**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

**(Mark One)**
| **x**      | ** ** | **QUARTERLY  REPORT UNDER SECTION 13 OR 15 (d)** | ** ** |
|------------|------------|--------------------------------------------------|------------|
| ** ** | ** ** | **OF THE  SECURITIES EXCHANGE ACT OF 1934**      | ** ** |

**For thequarterly period ended June 30, 2007**

**OR**
| ** ̈** | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15  (d)** | ** ** |
|------------|------------|---------------------------------------------------------|------------|
| ** ** | ** ** | **OF THE SECURITIES EXCHANGE ACT OF 1934**              | ** ** |

**For thetransition period from                 to                 **

**Commission File Number 1-11748**

**EASTERN AMERICAN NATURAL GAS TRUST**

(Exact name ofregistrant as specified in its charter)

| **Delaware**                     |   | **36-7034603**       |
|----------------------------------|--------|----------------------|
| (State or other  jurisdiction of |   | (I.R.S. Employer     |
| incorporation or  organization)  |   | Identification  No.) |

 

**The Bank of New York TrustCompany, N.A, Trustee**

**Global Corporate Trust**

**919 Congress Avenue Suite 500**

**Austin, Texas**

(Address ofprincipal executive offices)

**78701**

(Zip Code)

**(800) 852-1422**

(Registrant’stelephone number, including area code)

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports) and (2) has been subject to such filing requirementsfor the past 90 days.

Yes    x             No    o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer.  (as definedin Exchange Act Rule 12b-2 of the Exchange Act).
| Large  accelerated filer  o |   | Accelerated filer  x |   | Non-accelerated filer  o |
|---------------------------------------|--------|--------------------------------|--------|------------------------------------|

 

Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    o             No    x

As of August 1, 2007, 5,900,000Units of Beneficial Interest in Eastern American Natural Gas Trust were issued,outstanding and held by non-affiliates of the registrant (the “OutstandingUnits”).  Of the Outstanding Units,19,900 Units of Beneficial Interest (the “Withdrawn Units”) have been withdrawnfrom trading by voluntary action of Holders and may not be traded unless suchHolders comply with certain requirements provided in the related TrustAgreement.

 

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# **PART I –FINANCIAL INFORMATION**

**ITEM1.    Financial Statements**

**EASTERNAMERICAN NATURAL GAS TRUST**

**CONDENSEDSTATEMENTS OF DISTRIBUTABLE INCOME***(unaudited)*
| ** **                                                                  | ** ** | **Six Months Ended  June 30,** | ** ** | **Three Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|-----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2007**                                      | ** ** | **2006**                                        | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| Royalty Income                                                              |       | $                                             | 7,419,571  |                                            | $          | 9,958,436 |   | $ | 3,854,720 |   | $ | 4,595,350 |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| Operating Expenses                                                          |       |                                          |       |                                            |       |   |   |   |   |
| Taxes on  Production and Property                                           |       | 558,527                                       |       | 730,090                                         |       | 289,454 |   | 339,107 |   |
| Operating Cost  Charges                                                     |       | 294,080                                       |       | 280,534                                         |       | 147,040 |   | 140,267 |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| Total Operating  Expenses                                                   |       | 852,607                                       |       | 1,010,624                                       |       | 436,494 |   | 479,374 |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| Net Proceeds to the  Trust                                                  |       | 6,566,964                                     |       | 8,947,812                                       |       | 3,418,226 |   | 4,115,976 |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| General and  Administrative Expenses                                        |       | 591,410                                       |       | 783,310                                         |       | 274,647 |   | 336,090 |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| Distributable  Income                                                       |       | 5,975,554                                     |       | 8,164,502                                       |       | 3,143,579 |   | 3,779,886 |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| Cash Reserve Refunded                                                       |       | 500,000                                       |       | —                                          |       | 200,000 |   | — |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| Distribution  Amount                                                        |       | $                                             | 6,475,554  |                                            | $          | 8,164,502 |   | $ | 3,343,579 |   | $ | 3,779,886 |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| Distributable Income  per Unit (5,900,000 units authorized and outstanding) |       | $                                             | 1.0128     |                                            | $          | 1.3838 |   | $ | 0.5328 |   | $ | 0.6407 |   |
|                                                                        |       |                                          |       |                                            |       |   |   |   |   |
| Distribution Amount per Unit (5,900,000 units authorized and  outstanding)  |       | $                                             | 1.0976     |                                            | $          | 1.3838 |   | $ | 0.5667 |   | $ | 0.6407 |   |

 

**The accompanying notes are anintegral part of these unaudited condensed financial statements.**

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**EASTERNAMERICAN NATURAL GAS TRUST**

**CONDENSEDSTATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS***(unaudited)*
| ** **                                                 | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                                 | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| Assets:                                                    |       |                        |       |                            |       |
|                                                       |       |                        |       |                            |       |
| Cash                                                       |       | $                           | 195,750    |                            | $          | 590,585 |   |
| Net Proceeds  Receivable                                   |       | 3,418,226                   |       | 3,013,944                       |       |
| Net Profits  Interests in Gas Properties                   |       | 93,162,180                  |       | 93,162,180                      |       |
| Accumulated  Amortization                                  |       | (70,085,681                 | )          | (68,600,962                     | )          |
|                                                       |       |                        |       |                            |       |
| Total Assets                                               |       | $                           | 26,690,475 |                            | $          | 28,165,747 |   |
|                                                       |       |                        |       |                            |       |
|                                                       |       |                        |       |                            |       |
| Liabilities and Trust  Corpus:                             |       |                        |       |                            |       |
|                                                       |       |                        |       |                            |       |
|                                                       |       |                        |       |                            |       |
| Trust General  and Administrative Expenses Payable         |       | $                           | 70,142     |                            | $          | 223,442 |   |
| Distributions  Payable                                     |       | 3,343,834                   |       | 2,681,087                       |       |
| Trust Corpus  (5,900,000 units authorized and outstanding) |       | 23,276,499                  |       | 25,261,218                      |       |
|                                                       |       |                        |       |                            |       |
| Total Liabilities and  Trust Corpus                        |       | $                           | 26,690,475 |                            | $          | 28,165,747 |   |

 

**The accompanying notes are an integral part ofthese unaudited condensed financial statements.**

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**EASTERN AMERICANNATURAL GAS TRUST**

**CONDENSEDSTATEMENTS OF CHANGES IN TRUST CORPUS***(unaudited)*
| ** **                                               | ** ** | **Six Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| ** **                                               | ** ** | **June 30, 2007**    | ** ** | **June 30, 2006**    | ** ** |
|                                                     | * *   | * *                       |       |                           |       |
| Trust Corpus,  beginning of period                       |       | $                              | 25,261,218 |                           | $          | 28,703,265 |   |
| Distributable  Income                                    |       | 5,975,554                      |       | 8,164,502                      |       |
| Distributions  Payable to Unitholders                    |       | (6,475,554                     | )          | (8,164,502                     | )          |
| Amortization of  Net Profits Interests in Gas Properties |       | (1,484,719                     | )          | (1,512,026                     | )          |
|                                                     |       |                           |       |                           |       |
| Trust Corpus, end of  period                             |       | $                              | 23,276,499 |                           | $          | 27,191,239 |   |

 

**The accompanying notes are an integral part ofthese unaudited condensed financial statements.**

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**EASTERN AMERICAN NATURAL GAS TRUST**

**NOTES TOUNAUDITED CONDENSED FINANCIAL STATEMENTS**

NOTE 1.   Organization of the Trust

TheEastern American Natural Gas Trust (the “Trust”) was formed under the DelawareBusiness Trust Act pursuant to a Trust Agreement (the “Trust Agreement”) amongEastern American Energy Corporation (“Eastern American”), as grantor, Bank ofMontreal Trust Company, as Trustee, and Wilmington Trust Company, as DelawareTrustee (the “Delaware Trustee”). Effective May 8, 2000, The Bank of New Yorkacquired the corporate trust business of the Bank of Montreal Trust Company /Harris Trust, and consequently, The Bank of New York served as trustee of theTrust. On November 20, 2004, the holders of a majority of the Trust Unitsvoting at a special meeting approved the resignation of The Bank of New York astrustee and depository of the Trust and the appointment of JPMorgan Chase Bank,N.A. as successor trustee of the Trust, effective as of January 1, 2005.  Effective October 2, 2006, The Bank of New YorkTrust Company, N. A. replaced JPMorgan Chase Bank, N.A. as trustee inconnection with the sale by JPMorgan Chase Bank of substantially all of itscorporate trust business to The Bank of New York.  Consequently, references herein to the “Trustee”mean Bank of Montreal Trust Company until May 8, 2000; The Bank of New York assuccessor Trustee from May 8, 2000 through December 31, 2004; JPMorgan ChaseBank, N.A. as successor Trustee from January 1, 2005 through October 2, 2006;and The Bank of New York Trust Company, N.A. as successor Trustee, effective asof October 2, 2006.  The transfer agentfor the Trust is Bondholder Communications, an affiliate of The Bank of NewYork Trust Company, N.A.

TheTrust was formed to acquire and hold net profits interests (the “Net ProfitsInterests”) created from the working interests owned by Eastern American in 650producing gas wells and 65 proved development well locations (the “DevelopmentWells”) in West Virginia and Pennsylvania (the “Underlying Properties”).

On March 15, 1993,5,900,000 Depositary Units were issued in a public offering at an initialpublic offering price of $20.50 per Depositary Unit.  Each Depositary Unit consists of beneficialownership of one unit of beneficial interest (“Trust Unit”) in the Trust and a$20 face amount beneficial ownership interest in a $1,000 face amount zerocoupon United States Treasury Obligation (“Treasury Obligation”) maturing onMay 15, 2013.  The financial statementsof the Trust to which these notes relate do not include information concerningthe Treasury Obligations, the beneficial interest in which is held for theUnitholders by the Depositary.

