388,196       1,926,227       4,416,908       4,897,066  
                                 

INCOME FROM OPERATIONS

    40,802       838,603       1,840,494       2,514,445  
                                 

OTHER INCOME

                               

Interest and dividend income

    136,451       122,772       479,007       286,968  

Gain on disposal of property and equipment

    400       81,400       37,700       635,165  

Gain on sale of other assets

    -       -       -       8,960  

Total other income

    136,851       204,172       516,707       931,093  
                                 

NET INCOME

  $ 177,653     $ 1,042,775     $ 2,357,201     $ 3,445,538  
                                 
                                 

Allocation of Partnership Net Income

                               

Limited Partners

  $ 175,436     $ 1,030,308     $ 2,328,946     $ 3,404,561  

General Partner

    2,217       12,467       28,255       40,977  
                                 

Net income

  $ 177,653     $ 1,042,775     $ 2,357,201     $ 3,445,538  
                                 

Net income per Unit

  $ 0.03     $ 0.19     $ 0.42     $ 0.61  

 

See notes to unaudited consolidated financial statements.

 

 

 

EVERFLOW EASTERN PARTNERS, L.P.

 

CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY

 

Nine Months Ended September 30, 2019 and 2018

 

(Unaudited)

 

   

2019

   

2018

 
                 

PARTNERS' EQUITY - BEGINNING OF PERIOD

  $ 18,709,962     $ 14,273,208  
                 

Net income

    2,357,201       3,445,538  
                 

Cash distributions ($0.30 per unit in 2019)

    (1,684,936 )     -  
                 

Repurchase of Units

    (129,582 )     (7,509 )
                 

Options exercised

    45,000       3,300  
                 

PARTNERS' EQUITY - END OF PERIOD

  $ 19,297,645     $ 17,714,537  

 

See notes to unaudited consolidated financial statements.

 

 

 

EVERFLOW EASTERN PARTNERS, L.P.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Nine Months Ended September 30, 2019 and 2018

 

(Unaudited)

 

   

2019

   

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES

               

Net income

  $ 2,357,201     $ 3,445,538  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation, depletion and amortization

    432,134       458,878  

Accretion expense

    214,900       246,500  

Gain on disposal of property and equipment

    (37,700 )     (635,165 )

Gain on sale of other assets

    -       (8,960 )

Changes in assets and liabilities:

               

Production accounts receivable

    615,805       100,003  

Other current assets

    56,531       16,575  

Other assets

    (1,232 )     700  

Accounts payable

    282,579       (101,028 )

Accrued expenses

    (350,536 )     (288,794 )

Operational advances

    302,266       508,330  

Total adjustments

    1,514,747       297,039  

Net cash provided by operating activities

    3,871,948       3,742,577  
                 

CASH FLOWS FROM INVESTING ACTIVITIES

               

Purchase of investments

    (2,940,369 )     (3,762,150 )

Payments received on receivables from employees

    -       46,407  

Proceeds from disposal of property and equipment

    34,000       37,500  

Proceeds from sale of other assets

    -       8,960  

Purchase of property and equipment

    (113,457 )     -  

Net cash used in investing activities

    (3,019,826 )     (3,669,283 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES

               

Distributions

    (1,684,936 )     -  

Repurchase of Units

    (129,582 )     (7,509 )

Proceeds from options exercised

    45,000       3,300  

Net cash used in financing activities

    (1,769,518 )     (4,209 )
                 

NET CHANGE IN CASH AND EQUIVALENTS

    (917,396 )     69,085  
                 

CASH AND EQUIVALENTS - BEGINNING OF PERIOD

    12,566,868       11,883,725  
                 

CASH AND EQUIVALENTS - END OF PERIOD

  $ 11,649,472     $ 11,952,810  
                 

Supplemental disclosures of cash flow information:

               

Cash paid during the period for income taxes

  $ 11,135     $ 3,600  

 

See notes to unaudited consolidated financial statements.

