**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

| **ý**                                                                                                                                                                                                                                 | **QUARTERLY  REPORT UNDER SECTION 13 OR 15 (d)**        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|
| **OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                |
| ** **                                                                                                                                                                                                                                 |
| **For the quarterly period ended March 31,  2005**                                                                                                                                                                                    |
| ** **                                                                                                                                                                                                                                 |
| **OR**                                                                                                                                                                                                                                     |
| ** **                                                                                                                                                                                                                                 |
| **o**                                                                                                                                                                                                                                      | **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 1-11748**                                                                                                                                                                                                         |

 

**EASTERN AMERICAN NATURAL GAS TRUST**

(Exact name of registrant as specified in itscharter)

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

 

**JPMorgan Chase Bank, N.A., TrusteeInstitutional Trust Services700 Lavaca, 2nd FloorAustin, Texas**

(Address of principal executive offices)

 

**78701**

(Zip Code)

 

**(800) 852-1422**

(Registrant’s telephone number, includingarea code)

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports) and (2) has beensubject to such filing requirements for the past 90 days.

Yes   o               No   ý

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Act).

 

Yes   ý               No   o

 

(1)          The Registrant inadvertently did not filereports on Form 8-K for its 2004 second and third quarter pressreleases announcing quarterly distributable income and distribution amounts.

 

As of May 5, 2005, 5,900,000 Units of Beneficial Interest inEastern American Natural Gas Trust were outstanding.

 

 

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# **PART I – FINANCIAL INFORMATION**

# ** **

# **ITEM 1.   Financial Statements**

 

**EASTERN AMERICAN NATURAL GAS TRUST**

**CONDENSED STATEMENTS OFDISTRIBUTABLE INCOME**

*(Unaudited)*

 
| ** **                                                                    | ** ** | **Three Months Ended  March 31** | ** ** |
|-------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                    | ** ** | **2005**                         | ** ** | **2004** | ** ** |
|                                                                          |       |                             |       |   |   |
| Royalty  Income                                                               |       | $                                | 3,648,398  |   | $ | 3,080,080 |   |
|                                                                          |       |                             |       |   |   |
| Operating  Expenses:                                                          |       |                             |       |   |   |
| Taxes on production and property                                              |       | 253,671                          |       | 212,604 |   |
| Operating cost charges                                                        |       | 133,587                          |       | 130,335 |   |
|                                                                          |       |                             |       |   |   |
| Total Operating Expenses                                                      |       | 387,258                          |       | 342,939 |   |
|                                                                          |       |                             |       |   |   |
| Net Proceeds  to the Trust                                                    |       | 3,261,140                        |       | 2,737,141 |   |
|                                                                          |       |                             |       |   |   |
| General and  Administrative Expenses                                          |       | (303,473                         | )          | (225,742 | ) |
|                                                                          |       |                             |       |   |   |
| Interest  Income                                                              |       | 500                              |       | 222 |   |
|                                                                          |       |                             |       |   |   |
| Distributable  Income                                                         |       | 2,958,167                        |       | 2,511,621 |   |
|                                                                          |       |                             |       |   |   |
| Quarterly Distribution Amount                                                 |       | $                                | 2,958,167  |   | $ | 2,511,621 |   |
|                                                                          |       |                             |       |   |   |
| Distributable  Income Per Unit (5,900,000 units authorized and outstanding)   |       | $                                | 0.5014     |   | $ | 0.4257 |   |
|                                                                          |       |                             |       |   |   |
| Quarterly  Distribution Per Unit (5,900,000 units authorized and outstanding) |       | $                                | 0.5014     |   | $ | 0.4257 |   |

 

**The accompanying notes are an integral partof these condensed financial statements.**

 

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**EASTERN AMERICAN NATURAL GAS TRUST**

 

**CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUSTCORPUS**

 
| ** **                                                       | ** ** | **March 31, 2005** | ** ** | **December 31, 2004** | ** ** |
|------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                       | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
|                                                             |       |               |       |                  |       |
| Assets:                                                          |       |               |       |                  |       |
|                                                             |       |               |       |                  |       |
| Cash                                                             |       | $                  | 210,287    |                  | $          | 185,752 |   |
| Net Proceeds Receivable                                          |       | 3,261,140          |       | 3,989,827             |       |
| Net Profits Interests in Gas Properties                          |       | 93,162,180         |       | 93,162,180            |       |
| Accumulated Amortization                                         |       | (63,170,380        | )          | (62,337,672           | )          |
|                                                             |       |               |       |                  |       |
| Total Assets                                                     |       | $                  | 33,463,227 |                  | $          | 35,000,087 |   |
|                                                             |       |               |       |                  |       |
| Liabilities  and Trust Corpus:                                   |       |               |       |                  |       |
|                                                             |       |               |       |                  |       |
| Trust General and Administrative Expenses  Payable               |       | $                  | 198,260    |                  | $          | 220,596 |   |
| Distributions Payable                                            |       | 2,958,167          |       | 3,639,983             |       |
| Trust Corpus (5,900,000 Trust Units  authorized and outstanding) |       | 30,306,800         |       | 31,139,508            |       |
|                                                             |       |               |       |                  |       |
| Total Liabilities and Trust Corpus                               |       | $                  | 33,463,227 |                  | $          | 35,000,087 |   |

 

**The accompanying notes are an integral partof these condensed financial statements.**

 

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**EASTERN AMERICAN NATURAL GAS TRUST**

 

**CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS**

*(Unaudited)*

 
| ** **                                               | ** ** | **Three Months  Ended  March 31, 2005** | ** ** | **Three Months  Ended  March 31, 2004** | ** ** |
|----------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|
|                                                     |       |                                    |       |                                    |       |
| Trust  Corpus, Beginning of Period                       |       | $                                       | 31,139,508 |                                    | $          | 34,857,666 |   |
| Distributable  Income                                    |       | 2,958,167                               |       | 2,511,621                               |       |
| Distributions  Payable to Unitholders                    |       | (2,958,167                              | )          | (2,511,621                              | )          |
| Amortization  of Net Profits Interests in Gas Properties |       | (832,708                                | )          | (938,423                                | )          |
|                                                     |       |                                    |       |                                    |       |
| Trust  Corpus, End of Period                             |       | $                                       | 30,306,800 |                                    | $          | 33,919,243 |   |

 

**The accompanying notes are an integral partof these condensed financial statements.**

 

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**EASTERN AMERICAN NATURAL GAS TRUST**

 

**NOTES TO UNAUDITED CONDENSED FINANCIALSTATEMENTS**

 

NOTE 1. Organization of the Trust

 

The Eastern American Natural Gas Trust (the “Trust”)was formed under the Delaware Business Trust Act pursuant to a Trust Agreement(the “Trust Agreement”) among Eastern American Energy Corporation (“EasternAmerican”), as grantor, Bank of Montreal Trust Company, as trustee, andWilmington Trust Company, as Delaware Trustee (the “Delaware Trustee”).  Effective May 8, 2000, The Bank of NewYork acquired the corporate trust business of the then current Trustee andserved as Trustee through December 31, 2004.   On November 20, 2004, the holders of amajority of the Trust Units voting at a special meeting approved theresignation of The Bank of New York, as trustee and depository of the Trust,and the appointment of JPMorgan Chase Bank, N.A. as successor trustee(“Trustee”) of the Trust.  Theappointment of JPMorgan Chase Bank, N.A., as successor trustee, becameeffective as of January 1, 2005. Effective January 1, 2005, the transfer agent for the Trust isBondholder Communications.

 

The Trust was formed to acquire and hold net profitsinterests (the “Net Profits Interests”) created from the working interests ownedby Eastern American in 650 producing gas wells and 65 proved development welllocations (the “Development Wells”) in West Virginia and Pennsylvania (the“Underlying Properties”).

 

On March 15, 1993, 5,900,000 Depositary Units were issued in apublic offering at an initial public offering price of $20.50 per DepositaryUnit.  Each Depositary Unit consists ofbeneficial ownership of one unit of beneficial interest (“Trust Unit”) in theTrust and a $20 face amount beneficial ownership interest in a $1,000 faceamount zero coupon United States Treasury Obligation (“Treasury Obligation”)maturing on May 15, 2013.  Thefinancial statements of the Trust to which these notes relate do not includeinformation concerning the Treasury Obligations, the beneficial interest inwhich is held for the Unitholders by the Depositary.

 

The Net Profits Interests are passive in nature, and neither theTrustee nor the Delaware Trustee has management control or authority over, norany responsibility relating to, the operation of the properties subject to theNet Profits Interests.  The TrustAgreement provides, among other things, that the Trust shall not engage in anybusiness or commercial activity or acquire any asset other than the Net ProfitsInterests initially conveyed to the Trust; the Trustee may establish a reservefor payment of any liability that is contingent, uncertain in amount or is notcurrently due and payable; the Trustee is authorized to borrow funds requiredto pay liabilities of the Trust, provided that such borrowings are repaid infull prior to further distributions to Unitholders; and the Trustee will makequarterly cash distributions to Unitholders from funds of the Trust.

