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 SeptemberJune 30, 20182019
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 incorporation or organization) | (I.R.S. Employer | |||
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 X
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 5,549,3555,492,967 Units of limited partnership interest of the registrant as of November 9, 2018.August 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 SeptemberJune 30, 2018.2019.
EVERFLOW EASTERN PARTNERS, L.P.
INDEX
DESCRIPTION | PAGE NO. | ||
Part I. | |||
Item 1. | |||
Consolidated Balance Sheets | F-1 | ||
F-3 | |||
F-4 | |||
Consolidated Statements of Cash Flows | F-5 | ||
F-6 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 | |
Item 3. | 5 | ||
Item 4. | 5 | ||
Part II. | |||
Item 6. | 6 | ||
7 |
EVERFLOW EASTERN PARTNERS, L.P. |
CONSOLIDATED BALANCE SHEETS |
June 30, 2019 and December 31, 2018 |
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June 30, | December 31, | |||||||
2019 | 2018 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and equivalents | $ | 13,524,933 | $ | 12,566,868 | ||||
Investments | 17,379,591 | 17,064,136 | ||||||
Production accounts receivable | 1,284,063 | 1,661,669 | ||||||
Other | 8,150 | 64,681 | ||||||
Total current assets | 32,196,737 | 31,357,354 | ||||||
PROPERTY AND EQUIPMENT | ||||||||
Proved properties (successful efforts accounting method) | 174,919,377 | 175,062,777 | ||||||
Pipeline and support equipment | 786,011 | 762,440 | ||||||
Corporate and other | 2,090,250 | 2,094,423 | ||||||
Gross property and equipment | 177,795,638 | 177,919,640 | ||||||
Less accumulated depreciation, depletion, amortization and write down | 168,786,310 | 168,754,778 | ||||||
Net property and equipment | 9,009,328 | 9,164,862 | ||||||
OTHER ASSETS | 126,291 | 125,796 | ||||||
TOTAL ASSETS | $ | 41,332,356 | $ | 40,648,012 |
September 30, | December 31, | |||||||
2018 | 2017 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and equivalents | $ | 11,952,810 | $ | 11,883,725 | ||||
Investments | 16,969,928 | 13,207,778 | ||||||
Production accounts receivable | 1,089,521 | 1,189,524 | ||||||
Employees' notes receivable | - | 33,500 | ||||||
Other | 10,650 | 27,225 | ||||||
Total current assets | 30,022,909 | 26,341,752 | ||||||
PROPERTY AND EQUIPMENT | ||||||||
Proved properties (successful efforts accounting method) | 174,965,155 | 179,141,990 | ||||||
Pipeline and support equipment | 682,135 | 682,135 | ||||||
Corporate and other | 2,094,423 | 2,127,423 | ||||||
Gross property and equipment | 177,741,713 | 181,951,548 | ||||||
Less accumulated depreciation, depletion, amortization and write down | 168,723,919 | 172,431,241 | ||||||
Net property and equipment | 9,017,794 | 9,520,307 | ||||||
OTHER ASSETS | ||||||||
Employees' notes receivable | 335 | 13,242 | ||||||
Other | 122,348 | 123,048 | ||||||
Total other assets | 122,683 | 136,290 | ||||||
TOTAL ASSETS | $ | 39,163,386 | $ | 35,998,349 |
See notes to unaudited consolidated financial statements.