The Net Profits Interestsare passive in nature, and neither the Trustee nor the Delaware Trustee hasmanagement control or authority over, nor any responsibility relating to, theoperation of the properties subject to the Net Profits Interests.  The Trust Agreement provides, among otherthings, that the Trust shall not engage in any business or commercial activityor acquire any asset other than the Net Profits Interests initially conveyed tothe Trust; the Trustee may establish a reserve for payment of any liabilitythat is contingent, uncertain in amount or is not currently due and payable;

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the Trustee is authorizedto borrow funds required to pay liabilities of the Trust, provided that suchborrowings are repaid in full prior to further distributions to Unitholders;and the Trustee will make quarterly cash distributions to Unitholders fromfunds of the Trust.

### After the Trust was formed, 59of the 65 Development Wells were drilled and completed.  The remaining six Development Wells were notdrilled. Clear title to two of the Development Wells could not be established,and they were excluded from the Trust in accordance with the conveyancetransferring them to the Trust. Eastern American asserted that the remainingfour undrilled Development Wells, if drilled, would be too close to thenexisting wells on adjoining property, and thereafter settled its dispute withthe Trust about drilling those four Development Wells by agreeing instead topay the Trust annually for the annual volume of gas projected to be producedfrom those Development Wells as if they had been drilled.

The Net ProfitsInterests initially consisted of a royalty interest (“Royalty NPI”) in 322wells and a term interest (“Term NPI”) in the remaining wells and locations. Asof June 30, 2007, the Trust held Net Profits Interests in 670 wells, consistingof Royalty NPI in 317 wells and Term NPI in the remaining wells. The Term NPIexpire by their terms on May 15, 2013, or such earlier time as 41,683 MMcf ofgas has been produced that is attributable to Eastern American’s net revenueinterest in the properties burdened by the Term NPI. As of December 31, 2006,based on the Independent Petroleum Engineer’s Report, 23,661 MMcf of themaximum 41,683 MMcf has been produced.

Between May 15,2012 and May 15, 2013 (the “Liquidation Date”), the Trustee is required to sellall the Royalty NPI and liquidate the Trust. Under the Trust Agreement, EasternAmerican has the right of first refusal to purchase any of the Royalty NPI theTrustee is required to sell after the Liquidation Date. If it exercises thisright, Eastern American must pay the appraised Fair Value (as defined in theTrust Agreement) of the Royalty NPI, or the relevant third party offer price ifa third party has offered to purchase the Royalty NPI. Unitholders of record onthe relevant record dates will receive the net proceeds from selling theRoyalty NPI in accordance with the Trust Agreement, and also will receive theirrespective share of the matured face amount of the Treasury Obligations held bythe Depositary.

NOTE 2.   Basis of Presentation

The preparation offinancial statements requires estimates and assumptions that affect reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenue and expenses during the reporting period.  Without limiting the foregoing statement, theinformation furnished is based upon certain estimates of production for theperiods presented and is therefore subject to adjustment in future periods toreflect actual production for the periods presented.

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The informationfurnished reflects all adjustments which are, in the opinion of the Trustee,necessary for a fair presentation of the results for the interim periodspresented.  The accompanying financialstatements are unaudited interim financial statements, and should be read inconjunction with the audited financial statements and notes thereto included inthe Trust’s Annual Report on Form 10-K for the year ended December 31,2006.  The year-end condensed balancesheet data was derived from audited financial statements, but does not includeall disclosures required by accounting principles generally accepted in theUnited States of America.

NOTE 3.  TrustAccounting Policies

The Trust servesas a pass-through entity, with items of depletion, interest income and expense,and income tax attributes being based upon the status and election of theUnitholders. Thus, the Statements of Distributable Income purport to showDistributable Income, defined as Trust income available for distribution toUnitholders before application of those Unitholders’ additional expenses, ifany, for depletion, interest income and expense, and income taxes.

The Trust uses theaccrual basis to recognize revenue, with royalty income recorded as reservesare extracted from the Underlying Properties and sold. Expenses are alsorecognized on an accrual basis. Operating expenses, which include Taxes onProperty and Production and Operating Cost Charges, are recognized as incurredpursuant to the Conveyances on a per well production basis. The paymentprovisions of the Gas Purchase Contract between the Trust and Eastern MarketingCorporation (“Eastern Marketing”), a wholly owned subsidiary of EasternAmerican, require payment with respect to gas production for a calendar quarterto be made to the Trust on or before the tenth day of the third month followingsuch quarter.

The Net ProfitsInterests are assessed annually to determine whether their net capitalized costis impaired.  The Trust will determine ifa writedown is necessary to its investment in the Net Profits Interests in GasProperties to the extent that total capitalized costs, less accumulatedamortization, exceed undiscounted future net revenues attributable to provedgas reserves of the Underlying Properties. The Trust will then provide a writedown to the extent that the netcapitalized costs exceed the discounted future net revenues attributable toproved gas reserves of the Underlying Properties.   Any such writedown would not reduceDistributable Income, although it would reduce Trust Corpus.