 

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### ** **

### **After the Trust was formed, 59 of the 65 DevelopmentWells 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 conveyance transferringthem to the Trust. Eastern American asserted the remaining four undrilledDevelopment Wells, if drilled, would be too close to then existing wells on theproperty or an adjoining property, and thereafter settled its dispute with theTrust about drilling those four Development Wells by agreeing instead to paythe Trust annually for the annual volume of gas projected to be produced fromthose Development Wells as if they had been drilled.

 

The Net Profits Interests initially consisted of aroyalty interest (“Royalty NPI”) in 322 wells and a term interest (“Term NPI”)in the remaining wells and locations. As of March 31, 2005, the Trust heldNet Profits Interests in 671 wells, consisting of Royalty NPI in 317 wells andTerm NPI in the remaining wells. The Term NPI expire by their terms on May 15,2013, or such earlier time as 41,683 MMcf of gas has been produced that isattributable to Eastern American’s net revenue interest in the propertiesburdened by the Term NPI. As of December 31, 2004, based on theIndependent Petroleum Engineer’s Report, 20,706 MMcf of the maximum 41,683 MMcfhas been produced.

 

Between May 15, 2012 and May 15, 2013 (the“Liquidation Date”), the Trustee is required to sell all the Royalty NPI andliquidate the Trust. Under the Trust Agreement, Eastern American has the rightof first refusal to purchase any of the Royalty NPI the Trustee is required tosell after the Liquidation Date. If it exercises this right, Eastern Americanmust pay the appraised Fair Value (as defined in the Trust Agreement) of theRoyalty NPI, or the relevant third party offer price if a third party hasoffered to purchase the Royalty NPI. Unitholders of record on the relevantrecord dates will receive the net proceeds from selling the Royalty NPI in accordancewith the Trust Agreement, and also will receive their respective share of thematured face amount of the Treasury Obligations held by the Depositary.

 

NOTE 2.  Basis of Presentation

 

The preparation of financial statements requires estimates and assumptionsthat affect reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenue 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.  The information furnished reflects alladjustments which are, in the opinion of the Trustee, necessary for a fairpresentation of the results for the interim periods presented.  The accompanying financial statements areunaudited interim financial statements, and should be read in conjunction withthe audited financial statements and notes thereto included in the Trust’sAnnual Report on Form 10-K/A for the year ended December 31,2004.

 

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NOTE 3.  Trust AccountingPolicies

 

The Trust serves as a pass-through entity, with items of depletion,interest income and expense, and income tax attributes being based upon thestatus and elections of Unitholders. Thus, the Statements of Distributable Income show Distributable Income,defined as Trust income available for distribution to Unitholders subject toTrustees Cash Reserves described in Part I, Item 2 before application ofthose Unitholders’ additional expenses, if any, for depletion, interestexpense, and income taxes.  The Trustuses the accrual basis to recognize revenue, with Royalty Income recognized asgas reserves are extracted from properties and sold.  Expenses are also presented on an accrualbasis.  Actual cash receipts will varyfrom the accrual of revenues due to, among other reasons, the paymentprovisions of the gas purchase contract between the Trust and Eastern MarketingCorporation  (a subsidiary of EasternAmerican), which requires payment with respect to gas production for a calendarquarter to be made to the Trust on or before the tenth day of the third monthfollowing such quarter.

 

The Net Profits Interests are assessed annually to determine whethertheir net capitalized cost is impaired. The Trust will determine if a writedown is necessary to its investmentin the Net Profits Interests in gas properties to the extent that totalcapitalized costs, less accumulated amortization, exceed undiscounted futurenet revenues attributable to proved gas reserves of the UnderlyingProperties.  The Trust will then providea writedown to the extent that the net capitalized costs exceed the discountedfuture net revenues attributable to proved gas reserves of the UnderlyingProperties.   Any such writedown wouldnot reduce distributable income, although it would reduce Trust Corpus.

 

Amortization of the Net Profits Interests in Gas Properties iscalculated on a units-of-production basis, whereby the Trust’s cost basis inthe properties is divided by total Trust proved reserves to derive anamortization rate per reserve unit.  Suchamortization does not reduce distributable income, rather it is chargeddirectly to Trust Corpus.

 

The financial statements of the Trust differ from financial statementsprepared in accordance with accounting principles generally accepted in theUnited States of America due to the following: (i) certain cash reservesmay be established for contingencies which were not accrued in the financialstatements; (ii) amortization of the Net Profits Interests in gasproperties is charged directly to Trust Corpus; and (iii) the sale of theNet Profits Interests is reflected in the Statements of Distributable Income ascash proceeds to the Trust.

