Note 1.	Organization and Summary of Significant Accounting Policies

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 ~~28, 2017.~~ 27, 2018.


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

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.

F-6

Table of Contents

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.	Organization and Summary of Significant Accounting Policies

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 are Everflow Management Corporation ("EMC"); two individuals who are officers and directors of EEI and employees of Everflow; one individual who is the Chairman of the Board of EEI; one individual who is an employee of Everflow; and one private limited liability ~~company founded by an individual who is a director of EEI.~~company. EMC is an Ohio corporation formed in September 1990 and is the managing member of EML. EML holds no assets other than its general partner’s interest in Everflow, nor does it have any liabilities. In addition, EML has no separate operations or role apart from its role as the Company’s general partner.

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.

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. As of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, cash and equivalents include ~~$1,469,486~~$2,022,254 and ~~$1,053,582,~~$1,513,924, respectively, of operational advances, which are funds collected and held on behalf of joint venture partners for their anticipated share of future plugging and abandonment costs, including interest earned. Operational advances held on behalf of joint venture partners include those held on behalf of employees, including officers and directors (see Note 6)5).

Investments – The Company’s investments are classified as available-for-sale securities and 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.

F-7

Table of Contents

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.	Organization and Summary of Significant Accounting Policies

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

G.G.

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.


		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 $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.

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Table of Contents

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.	Organization and Summary of Significant Accounting Policies

H.H.

Revenue Recognition - – As described in Note 1.K., beginning in 2018, the Company accounts for revenue from contracts in accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Revenues from contracts with customers are recognized when performance obligations are satisfied in accordance with contractual terms.

The Company ~~recognizes~~recognized 28% and 44% of crude oil and natural gas ~~revenues when~~sales from two purchasers of natural gas from operated properties under sales contracts during the three and nine month periods ended September 30, 2018, respectively. Generally, each unit (MCF) is 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 ~~sold to a purchaser~~recognized as revenue upon delivery of the natural gas, which is the point in time that the customer obtains control of the natural gas and the Company's performance obligation is satisfied.

Other crude oil and natural gas sales not under contract from customers, as well as crude oil and natural gas sales derived from third party operated wells, is recognized under similar terms as sales contracts where revenue is recognized at a ~~fixed or determinable price,~~point in time when ~~delivery has occurred, title and risk of loss have transferred to~~the product is delivered, the purchaser obtains control and ~~collectability~~the Company's performance obligation is satisfied. The Company does not track the purchasers of ~~the revenue is reasonably assured.~~ natural gas and crude oil derived from third party operated wells.

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, ~~2017~~2018 and December 31, ~~2016. 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.~~2017.


		The Company participates (and may act as drilling contractor) with unaffiliated joint venture partners and employees 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 and employees 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. ~~Accounts and notes~~Notes receivable from ~~joint venture partners and~~ employees consist principally of drilling and development costs the Company has advanced or incurred on behalf of employees (see Note 5). Well management and operating revenues are derived from a variety of both verbal and written operating agreements with joint venture partners, and ~~employees (see Note~~ ~~6). The Company earns~~are recognized monthly as services are provided and ~~receives monthly management and operating fees from certain joint venture partners and employees after the~~ properties are ~~completed~~managed and ~~placed into production.~~operated.

F-9

Table of Contents

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.

Organization and Summary of Significant Accounting Policies

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. ~~The Company's tax returns are subject to examination by the Internal Revenue Service, as well as various state and local taxing authorities, generally for three years after they are filed.~~

~~F-9~~

~~EVERFLOW EASTERN PARTNERS, L.P.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Note 1.~~	~~Organization and Summary of Significant Accounting Policies~~

J.J.

