**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-Q**

**(Mark One)**

**x**                              QUARTERLYREPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe quarterly period ended March 31, 2007**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe transition period from                    to                 .**

**CommissionFile Number  1-11748**

**EASTERN AMERICAN NATURAL GAS TRUST**

(Exact name of registrantas 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 Trust Company, N.A, Trustee** |
|------------------------------------------------------|
| **Global  Corporate Trust**                          |
| **919 Congress  Avenue Suite 500**                   |
| **Austin,  Texas**                                   |
| (Address of  principal executive offices)            |

 

**78701**

(Zip Code)

**(800) 852-1422**

(Registrant’s telephonenumber, including area code)

Indicate by check mark whether the registrant (1) hasfiled all reports 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 been subjectto such filing requirements for the past 90 days.   Yes  x   No  o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. (as defined in 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 registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  o   No  x

Asof May 1, 2007, 5,900,000 Units of Beneficial Interest in Eastern AmericanNatural Gas Trust were issued, outstanding and held by non-affiliates of theregistrant (the “Outstanding Units”).  Ofthe Outstanding Units, 19,900 Units of Beneficial Interest (the “WithdrawnUnits”) have been withdrawn from trading by voluntary action of Holders and maynot be traded unless such Holders comply with certain requirements provided inthe related Trust Agreement.

 

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**PART I — FINANCIALINFORMATION**

**ITEM 1.**                    Financial Statements

**EASTERN AMERICANNATURAL GAS TRUST**

**CONDENSEDSTATEMENTS OF DISTRIBUTABLE INCOME***(Unaudited)*
| ** **                                                                  | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                  | ** ** | **March 31,**               | ** ** |
| ** **                                                                  | ** ** | ** **                       | ** ** | ** ** | ** ** |
| ** **                                                                  | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                                                        |       |                             |       |   |   |
| Royalty Income                                                              |       | $                                | 3,564,851  |   | $ | 5,363,086 |   |
|                                                                        |       |                             |       |   |   |
| Operating Expenses                                                          |       |                             |       |   |   |
| Taxes on  Production and Property                                           |       | 269,073                          |       | 390,983 |   |
| Operating Cost  Charges                                                     |       | 147,040                          |       | 140,267 |   |
|                                                                        |       |                             |       |   |   |
| Total Operating  Expenses                                                   |       | 416,113                          |       | 531,250 |   |
|                                                                        |       |                             |       |   |   |
| Net Proceeds to the  Trust                                                  |       | 3,148,738                        |       | 4,831,836 |   |
|                                                                        |       |                             |       |   |   |
| General and  Administrative Expenses                                        |       | 316,763                          |       | 447,220 |   |
|                                                                        |       |                             |       |   |   |
| Distributable  Income                                                       |       | 2,831,975                        |       | 4,384,616 |   |
|                                                                        |       |                             |       |   |   |
| Cash Reserve Refunded                                                       |       | 300,000                          |       | - |   |
|                                                                        |       |                             |       |   |   |
| Distribution  Amount                                                        |       | $                                | 3,131,975  |   | $ | 4,384,616 |   |
|                                                                        |       |                             |       |   |   |
|                                                                        |       |                             |       |   |   |
| Distributable Income  Per Unit (5,900,000 units authorized and outstanding) |       | $                                | 0.4800     |   | $ | 0.7432 |   |
|                                                                        |       |                             |       |   |   |
| Distribution Amount Per  Unit (5,900,000 units authorized and outstanding)  |       | $                                | 0.5308     |   | $ | 0.7432 |   |
|                                                                        |       |                             |       |   |   |

 

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

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**EASTERN AMERICANNATURAL GAS TRUST**

**CONDENSEDSTATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS**
| ** **                                                       | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                       | ** ** | **(Unaudited)**              | ** ** | ** **                      | ** ** |
|                                                             |       |                         |       |                            |       |
| **Assets:**                                                      |       |                         |       |                            |       |
|                                                             |       |                         |       |                            |       |
| Cash                                                             |       | $                            | 636,120    |                            | $          | 590,585 |   |
| Net Proceeds  Receivable                                         |       | 3,148,738                    |       | 3,013,944                       |       |
| Net Profits  Interests in Gas Properties                         |       | 93,162,180                   |       | 93,162,180                      |       |
| Accumulated  Amortization                                        |       | (69,353,449                  | )          | (68,600,962                     | )          |
|                                                             |       |                         |       |                            |       |
| Total Assets                                                     |       | $                            | 27,593,589 |                            | $          | 28,165,747 |   |
|                                                             |       |                         |       |                            |       |
|                                                             |       |                         |       |                            |       |
| **Liabilities and Trust Corpus:**                                |       |                         |       |                            |       |
|                                                             |       |                         |       |                            |       |
| Trust General  and Administrative Expenses Payable               |       | $                            | 252,883    |                            | $          | 223,442 |   |
| Distributions  Payable                                           |       | 3,131,975                    |       | 2,681,087                       |       |
| Trust Corpus  (5,900,000 Trust Units authorized and outstanding) |       | 24,208,731                   |       | 25,261,218                      |       |
|                                                             |       |                         |       |                            |       |
| Total  Liabilities and Trust Corpus                              |       | $                            | 27,593,589 |                            | $          | 28,165,747 |   |

 

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

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**EASTERN AMERICANNATURAL GAS TRUST**

**CONDENSEDSTATEMENTS OF CHANGES IN TRUST CORPUS***(Unaudited)*
| ** **                                | ** ** | **Three Months**        | ** ** | **Three Months**        | ** ** |
|-------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                | ** ** | **Ended**                    | ** ** | **Ended**                    | ** ** |
| ** **                                | ** ** | **March 31, 2007** | ** ** | **March 31, 2006** | ** ** |
|                                      |       |                         |       |                         |       |
| Trust Corpus, Beginning  of Period        |       | $                            | 25,261,218 |                         | $          | 28,703,265 |   |
| Distributable Income                      |       | 2,831,975                    |       | 4,384,616                    |       |
| Distributions Payable  to Unitholders     |       | (3,131,975                   | )          | (4,384,616                   | )          |
| Amortization of Net  Profits Interests in |       |                         |       |                         |       |
| Gas Properties                            |       | (752,487                     | )          | (743,317                     | )          |
|                                      |       |                         |       |                         |       |
| Trust Corpus, End of Period               |       | $                            | 24,208,731 |                         | $          | 27,959,948 |   |

 

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

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**EASTERN AMERICAN NATURAL GAS TRUST**

**NOTES TOUNAUDITED CONDENSED FINANCIAL STATEMENTS**

**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 New York acquired the corporate trustbusiness of the Bank of Montreal Trust Company / Harris Trust, andconsequently, The Bank of New York served as trustee of the Trust. On November20, 2004, the holders of a majority of the Trust Units voting at a special meetingapproved the resignation of The Bank of New York as trustee and depository ofthe Trust and the appointment of JPMorgan Chase Bank, N.A. as successor trusteeof the Trust, effective as of January 1, 2005. Effective October 2, 2006, The Bank of New York Trust Company, N. A.replaced JPMorgan Chase Bank, N.A. as trustee in connection with the sale byJPMorgan Chase Bank of substantially all of its corporate trust business to TheBank of New York.  Consequently, referencesherein to the “Trustee” mean Bank of Montreal Trust Company until May 8, 2000;The Bank of New York as successor Trustee from May 8, 2000 through December 31,2004; JPMorgan Chase Bank, N.A. as successor trustee, from January 1, 2005through October 2, 2006; and The Bank of New York Trust Company, N.A. assuccessor trustee, effective as of October 2, 2006.  The transfer agent for the Trust isBondholder Communications, an affiliate of The Bank of New York Trust Company,N.A.

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

On March 15, 1993, 5,900,000 Depositary Units wereissued in a public offering at an initial public offering price of $20.50 perDepositary Unit.  Each Depositary Unitconsists of beneficial ownership of one unit of beneficial interest (“TrustUnit”) in the Trust and a $20 face amount beneficial ownership interest in a$1,000 face amount zero coupon United States Treasury Obligation (“TreasuryObligation”) maturing on May 15, 2013. The financial statements of the Trust to which these notes relate do notinclude information concerning the Treasury Obligations, the beneficialinterest in which is held for the Unitholders by the Depositary.