 

NOTE 4. Income Taxes

 

The Trust is a grantor trust and is not required to pay federal orstate income taxes.  Accordingly, noprovision for federal or state income taxes has been made.  All income is taxed to the Unitholders of theTrust.

 

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

 

Cautionary Statement

 

This Form 10-Q includes “forward-looking statements” withinthe meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21Eof the Securities Exchange Act of 1934, as amended. All statements other thanstatements of historical facts included in this Form 10-Q, includingwithout limitation the statements under “Management’s Discussion and Analysisof Financial Condition and Results of Operations” are forward-lookingstatements. Although Eastern American has advised the Trustee that its believesthat the expectations reflected in the forward-looking statements containedherein are reasonable, no assurance can be given that such expectations willprove to have been correct. Important factors that could cause actual resultsto differ materially from expectations (“Cautionary Statements”) are disclosedin this Form 10-Q and in the Trust’s Annual Report on Form 10-Kfor the year ended December 31, 2004, as amended, and include the factthat none of the Trust, the Trustee or Eastern American is able to predictfuture changes in gas prices, gas production levels, economic activity,legislation or regulation, or certain changes in expenses of the Trust. Allsubsequent written and oral forward-looking statements attributable to theTrust or persons acting on its behalf are expressly qualified in their entiretyby the Cautionary Statements.  The Trust,the Trustee and Eastern American disclaim any obligation to update any forwardlooking statements.

 

General

 

The Trust does not conduct any operations or activities.  The Trust’s purpose is, in general, to holdthe Net Profits Interests, to distribute the cash proceeds to Unitholders whichthe Trust receives in respect of the Net Profits Interests (net of Trustexpenses), and to perform certain administrative functions in respect of theNet Profits Interests and the Depositary Units. Accordingly, the Trust derives substantially all of its income and cashflows from the Net Profits Interests. The Trust has no source of liquidity or capital resources other than thecash flows from the Net Profits Interests.

 

The Net Profits Interests were created pursuant to conveyances (the“Conveyances”) from Eastern American to the Trust.  In connection therewith, Eastern Americanassigned its rights under a gas purchase contract (the “Gas PurchaseContract”), which obligates Eastern Marketing Corporation, a subsidiary ofEastern American, to purchase all of the natural gas produced from theUnderlying Properties that is attributable to the Net Profits Interests.

 

The Conveyances and the Gas Purchase Contract entitlethe Trust to receive an amount of cash for each calendar quarter equal to theNet Proceeds for such quarter.  “NetProceeds” for any calendar quarter generally means an amount of cash equal to (a) 90%of a volume of gas equal to (i) the volume of gas produced during suchquarter attributable to the Underlying Properties less (ii) a volume ofgas equal to “Chargeable Costs” for such quarter, multiplied by (b) theapplicable price for such quarter under the Gas Purchase Contract.  “Chargeable Costs” is that volume of gaswhich equates in value, determined by reference to the relevant sales priceunder the Gas Purchase Contract or the Conveyances, as applicable, to the sumof the “Operating Cost Charge”, “Capital Costs” and

 

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“Taxes”.

 

The “Operating Cost Charge” for 2005 is based on anannual rate of $535,224, and for 2004 was an annual rate of $521,340.  As provided in the Conveyances, the OperatingCost Charge will fluctuate based on the lesser of (A) five percent (5%) or(B) a percentage, not less than zero percent (0%), equal to the percentageincrease, if any, in the average weekly earnings of Crude Petroleum and GasProduction Workers for the last calendar year, as shown by the index of averageweekly earnings of Crude Petroleum and Gas Production Workers, as published bythe United States Department of Labor, Bureau of Labor Statistics, based onDecember-to-December comparison.

 

During 2003, the United States Department of Labor,Bureau of Labor Statistics converted all of its industry-based statistics to adifferent reporting system that was developed in cooperation with the UnitedStates’ North American Free Trade Agreement Partners, Canada and Mexico, in aneffort to standardize and modernize reporting codes.  As a result of this conversion, the CrudePetroleum and Gas Production Workers index is no longer available for use inthe annual calculation of overhead adjustment called for in the various Councilof Petroleum Accountants Societies (“COPAS”) model forms after March 2003.