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. ~~Average outstanding Units for earnings per limited partner Unit calculations amounted to 5,587,616 for the three and nine months ended September 30, 2017 and 2016, respectively.~~

New Accounting Standards – In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ~~Accounting Standards Update No.~~ASU 2014-09, ~~“Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09~~which is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle based approach. The core principle of the standard is that revenue should be recognized when the transfer of promised goods or services is made in an amount that the entity expects to be entitled to in exchange for the transfer of goods and services. ASU 2014-09 also requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09, through issuance of ASU 2015-14, is to be effective for financial statements issued for annual periods beginning after December 31, 2017 (including interim reporting periods within those periods). The Company ~~expects to adopt Topic 606~~adopted ASU 2014-09 using the modified retrospective method ~~of adoption~~ on January 1, ~~2018 and anticipates that this standard will not have a~~2018. There was no material impact ~~on net income. The Company is continuing~~ to ~~evaluate~~ the ~~potential impact~~Company's consolidated financial statements and, therefore, prior period amounts were not adjusted and no cumulative effect adjustment was recognized. However, ASU 2014-09 expanded disclosures regarding information of ~~these standards on~~ the ~~financial statements.~~ Company's nature, amount and timing of revenue arising from contracts with customers.

F-10

Table of Contents

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.

Organization and Summary of Significant Accounting Policies

New Accounting Standards (continued)

The Company has reviewed all other 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.

~~F-10~~F-11

Table of Contents

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

F-12

Table of Contents

EVERFLOW EASTERN PARTNERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3.

Partners’ Equity (continued)

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 ~~Company determined that the~~ price associated with the ~~2017~~2018 Repurchase Right, based upon the December 31, ~~2016~~2017 calculation, ~~is negative, and as such the Company did not offer to repurchase Units in 2017. Additionally, the Company did not offer to repurchase Units in 2016. The Company has not made a distribution in 2017.~~

~~F-11~~

~~EVERFLOW EASTERN PARTNERS, L.P.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Note 3.~~

~~Partners’ Equity (continued)~~was $0.11 per Unit.

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. In June 2018, the Company granted 30,000 options to officers and certain key employees. All options granted were exercised on the same date. The Company did not grant any options in ~~2017 or 2016.~~2017.

In June 2018, the Company repurchased 68,261 units pursuant to the Repurchase Right. The Company did not offer to repurchase any Units ~~repurchased~~ pursuant to the Repurchase Right during 2017 or 2016 because the price associated with the Repurchase Rights for both years was negative. There were 5,549,355 outstanding Units on June 30, 2018 following the Company’s repurchase of Units and ~~Units issued through the exercise~~issuance of ~~options pursuant to the Option Plan (collectively the “Units Activity”) for the years 2014 and 2015 are as follows:~~options.

Per Unit

Units Out-

Calculated

standing

Price for

Less

Net

Following

Repurchase

Interim

Price

Units

Units

Units

Year

Right

Distributions

Paid

Repurchased

Issued

Activity

2014
$ 7.010 $ 0.500 $ 6.51 11,964 5,982 5,601,003
2015
$ 4.935 $ 0.375 $ 4.56 26,774 13,387 5,587,616

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 no instruments outstanding at September 30, ~~2017~~2018 or ~~2016~~2017 that would potentially dilute net income per Unit.

~~F-12~~F-13
Table of Contents

EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4.
~~Gas Purchase Agreements~~
The Company has multiple contracts with Dominion Field Services and Interstate Gas Supply (collectively, the “Gas Purchasers”) which obligate the Gas Purchasers 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. The Company may elect to lock-in specific volumes of natural gas to be sold in specific months at a mutually agreeable price. The Company has elected to lock-in various monthly quantities of natural gas which total 210,000 MCF from October 2017 through March 2018 at various monthly weighted-average pricing provisions averaging $3.16 per MCF, net of regional basis adjustments. Pricing provisions with the Gas Purchasers apply to certain fixed quantities on a monthly basis with excess monthly quantities being priced based on the current spot market price, plus or minus a current regional basis adjustment. The impact of these contracts on the Company’s future oil and gas sales cannot fully be measured until actual production volumes and prices have been determined.
~~Note 5.~~
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 ~~delivery commitments to~~production from the ~~Gas Purchasers (see Note 4).~~Company’s oil and gas properties throughout the contract periods. Management believes the Company can meet its delivery commitments based on estimated production. If, however, the Company cannot meet its delivery commitments, it may be required to purchase natural gas at market prices to meet such commitments which may result in a gain or loss for the difference between the delivery commitment price and the price at which the Company is able to purchase the natural gas for redelivery (resale) to its customers.
The Company is party to various legal proceedings and claims in the ordinary course of its business. The Company believes certain of these matters will be covered by insurance and that the outcome of other matters will not have a material adverse effect on its consolidated financial position, results of operations, or liquidity.