EVERFLOW EASTERN PARTNERS, L.P. |
CONSOLIDATED BALANCE SHEETS |
June 30, 2019 and December 31, 2018 |
June 30, | December 31, | |||||||
2019 | 2018 | |||||||
(Unaudited) | (Audited) | |||||||
LIABILITIES AND PARTNERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 2,085,986 | $ | 1,869,885 | ||||
Accrued expenses | 771,355 | 1,084,347 | ||||||
Total current liabilities | 2,857,341 | 2,954,232 | ||||||
DEFERRED INCOME TAXES | 40,700 | 40,700 | ||||||
OPERATIONAL ADVANCES | 2,376,437 | 2,135,632 | ||||||
ASSET RETIREMENT OBLIGATIONS | 16,937,886 | 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 | 18,889,255 | 18,486,440 | ||||||
GENERAL PARTNER'S EQUITY | 230,737 | 223,522 | ||||||
Total partners' equity | 19,119,992 | 18,709,962 | ||||||
TOTAL LIABILITIES AND PARTNERS' EQUITY | $ | 41,332,356 | $ | 40,648,012 |
See notes to unaudited consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS Three and Six Months Ended June 30, 2019 and 2018 (Unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
REVENUES | ||||||||||||||||
Crude oil and natural gas sales | $ | 1,788,101 | $ | 2,293,924 | $ | 4,529,297 | $ | 4,350,103 | ||||||||
Well management and operating | 145,039 | 145,129 | 294,861 | 292,765 | ||||||||||||
Other | 1,952 | 1,586 | 4,246 | 3,813 | ||||||||||||
Total revenues | 1,935,092 | 2,440,639 | 4,828,404 | 4,646,681 | ||||||||||||
DIRECT COST OF REVENUES | ||||||||||||||||
Production costs | 527,307 | 505,126 | 1,384,482 | 1,238,906 | ||||||||||||
Well management and operating | 86,955 | 84,761 | 174,854 | 170,947 | ||||||||||||
Depreciation, depletion and amortization | 112,268 | 143,645 | 226,812 | 283,618 | ||||||||||||
Accretion expense | 71,900 | 80,800 | 146,600 | 167,400 | ||||||||||||
Total direct cost of revenues | 798,430 | 814,332 | 1,932,748 | 1,860,871 | ||||||||||||
GENERAL AND ADMINISTRATIVE EXPENSE | 493,100 | 523,167 | 1,095,964 | 1,109,968 | ||||||||||||
Total cost of revenues | 1,291,530 | 1,337,499 | 3,028,712 | 2,970,839 | ||||||||||||
INCOME FROM OPERATIONS | 643,562 | 1,103,140 | 1,799,692 | 1,675,842 | ||||||||||||
OTHER INCOME | ||||||||||||||||
Interest and dividend income | 163,387 | 107,838 | 342,556 | 164,196 | ||||||||||||
Gain (Loss) on disposal of property and equipment | (1,300 | ) | 426,300 | 37,300 | 553,765 | |||||||||||
Gain on sale of other assets | - | 8,960 | - | 8,960 | ||||||||||||
Total other income | 162,087 | 543,098 | 379,856 | 726,921 | ||||||||||||
NET INCOME | $ | 805,649 | $ | 1,646,238 | $ | 2,179,548 | $ | 2,402,763 | ||||||||
Allocation of Partnership Net Income | ||||||||||||||||
Limited Partners | $ | 796,025 | $ | 1,626,705 | $ | 2,153,510 | $ | 2,374,253 | ||||||||
General Partner | 9,624 | 19,533 | 26,038 | 28,510 | ||||||||||||
Net income | $ | 805,649 | $ | 1,646,238 | $ | 2,179,548 | $ | 2,402,763 | ||||||||
Net income per unit | $ | 0.15 | $ | 0.29 | $ | 0.39 | $ | 0.42 |
See notes to unaudited consolidated financial statements.