 

Research by COPAS covering the past ten yearsindicated that by blending the Oil and Gas Extraction Index with theProfessional and Technical Services Index, the results approximate the datafrom the old Crude Petroleum and Natural Gas Workers Index.  Accordingly, COPAS has calculated thepercentage change in the simple average of the Oil and Extraction Index and theProfessional and Technical Services Index, commencing in April 2004.  This “Overhead Adjustment Index” has beenprovided as a guidance to the industry as a replacement index for use incalculating the overhead adjustment.  Theadjustment for the effective time period is 3.5%.  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 Charge will be reduced for eachwell that is sold (free of the Net Profits Interests) or plugged andabandoned.  Capital Costs are defined asEastern American’s working interest share of capital costs for operations onthe Underlying Properties having a useful life of at least three years, andexcluding any capital costs incurred in drilling the Development Wells.  Taxes refer to ad valorem taxes, productionand severance taxes, and other taxes imposed on Eastern American’s or the Trust’sinterests in the Underlying Properties, or production therefrom.

 

Pursuant to the Gas Purchase Contract, Eastern Marketing is obligatedto purchase such gas production at a purchase price per Mcf equal to the IndexPrice.  The Index Price for any quarteris determined solely 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 any calendar quarterequal to the price obtained with respect to each of the three months in suchquarter, in the manner specified below, and then taking the average of theprices 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 perMMBtu for Henry 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 settlementprice per 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 ofHenry Hub Gas Futures Contracts determined as of the contract settlement datefor such 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 Index Price payable to the Trust for production may behigher or lower based on the fluctuations in natural gas futures prices duringthe relevant calculation period.  Theprice payable to the Trust will have a direct impact, positively or negatively,on the quarterly distributions payable by the Trust to its unit holders.

 

Eastern American had a disagreement with the Trustover Eastern American’s obligation to drill certain Development Wells that wereclosely offset by third parties.  TheTrust agreed that in lieu of drilling these closely offset Development Wells,Eastern American could provide the Trust, on an annual basis commencing on April 1,1997, and over the remaining life of the Trust, a volume of gas which is equalto the projected volumes of the wells as if they had been drilled.  These volumes have been estimated by RyderScott Company, independent petroleum engineers. During the quarter ended March 31, 2005, an additional volume of4,457 Mcf was delivered to the Trust, as compared to 4,822 Mcf for the quarterended March 31, 2004.  Theseadditional volumes fulfill Eastern American’s obligation to provide volumes forDevelopment Wells that had been closely offset by third parties.

 

Eastern American has fulfilled its obligation withrespect to the drilling of the Development Wells. Since the inception of theTrust, Eastern has drilled a total of 59 Development Wells, which are onlineand producing.  (See the Trust’s AnnualReport on Form 10-K for the fiscal year ended December 31,2004, as amended, for a more complete description of the Development Wells.)

 

During 2004, an oil and gas company contacted Eastern American andinquired as to whether it would sell certain assets situated in Centre County,Pennsylvania including the Horne #1, Horne #2 and Horne #15 wells (“the HorneUnderlying Properties”), which are wells in which the Trust owns a Net ProfitsInterests.  Eastern American reviewed theTrust Agreement and certified to the Trustee that:  (i) the gross purchase price to bereceived by Eastern American for the sale of the Horne Underlying Properties ina single transaction or a series of related transactions is less than $500,000;(ii) the Assignee of the Horne Underlying Properties is not an Affiliateof Eastern American; (iii) the aggregate sale proceeds of $80,205 to bereceived by the Trust from Eastern American (the Trust’s Horne Sale Proceeds)represents the fair value to the Trust for Net Profits Interests to be releasedby the Trustee in connection with Eastern American’s sale of the HorneUnderlying Properties; and (iv)

 

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the Trust’s Horne Sale Proceeds plus the aggregate sale proceedsreceived by the Trust pursuant to Section 3.02(b)(ii) of the TrustAgreement with respect to all other Net Profits Interests previously releasedby the Trustee pursuant to Section 3.02(b) during the most recentlycompleted twelve calendar months does not exceed $500,000.  Eastern American advised the oil and gascompany that it could sell these wells. The effective date of the sale was May 1, 2004.  The Trust’s share of the proceeds of $80,205was included in the Distributable Income of the Trust during the quarter endingJune 30, 2004.