~~F-13~~

~~EVERFLOW EASTERN PARTNERS, L.P.~~
~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~
Note 6.5.
Related Party Transactions
The Company’s officers, directors, affiliates and certain employees have frequently participated, and will likely continue to participate in the future, as working interest owners in wells in which the Company has an interest. ~~Frequently, the~~The Company has historically loaned the funds necessary for certain employees to participate in the drilling and development of such wells. Initial terms of the unsecured loans call for repayment of all principal and accrued interest at the end of four years, however, the loan amounts are reduced from payments made by employees and as production proceeds attributable to the employees’ working interests are not remitted to the employees but rather used to reduce the amounts owed by the employees to the Company. If an outstanding balance remains after the initial four-year term, the Company and employee shall, acting in good faith, agree upon further repayment terms.
F-14
Table of Contents
EVERFLOW EASTERN PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 5.
Related Party Transactions (continued)
Employees remain obligated for the entire loan amount regardless of a dry-hole event or otherwise insufficient production. The loans carry no loan forgiveness provisions, and no loans have ever been forgiven. The loans accrue interest at the prime rate, which was ~~4.25%~~5.25% at September 30, ~~2017.~~2018.
In accordance with the Sarbanes-Oxley Act of 2002, the Company has not extended any loans to officers or directors since 2002. At September 30, ~~2017 and December 31, 2016,~~2018, the Company has extended ~~various loans, evidenced by notes,~~a loan to ~~two employees~~an employee with a note origination ~~dates ranging from~~date of December ~~2010 to December 2015. In addition, two subsequent addenda extending additional payment terms to certain notes are outstanding at September 30,~~ 2017. Employees’ notes receivable, including accrued interest, amounted to ~~$37,707~~$335 and ~~$87,045~~$46,742 at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.
The Company collects and holds operational advances from employees, including officers and directors, who own working interests in wells of which the Company operates (see Note 1). Operational advances held on behalf of employees, including officers and directors, as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 were approximately ~~$157,100~~$278,800 and ~~$40,300,~~$180,300, respectively.

~~F-14~~F-15
Table of Contents

~~Part I:~~  ~~Financial Information~~
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~~’sCompany’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 ~~2016~~2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March ~~28, 2017.~~ 27, 2018.

Liquidity and Capital Resources

The following table summarizes the Company's financial position at September 30, ~~2017~~2018 and December 31, ~~2016:~~2017:

September 30, 2017

December 31, 2016

Amount

%

Amount

%

(Amounts in Thousands)

(Amounts in Thousands)

Working capital
$ 22,938 70
%
$ 19,577 65
%
Property and equipment (net)
9,693 30 10,266 34
Other
123 - 223 1
Total
$ 32,754 100
%
$ 30,066 100
%

Deferred income taxes
$ 74 -
%
$ 74 -
%
Long-term liabilities
18,446 56 17,794 59
Partners' equity
14,234 44 12,198 41
Total
$ 32,754 100
%
$ 30,066 100
%

September 30, 2018

December 31, 2017

Amount

%

Amount

%

(Amounts in Thousands)

(Amounts in Thousands)