 

 

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Note 1.

Organization and Summary of Significant Accounting Policies

 

 

A.

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

 

The accompanying condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the disclosures normally required by GAAP, or those normally made in an Annual Report on Form 10-K, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto which are incorporated in Everflow Eastern Partners, L.P.’s annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 27, 2019.

 

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

 

 

B.

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

 

 

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1.

Organization and Summary of Significant Accounting Policies

 

 

C.

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

 

Everflow Management Limited, LLC (“EML”), an Ohio limited liability company, is the general partner of Everflow and, as such, is authorized to perform all acts necessary or desirable to carry out the purposes and conduct of the business of Everflow. The members of EML include Everflow Management Corporation ("EMC"), two individuals who are officers and directors of EEI, one individual who is the Chairman of the Board of EEI, and a private limited liability company which also serves as Everflow’s largest limited partner. EMC is an Ohio corporation formed in September 1990 and is the managing member of EML.

 

 

D.

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

 

 

E.

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

 

 

F.

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

 

 

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1.

Organization and Summary of Significant Accounting Policies

 

 

F.

Investments (continued)

 

The Financial Accounting Standards Board established a framework for measuring fair value and expanded disclosures about fair value measurements by establishing a fair value hierarchy that prioritizes the inputs and defines valuation techniques used to measure fair value. The hierarchy gives highest priority to Level I inputs and lowest priority to Level III inputs. The three levels of the fair value hierarchy are described below:

 

Level I – Quoted prices are available in active markets for identical financial instruments as of the reporting date.

 

Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

 

Level III – Pricing inputs are unobservable for the financial instrument and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation.

 

The Company’s investments are carried at fair market value based on quoted prices available in active markets and are therefore classified as Level 1.

 

 

G.

Operational Advances - The Company collects and maintains funds on behalf of joint venture partners who own working interests in wells of which the Company operates for their anticipated share of future plugging and abandonment costs. As of September 30, 2019 and December 31, 2018, cash and equivalents include $2,437,898 and $2,135,632, respectively, of operational advances. Operational advances held on behalf of employees, including officers, and directors were approximately $385,200 and $307,800 as of September 30, 2019 and December 31, 2018, respectively.

 

 

H.

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

 

 

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1.

Organization and Summary of Significant Accounting Policies

 

 

H.

Asset Retirement Obligations (continued)

 

The estimated liability is based on historical experience in dismantling, plugging and abandoning wells, estimated remaining lives of those wells based on reserves estimates, estimates of the external cost to dismantle, plug and abandon the wells in the future and federal and state regulatory requirements. The liability is discounted using an assumed credit-adjusted, risk-free interest rate.

 

Gain on disposal of property and equipment includes approximately $2,100 and $7,200 associated with non-cash settlements of asset retirement obligations during the three and nine month periods ended September 30, 2019, respectively. Gain on disposal of property and equipment includes approximately $81,500 and $641,300 associated with non-cash settlements of asset retirement obligations during the three and nine month periods ended September 30, 2018, respectively.

 

 

I.

Revenue Recognition – The Company accounts for revenue from contracts in accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. Revenues from contracts with customers are recognized when performance obligations are satisfied in accordance with contractual terms.

 

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

 

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

 

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

 

Based on the Company's judgment, the Company's performance obligations have been satisfied and an unconditional right to consideration exists at September 30, 2019 and December 31, 2018, respectively; therefore, the Company recognized amounts due from contracts with customers as production accounts receivable within the Company’s consolidated balance sheets at September 30, 2019 and December 31, 2018, respectively.

 

 

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1.

Organization and Summary of Significant Accounting Policies

 

 

I.

Revenue Recognition (continued)

 

The Company utilizes the sales method to account for gas production volume imbalances. Under this method, revenue is recognized only when gas is produced and sold on the Company’s behalf. The Company had no material gas imbalances at September 30, 2019 and December 31, 2018, respectively.