 

Also, during 2004, a landowner contacted Eastern American to inquireabout the sale of certain wells located on the landowner’s property, includingthe Wurst #2 well, which is a well in which the Trust owns a Net ProfitsInterest.  Eastern certified to the Trustthat: (i) the Assignee of the Wurst #2 was not an Affiliate of Easternand; (ii) the aggregate sale proceeds to be received from all other salesof wells in which the Trust owns a Net Profits Interest and previously releasedby the Trust during the preceeding twelve (12) calendar months did not exceed$500,000.  The Wurst #2 well was found tobe uneconomic to operate and was subject to plugging and abandonment by EasternAmerican if not assigned to the landowner. Eastern American advised the landowner that it could assign this well.The Wurst #2 well had no value and no cash distribution was made to the Trust.

 

Over the remaining life of the Trust, additional wellsmay be disposed of for similar or other reasons.

 

**Critical Accounting Policies**

 

The following is a summary of the critical accounting policies followedby the Trust.

 

*Basis of Accounting:*

 

The financial statements of the Trust differ from financial statementsprepared in accordance with accounting principles generally accepted in theUnited States of America due to the following: (i) certain cash reservesmay be established for contingencies which were not accrued in the financialstatements; (ii) amortization of the Net Profits Interests in gasproperties is charged directly to Trust Corpus; and (iii) the sale of theNet Profits Interests is reflected in the Statements of Distributable Income ascash proceeds to the Trust.

 

*Net Profits Interests in Gas Properties:*

 

The Net Profits Interests in gas properties are periodically assessedto determine whether their net capitalized cost is impaired.  The Trust will determine if a writedown isnecessary to its investment in the Net Profits Interests in gas properties tothe extent that total capitalized costs, less accumulated amortization, exceedundiscounted future net revenues attributable to proved gas reserves of theUnderlying Properties.  The Trust willthen provide a writedown to the extent that the net capitalized costs exceedthe discounted future net revenues attributable to proved gas reserves of theUnderlying Properties.  Any such writedownwould not reduce distributable income, although it would reduce Trust Corpus.

 

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Amortization of the Net Profits Interests in gas properties iscalculated on a units-of-production basis, whereby the Trust’s cost basis inthe properties is divided by total Trust proved reserves to derive anamortization rate per reserve unit.  Suchamortization does not reduce distributable income, rather it is chargeddirectly to Trust Corpus.  Revisions toestimated future units-of-production are treated on a prospective basisbeginning on the date significant revisions are known.

 

The Net Profits Interest impairment test and the determination ofamortization rates are dependent on estimates of proved gas reserves attributableto the Trust.  Numerous uncertainties areinherent in estimating reserve volumes and values, including economic andoperating conditions, and such estimates are subject to change as additionalinformation becomes available.

 

**Liquidity andCapital Resources**

** **

The Trust has no source of liquidity or capital resources other thanthe distributions received from the Net Profits Interests.

 

In accordance with the provisions of the Conveyances,generally all revenues received by the Trust, net of Trust administrative andoperating expenses and the amount of established reserves, are distributedcurrently to the Unitholders.

 

The Trust did not have any contractual obligations asof March 31, 2005.  At March 31,2005, the Trust had accounts payable of $198,260 and distributions payable of$2,958,167.

 

Comparison of Results of Operations for Three Months EndedMarch 31, 2005 and Three Months Ended March 31, 2004

 

The Trust’s distributable income was $2,958,167 forthe three months ended March 31, 2005 as compared to $2,511,621 for thethree months ended March 31, 2004. This increase was due to an increase in Royalty Income for the threemonths ended March 31, 2005 of $3,648,398 as compared to the three monthsended March 31, 2004 of $3,080,080. The increase in Royalty Income was due to an increase in the pricepayable to the Trust under the Gas Purchase Contract as discussed below ($7.455per Mcf for the three months ended March 31, 2005; $6.056 per Mcf for thethree months ended March 31, 2004). This increase was offset by a decrease in production of gas attributableto the Net Profits Interests for the three months ended March 31, 2005(491 Mmcf) as compared to the three months ended March 31, 2004 (508Mmcf).  The decline in production isprimarily attributable to natural production declines.  Taxes on production and property were$253,671 for the three months ended March 31, 2005 as compared to $212,604for the three months ended March 31, 2004. The increase in taxes is duedirectly to the increase in Royalty Income as discussed above.  Trust general and administrative expenseswere $303,473 for the three months ended March 31, 2005 as compared to$225,742 for the three months ended March 31, 2004.  This increase in general and administrativeexpense was primarily related to professional service fees of $87,930.

 

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The price payable to the Trust for gas production attributable to theNet Profits Interests was $7.455 per Mcf for the three months ended March 31,2005 and $6.056 per Mcf for the three months ended March 31, 2004.  The price per Mcf was higher for the threemonths ended March 31, 2005 than for the corresponding three month periodended March 31, 2004 due to an increase in the average spot market pricefor gas delivered at the Henry Hub near Henry, Louisiana ($6.477 per Dth forthe three months ended March 31, 2005; $5.205 per Dth for the three monthsended March 31, 2004).