The Net Profits Interests are passive in nature, andneither the Trustee nor the Delaware Trustee has management control or authorityover, nor any responsibility relating to, the operation of the propertiessubject to the Net Profits Interests. The Trust Agreement provides, among other things, that the Trust shallnot engage in any business or commercial activity or acquire any asset otherthan the Net Profits Interests initially conveyed to the Trust; the Trustee mayestablish a reserve for payment of any liability that is contingent, uncertainin amount or is not currently due and payable;

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**EASTERN AMERICANNATURAL GAS TRUST**

**NOTES TO UNAUDITEDCONDENSED FINANCIAL STATEMENTS - (Continued)**

the Trustee isauthorized to borrow funds required to pay liabilities of the Trust, providedthat such borrowings are repaid in full prior to further distributions toUnitholders; and the Trustee will make quarterly cash distributions toUnitholders from funds of the Trust.

**After the Trust was formed, 59 ofthe 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 the remaining fourundrilled Development Wells, if drilled, would be too close to then existingwells on adjoining property, and thereafter settled its dispute with the Trustabout drilling those four Development Wells by agreeing instead to pay theTrust annually for the annual volume of gas projected to be produced from thoseDevelopment 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, 2007, the Trust held NetProfits Interests in 670 wells, consisting of Royalty NPI in 317 wells and TermNPI 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, 2006, based on the IndependentPetroleum Engineer’s Report, 23,661 MMcf of the maximum 41,683 MMcf has beenproduced.

Between May 15, 2012 and May 15, 2013 (the “LiquidationDate”), the Trustee is required to sell all the Royalty NPI and liquidate theTrust. Under the Trust Agreement, Eastern American has the right of firstrefusal to purchase any of the Royalty NPI the Trustee is required to sellafter the Liquidation Date. If it exercises this right, Eastern American mustpay the appraised Fair Value (as defined in the Trust Agreement) of the RoyaltyNPI, or the relevant third party offer price if a third party has offered topurchase the Royalty NPI. Unitholders of record on the relevant record dateswill receive the net proceeds from selling the Royalty NPI in accordance withthe 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 requiresestimates and assumptions that affect reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenue and expensesduring the reporting period.  Withoutlimiting the foregoing statement, the information furnished is based uponcertain estimates of production for the periods presented and is thereforesubject to adjustment in future periods to reflect actual production for theperiods presented.  The informationfurnished reflects all adjustments which are, in the opinion of the Trustee,necessary for a fair presentation of the results

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**EASTERN AMERICANNATURAL GAS TRUST**

**NOTES TO UNAUDITEDCONDENSED FINANCIAL STATEMENTS - (Continued)**

for the interimperiods presented.  The accompanyingfinancial statements are unaudited interim financial statements, and should beread in conjunction with the audited financial statements and notes thereto includedin the 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 for complete financial statements.

**NOTE 3. Trust Accounting Policies**

The Trust serves as a pass-through entity, with itemsof depletion, interest income and expense, and income tax attributes beingbased upon the status and election of the Unitholders. Thus, the Statements ofDistributable Income purport to show Distributable Income, defined as Trustincome available for distribution to Unitholders before application of thoseUnitholders’ additional expenses, if any, for depletion, interest income andexpense, and income taxes.

The Trust uses the accrual basis to recognize revenue,with royalty income recorded as reserves are extracted from the UnderlyingProperties and sold. Expenses are also recognized on an accrual basis.Operating expenses which include Taxes on Property and Production and OperatingCost Charges are recognized as incurred pursuant to the Conveyances on a perwell production basis. The payment provisions of the Gas Purchase Contractbetween the Trust and Eastern Marketing Corporation (“Eastern Marketing”), awholly owned subsidiary of Eastern American, require payment with respect togas production for a calendar quarter to be made to the Trust on or before thetenth day of the third month following such quarter.

The Net Profits Interests are assessed annually todetermine 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 suchwritedown would not reduce Distributable Income, although it would reduce TrustCorpus.

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.

The financial statements of the Trust differ fromfinancial statements prepared in accordance with accounting principlesgenerally accepted in the United States of America due to the following: (i)certain cash reserves may be established for contingencies which were notaccrued in the financial

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**EASTERN AMERICANNATURAL GAS TRUST**

**NOTES TO UNAUDITEDCONDENSED FINANCIAL STATEMENTS - (Continued)**

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, if any, isreflected in the Statements of Distributable Income as Cash Proceeds on Sale ofNet Profit Interests to the Trust.

**NOTE 4. Income Taxes**

The Trust is a grantor trust and is not required topay federal or state income taxes. Accordingly, no provision for federal or state income taxes has beenmade.  All income is taxed to the Unitholdersof the Trust.

