##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 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 0-6529
 DOUBLE EAGLE PETROLEUM CO.
  MARYLAND
    
    83-0214692(State or other jurisdiction of
    
    (I.R.S. employerincorporation or organization)
    
    identification no.)1675 Broadway, Suite 1000, Denver, Colorado
    
    80202(Address of principal executive offices)
    
    (Zip code)
 307-237-9330
 Former Address: 777 Overland Trail, P.O. Box 766, Casper, Wyoming 82602
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Small reporting Company o(Do not check if a small reporting company)
  o þ
  Class
    
    Outstanding as of August 1, 2008Common stock, $.10 par value
    
    9,163,105




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##### 



Page #PART I. Financial Information:Item 1. Financial StatementsConsolidated Balance Sheets as of June 30, 2008 (Unaudited)
and December 31, 2007
    
    
    2Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2008 and 2007 (Unaudited)
    
    
    3Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2008 and 2007 (Unaudited)
    
    
    4Notes to Consolidated Financial Statements (Unaudited)
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II. Other Information:Item 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 6. Exhibits
    
    
    21Signatures
    
    
    22Exhibit 31.1Exhibit 32
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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS
 DOUBLE EAGLE PETROLEUM CO.
 
 CONSOLIDATED BALANCE SHEET  (Amounts in thousands of dollars except share and per share data)
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    265
    
    
    $
    125Cash held in escrow
    
    
    613
    
    
    
    719Accounts receivable
    
    
    20,724
    
    
    
    3,664Assets from price risk management
    
    
    2,916
    
    
    
    Other current assets
    
    
    2,224
    
    
    
    586Total current assets
    
    
    26,742
    
    
    
    5,094Oil and gas properties and equipment, successful efforts method:Developed properties
    
    
    105,132
    
    
    
    61,394Wells in progress
    
    
    
    
    
    
    29,768Gas transportation pipeline
    
    
    5,465
    
    
    
    5,465Undeveloped properties
    
    
    3,152
    
    
    
    3,147Corporate and other assets
    
    
    1,855
    
    
    
    1,585115,604
    
    
    
    101,359Less accumulated depreciation, depletion and amortization
    
    
    (28,559
    )
    
    
    (24,785
    )Net properties and equipment
    
    
    87,045
    
    
    
    76,574Deferred tax asset
    
    
    
    
    
    
    2,873Other assets
    
    
    56
    
    
    
    56TOTAL ASSETS
    
    $
    113,843
    
    
    $
    84,597LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,019
    
    
    $
    8,584Accrued expenses
    
    
    8,506
    
    
    
    2,079Liabilities from price risk management
    
    
    7,173
    
    
    
    474Accrued production taxes
    
    
    2,629
    
    
    
    969Total current liabilities
    
    
    27,327
    
    
    
    12,106Line of credit
    
    
    19,184
    
    
    
    3,445Asset retirement obligation
    
    
    1,624
    
    
    
    1,449Liabilities from price risk management
    
    
    113
    
    
    
    1,001Deferred tax liability
    
    
    125
    
    
    
    Total liabilities
    
    
    48,373
    
    
    
    18,001Preferred stock, $0.10 par value; 10,000,000 shares authorized;
1,610,000 shares issued and outstanding as of
June 30, 2008 and December 31, 2007
    
    
    37,972
    
    
    
    37,972Stockholders equity:Common stock, $0.10 par value; 50,000,000 shares authorized;
9,163,105 and 9,148,105 shares issued and outstanding as of
June 30, 2008 and December 31, 2007, respectively
    
    
    916
    
    
    
    915Additional paid-in capital
    
    
    34,186
    
    
    
    33,670Accumulated deficit
    
    
    (1,213
    )
    
    
    (4,486
    )Accumulated other comprehensive loss
    
    
    (6,391
    )
    
    
    (1,475
    )Total stockholders equity
    
    
    27,498
    
    
    
    28,624TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    113,843
    
    
    $
    84,597
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DOUBLE EAGLE PETROLEUM CO.
 