 

**Off-Balance SheetArrangements**

** **

The Trust does not have anyoff-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 quarter ended March 31, 2005,the high and low closing prices of the Treasury Obligations (which have $1,000face principal amount), as quoted in the over-the-counter market for UnitedStates Treasury obligations were $718.10 and $684.40 respectively.  On March 31, 2005 the closing price ofthe Treasury Obligations, as quoted on such market, was $693.90.

 

**The Trust provides Unitholders withthe option to separate the related Treasury Obligation from the TrustUnits.  Upon exercising this option, theTrustee transfers such Trust Units from the name of the Depositary to the nameof the withdrawing Unitholder.  As of March 31,2005, this option was exercised on 19,900 Trust Units.  (See the Trust’s 10-K for the fiscalyear ended December 31, 2004 for a more complete description of theWithdrawal of Trust Units and Restriction on Transfer.)**

** **

On November 20, 2004, the holders of a majorityof the Trust Units voting at a special meeting approved the resignation of TheBank of New York as trustee and depository of the Trust and the appointment ofJPMorgan Chase Bank, N.A. as successor trustee of the Trust.  The appointment of JPMorgan Chase Bank, N.A.as successor trustee became effective as of January 1, 2005.  Effective January 1, 2005, the transferagent for the Trust is Bondholder Communications.

 

ITEM 3.  Quantitative andQualitative 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.  Asdescribed elsewhere herein, the Depositary Units consist of beneficialownership of one unit of beneficial interest in the Trust and a $20 face amountbeneficial ownership interest in a $1,000 face amount zero coupon TreasuryObligation maturing on May 15, 2013. High and low price information for the Treasury Obligations is includedunder Part II Item 5.  As describedelsewhere herein, gas production attributable to the Net Profits Interest issold to a wholly owned subsidiary of Eastern American pursuant to the GasPurchase Contract described herein, and the Trust’s quarterly distributions are

 

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highly dependent on the price payable to the Trust for gas productionattributable to the Net Profits Interest. Natural gas prices can fluctuate widely in response to many factors, allof which are out of the control of the Trust, the Trustee and Eastern American.

 

ITEM 4.  Controls and Procedures

 

*Evaluation of Disclosure Controls andProcedures. *TheTrustee maintains disclosure controls and procedures designed to providereasonable assurance that information required to be disclosed by the Trust inthe reports that it files or submits under the Securities Exchange Act of 1934,as amended, is recorded, processed, summarized and reported within the timeperiods specified in the SEC’s rules and regulations.  Disclosure controls and procedures includecontrols and procedures designed to provide reasonable assurance thatinformation required to be disclosed by the Trust is accumulated andcommunicated by several parties, including without limitation, the working interestowner, Eastern American, and the independent reserve engineer to JPMorgan ChaseBank, N.A., as Trustee of the Trust, and its employees who participate in thepreparation of the Trust’s periodic reports as appropriate to allow timelydecisions regarding required disclosure. In addition, the Trustee is required by the Trust Agreement to engageand has engaged an independent registered public accounting firm to review thequarterly financial statements of the Trust and audit the annual financialstatements of the Trust, which includes financial data provided by EasternAmerican.

 

As of March 31, 2005, the Trustee carried out an evaluation of theTrustee’s disclosure controls and procedures, as defined under Rules 13a-15(e) and15(d-15(e) under the Securities and Exchange Act.  Mike Ulrich, a Vice President of JPMorganChase Bank, N.A., has concluded that the controls and procedures are effectiveat the reasonable assurance level, while noting certain limitations ondisclosure controls and procedures as set forth below.

 

Due to the contractual arrangements of (i) the Trust Agreement,and (ii) the rights of the Trustee under the Conveyances regardinginformation furnished by Eastern American, there are certain potentialweaknesses that may limit the effectiveness of disclosure controls andprocedures established by the Trustee or its employees and their ability toverify the accuracy of certain financial information.  The contractual limitations creatingpotential weaknesses in disclosure controls and procedures may be deemed to include:

 

•                  Eastern Americanand its consolidated subsidiaries manage (i) historical operating data,including production volumes, marketing of products, operating and capitalexpenditures, environmental and other liabilities, the effects of regulatorychanges and the number of producing wells and acreage; (ii) plans forfuture operating and capital expenditures; and (iii) geological datarelating to reserves.  While the Trusteerequests material information for use in periodic reports as part of itsdisclosure controls and procedures, the Trustee does not manage thisinformation, and relies to the extent considered reasonable on Eastern Americanto provide accurate and timely information when requested for use in the Trust’sreports.