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**ITEM 2.**                    Management’s Discussion and Analysis of FinancialCondition and Results of Operations

Cautionary Statement

This Form 10-Q includes “forward-looking statements”within the meaning of Section 27A of the Securities Act of 1933, as amended,and Section 21E of the Securities Exchange Act of 1934, as amended. Allstatements other than statements of historical fact included in this Form 10-Q,including without limitation the statements under “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” are forward-lookingstatements. Although Eastern American has advised the Trustee that it 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-K for the yearended December 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 oralforward-looking statements attributable to the Trust or persons acting on itsbehalf are expressly qualified in their entirety by the CautionaryStatements.  The Trust, the Trustee andEastern American disclaim any obligation to update any forward-lookingstatements.

General

The Trust does not conduct any operations oractivities.  The Trust’s purpose is, ingeneral, to hold the Net Profits Interests, to distribute the cash proceeds toUnitholders which the Trust receives in respect of the Net Profits Interests(net of Trust expenses), and to perform certain administrative functions inrespect of the Net Profits Interests and the Depositary Units.  Accordingly, the Trust derives substantiallyall of its income and cash flows from the Net Profits Interests.  The Trust has no source of liquidity orcapital resources other than the cash flows from the Net Profits Interests.

The Net Profits Interests were created pursuant toconveyances (the “Conveyances”) from Eastern American to the Trust.  In connection therewith, Eastern Americanassigned its rights under a gas purchase contract (the “Gas Purchase Contract”),which obligates Eastern Marketing Corporation, a subsidiary of EasternAmerican, to purchase all of the natural gas produced from the UnderlyingProperties 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 of gasequal to “Chargeable Costs” for such quarter, multiplied by (b) the applicableprice 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 “Taxes”.

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The “Operating Cost Charge” for 2007 is based on anannual rate of $588,160, and 2006 was based on an annual rate of $561,068.  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, or COPAS, model forms after March 2003.

Research by COPAS covering a ten year period indicatedthat by blending the Oil and Gas Extraction Index with the Professional and TechnicalServices Index, the results approximate the data from the old Crude Petroleumand Natural Gas Workers Index. Accordingly, COPAS has calculated the percentage change in the simpleaverage of the Oil and Extraction Index and the Professional and TechnicalServices Index, commencing in April 2004. This “Overhead Adjustment Index” has been provided as a guidance to theindustry as a replacement index for use in calculating the overheadadjustment.  The adjustment for theeffective time period is 5.0%.  Since theConveyance Documents do not specifically provide for a replacement index if theCrude Petroleum and Gas Production Workers Index was no longer published,Eastern American believes, and advised the Trustee, that the “OverheadAdjustment Index” as calculated by COPAS is a reasonable index to utilize sincethe industry is generally adopting the same as a replacement.  Eastern American, with the concurrence of theTrustee, will utilize this “Overhead Adjustment Index” to adjust the “OperatingCost Charge” so long as such index is 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, EasternMarketing is obligated to purchase such gas production at a purchase price perMcf equal to the Index Price.  The IndexPrice for any quarter is determined solely by reference to the Variable Pricecomponent.  The Variable Price for anyquarter is equal to the Henry Hub Average Spot Price (as defined) per MMBtuplus $0.30 per MMBtu, multiplied by 110% to effect a fixed adjustment for Btucontent.  The Henry Hub Average SpotPrice

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is defined as the priceper MMBtu determined for any calendar quarter equal to the price obtained withrespect to each of the three months in such quarter, in the manner specifiedbelow, and then taking the average of the prices determined for each of suchthree months.  The price determined forany month of such quarter is equal to the average of (i) the final settlementprice per MMBtu for Henry Hub Gas Futures Contracts (as defined), as reportedin *The Wall Street Journal*, for suchcontracts which expired in each of the five months prior to such month; (ii)the final settlement price per MMBtu for Henry Hub Gas Futures Contracts, asreported in *The Wall Street Journal*, for suchcontracts which expire during such month; and (iii) the closing settlementprice per MMBtu of Henry Hub Gas Futures Contracts determined as of thecontract settlement date for such month, as reported in *The WallStreet Journal*, for such contracts which expire in each of the sixmonths following such month.  A Henry HubGas Futures Contract is defined as a gas futures contract for gas to bedelivered to the Henry Hub that is traded on the New York Mercantile Exchange.