Working capital
$ 27,285 75
%
$ 22,760 70
%
Property and equipment (net)
9,018 25 9,520 29
Other
123 - 136 1
Total
$ 36,426 100
%
$ 32,416 100
%

Deferred income taxes
$ 38 -
%
$ 38 -
%
Long-term liabilities
18,673 51 18,105 56
Partners' equity
17,715 49 14,273 44
Total
$ 36,426 100
%
$ 32,416 100
%

Working capital of ~~$22.9~~$27.3 million as of September 30, ~~2017~~2018 represented an increase of ~~$3.4~~$4.5 million from December 31, ~~2016,~~2017, due primarily to ~~increases~~an increase in ~~cash and equivalents and~~ investments and a decrease in accrued expenses, offset somewhat by an increase in accounts payable. The increase in cash and equivalents is primarily the result of cash provided by operating activities during the nine months ended September 30, 2017, offset somewhat by cash used in investing activities.expenses. The increase in investments was primarily the result of additional purchases of shares in a mutual fund during the nine months ended September 30, ~~2017~~2018 that invests primarily in investment grade, short-term fixed and floating rate debt securities. The decrease in accrued expenses is primarily the result of a decrease in the current portion of asset retirement obligations associated with oil and gas properties disposed of during the nine months ended September 30, 2018. In addition, all payroll and retirement contributions accrued at December 31, ~~2016 having been~~2017 were paid during the nine months ended September 30, ~~2017. The increase in accounts payable is primarily due to an increase in production and related other payables due.~~2018.
3

The Company funds its ~~operation~~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, 2017.~~9, 2018.
3
Table of Contents

The Company’s cash flow provided by operations before the change in working capital was ~~$3.2~~$4.0 million during the nine months ended September 30, ~~2017,~~2018, an increase of ~~$3.9 million~~$854,000 as compared to ~~$715,000~~$3.2 million of cash flow ~~used in~~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 decreased cash by ~~$7,000~~$273,000 during the nine months ended September 30, ~~2017.~~2018. Cash flows provided by operating activities was ~~$3.2~~$3.7 million for the nine months ended September 30, ~~2017.~~2018.

Management of the Company believes cash flows and existing cash and equivalents should be sufficient to meet the current funding requirements of ongoing operations, ~~and~~ capital investments to develop and/or purchase oil and gas ~~properties.~~properties and the repurchase of Units pursuant to the 2019 repurchase right. The Company has not paid a ~~quarterly~~ cash distribution since October 2015.

The Company has multiple contracts with Dominion Field Services ~~and Interstate Gas Supply (collectively, the “Gas Purchasers”~~(“Dominion”) which obligate ~~the Gas Purchasers~~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. ~~The~~Management believes the Company may elect to lock-in specific volumes of natural gas to be sold in specific months at a mutually agreeable price. The Company has elected to lock-in various monthly quantities of natural gas which total 210,000 MCF from October 2017 through March 2018 at various monthly weighted-average pricing provisions averaging $3.16 per MCF, net of regional basis adjustments. Pricing provisions with the Gas Purchasers apply to certain fixed quantities on a monthly basis with excess monthly quantities being pricedcan meet its delivery commitments based on the current spot market price, plus or minus a current regional basis adjustment. The impact of these contracts on the Company’s future oil and gas sales cannot fully be measured until actual production volumes and prices have been determined. estimated production.

4
Table of Contents

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, ~~2017~~2018 and ~~2016.~~2017. 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~~select items below:

Three Months

Nine Months

Three Months

Nine Months

Ended September 30,

Ended September 30,

Ended September 30,

Ended September 30,

2017

2016

2017

2016

2018

2017

2018

2017

Revenues:

Crude oil and natural gas sales
92
%
89
%
93
%
87
%
96
%
92
%
94
%
93
%
Well management and operating
8 11 6 12 4 8 6 6
Other
- - 1 1 - - - 1
Total revenues
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%

Expenses:

Production costs
29 49 27 62 41 29 32 27
Well management and operating
5 6 4 7 3 5 3 4
Depreciation, depletion and amortization
16 112 10 123 4 16 6 10
Accretion expense
6 11 5 12 3 6 3 5
General and administrative expense
39 57 26 66 19 39 22 26
Total expenses
95
%
235
%
72
%
270
%
70
%
95
%
66
%
72
%

Other income:

Interest and dividend income
4 3 2 2 5 4 4 2
Gain on disposal of property and equipment
- - 1 - 3 - 9 1
Gain on sale of other assets
- - 3 - - - - 3
Total other income
4
%
3
%
6
%
2
%
8
%
4
%
13
%
6
%

Net income (loss)
9
%
(132 )% 34
%
(168
)%
Net income
38
%
9
%
47
%
34
%

Revenues for the three and nine month periods ended September 30, ~~2017~~2018 increased ~~$495,000 and $3.5~~$1.4 million, respectively, as compared to the prior comparable periods. ~~Both~~ The increases were primarily the result of increases in crude oil and natural gas sales.

Crude oil and natural gas sales increased ~~$475,000,~~$1.4 million, or ~~60%~~108%, during the three months ended September 30, ~~2017~~2018 as compared to the prior comparable period. Crude oil and natural gas sales increased ~~$3.4~~$1.4 million, or ~~153%~~26%, during the nine months ended September 30, ~~2017~~2018 as compared to the prior comparable period. The increases were primarily the ~~combined~~ result of ~~increases in~~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 months ended September 30, 2018, respectively. The increases were also impacted by increases in crude oil volumes produced ~~and higher natural gas~~ and crude oil prices received during the three and nine ~~month periods~~months ended September 30, ~~2017~~2018 as compared to the prior comparable periods. The ~~increases~~increase in crude oil and natural gas sales during the three months ended September 30, 2018 as compared to the prior comparable period was also the result of an increase in natural gas volumes produced and an increase in natural gas prices received during the three months ended September 30, 2018 as compared to the prior comparable period. The increase in natural gas volumes produced during the three month period ended September 30, 2018 as compared to the prior comparable period was primarily the result of less Company operated properties being voluntarily shut-in during the three months ended September 30, 2018 as compared to the prior comparable period.
5
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Production costs increased $739,000, or 185%, during the three months ended September 30, 2018 as compared to the prior comparable period. Production costs increased $773,000, or 48%, during the nine months ended September 30, 2018 as compared to the prior comparable period. The increases were primarily the result of 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. The increases were also impacted by the effect of less Company operated properties being voluntarily shut-in during the three and nine month periods ended September 30, ~~2017~~2018 as compared to the prior comparable periods.
5

Depreciation, depletion and amortization (“DD&A”) decreased ~~$778,000,~~$107,000, or ~~78%~~48%, during the three months ended September 30, ~~2017~~2018 as compared to the prior comparable period. DD&A decreased ~~$2.5 million,~~$204,000, or ~~80%~~34%, during the nine months ended September 30, ~~2017~~2018 as compared to the prior comparable period. The primary ~~reasons~~reason for the decreases ~~are~~is less depletable bases of oil and gas properties available to deplete during the three and nine month periods ended September 30, 2017 as compared to the prior comparable periods and higher projected natural gas and crude oil reserves, the effects of which are offset somewhat by an increase in natural gas and crude oil volumes produced during the three and nine month periods ended September 30, 20172018 as compared to the prior comparable periods. Less depletable bases of oil and gas properties is primarily the result of ~~$26.8 million of~~ DD&A, write down/impairment and abandonment of properties recognized ~~during the~~in prior fiscal years ended December 31, 2015 and 2016. The increase in projected natural gas and crude oil reserves is primarily the result of higher benchmark natural gas and crude oil prices indexed throughout the first nine months of 2017 as compared to the benchmark prices indexed throughout the prior comparable period. The higher 2017 benchmark prices project to increase reserves at December 31, 2017, the next scheduled valuation date, which will in turn project to increase the average economic life of the Company’s oil and gas properties as compared to December 31, 2016, the prior valuation date.periods.