Amortization ofthe Net Profits Interests in Gas Properties is calculated on aunits-of-production basis, whereby the Trust’s cost basis in the properties isdivided by total Trust proved reserves to derive an amortization rate perreserve unit.  Such amortization does notreduce Distributable Income, rather it is charged directly to Trust Corpus.

The financial statementsof the Trust differ from financial statements prepared in accordance withaccounting principles generally accepted in the United States of America due tothe following: (i)

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certain cash reservesmay be established for contingencies which were not accrued in the financial statements;(ii) amortization of the Net Profits Interests in Gas Properties is chargeddirectly to Trust Corpus; and (iii) the sale of the Net Profits Interests, ifany, is reflected in the Statements of Distributable Income as Cash Proceeds onSale of Net Profit Interests to the Trust.

NOTE 4.   Income Taxes

The Trust is agrantor trust and is not required to pay federal or state income taxes.  Accordingly, no provision for federal orstate income taxes has been made.  Allincome is taxed to the Unitholders of the Trust.

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ITEM 2.   Management’sDiscussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement

This Form 10-Q includes “forward-looking statements” within the meaningof Section 27A of the Securities Act of 1933, as amended, and Section 21E ofthe Securities Exchange Act of 1934, as amended. All statements other thanstatements of historical fact included in this Form 10-Q, including withoutlimitation the statements under “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” are forward-looking statements.Although Eastern American has advised the Trustee that it believes that theexpectations reflected in the forward-looking statements contained herein arereasonable, no assurance can be given that such expectations will prove to havebeen correct. Important factors that could cause actual results to differmaterially from expectations (“Cautionary Statements”) are disclosed in thisForm 10-Q and in the Trust’s Annual Report on Form 10-K for the year endedDecember 31, 2006 and include the fact that none of the Trust, theTrustee or Eastern American is able to predict future changes in gas prices,gas production levels, economic activity, legislation or regulation, or certainchanges in expenses of the Trust.All subsequent written and oral forward-looking statements attributable to theTrust or persons acting on its behalf are expressly qualified in their entiretyby the Cautionary Statements.  TheTrust, the Trustee and Eastern American disclaim any obligation to update anyforward-looking statements.

General

The Trust does notconduct any operations or activities. The Trust’s purpose is, in general, to hold the Net Profits Interests,to distribute the cash proceeds to Unitholders which the Trust receives inrespect of the Net Profits Interests (net of Trust expenses), and to performcertain administrative functions in respect of the Net Profits Interests andthe Depositary Units.  Accordingly, theTrust derives substantially all of its income and cash flows from the NetProfits Interests.  The Trust has nosource of liquidity or capital resources other than the cash flows from the NetProfits Interests.

The Net ProfitsInterests were created pursuant to conveyances (the “Conveyances”) from EasternAmerican to the Trust.  In connectiontherewith, Eastern American assigned its rights under a gas purchase contract(the “Gas Purchase Contract”), which obligates Eastern Marketing Corporation, asubsidiary of Eastern American, to purchase all of the natural gas producedfrom the Underlying Properties that is attributable to the Net ProfitsInterests.

The Conveyancesand the Gas Purchase Contract entitle the Trust to receive an amount of cashfor each calendar quarter equal to the Net Proceeds for such quarter.  “Net Proceeds” for any calendar quartergenerally means an amount of cash equal to (a) 90% of a volume of gas equal to(i) the volume of gas produced during such quarter attributable to theUnderlying Properties less (ii) a volume of gas equal to “Chargeable Costs” forsuch quarter, multiplied by (b) the applicable price for such quarter under theGas Purchase Contract.  “Chargeable Costs”is that volume of gas which equates in value, determined by reference to therelevant sales price under the Gas Purchase Contract or the Conveyances, asapplicable, to the sum of the “Operating Cost Charge”, “Capital Costs” and 

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“Taxes”.

The “OperatingCost Charge” for 2007 is based on an annual rate of $588,160, and 2006 wasbased on an annual rate of $561,068.  Asprovided in the Conveyances, the Operating Cost Charge will fluctuate based onthe lesser of (A) five percent (5%) or (B) a percentage, not less than zeropercent (0%), equal to the percentage increase, if any, in the average weeklyearnings of Crude Petroleum and Gas Production Workers for the last calendaryear, as shown by the index of average weekly earnings of Crude Petroleum andGas Production Workers, as published by the United States Department of Labor,Bureau of Labor Statistics, based on December-to-December comparison.