•                  Under the termsof the Trust Agreement, the Trustee is entitled to, and in fact does, rely uponin good faith the independent reserve engineer, as an expert with respect tothe annual reserve

 

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report, which includes projected production, operating expenses andcapital expenses..  Other than reviewingthe financial and other information provided to the Trust by Eastern Americanon a quarterly basis, the Trustee makes no independent or direct verificationof this financial or other information. While the Trustee has no reason tobelieve its reliance upon this expert is unreasonable, this reliance on anexpert and restricted access to information may be viewed as a weakness.

 

The Trustee does not intend to expand its responsibilities beyond thosepermitted or required by the Trust Agreement and those required underapplicable law.

 

**Changes inInternal Control Over Financial Reporting**

 

There has been no change in the Trustee’s internal control overfinancial reporting during the three months ended March 31, 2005 that hasmaterially affected, or is reasonable likely to materially affect, the Trustee’sinternal control over financial reporting. The Trustee notes for purposes of clarification that it has no authorityover, and makes no statement concerning, the internal control over financialreporting of Eastern American.

 

### **PART II – OTHER INFORMATION**

### ** **

ITEM 1.                             Legal Proceedings.

 

None.

 

ITEM 2.                             Unregistered Sales of EquitySecurities and Use of Proceeds.

 

None.

 

ITEM 3.                             Defaults Upon SeniorSecurities.

 

None.

 

ITEM 4.                             Submission of Matters to aVote of Security Holders.

 

None.

 

ITEM 5.                             Other Information.

 

None.

 

ITEM 6.                             Exhibits.

 

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                                       |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                  |
| 3.1*                |       | Second Amended and Restated Trust Agreement of  Eastern American Natural Gas Trust                                                                    |
|                |       |                                                                                                                                                  |
| 4.1*                |       | Specimen Depositary Receipt                                                                                                                           |
|                |       |                                                                                                                                                  |
| 4.2*                |       | Form of NPI Royalty Deposit Agreement                                                                                                            |
|                |       |                                                                                                                                                  |
| 10.1*               |       | Form of Conveyance                                                                                                                               |
|                |       |                                                                                                                                                  |
| 10.2*               |       | Form of Term NPI Conveyance                                                                                                                      |
|                |       |                                                                                                                                                  |
| 10.3*               |       | Form of Gas Purchase Contact between Eastern American Energy  Corporation, Eastern Marketing Corporation and Eastern American Natural Gas  Trust |
|                |       |                                                                                                                                                  |
| 10.5*               |       | Form of Conveyance of Production Payment/Assignment of  Production from Eastern American Natural Gas Trust to Eastern Marketing  Corporation     |
|                |       |                                                                                                                                                  |
| 10.6*               |       | Form of Assignment and Standby Performance Agreement                                                                                             |
|                |       |                                                                                                                                                  |
| 31.                 |       | Rule 13a-14(a)/15d-14(a) Certification                                                                                                      |
|                |       |                                                                                                                                                  |
| 32.                 |       | Section 1350 Certification                                                                                                                       |

 

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*    Incorporated by reference tothe indicated exhibits to filings previously made by the registrant with theSecurities and Exchange Commission.  Allreferences are to the registrant’s Registration Statement on Form S-1,Registration No. 33-56336, except for Exhibit 3.1, which isincorporated by reference to the Registrant’s Annual report on Form 10-Kfor the year ended December 31, 1994.

 

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### **SIGNATURES**

### ** **

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 theundersigned, thereunto duly authorized.

 
|                   | EASTERN AMERICAN NATURAL GAS TRUST     |
|------------------------|----------------------------------------|
|                   |                                   |
|                   | By: JPMorgan Chase Bank, N.A., Trustee |
|                   |                                   |
|                   | /s/ Mike Ulrich                        |   |
|                   | Name:                                  | Mike Ulrich |
|                   | Title:                                 | Vice President  JPMorgan Chase Bank, N.A. |
|                   |                                   |
|                   |                                   |
| Date: May 9, 2005 |
|                        |                                        |  |  |

 

The Registrant, Eastern American Natural Gas Trust, has no principalexecutive officer, principal financial officer, board of directors or personsperforming similar functions. Accordingly no additional signatures are available and none have beenprovided.

 

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