 CONSOLIDATED STATEMENT OF OPERATIONS  (Amounts in thousands of dollars except share and per share data)
 Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenuesOil and gas revenue
    
    $
    12,456
    
    
    $
    3,417
    
    
    $
    19,252
    
    
    $
    8,033Transportation revenue
    
    
    723
    
    
    
    226
    
    
    
    1,087
    
    
    
    433Price risk management activities
    
    
    440
    
    
    
    
    
    
    
    547
    
    
    
    Other income, net
    
    
    170
    
    
    
    19
    
    
    
    219
    
    
    
    141Total revenues
    
    
    13,789
    
    
    
    3,662
    
    
    
    21,105
    
    
    
    8,607Costs and expensesProduction costs
    
    
    2,076
    
    
    
    1,641
    
    
    
    3,092
    
    
    
    3,066Production taxes
    
    
    1,534
    
    
    
    433
    
    
    
    2,334
    
    
    
    1,000Exploration expenses including dry hole costs
    
    
    50
    
    
    
    118
    
    
    
    531
    
    
    
    278Pipeline operating costs
    
    
    659
    
    
    
    45
    
    
    
    747
    
    
    
    84General and administrative
    
    
    1,302
    
    
    
    968
    
    
    
    2,209
    
    
    
    1,775Depreciation, depletion and amortization
    
    
    2,979
    
    
    
    1,361
    
    
    
    3,994
    
    
    
    2,745Impairment of equipment and properties
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    91Total costs and expenses
    
    
    8,600
    
    
    
    4,657
    
    
    
    12,907
    
    
    
    9,039Income (loss) from operations
    
    
    5,189
    
    
    
    (995
    )
    
    
    8,198
    
    
    
    (432
    )Interest expense, net
    
    
    
    
    
    
    
    
    
    
    (64
    )
    
    
    (155
    )Income (loss) before income taxes
    
    
    5,189
    
    
    
    (995
    )
    
    
    8,134
    
    
    
    (587
    )Provision for deferred income taxes
    
    
    (1,916
    )
    
    
    488
    
    
    
    (2,999
    )
    
    
    319NET INCOME (LOSS)
    
    $
    3,273
    
    
    $
    (507
    )
    
    $
    5,135
    
    
    $
    (268
    )Preferred stock dividends
    
    
    931
    
    
    
    
    
    
    
    1,862
    
    
    
    Net Income (loss) attributable to common stock
    
    $
    2,342
    
    
    $
    (507
    )
    
    $
    3,273
    
    
    $
    (268
    )Net income (loss) per common share:Basic
    
    $
    0.26
    
    
    $
    (0.06
    )
    
    $
    0.36
    
    
    $
    (0.03
    )Diluted
    
    $
    0.26
    
    
    $
    (0.06
    )
    
    $
    0.36
    
    
    $
    (0.03
    )Weighted average shares outstanding:Basic
    
    
    9,152,023
    
    
    
    9,141,609
    
    
    
    9,150,064
    
    
    
    9,080,585Diluted
    
    
    9,161,258
    
    
    
    9,141,609
    
    
    
    9,153,696
    
    
    
    9,080,585
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DOUBLE EAGLE PETROLEUM CO.
 