2019 | 2018 | |||||||
PARTNERS' EQUITY - BEGINNING OF PERIOD | $ | 18,709,962 | $ | 14,273,208 | ||||
Net income | 2,179,548 | 2,402,763 | ||||||
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 | $ | 19,119,992 | $ | 16,671,762 |
See notes to unaudited consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS |
Six Months Ended June 30, 2019 and 2018 |
(Unaudited) |
2019 | 2018 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 2,179,548 | $ | 2,402,763 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation, depletion and amortization | 267,512 | 322,518 | ||||||
Accretion expense | 146,600 | 167,400 | ||||||
Gain on disposal of property and equipment | (37,300 | ) | (553,765 | ) | ||||
Gain on sale of other assets | - | (8,960 | ) | |||||
Changes in assets and liabilities: | ||||||||
Production accounts receivable | 377,606 | (199,398 | ) | |||||
Other current assets | 56,531 | 1,846 | ||||||
Other assets | (495 | ) | 700 | |||||
Accounts payable | 216,101 | (63,359 | ) | |||||
Accrued expenses | (453,674 | ) | (445,709 | ) | ||||
Operational advances | 240,805 | 325,844 | ||||||
Total adjustments | 813,686 | (452,883 | ) | |||||
Net cash provided by operating activities | 2,993,234 | 1,949,880 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of investments | (315,455 | ) | (3,649,154 | ) | ||||
Payments received on receivables from employees | - | 37,831 | ||||||
Proceeds from disposal of property and equipment | 33,700 | 35,300 | ||||||
Proceeds from sale of other assets | - | 8,960 | ||||||
Purchase of property and equipment | (113,478 | ) | - | |||||
Net cash used in investing activities | (395,233 | ) | (3,567,063 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Distributions | (1,684,936 | ) | - | |||||
Proceeds from options exercised | 45,000 | 3,300 | ||||||
Net cash provided by (used in) financing activities | (1,639,936 | ) | 3,300 | |||||
NET CHANGE IN CASH AND EQUIVALENTS | 958,065 | (1,613,883 | ) | |||||
CASH AND EQUIVALENTS - BEGINNING OF PERIOD | 12,566,868 | 11,883,725 | ||||||
CASH AND EQUIVALENTS - END OF PERIOD | $ | 13,524,933 | $ | 10,269,842 | ||||
Supplemental disclosures of cash flow information and non-cash activities: | ||||||||
Cash paid during the period for income taxes | $ | 11,135 | $ | 3,600 |
See notes to unaudited consolidated financial statements.
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Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
REVENUES | ||||||||||||||||
Crude oil and natural gas sales | $ | 2,642,422 | $ | 1,270,385 | $ | 6,992,525 | $ | 5,556,830 | ||||||||
Well management and operating | 120,591 | 110,785 | 413,356 | 389,186 | ||||||||||||
Other | 1,817 | 5,818 | 5,630 | 61,887 | ||||||||||||
Total revenues | 2,764,830 | 1,386,988 | 7,411,511 | 6,007,903 | ||||||||||||
DIRECT COST OF REVENUES | ||||||||||||||||
Production costs | 1,138,454 | 399,083 | 2,377,360 | 1,604,213 | ||||||||||||
Well management and operating | 73,320 | 64,817 | 244,267 | 228,600 | ||||||||||||
Depreciation, depletion and amortization | 116,860 | 223,406 | 400,478 | 604,296 | ||||||||||||
Accretion expense | 79,100 | 89,900 | 246,500 | 276,600 | ||||||||||||
Total direct cost of revenues | 1,407,734 | 777,206 | 3,268,605 | 2,713,709 | ||||||||||||
GENERAL AND ADMINISTRATIVE EXPENSE | 518,493 | 535,315 | 1,628,461 | 1,606,617 | ||||||||||||
Total cost of revenues | 1,926,227 | 1,312,521 | 4,897,066 | 4,320,326 | ||||||||||||
INCOME FROM OPERATIONS | 838,603 | 74,467 | 2,514,445 | 1,687,577 | ||||||||||||
OTHER INCOME | ||||||||||||||||
Interest and dividend income | 122,772 | 56,307 | 286,968 | 126,098 | ||||||||||||
Gain on disposal of property and equipment | 81,400 | - | 635,165 | 63,709 | ||||||||||||
Gain on sale of other assets | - | - | 8,960 | 159,037 | ||||||||||||
Total other income | 204,172 | 56,307 | 931,093 | 348,844 | ||||||||||||
NET INCOME | $ | 1,042,775 | $ | 130,774 | $ | 3,445,538 | $ | 2,036,421 | ||||||||
Allocation of Partnership Net Income: | ||||||||||||||||
Limited Partners | $ | 1,030,308 | $ | 129,222 | $ | 3,404,561 | $ | 2,012,257 | ||||||||
General Partner | 12,467 | 1,552 | 40,977 | 24,164 | ||||||||||||
Net income | $ | 1,042,775 | $ | 130,774 | $ | 3,445,538 | $ | 2,036,421 | ||||||||
Net income per unit | $ | 0.19 | $ | 0.03 | $ | 0.61 | $ | 0.36 |
See notes to unaudited consolidated financial statements.