 

The Company participates (and may act as drilling contractor) with unaffiliated and affiliated joint venture partners, employees, including officers, and directors in the drilling, development and operation of jointly owned oil and gas properties. Each owner, including the Company, has an undivided interest in the jointly owned properties. Generally, the joint venture partners, employees and directors participate on the same drilling/development cost basis as the Company and, therefore, no revenue, expense or income is recognized on the drilling and development of the properties. Well management and operating revenues are derived from a variety of both verbal and written operating agreements with joint venture partners and are recognized monthly as services are provided and properties are managed and operated. Other revenues consist of miscellaneous revenues that are recognized at the time services are rendered, the Company has a contractual right to such revenue and collection is reasonably assured.

 

 

J.

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

 

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

 

 

K.

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

 

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

 

 

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1.

Organization and Summary of Significant Accounting Policies

 

 

L.

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

 

 

Note 2.

Current Liabilities

 

The Company’s current liabilities consist of the following at September 30, 2019 and December 31, 2018:

 

   

September 30,

   

December 31,

 
   

2019

   

2018

 
                 

Accounts Payable:

               

Production and related other

  $ 1,808,741     $ 1,522,106  

Other

    293,699       299,150  

Joint venture partner deposits

    50,024       48,629  
                 

Total accounts payable

  $ 2,152,464     $ 1,869,885  
                 

Accrued Expenses:

               

Payroll and retirement plan contributions

  $ 412,798     $ 692,083  

Current portion of asset retirement obligations

    196,000       196,000  

Drilling

    106,100       106,100  

Federal, state and local taxes

    30,513       35,064  

Other

    17,600       55,100  
                 

Total accrued expenses

  $ 763,011     $ 1,084,347  

 

 

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Note 3.

Partners’ Equity

 

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

 

The partnership agreement provides that Everflow will repurchase for cash up to 10% of the then outstanding Units, to the extent Unitholders offer Units to Everflow for repurchase pursuant to the Repurchase Right. The Repurchase Right entitles any Unitholder, between May 1 and June 30 of each year, to notify Everflow that the Unitholder elects to exercise the Repurchase Right and have Everflow acquire certain or all Units. The price to be paid for any such Units is calculated based upon the audited financial statements of the Company as of December 31 of the year prior to the year in which the Repurchase Right is to be effective and independently prepared reserve reports. The price per Unit equals 66% of the adjusted book value of the Company allocable to the Units, divided by the number of Units outstanding at the beginning of the year in which the applicable Repurchase Right is to be effective less interim cash distributions received by a Unitholder. The adjusted book value is calculated by adding partners’ equity, the Standardized Measure of Discounted Future Net Cash Flows and the tax effect included in the Standardized Measure and subtracting from that sum the carrying value of oil and gas properties (net of undeveloped lease costs). If more than 10% of the then outstanding Units are tendered during any period during which the Repurchase Right is to be effective, the Investors’ Units tendered shall be prorated for purposes of calculating the actual number of Units to be acquired during any such period. The price associated with the 2019 Repurchase Right, based upon the December 31, 2018 calculation, was $1.50 per Unit, net of a $0.30 per Unit distribution made in April 2019.

 

In June 2019, the Company repurchased 86,388 Units pursuant to the Repurchase Right at a price of $1.50 per Unit. In June 2018, the Company repurchased 68,261 Units pursuant to the Repurchase Right at a price of $0.11 per Unit. The Company did not offer to repurchase any Units pursuant to the Repurchase Right during 2017 because the price associated with the Repurchase Right was negative.

 

The Company has an Option Repurchase Plan (the “Option Plan”) which permits the grant of options to select officers and employees to purchase certain Units acquired by the Company pursuant to the Repurchase Right. The purpose of the Option Plan is to assist the Company to attract and retain officers and other key employees and to enable those individuals to acquire or increase their ownership interest in the Company in order to encourage them to promote the growth and profitability of the Company. The Option Plan is designed to align directly the financial interests of the participants with the financial interests of the Unitholders. The Company granted 30,000 options to officers and key employees in June 2019 and 2018, respectively. All options granted were exercised on the same date. The Company did not grant any options in 2017.