~~The Company recognized other~~Other income ~~of $349,000~~increased $148,000, or 263%, during the ~~nine~~three months ended September 30, ~~2017~~2018 as compared to ~~$61,000 of other income recognized during the~~ prior comparable period. Other income recognized during the nine months ended September 30, 2017 included $64,000 of gains associated with disposal of property and equipment and a $159,000 gain associated with a sale of other assets. In addition, interest and dividend income increased ~~$65,000,~~$582,000, or ~~107%~~167%, during the nine months ended September 30, ~~2017~~2018 as compared to the prior comparable period. The primary reasons for the increases were the result of increases in interest and dividend income and gain on disposal of property and equipment. 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 ~~months~~month periods ended September 30, ~~2017~~2018 as compared to the prior comparable periods. The increase in gain on disposal of property and equipment was primarily the result of additional oil and gas properties disposed of during the three and nine month periods ended September 30, 2018 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 30, 2018 were associated with settlements of the properties’ related asset retirement obligations. The increase in other income from the nine month period ending September 30, 2018 as compared to the prior comparable period was offset somewhat by a decrease in gain on sale of other assets. The decrease in gain on sale of other assets was primarily the result of less other assets sold during the nine month period ending September 30, 2018 as compared to the prior comparable period.

The Company reported net income of $1.0 million and $131,000 during the three months ended September 30, 2018 and 2017, respectively, representing 38% and 9% of total revenues during the three month periods ended September 30, 2018 and 2017, respectively. The Company reported net income of $3.4 million and $2.0 million during the ~~three and~~ nine months ended September 30, 2018 and 2017, respectively, ~~whereas the Company reported a net loss~~representing 47% and 34% of ~~$1.2 million and $4.2 million~~total revenues during the ~~three and~~ nine ~~months~~month periods ended September 30, ~~2016,~~2018 and 2017, respectively. The ~~increase~~increases in net income ~~was~~were primarily the result of increases in crude oil and natural gas sales and other income and a decrease in DD&A. The Company’s net income represented 9% and 34% of total revenues during the three and nine month periods ended September 30, 2017, respectively, whereas the Company’s net loss represented 132% and 168% of total revenues during the three and nine month periods ended September 30, 2016, respectively.&A, offset somewhat by an increase in production costs.

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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~~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, ~~2016.~~2017.

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, ~~2016,~~2017, for a more complete ~~understanding~~understanding of the matters covered by such certifications.

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Table of Contents

(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.

8
Part II.  ~~Other Information~~ 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

98
Table of Contents

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~~

By:
everflow management limited, llc
General Partner

By:
everflow management corporation
Managing Member
Dated: November ~~13, 2017~~9, 2018
By:
/s/ Brian A. Staebler
Brian A. Staebler
Vice President, Secretary-Treasurer and
Principal Financial and Accounting Officer

~~Brian A. Staebler~~
~~Vice President, Secretary-Treasurer and~~
~~Principal Financial and Accounting Officer~~
(Duly Authorized Officer)

10
9

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


		~~For the quarterly period ended September 30, 2017~~

		OR

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

	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)

	DESCRIPTION		PAGE NO.


Part I.	Financial Information

	Item 1.	~~Item 1.~~	Financial Statements

		Consolidated Balance Sheets September 30, ~~2017~~2018 and December 31, ~~2016~~2017	F-1

		Consolidated Statements of Operations Three and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017	F-3


		Consolidated Statements of ~~Partners~~’Partners’ Equity Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017	F-4

		Consolidated Statements of Cash Flows Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017	F-5


		Notes to Unaudited Consolidated Financial Statements	F-6

	Item 2.	~~Item 2.~~	~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations	3