Accordingly, the Index Price payable to the Trust forproduction may be higher or lower based on the fluctuations in natural gasfutures prices during the relevant calculation period.  The price payable to the Trust will have adirect impact, positively or negatively, on the quarterly Distributions Payableby the Trust to its Unitholders.

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 onApril 1, 1997, and over the remaining life of the Trust, a volume of gas whichis equal to the projected volumes of the wells as if they had beendrilled.  These volumes have beenestimated by Ryder Scott Company, independent petroleum engineers.  During the quarter ended March 31, 2007, anadditional volume of 3,813 Mcf was delivered to the Trust, as compared to 4,122Mcf for the quarter ended March 31, 2006. These additional volumes fulfill Eastern American’s obligation toprovide volumes for Development Wells that had been closely offset by thirdparties.

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, 2006, for a morecomplete description of the Development Wells.)

Over the remaining life of the Trust, wells may bedisposed of from time to time in accordance with the documents governing theTrust.

The administrative costs the Trust incurs in thefuture will fluctuate depending primarily on the expenses the Trust incurs forprofessional 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 financial statements of the Trust differ fromfinancial statements prepared in accordance with accounting principlesgenerally accepted in the United States of America due to the following: (i)certain cash reserves may be established for contingencies which were notaccrued in the financial statements; (ii) amortization of the Net ProfitsInterests in Gas Properties is charged directly to Trust Corpus; and (iii) thesale of the Net Profits Interests is reflected in the Statements ofDistributable Income as cash proceeds to the Trust.

*NetProfits 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.

The Net Profits Interest impairment test and thedetermination of amortization rates are dependent on estimates of proved gasreserves attributable to the Trust. Numerous uncertainties are inherent in estimating reserve volumes andvalues, including economic and operating conditions, and such estimates aresubject to change as additional information becomes available.

**Recent Accounting Pronouncements**

**In February 2007, the FinancialAccounting Standards Board (“FASB”) issued Statement of Financial AccountingStandards No. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities - Including an amendment to FASB Statement No. 115” (“SFAS 159”).  SFAS 159 permits entities to measure manyfinancial instruments at fair value with the changes in fair value recognizedin earnings at each subsequent reporting date. This statement is effective for fiscal years beginning after November15, 2007.  The Trust does not havefinancial instruments.  Therefore, SFAS159 does**

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**notapply to the Trust and would have no impact on the financial statements.**

**Liquidity and Capital Resources**

The Trust has no source of liquidity or capitalresources other than the 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, 2007.  At March 31, 2007,the Trust had Trust General and Administrative Expenses Payable of $252,883 andDistributions Payable of $3,131,975.

Comparison ofResults of Operations for Three Months Ended March 31, 2007 and Three MonthsEnded March 31, 2006

The Trust’s Distributable Income was $2,831,975 forthe three months ended March 31, 2007 as compared to $4,384,616 for the threemonths ended March 31, 2006.  Thisdecrease was due to a decrease in Royalty Income for the three months endedMarch 31, 2007 to $3,564,851 as compared to the three months ended March 31,2006 of $5,363,086.  The decrease inRoyalty Income was due to a decrease in the price payable to the Trust underthe Gas Purchase Contract as discussed below ($7.930 per Mcf for the three monthsended March 31, 2007 as compared to $11.565 per Mcf for the three months endedMarch 31, 2006).  This decrease was alsorelated to a decrease in production of gas attributable to the Net ProfitsInterests for the three months ended March 31, 2007 (450 Mmcf) as compared tothe three months ended March 31, 2006 (467 Mmcf).  The decline in production is primarilyattributable to natural production declines. Taxes on Production and Property were $269,073 for the three monthsended March 31, 2007 as compared to $390,983 for the three months ended March31, 2006. The decrease in taxes is due directly to the decrease in RoyaltyIncome as discussed above.  General andAdministrative Expenses were $316,763 for the three months ended March 31, 2007as compared to $447,220 for the three months ended March 31, 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.