 

 

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 3.

Partners’ Equity (continued)

 

All Units repurchased pursuant to the Repurchase Right are retired except for those Units issued through the exercise of options pursuant to the Option Plan. There were 5,492,967 and 5,549,355 outstanding Units following the Company’s repurchase of Units and issuance of options in June 2019 and 2018, respectively. There were no instruments outstanding at September 30, 2019 or 2018 that would potentially dilute net income per Unit.

 

 

Note 4.

Commitments and Contingencies

 

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

 

The Company has multiple contracts with Dominion Field Services (“Dominion”) which obligate Dominion to purchase, and the Company to sell and deliver, certain quantities of natural gas production from the Company’s oil and gas properties throughout the contract periods. Management believes the Company can meet its delivery commitments based on estimated production.

 

The Company is party to various legal proceedings and claims in the ordinary course of its business. The Company believes that the outcome of these matters will not have a material adverse effect on its consolidated financial position, results of operations, or liquidity.

 

 

 

 

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion is intended to assist in the understanding of the Company’s liquidity, capital resources and results of operations. It is suggested that this information be read in conjunction with the Company’s interim consolidated financial statements, the related notes to consolidated financial statements and the Company’s 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019.

 

Liquidity and Capital Resources

 

The following table summarizes the Company's financial position at September 30, 2019 and December 31, 2018:

 

   

September 30, 2019

   

December 31, 2018

 
   

Amount

   

%

   

Amount

   

%

 
   

(Amounts in Thousands)

   

(Amounts in Thousands)

 
                                 

Working capital

  $ 29,793       77

%

  $ 28,403       76

%

Property and equipment (net)

    8,843       23       9,165       24  

Other

    127       -       126       -  

Total

  $ 38,763       100

%

  $ 37,694       100

%

                                 

Deferred income taxes

  $ 41       -

%

  $ 41       -

%

Long-term liabilities

    19,424       50       18,943       50  

Partners' equity

    19,298       50       18,710       50  

Total

  $ 38,763       100

%

  $ 37,694       100

%

 

Working capital of $29.8 million as of September 30, 2019 represented an increase of $1.4 million from December 31, 2018, due primarily to an increase in investments and a decrease in accrued expenses; offset somewhat by decreases in cash and equivalents and production accounts receivable and an increase in accounts payable. The increase in investments was primarily the result of additional purchases of shares in a mutual fund during the nine months ended September 30, 2019 that invests primarily in investment grade, short-term fixed and floating rate debt securities. The decrease in accrued expenses was primarily the result of all payroll and retirement contributions accrued at December 31, 2018 being paid during the nine months ended September 30, 2019. The decrease in production accounts receivable was primarily the result of lower average natural gas and crude oil prices received on production, as well as less natural gas volumes produced, during the current receivable period as compared to the prior comparable receivable period. The effect of lower average natural gas and crude oil prices received and less natural gas volumes produced was offset somewhat by additional natural gas and crude oil volumes recognized from third party operators during the current receivable period as compared to the prior comparable receivable period. The decrease in natural gas volumes produced was primarily the result of more Company operated properties being voluntarily shut-in during the current receivable period as compared to the prior comparable receivable period. The increase in accounts payable was primarily the result of additional production and related other payables outstanding at September 30, 2019 as compared to the prior comparable reporting date.

 

 

The Company funds its operations with cash generated by operations and/or existing cash and equivalent balances. The Company has had no borrowings since 2003 and no principal indebtedness was outstanding as of November 10, 2019. The Company used cash provided by operating activities and existing cash and equivalents to fund the purchase of $2.9 million of investments during the nine month period ending September 30, 2019, the payment of a distribution amounting to approximately $1.7 million in April 2019, and $130,000 in payments in July 2019 associated with the repurchase of Units tendered in conjunction with the Company’s 2019 Repurchase Right.