 CONSOLIDATED STATEMENT OF CASH FLOWS  (Amounts in thousands of dollars)
 Six months ended June 30,2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    5,135
    
    
    $
    (268
    )Adjustments to reconcile net income to net cash from
operating activities:Depreciation, depletion, amortization and accretion of asset retirement obligation
    
    
    4,116
    
    
    
    2,759Abandonment of non-producing properties
    
    
    141
    
    
    
    29Impairment of equipment and properties
    
    
    
    
    
    
    91Provision for deferred taxes
    
    
    2,998
    
    
    
    (319
    )Non-cash employee stock option expense
    
    
    240
    
    
    
    175Non-cash gain on derivative contracts
    
    
    (2,022
    )
    
    
    Gain on sales of producing property and equipment
    
    
    (66
    )Gain on sale of working interest in non-producing property
    
    
    
    
    
    
    (98
    )Changes in current assets and liabilities:Decrease in deposit held in escrow
    
    
    106
    
    
    
    41Increase in accounts receivable
    
    
    (6,363
    )
    
    
    (205
    )Increase in other current assets
    
    
    (1,638
    )
    
    
    (215
    )Increase in accounts payable
    
    
    2,446
    
    
    
    297Increase (Decrease) in accrued expenses
    
    
    3,717
    
    
    
    (14
    )Increase in accrued production taxes
    
    
    1,660
    
    
    
    309NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    10,470
    
    
    
    2,582Cash flows from investing activities:Additions of producing properties and equipment, net
    
    
    (24,209
    )
    
    
    (15,867
    )Additions of corporate and non-producing properties
    
    
    (275
    )
    
    
    (431
    )Proceeds from sale of non-producing properties
    
    
    
    
    
    
    244NET CASH USED IN INVESTING ACTIVITIES
    
    
    (24,484
    )
    
    
    (16,054
    )Cash flows from financing activities:Net proceeds from sale of common stock
    
    
    
    
    
    
    9,978Dividends on preferred stock
    
    
    (1,862
    )
    
    
    Net borrowings (repayments) on line of credit
    
    
    15,739
    
    
    
    2,961Exercise of stock options
    
    
    277
    
    
    
    27NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    14,154
    
    
    
    12,966Change in cash and cash equivalents
    
    
    140
    
    
    
    (506
    )Cash and cash equivalents at beginning of period
    
    
    125
    
    
    
    611CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    265
    
    
    $
    105Supplemental disclosure of cash and non-cash transactions:Cash paid for interest
    
    $
    162
    
    
    $
    317Interest capitalized
    
    $
    293
    
    
    $
    257Receivables from joint interest partners
    
    $
    9,939
    
    
    $
    Additions to developed properties included in current liabilities
    
    $
    5,607
    
    
    $
    474Stock option expense
    
    $
    240
    
    
    $
    175
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DOUBLE EAGLE PETROLEUM CO.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Amounts in thousands of dollars except share and per share data)
 1.
    