During 2003, theUnited States Department of Labor, Bureau of Labor Statistics converted all ofits industry-based statistics to a different reporting system that wasdeveloped in cooperation with the United States’ North American Free TradeAgreement Partners, Canada and Mexico, in an effort to standardize andmodernize reporting codes.  As a resultof this conversion, the Crude Petroleum and Gas Production Workers index is nolonger available for use in the annual calculation of overhead adjustmentcalled for in the various Council of Petroleum Accountants Societies, or COPAS,model forms after March 2003.

Research by COPAScovering a ten year period indicated that by blending the Oil and GasExtraction Index with the Professional and Technical Services Index, theresults approximate the data from the old Crude Petroleum and Natural GasWorkers Index.  Accordingly, COPAS hascalculated the percentage change in the simple average of the Oil andExtraction Index and the Professional and Technical Services Index, commencingin April 2004.  This “Overhead AdjustmentIndex” has been provided as a guidance to the industry as a replacement index foruse in calculating the overhead adjustment. The adjustment for the effective time period is 5.0%.  Since the Conveyance Documents do notspecifically provide for a replacement index if the Crude Petroleum and GasProduction Workers Index was no longer published, Eastern American believes,and advised the Trustee, that the “Overhead Adjustment Index” as calculated byCOPAS is a reasonable index to utilize since the industry is generally adoptingthe same as a replacement.  EasternAmerican, with the concurrence of the Trustee, will utilize this “OverheadAdjustment Index” to adjust the “Operating Cost Charge” so long as such indexis published by COPAS.

The Operating Cost Chargewill be reduced for each well that is sold (free of the Net Profits Interests)or plugged and abandoned.  Capital Costsare defined as Eastern American’s working interest share of capital costs foroperations on the Underlying Properties having a useful life of at least threeyears, and excluding any capital costs incurred in drilling the DevelopmentWells.  Taxes refer to ad valorem taxes,production and severance taxes, and other taxes imposed on Eastern American’sor the Trust’s interests in the Underlying Properties, or production therefrom.

Pursuant to the GasPurchase Contract, Eastern Marketing is obligated to purchase such gasproduction at a purchase price per Mcf equal to the Index Price.  The Index Price for any quarter is determinedsolely by reference to the Variable Price component.  The Variable Price for any quarter is equalto the Henry Hub Average Spot Price (as defined) per MMBtu plus $0.30 perMMBtu, multiplied by 110% to effect a fixed adjustment for Btu content.  The Henry Hub Average Spot Price 

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is defined as the price per MMBtu determined for anycalendar quarter equal to the price obtained with respect to each of the threemonths in such quarter, in the manner specified below, and then taking theaverage of the prices determined for each of such three months.  The price determined for any month of suchquarter is equal to the average of (i) the final settlement price per MMBtu forHenry Hub Gas Futures Contracts (as defined), as reported in *The Wall Street Journal*, for such contracts which expired ineach of the five months prior to such month; (ii) the final settlement priceper MMBtu for Henry Hub Gas Futures Contracts, as reported in *The Wall Street Journal*, for such contracts which expireduring such month; and (iii) the closing settlement price per MMBtu of HenryHub Gas Futures Contracts determined as of the contract settlement date forsuch month, as reported in *The Wall Street Journal*,for such contracts which expire in each of the six months following suchmonth.  A Henry Hub Gas Futures Contractis defined as a gas futures contract for gas to be delivered to the Henry Hubthat is traded on the New York Mercantile Exchange.

Accordingly, the IndexPrice payable to the Trust for production may be higher or lower based on thefluctuations in natural gas futures prices during the relevant calculationperiod.  The price payable to the Trustwill have a direct impact, positively or negatively, on the quarterlyDistributions Payable by the Trust to its Unitholders.

Eastern American had adisagreement with the Trust over Eastern American’s obligation to drill certainDevelopment Wells that were closely offset by third parties.  The Trust agreed that in lieu of drillingthese closely offset Development Wells, Eastern American could provide theTrust, on an annual basis commencing on April 1, 1997, and over the remaininglife of the Trust, a volume of gas which is equal to the projected volumes ofthe wells as if they had been drilled. These volumes have been estimated by Ryder Scott Company, independentpetroleum engineers.  During the quarterended June 30, 2007, payment for an additional volume of 3,527 Mcf wasdelivered to the Trust, as compared to a payment for 3,813 Mcf for the quarterended June 30, 2006.  These additionalpayments fulfill Eastern American’s agreement to provide payment for volumesfor Development Wells that had been closely offset by third parties.

Eastern Americanhas fulfilled its obligation with respect to the drilling of the DevelopmentWells. Since the inception of the Trust, Eastern has drilled a total of 59Development Wells, which are online and producing.  (See the Trust’s Annual Report on Form 10-Kfor the fiscal year ended December 31, 2006, for a more complete description ofthe Development Wells.)

Over the remaininglife of the Trust, wells may be disposed of from time to time in accordancewith the documents governing the Trust.

The administrativecosts the Trust incurs in the future will fluctuate depending primarily on theexpenses the Trust incurs for professional services, particularly legal,accounting and engineering services.

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**Critical Accounting Policies**

The following is asummary of the critical accounting policies followed by the Trust.