 

The Company’s cash flow provided by operations before the change in working capital was $3.3 million during the nine months ended September 30, 2019, a decrease of $748,000 as compared to $4.0 million of cash flow provided by operations before the change in working capital during the prior comparable period. Changes in working capital from operations other than cash and equivalents increased cash by $604,000 during the nine months ended September 30, 2019. Cash flows provided by operating activities was $3.9 million for the nine months ended September 30, 2019.

 

Management of the Company believes cash flows and existing cash and equivalents should be sufficient to meet the current funding requirements of ongoing operations, capital investments to develop and/or purchase oil and gas properties and the repurchase of Units pursuant to the 2020 Repurchase Right.

 

The Company has multiple contracts with Dominion Field Services (“Dominion”) which obligate Dominion to purchase, and the Company to sell and deliver, certain quantities of natural gas production from the Company’s oil and gas properties throughout the contract periods. Management believes the Company can meet its delivery commitments based on estimated production.

 

 

Results of Operations

 

The following table and discussion is a review of the results of operations of the Company for the three and nine month periods ended September 30, 2019 and 2018. All items in the table are calculated as a percentage of total revenues. This table should be read in conjunction with the discussions of select items below:

 

   

Three Months

   

Nine Months

 
   

Ended September 30,

   

Ended September 30,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Revenues:

                               

Crude oil and natural gas sales

    92

%

    96

%

    93

%

    94

%

Well management and operating

    8       4       7       6  

Total revenues

    100

%

    100

%

    100

%

    100

%

                                 

Expenses:

                               

Production costs

    39       41       31       32  

Well management and operating

    5       3       4       3  

Depreciation, depletion and amortization

    10       4       6       6  

Accretion expense

    5       3       3       3  

General and administrative expense

    38       19       26       22  

Total expenses

    97

%

    70

%

    70

%

    66

%

                                 

Other income:

                               

Interest and dividend income

    9       5       8       4  

Gain on disposal of property and equipment

    -       3       -       9  

Total other income

    9

%

    8

%

    8

%

    13

%

                                 

Net income

    12

%

    38

%

    38

%

    47

%

 

 

Revenues for the three month period ended September 30, 2019 decreased $1.3 million, or 48%, as compared to the prior comparable period. Revenues for the nine month period ended September 30, 2019 decreased $1.2 million, or 16%, as compared to the prior comparable period. Both revenue variances were primarily the result of variances in crude oil and natural gas sales from the current period in comparison to the prior comparable periods.

 

Crude oil and natural gas sales decreased $1.3 million, or 50%, during the three months ended September 30, 2019 as compared to the prior comparable period. The decrease was primarily the result of less natural gas and crude oil volumes produced and lower average crude oil and natural gas prices received during the three month period ended September 30, 2019 as compared to the prior comparable period. Crude oil and natural gas sales decreased $1.2 million, or 16%, during the nine months ended September 30, 2019 as compared to the prior comparable period. The decrease was primarily the result of less natural gas and crude oil volumes produced and lower average crude oil prices received, offset somewhat by the effect of higher average natural gas prices received, during the nine month period ended September 30, 2019 as compared to the prior comparable period. The decreases in natural gas and crude oil volumes produced during the three and nine month periods ended September 30, 2019 as compared to the prior comparable periods were primarily the result of more Company operated properties being voluntarily shut-in. Another contributing factor to the decreases in crude oil and natural gas sales for the three and nine month periods ended September 30, 2019 as compared to the prior comparable periods was the recognition of $956,000 of crude oil and natural gas sales reported by a third party operator significantly in arrears during the three and nine month periods ended September 30, 2018.