    Summary of Significant Accounting PoliciesBasis of presentationThe accompanying unaudited interim consolidated financial statements were prepared by Double
Eagle Petroleum Co. (Double Eagle or the Company) pursuant to the rules and regulations of
the Securities and Exchange Commission (the SEC). Certain information and note disclosures
normally included in the annual consolidated financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have been condensed or
omitted as allowed by such rules and regulations. These consolidated financial statements
include all of the adjustments, which, in the opinion of management, are necessary for a fair
presentation of the financial position and results of operations. All such adjustments are of a
normal recurring nature only. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full fiscal year.Certain amounts in the 2007 consolidated financial statements have been reclassified to conform
to the 2008 consolidated financial statement presentation. Such reclassifications had no affect
on net income.The accounting policies followed by the Company are set forth in Note 1 to the Companys
consolidated financial statements in the Form 10-K for the year ended December 31, 2007, and are
supplemented throughout the notes to this quarterly report on Form 10-Q.The interim consolidated financial statements presented herein should be read in conjunction
with the consolidated financial statements and notes thereto for the year ended December 31,
2007 included in the Form 10-K filed with the SEC.Recently adopted accounting pronouncementsIn September 2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 157  Fair Value Measurements (SFAS 157). The statement
defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. In February 2008,
the FASB issued Staff Position No. FAS 157-2 which proposed a one year deferral for the
implementation of SFAS 157 for non-financial assets and liabilities that are recognized or
disclosed at fair value on a nonrecurring basis (less frequent than annually). On January 1,
2008 the Company elected to implement this Statement with the one-year deferral. Given the
nature of the Companys current financial instruments, the adoption of SFAS No. 157 did not have
a material impact on the Companys financial position, results of operations or cash flows.
Beginning January 1, 2009, we will adopt the provisions for nonfinancial assets and nonfinancial
liabilities that are not required or permitted to be measured at fair value on a recurring
basis. The Company is in the process of evaluating this standard with respect to its effect on
nonfinancial assets and liabilities and has not yet determined the impact that it will have on
its financial statements upon full adoption in 2009.In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159  The Fair
Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB
Statement No. 115 (SFAS 159). The statement permits companies to choose to measure many
financial instruments and certain other items at fair value that are not currently required to
be measured at fair value. The objective of SFAS 159 is to provide opportunities to mitigate
volatility in reported earnings caused by measuring related assets and liabilities differently
without having to apply hedge accounting provisions. SFAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities. The Company
adopted SFAS No. 159 on January 1, 2008. The adoption of SFAS No. 159 did not have a material
effect on our financial condition, results of operations or cash flows as the Company did not
elect this fair value option.New accounting pronouncementsIn November 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R) -
Business Combinations (SFAS 141(R)). SFAS 141(R) changes the accounting for business
combinations both at the acquisition date and in subsequent reporting periods. SFAS 141(R)
requires the acquiring company to measure almost all assets acquired and liabilities assumed in
the acquisition at fair value as of the acquisition date. The standard is effective for fiscal
years
beginning on or after December 15, 2008 and should be applied prospectively with the exception
of income taxes which should be applied retrospectively for all business combinations. Early
adoption is prohibited. The adoption of SFAS 141(R) is not expected to have a material impact
on the Companys financial position, results of operations or cash flows.
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In November 2007, the FASB issued Statement of Financial Accounting Standards No. 160 -
Non-controlling Interests in Consolidated Financial Statements an amendment to ARB NO. 51 (SFAS
160). SFAS 160 requires non-controlling interests in a subsidiary to be initially measured at
fair value and classified as a separate component of equity. The standard is effective for
fiscal years beginning on or after December 15, 2008 and should be applied prospectively with
the exception of the presentation and disclosure requirements which should be applied
retrospectively if comparative financial statements are presented. Early adoption is
prohibited. The adoption of SFAS 160 is not expected to have a material impact on the Companys
financial position, results of operations or cash flows.In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161  Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 does not change
current accounting treatment of derivatives, but requires expanded disclosures about how and why
an entity uses derivative instruments, how derivative instruments and related hedged items (if
any) are accounted for, and how they affect the Companys financial position, financial
performance and cash flows. The standard is effective for fiscal years and interim periods
beginning after November 15, 2008 and early adoption is encouraged.In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy
of Generally Accepted Accounting Principles(SFAS 162). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles to be used in the
preparation of financial statements that are presented in conformity with U.S. generally
accepted accounting principles. The Statement becomes effective 60 days following the SECs
approval of the Public Company Accounting Oversight Board amendments to the auditing literature.
The adoption of SFAS 162 will not have an impact on the Companys financial position, results of
operations or cash flows.2.
    
    Earnings per shareBasic earnings per share of common stock (EPS) is calculated by dividing net income (loss)
attributable to common stock by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share is calculated by dividing net income
(loss) attributable to common stock by the weighted average number of shares of common stock and
potential common stock equivalents outstanding during the period, if dilutive. Potential common
stock equivalents include incremental shares of common stock issuable upon the exercise of stock
options and employee stock awards. Income attributable to common stock is calculated as net
income (loss) less dividends paid on the Series A Preferred Stock. We declared and paid cash
dividends of $931 ($.5871 per share) and $0 on the Series A Preferred Stock for the three months
ended June 30, 2008 and 2007, respectively, and $1,862 and $0 for the six month periods ended
June 30, 2008 and 2007, respectively.The following is the calculation of basic and diluted weighted average shares outstanding and
earnings per share of common stock for the periods indicated:
 For the Three Months Ended June 30,
    