*Basis ofAccounting:*

The financialstatements of the Trust differ from financial statements prepared in accordancewith accounting principles generally accepted in the United States of Americadue to the following: (i) certain cash reserves may be established forcontingencies which were not accrued in the financial statements; (ii)amortization of the Net Profits Interests in Gas Properties is charged directlyto Trust Corpus; and (iii) the sale of the Net Profits Interests is reflectedin the Statements of Distributable Income as cash proceeds to the Trust.

*Net Profits Interests in Gas Properties:*

The Net Profits Interests in Gas Properties areperiodically assessed to determine whether their net capitalized cost isimpaired.  The Trust will determine if awritedown is necessary to its investment in the Net Profits Interests in GasProperties to the extent that total capitalized costs, less accumulatedamortization, exceed undiscounted future net revenues attributable to provedgas reserves of the Underlying Properties. The Trust will then provide a writedown to the extent that the netcapitalized costs exceed the discounted future net revenues attributable toproved gas reserves of the Underlying Properties.  Any such writedown would not reduceDistributable Income, although it would reduce Trust Corpus.

Amortization of the Net Profits Interests in GasProperties is calculated on a units-of-production basis, whereby the Trust’scost basis in the properties is divided by total Trust proved reserves toderive an amortization rate per reserve unit. Such amortization does not reduce Distributable Income, rather it ischarged directly to Trust Corpus. Revisions to estimated future units-of-production are treated on aprospective basis beginning on the date significant revisions are known.

TheNet Profits Interest impairment test and the determination of amortizationrates are dependent on estimates of proved gas reserves attributable to theTrust.  Numerous uncertainties areinherent in estimating reserve volumes and values, including economic andoperating conditions, and such estimates are subject to change as additionalinformation becomes available.

**Recent Accounting Pronouncements**

In February 2007, the Financial Accounting Standards Board (“FASB”)issued Statement of Financial Accounting Standards No. 159, “The Fair ValueOption for Financial Assets and Financial Liabilities - Including an amendmentto FASB Statement No. 115” (SFAS 159). SFAS 159 permits entities to measure many financial instruments at fairvalue with the changes in fair value recognized in earnings at each subsequentreporting date.  This Statement iseffective for fiscal years beginning after November 15, 2007.  The Trust does not have financialinstruments.  Therefore, SFAS 159 does 

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not apply to the Trust and wouldhave no impact on the financial statements.

**Liquidity and Capital Resources**

The Trust has nosource of liquidity or capital resources other than the distributions receivedfrom the Net Profits Interests.

In accordance with theprovisions of the Conveyances, generally all revenues received by the Trust,net of Trust administrative and operating expenses and the amount ofestablished reserves, are distributed currently to the Unitholders.

The Trust did not haveany contractual obligations as of June 30, 2007.  At June 30, 2007, the Trust had Trust Generaland Administrative Expenses Payable of $70,142 and Distributions Payable of $3,343,834.

Comparison of Results ofOperations for Three Months Ended June 30, 2007 and Three Months Ended June 30,2006

The Trust’s Distributable Income was $3,143,579 forthe three months ended June 30, 2007 as compared to $3,779,886 for the threemonths ended June 30, 2006.  Thisdecrease was due to a decrease in Royalty Income for the three months endedJune 30, 2007 to $3,854,720 as compared to the three months ended June 30, 2006of $4,595,350.  The decrease in RoyaltyIncome was due to a decrease in the price payable to the Trust under the GasPurchase Contract as discussed below ($8.752 per Mcf for the three months endedJune 30, 2007 as compared to $9.468 per Mcf for the three months ended June 30,2006).  This decrease was also related toa decrease in production of gas attributable to the Net Profits Interests forthe three months ended June 30, 2007 (438 MMcf) as compared to the three monthsended June 30, 2006 (482 MMcf).  Thedecline in production is primarily attributable to natural productiondeclines.  Taxes on Production andProperty were $289,454 for the three months ended June 30, 2007 as compared to$339,107 for the three months ended June 30, 2006. The decrease in taxes is duedirectly to the decrease in Royalty Income as discussed above.  General and Administrative Expenses were $274,647for the three months ended June 30, 2007 as compared to $336,090 for the threemonths ended June 30, 2006.  The decreasein General and Administrative Expenses was due primarily to a decrease inprofessional fees. The decrease in General and Administrative Expenses was dueprimarily to a decrease in professional fees incurred as a direct result of theexchange offers made by Ensource Energy Income Fund LP, which were terminatedon September 15, 2006.

The price payable to theTrust for gas production attributable to the Net Profits Interests was $8.752per Mcf for the three months ended June 30, 2007 and $9.468 per Mcf for thethree months ended June 30, 2006.  Theprice per Mcf was lower for the three months ended June 30, 2007 than for thecorresponding three month period ended June 30, 2006 due to a decrease in theaverage spot market price for gas delivered at the Henry Hub near Henry,Louisiana ($7.656 per Dth for the three months ended June 30, 2007 as comparedto $8.307 per Dth for the three months ended June 30, 2006).