	Item 3.	~~Item 3.~~	Quantitative and Qualitative Disclosures About Market Risk	7

	Item 4.	~~Item 4.~~	Controls and Procedures	7

Part II.	Other Information

	Item 6.	~~Exhibits~~	9Exhibits	8

		Signature	109

	September 30,		December 31,		September 30,		December 31,
	2017		2016		2018		2017
	(Unaudited)		(Audited)		(Unaudited)		(Audited)
ASSETS

CURRENT ASSETS
Cash and equivalents	$	11,511,541	$	11,224,865	$	11,952,810	$	11,883,725
Investments		13,193,199		10,080,608		16,969,928		13,207,778
Accounts receivable:
Production		977,232		1,014,946
Joint venture partners		-		3,366
Production accounts receivable						1,089,521		1,189,524
Employees' notes receivable		37,707		41,000		-		33,500
Other		10,650		52,831		10,650		27,225
Total current assets		25,730,329		22,417,616		30,022,909		26,341,752

PROPERTY AND EQUIPMENT
Proved properties (successful efforts accounting method)		181,123,808		181,447,571		174,965,155		179,141,990
Pipeline and support equipment		682,135		682,135		682,135		682,135
Corporate and other		2,127,423		2,116,482		2,094,423		2,127,423
Gross property and equipment		183,933,366		184,246,188		177,741,713		181,951,548

Less accumulated depreciation, depletion, amortization and write down		174,240,761		173,979,881		168,723,919		172,431,241
Net property and equipment		9,692,605		10,266,307		9,017,794		9,520,307

OTHER ASSETS
Employees' notes receivable		-		46,045		335		13,242
Other		122,579		176,558		122,348		123,048
Total other assets		122,579		222,603		122,683		136,290

TOTAL ASSETS	$	35,545,513	$	32,906,526	$	39,163,386	$	35,998,349

	Three Months Ended					Nine Months Ended					Three Months Ended				Nine Months Ended
	September 30,					September 30,					September 30,				September 30,

	2017		2016			2017		2016			2018		2017		2018		2017
REVENUES
Crude oil and natural gas sales	$	1,270,385	$	795,459		$	5,556,830	$	2,193,374		$	2,642,422	$	1,270,385	$	6,992,525	$	5,556,830
Well management and operating		110,785		93,864			389,186		297,051			120,591		110,785		413,356		389,186
Other		5,818		2,525			61,887		30,241			1,817		5,818		5,630		61,887
Total revenues		1,386,988		891,848			6,007,903		2,520,666			2,764,830		1,386,988		7,411,511		6,007,903

DIRECT COST OF REVENUES
Production costs		399,083		434,634			1,604,213		1,577,158			1,138,454		399,083		2,377,360		1,604,213
Well management and operating		64,817		54,256			228,600		174,532			73,320		64,817		244,267		228,600
Depreciation, depletion and amortization		223,406		1,001,542			604,296		3,096,470			116,860		223,406		400,478		604,296
Accretion expense		89,900		97,700			276,600		303,600			79,100		89,900		246,500		276,600
Total direct cost of revenues		777,206		1,588,132			2,713,709		5,151,760			1,407,734		777,206		3,268,605		2,713,709

GENERAL AND ADMINISTRATIVE EXPENSE		535,315		504,887			1,606,617		1,654,905			518,493		535,315		1,628,461		1,606,617
Total cost of revenues		1,312,521		2,093,019			4,320,326		6,806,665			1,926,227		1,312,521		4,897,066		4,320,326

INCOME (LOSS) FROM OPERATIONS		74,467		(1,201,171	)		1,687,577		(4,285,999	)
INCOME FROM OPERATIONS												838,603		74,467		2,514,445		1,687,577

OTHER INCOME
Interest and dividend income		56,307		27,808			126,098		61,017			122,772		56,307		286,968		126,098
Gain on disposal of property and equipment		-		-			63,709		-			81,400		-		635,165		63,709
Gain on sale of other assets		-		-			159,037		-			-		-		8,960		159,037
Total other income		56,307		27,808			348,844		61,017			204,172		56,307		931,093		348,844