 

 

Production costs decreased $581,000, or 51%, during the three months ended September 30, 2019 as compared to the prior comparable period. Production costs decreased $435,000, or 18%, during the nine months ended September 30, 2019 as compared to the prior comparable period. The decreases were primarily the result of one-time recognition of $637,000 of production costs reported by a third party operator significantly in arrears during the three and nine months ended September 30, 2018, respectively, offset somewhat by additional costs associated with third party operated wells during the three and nine month periods ended September 30, 2019 as compared to the prior comparable periods.

 

Other income decreased $67,000, or 33%, during the three month period ended September 30, 2019 as compared to the prior comparable period. Other income decreased $414,000, or 45%, during the nine month period ended September 30, 2019 as compared to the prior comparable period. The primary reason for the decreases was the result of less gain recognized on the disposal of property and equipment. The Company had a substantial decrease in the number of properties disposed during the three and nine month periods ended September 30, 2019 as compared to the prior comparable periods. The majority of the gains on disposal of property and equipment during the three and nine month periods ended September 2018 were associated with settlements of the properties’ related asset retirement obligations. The effect of less gain recognized on the disposal of property and equipment was offset somewhat by additional interest and dividend income recognized during the three and nine month periods ended September 30, 2019 as compared to the prior comparable periods. The increase in interest and dividend income was primarily the result of additional investments held and the related dividends yielded on investments during the three and nine month periods ended September 30, 2019 as compared to the prior comparable periods.

 

The Company reported net income of $178,000 and $1.0 million during the three months ended September 30, 2019 and 2018, respectively, representing 12% and 38% of total revenues during the three month periods ended September 30, 2019 and 2018, respectively. The Company reported net income of $2.4 million and $3.4 million during the nine months ended September 30, 2019 and 2018, respectively, representing 38% and 47% of total revenues during the nine month periods ended September 30, 2019 and 2018, respectively. The decreases in net income were primarily the result of decreases in crude oil and natural gas sales and other income, offset somewhat by decreases in production costs.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The critical accounting policies that affect the Company’s more complex judgments and estimates are described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

 

 

Forward-Looking Statements

 

Except for historical financial information contained in this Form 10-Q, the statements made in this report are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). In addition, words such as “expects,” “anticipate,” “intends,” “plans,” “believes,” “estimates,” variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ materially from those in the forward-looking statements include price fluctuations in the gas market in the Appalachian Basin, actual oil and gas production and the ability to locate economically productive oil and gas prospects for development by the Company. In addition, any forward-looking statements speak only as of the date on which such statement is made and the Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

 

Item 4.

CONTROLS AND PROCEDURES

 

(a)     Disclosure Controls and Procedures. As of the end of the period covered by this report, management performed, with the participation of our Principal Executive Officer (the “CEO”) and Principal Financial and Accounting Officer (the “CFO”), an evaluation of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15 (the “evaluation”). Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures. Based on the evaluation, management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

 

The certifications of the Company’s CEO and CFO are attached as Exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q and include, in paragraph 4 of such certifications, information concerning the Company’s disclosure controls and procedures and internal control over financial reporting. Such certifications should be read in conjunction with the information contained in this Item 4., including the information incorporated by reference to our filing on Form 10-K for the year ended December 31, 2018, for a more complete understanding of the matters covered by such certifications.

 

(b)     Changes in internal control over financial reporting. No change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

Part II:

OTHER INFORMATION

 

Item 6.

EXHIBITS

 

 

Exhibit 31.1

Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

Exhibit 31.2

Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

101.INS

Instance Document

 

 

101.SCH

XBRL Taxonomy Extension Schema Document

 

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

 

 

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

101.DEF

XBRL Taxonomy Definition Linkbase Document

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

EVERFLOW EASTERN PARTNERS, L.P.
     
 

By:

everflow management limited, llc

   

General Partner

     
 

By:

everflow management corporation

   

Managing Member

 

 

Dated:  November 13, 2019

By:

/s/ Brian A. Staebler

   

Brian A. Staebler

   

Vice President, Secretary-Treasurer and

Principal Financial and Accounting Officer

   

(Duly Authorized Officer)

     

 

9