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Comparison ofResults of Operations for Six Months Ended June 30, 2007 and Six Months EndedJune 30, 2006

The Trust’sDistributable Income was $5,975,554 for the six months ended June 30, 2007 ascompared to $8,164,502 for the six months ended June 30, 2006.  This decrease was due to a decrease inRoyalty Income for the six months ended June 30, 2007 to $7,419,571 as comparedto the six months ended June 30, 2006 of $9,958,436.  The decrease in Royalty Income was due to adecrease in the price payable to the Trust under the Gas Purchase Contract asdiscussed below ($8.341 per Mcf for the six months ended June 30, 2007 ascompared to $10.516 per Mcf for the six months ended June 30, 2006).  This decrease was also related to a decreasein production of gas attributable to the Net Profits Interests for the sixmonths ended June 30, 2007 (889 MMcf) as compared to the six months ended June30, 2006 (949 MMcf).  The decline inproduction is primarily attributable to natural production declines.  Taxes on Production and Property were$558,527 for the six months ended June 30, 2007 as compared to $730,090 for thesix months ended June 30, 2006. The decrease in taxes is due directly to thedecrease in Royalty Income as discussed above. General and Administrative Expenses were $591,410 for the six monthsended June 30, 2007 as compared to $783,310 for the six months ended June 30, 2006.  The decrease in General and AdministrativeExpenses was due primarily to a decrease in professional fees incurred as adirect result of the exchange offers made by Ensource Energy Income Fund LP,which were terminated on September 15, 2006.

Theprice payable to the Trust for gas production attributable to the Net ProfitsInterests was $8.341 per Mcf for the six months ended June 30, 2007 and $10.516per Mcf for the six months ended June 30, 2006. The price per Mcf was lower for the six months ended June 30, 2007 thanfor the corresponding three month period ended June 30, 2006 due to a decreasein the average spot market price for gas delivered at the Henry Hub near Henry,Louisiana ($7.283 per Dth for the six months ended June 30, 2007 as compared to$9.260 per Dth for the six months ended June 30, 2006).

**Off-Balance Sheet Arrangements**

The Trust does not haveany off-balance sheet arrangements that have or are reasonably likely to have acurrent or future effect on the Trust’s financial condition, changes infinancial condition, revenue or expenses, results of operations, liquidity,capital expenditures or capital resources that is material to investors.

**Other Information**

For the calendar quarterended June 30, 2007, the high and low closing prices of the TreasuryObligations (which have $1,000 face principal amount), as quoted in theover-the-counter market for United States Treasury obligations were $738.36 and$763.55 respectively.  On June 30, 2007,the closing price of the Treasury Obligations, as quoted on such market, was$751.29.

**TheTrust provides Unitholders with the option to separate the related TreasuryObligation from the Trust Units.  Uponexercising this option, the Trustee transfers such Trust Units from the name ofthe Depositary to the name of the withdrawing Unitholder.  As of June 30, 2007, this option was**

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**exercised on 19,900 TrustUnits.  (See the Trust’s 10-K, for thefiscal year ended December 31, 2006 for a more complete description of theWithdrawal of Trust Units and Restriction on Transfer.)**

ITEM 3.   Quantitativeand Qualitative Disclosures about Market Risk

The Trust does not engage in any operations, and doesnot utilize market risk sensitive instruments, either for trading purposes orfor other than trading purposes.  As describedelsewhere herein, the Depositary Units consist of beneficial ownership of oneunit of beneficial interest in the Trust and a $20 face amount beneficialownership interest in a $1,000 face amount zero coupon Treasury Obligationmaturing on May 15, 2013.  High and lowprice information for the Treasury Obligations is included under Item 2.  As described elsewhere herein, gas productionattributable to the Net Profits Interests is sold to a wholly owned subsidiaryof Eastern American pursuant to the Gas Purchase Contract described herein, andthe Trust’s quarterly distributions are highly dependent on the price payableto the Trust for gas production attributable to the Net Profits Interests.  Natural gas prices can fluctuate widely inresponse to many factors, all of which are out of the control of the Trust, theTrustee and Eastern American.

ITEM 4.   Controlsand Procedures

*Evaluationof Disclosure Controls and Procedures. * The Trustee maintains disclosure controls andprocedures designed to ensure that information required to be disclosed by theTrust in the reports that it files or submits under the Securities Exchange Actof 1934, as amended, is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and regulations.  Disclosurecontrols and procedures include controls and procedures designed to ensure thatinformation required to be disclosed by the Trust is accumulated andcommunicated by several parties, including without limitation, the working interestowner, Eastern American Energy Corporation (“Eastern American”), and theindependent reserve engineer to The Bank of New York Trust Company, N.A., asTrustee of the Trust, and its employees who participate in the preparation ofthe Trust’s periodic reports as appropriate to allow timely decisions regardingrequired disclosure.  In addition, the Trustee is required by the TrustAgreement to engage and has engaged an independent registered public accountingfirm to review the quarterly financial statements of the Trust and audit theannual financial statements of the Trust, which includes financial dataprovided by Eastern American.