INCOME (LOSS) BEFORE INCOME TAXES		130,774		(1,173,363	)		2,036,421		(4,224,982	)
NET INCOME											$	1,042,775	$	130,774	$	3,445,538	$	2,036,421

INCOME TAX EXPENSE (BENEFIT)
Current		-		500			-		1,500
Deferred		-		(1,000	)		-		(3,000	)
Total income tax benefit		-		(500	)		-		(1,500	)

NET INCOME (LOSS)	$	130,774	$	(1,172,863	)	$	2,036,421	$	(4,223,482	)

Allocation of Partnership Net Income (Loss):
Allocation of Partnership Net Income:
Limited Partners	$	129,222	$	(1,158,946	)	$	2,012,257	$	(4,173,367	)	$	1,030,308	$	129,222	$	3,404,561	$	2,012,257
General Partner		1,552		(13,917	)		24,164		(50,115	)		12,467		1,552		40,977		24,164

Net income (loss)	$	130,774	$	(1,172,863	)	$	2,036,421	$	(4,223,482	)
Net income											$	1,042,775	$	130,774	$	3,445,538	$	2,036,421

Net income (loss) per unit	$	0.03	$	(0.21	)	$	0.36	$	(0.75	)
Net income per unit											$	0.19	$	0.03	$	0.61	$	0.36

	Per Unit										Units Out-
	Calculated										standing
	Price for		Less		Net						Following
	Repurchase		Interim		Price		Units		Units		Units
Year	Right		Distributions		Paid		Repurchased		Issued		Activity

2014	$	7.010	$	0.500	$	6.51		11,964		5,982		5,601,003
2015	$	4.935	$	0.375	$	4.56		26,774		13,387		5,587,616

	September 30,		December 31,		September 30,		December 31,
	2017		2016		2018		2017
	(Unaudited)		(Audited)		(Unaudited)		(Audited)
LIABILITIES AND PARTNERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	1,937,652	$	1,703,441	$	1,857,014	$	1,958,042
Accrued expenses		854,241		1,137,290		881,211		1,624,205
Total current liabilities		2,791,893		2,840,731		2,738,225		3,582,247

DEFERRED INCOME TAXES		74,000		74,000		37,700		37,700

OPERATIONAL ADVANCES		1,469,486		1,053,582		2,022,254		1,513,924

ASSET RETIREMENT OBLIGATIONS		16,976,130		16,740,630		16,650,670		16,591,270

COMMITMENTS AND CONTINGENCIES

LIMITED PARTNERS' EQUITY, SUBJECT TO REPURCHASE RIGHT
Authorized - 8,000,000 Units
Issued and outstanding - 5,587,616 Units		14,065,105		12,052,848
Issued and outstanding - 5,549,355 and 5,587,616 Units, respectively						17,502,907		14,103,844

GENERAL PARTNER'S EQUITY		168,899		144,735		211,630		169,364
Total partners' equity		14,234,004		12,197,583		17,714,537		14,273,208

TOTAL LIABILITIES AND PARTNERS' EQUITY	$	35,545,513	$	32,906,526	$	39,163,386	$	35,998,349

	2017		2016			2018			2017

PARTNERS' EQUITY - BEGINNING OF PERIOD	$	12,197,583	$	18,160,096		$	14,273,208		$	12,197,583

Net income (loss)		2,036,421		(4,223,482	)
Net income							3,445,538			2,036,421

Repurchase of Units							(7,509	)		-

Options exercised							3,300			-

PARTNERS' EQUITY - END OF PERIOD	$	14,234,004	$	13,936,614		$	17,714,537		$	14,234,004

Large accelerated filer

Accelerated filer

~~Non-accelerated filer~~ ~~(Do not check if a smaller reporting company)~~

Non-accelerated filer

Smaller reporting company

Emerging growth company ~~________~~