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2018 | 2017 | |||||||
PARTNERS' EQUITY - BEGINNING OF PERIOD | $ | 14,273,208 | $ | 12,197,583 | ||||
Net income | 3,445,538 | 2,036,421 | ||||||
Repurchase of Units | (7,509 | ) | - | |||||
Options exercised | 3,300 | - | ||||||
PARTNERS' EQUITY - END OF PERIOD | $ | 17,714,537 | $ | 14,234,004 |
See notes to unaudited consolidated financial statements.
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2018 | 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 3,445,538 | $ | 2,036,421 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation, depletion and amortization | 458,878 | 669,096 | ||||||
Accretion expense | 246,500 | 276,600 | ||||||
Gain on disposal of property and equipment | (635,165 | ) | (63,709 | ) | ||||
Gain on sale of other assets | (8,960 | ) | (159,037 | ) | ||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 100,003 | 41,080 | ||||||
Other current assets | 16,575 | 42,181 | ||||||
Other assets | 700 | (13,271 | ) | |||||
Accounts payable | (101,028 | ) | 234,211 | |||||
Accrued expenses | (288,794 | ) | (324,149 | ) | ||||
Operational advances | 508,330 | 415,904 | ||||||
Total adjustments | 297,039 | 1,118,906 | ||||||
Net cash provided by operating activities | 3,742,577 | 3,155,327 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of investments | (3,762,150 | ) | (3,112,591 | ) | ||||
Payments received on receivables from employees | 46,407 | 49,338 | ||||||
Proceeds on disposal of property and equipment | 37,500 | 92,200 | ||||||
Proceeds on sale of other assets | 8,960 | 226,287 | ||||||
Purchase of property and equipment | - | (123,885 | ) | |||||
Net cash used in investing activities | (3,669,283 | ) | (2,868,651 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Repurchase of Units | (7,509 | ) | - | |||||
Proceeds from options exercised | 3,300 | - | ||||||
Net cash used in financing activities | (4,209 | ) | - | |||||
NET CHANGE IN CASH AND EQUIVALENTS | 69,085 | 286,676 | ||||||
CASH AND EQUIVALENTS - BEGINNING OF PERIOD | 11,883,725 | 11,224,865 | ||||||
CASH AND EQUIVALENTS - END OF PERIOD | $ | 11,952,810 | $ | 11,511,541 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | 3,600 | $ | 499 |
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.
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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, a private limited liability company which also serves as Everflow’s largest limited partner, and an individual 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 |
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.
EVERFLOW EASTERN PARTNERS, L.P. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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. Loss on disposal of property and equipment includes approximately $900 associated with non-cash settlements of asset retirement obligations during the three month period ended June 30, 2019. Gain on disposal of property and equipment includes approximately $5,100 associated with non-cash settlements of asset retirement obligations during the six month period ended June 30, 2019. Gain on disposal of property and equipment includes approximately $449,700 and $559,800 associated with non-cash settlements of asset retirement obligations during the three and six month periods ended June 30, 2018, respectively.
EVERFLOW EASTERN PARTNERS, L.P. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 June 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.
EVERFLOW EASTERN PARTNERS, L.P. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
EVERFLOW EASTERN PARTNERS, L.P. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
EVERFLOW EASTERN PARTNERS, L.P. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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
Liquidity and Capital Resources
The following table summarizes the Company's financial position at
Working capital of
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
The Company’s cash flow provided by operations before the change in working capital was
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
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
Revenues for the three
Crude oil and natural gas sales Production costs increased $146,000, or 12%, during the six months ended June 30, 2019 as compared to the prior comparable period. The increase was primarily the result of additional costs associated with less Company operated properties being voluntarily shut-in during the
The Company reported net income of
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.
This information has been omitted, as the Company qualifies as a smaller reporting company.
(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,
(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.
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.
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