As ofJune 30, 2007, the Trustee carried out an evaluation of the Trustee’sdisclosure controls and procedures.  MikeUlrich, as Trust Officer of the Trustee, has concluded that the disclosurecontrols and procedures are effective.

Dueto (i) the contractual arrangements of the Trust Agreement and (ii) the rightsof the Trustee under the Conveyances regarding information furnished by EasternAmerican, there are certain potential weaknesses that may limit theeffectiveness of disclosure controls and procedures established by the Trusteeor its employees and their ability to verify the accuracy of certain financialinformation.  The contractual limitationscreating potential weaknesses in disclosure controls and procedures may bedeemed to include the following:

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·          EasternAmerican and its consolidated subsidiaries manage information relating to theTrust, including (i) historical operating data, including production volumes,marketing of products, operating and capital expenditures, environmental andother liabilities, the effects of regulatory changes and the number ofproducing wells and acreage, (ii) plans for future operating and capitalexpenditures and (iii) geological data relating to reserves; and

·          TheTrustee necessarily relies upon the independent reserve engineer as an expertwith respect to the annual reserve report, which includes projected production,operating expenses and capital expenses.

Otherthan reviewing the financial and other information provided to the Trust byEastern American and the independent reserve engineer, the Trustee made noindependent or direct verification of this financial or other information.

TheTrustee does not intend to expand its responsibilities beyond those permittedor required by the Trust Agreement and those required under applicable law.

TheTrustee does not expect that the Trustee’s disclosure controls and proceduresor the Trustee’s internal control over financial reporting will prevent allerrors or all fraud.  Further, the designof disclosure controls and procedures and internal control over financialreporting must reflect the fact that there are resource constraints, and thebenefits of controls must be considered relative to costs.  Because of the inherent limitations in allcontrol systems, no evaluation of controls can provide absolute assurance thatall control issues and instances of fraud, if any, have been detected.

**Changesin Internal Control Over Financial Reporting**

Inconnection with the evaluation by the Trustee of changes in internal controlover financial reporting of the Trust that occurred during the Trust’s lastfiscal quarter, no change in the Trust’s internal control over financialreporting was identified that has materially affected, or is reasonably likelyto materially affect, the Trust’s internal control over financial reporting.

### **PART II – OTHER INFORMATION**

| ITEM 1.                                                                                                                                                                                         |   | Legal Proceedings. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|
|                                                                                                                                                                                            |   |               |
| None.                                                                                                                                                                                           |
|                                                                                                                                                                                            |   |               |
| ITEM 1A.                                                                                                                                                                                        |   | Risk Factors.      |
|                                                                                                                                                                                            |   |               |
| There have been no  material changes in the risk factors disclosed under Part I, Item 1A of  the Trust’s Annual Report on Form 10-K, for the year ended  December 31, 2006. |

 

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| ITEM 2. |   | Unregistered Sales of Equity Securities and Use of  Proceeds. |
|---------|--------|---------------------------------------------------------------|
|    |   |                                                          |
| None.   |
|    |
| ITEM 3. |   | Defaults Upon Senior Securities.                              |
|    |   |                                                          |
| None.   |
|    |
| ITEM 4. |   | Submission of Matters to a Vote of Security Holders.          |
|    |   |                                                          |
| None.   |
|    |
| ITEM 5. |   | Other Information.                                            |
|    |   |                                                          |
| None.   |
|    |
| ITEM 6. |   | Exhibits.                                                     |

 
| Exhibit  Number | ** ** | **Description**                        |
|-----------------|------------|----------------------------------------|
|            |       |                                   |
| 31.             |       | Rule 13a-14(a)/15d-14(a) Certification |
|            |       |                                   |
| 32.             |       | Section 1350 Certification             |

 

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SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has duly causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.
|                             |   | EASTERN AMERICAN NATURAL GAS  TRUST                    |
|----------------------------------|--------|--------------------------------------------------------|
|                             |   |                                                   |
|                             |   | By: The Bank of  New York Trust Company, N.A., Trustee |
|                             |   |                                                   |
|                             |   | /s/ Mike Ulrich                                        |   |
|                             |   | Name:                                                  | Mike Ulrich |
|                             |   | Title:                                                 | Vice President |
|                             |   |                                                   | The Bank of New York Trust Company, N.A.,  Trustee |
|                             |   |                                                   |   |
|                             |   |                                                   |   |
| Date:  August  9, 2007 |   |                                                   |   |
|                                  |        |                                                        |  |  |

 

The Registrant, Eastern American Natural Gas Trust,has no principal executive officer, principal financial officer, board ofdirectors or persons performing similar functions.  Accordingly, no additional signatures areavailable and none have been provided.

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