The price payable to the Trust for gas productionattributable to the Net Profits Interests was $7.930 per Mcf for the threemonths ended March 31, 2007 and $11.565 per Mcf for the three months endedMarch 31, 2006.  The price per Mcf waslower for the three months ended March 31, 2007 than for the correspondingthree month period ended March 31, 2006 due to a decrease in the average spotmarket price for gas delivered at the Henry Hub near Henry, Louisiana ($6.909 perDth for the three months ended March 31, 2007 as compared to $10.213 per Dthfor the three months ended March 31, 2006).

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**Off-Balance Sheet Arrangements**

The Trust does not have any off-balance sheetarrangements that have or are reasonably likely to have a current or futureeffect on the Trust’s financial condition, changes in financial condition,revenue or expenses, results of operations, liquidity, capital expenditures orcapital resources that is material to investors.

**Other Information**

For the calendar quarter ended March 31, 2007, thehigh and low closing prices of the Treasury Obligations (which have $1,000 faceprincipal amount), as quoted in the over-the-counter market for United StatesTreasury obligations were $762.40 and $738.92 respectively.  On March 31, 2007, the closing price of theTreasury Obligations, as quoted on such market, was $758.46.

The Trust provides Unitholders with the option toseparate the related Treasury Obligation from the Trust Units.  Upon exercising this option, the Trusteetransfers such Trust Units from the name of the Depositary to the name of thewithdrawing Unitholder.  As of March 31,2007, this option was exercised on 19,900 Trust Units.  (See the Trust’s 10-K, for the fiscal yearended December 31, 2006 for a more complete description of the Withdrawal ofTrust Units and Restriction on Transfer.)

**ITEM 3.**                    Quantitative and Qualitative Disclosures aboutMarket 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 Item 2.  As described elsewhereherein, gas production attributable to the Net Profits Interests is sold to awholly owned subsidiary of Eastern American pursuant to the Gas Purchase Contractdescribed herein, and the Trust’s quarterly distributions are highly dependenton the price payable to the Trust for gas production attributable to the NetProfits Interests.  Natural gas pricescan fluctuate widely in response to many factors, all of which are out of thecontrol of the Trust, the Trustee and Eastern American.

**ITEM 4.**                    Controls and Procedures

*Evaluation ofDisclosure Controls and Procedures*.   The Trustee maintainsdisclosure controls and procedures designed to ensure that information requiredto be disclosed by the Trust in the reports that it files or submits under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules andregulations.  Disclosure controls and procedures include controls andprocedures designed to ensure that information required to be disclosed by theTrust is accumulated and communicated by several parties, including withoutlimitation, the working interest owner, Eastern American Energy

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*Corporation(“Eastern American”), and the independent reserve engineer to The Bank of NewYork Trust Company, N.A., as Trustee of the Trust, and its employees whoparticipate in the preparation of the Trust’s periodic reports as appropriateto allow timely decisions regarding required disclosure.  In addition, theTrustee is required by the Trust Agreement to engage and has engaged anindependent registered public accounting firm to review the quarterly financialstatements of the Trust and audit the annual financial statements of the Trust,which includes financial data provided by Eastern American.*

As of March 31, 2007, the Trustee carried out anevaluation of the Trustee’s disclosure controls and procedures.  Mike Ulrich, as Trust Officer of the Trustee,has concluded that the disclosure controls and procedures are effective.

Due to (i) the contractual arrangements of the TrustAgreement 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 toinclude the following:

·                  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.

Other than reviewing the financial and otherinformation provided to the Trust by Eastern American and the independentreserve engineer, the Trustee made no independent or direct verification ofthis financial or other information.

The Trustee does not intend to expand itsresponsibilities beyond those permitted or required by the Trust Agreement andthose required under applicable law.

The Trustee does not expect that the Trustee’sdisclosure controls and procedures or the Trustee’s internal control overfinancial reporting will prevent all errors or all fraud.  Further, the design of disclosure controlsand procedures and internal control over financial reporting must reflect thefact that there are resource constraints, and the benefits of controls must beconsidered relative to costs.  Because ofthe inherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, ifany, have been detected.

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**Changesin Internal Control Over Financial Reporting**

In connection with the evaluation by the Trustee ofchanges in internal control over financial reporting of the Trust that occurredduring the Trust’s last fiscal quarter, no change in the Trust’s internalcontrol over financial reporting was identified that has materially affected,or is reasonably likely to materially affect, the Trust’s internal control overfinancial reporting.

**PART II — OTHERINFORMATION**
| 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. |
|                                                                         |
| 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 the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.
|        | 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:  May 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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