    
    For the Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss) attributable to
common stock
    
    $
    2,342
    
    
    $
    (507
    )
    
    $
    3,273
    
    
    $
    (268
    )Weighted average shares:Weighted average shares  basicDilution effect of stock options outstanding at the end of period
    
    
    9,152,023
    
    
    
    9,141,609
    
    
    
    9,150,064
    
    
    
    9,080,585Weighted average shares  fully
    
    
    9,235
    
    
    
    
    
    
    
    3,632
    
    
    
    9,161,258
    
    
    
    9,141,609
    
    
    
    9,153,696
    
    
    
    9,080,585Earnings per share:BasicFully diluted
    
    $
    0.26
    
    
    $
    (0.06
    )
    
    $
    0.36
    
    
    $
    (0.03
    )$
    0.26
    
    
    $
    (0.06
    )
    
    $
    0.36
    
    
    $
    (0.03
    )
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The following options, which could be potentially dilutive in future periods, were not included
in the computation of diluted net income (loss) per share because the effect would have been
anti-dilutive for the periods indicated:
 For the Three Months Ended June 30,
    
    
    For the Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Options to purchase common stock
    
    
    35,560
    
    
    
    27,285
    
    
    
    15,586
    
    
    
    34,852
 3.
    
    Fair Value of Financial InstrumentsEffective January 1, 2008, the Company adopted the provisions of SFAS No. 157, Fair Value
measurements, for all financial instruments. SFAS 157 establishes a three-level valuation
hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the
transparency of inputs to the valuation of an asset or liability as of the measurement date. The
three levels are defined as follows:
 
 
 
 The following describes the valuation methodologies we use to measure financial instruments at
fair value.Line of CreditThe recorded value of the Companys credit facility approximates fair value as it bears interest
at a floating rate.Derivative InstrumentsThe Company uses derivative financial instruments to mitigate exposures to oil and gas
production cash-flow risks caused by fluctuating commodity prices. At June 30, 2008 the types
of derivative instruments utilized by the Company included fixed price delivery contracts,
futures, and costless collars.The Company has entered into fixed delivery contracts which expire at various dates through
October 2009. Certain of these fixed delivery contracts are recorded using cash flow hedge
accounting, under which the change in fair value is initially reported as a component of
accumulated other comprehensive income and is subsequently reclassified into earnings as the
contracts settle. At June 30, 2008, the Company also had a futures contract and costless
collars in place which were recorded at fair value and marked to market, with the changes in the
fair value subsequent to the initial measurement flowing through earnings.Although the Companys fixed delivery contracts, futures contract, and costless collars are
valued using public indices, the instruments themselves are traded with third-party
counterparties and are not openly traded on an exchange. As such, the Companys has classified
these instruments as Level 2.
  7




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The following table provides a summary of the fair values of assets and liabilities measured on
a recurring basis under SFAS No. 157:
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssetsDerivative instruments
    
    $
    
    
    
    $
    2,916
    
    
    $
    
    
    
    $
    2,916Total assets at fair value
    
    $
    
    
    
    $
    2,916
    
    
    $
    
    
    
    $
    2,916LiabilitiesDerivative instruments
    
    $
    
    
    
    $
    7,286
    
    
    $
    
    
    
    $
    7,286Total liabliities at fair value
    
    $
    
    
    
    $
    7,286
    
    
    $
    
    
    
    $
    7,286
 4.
    
    Impairment of Long-Lived AssetsThe Company reviews the carrying values of its long-lived assets whenever events or changes in
circumstances indicate that such carrying values may not be recoverable. If, upon review, the
sum of the undiscounted pretax cash flows is less than the carrying value of the asset group,
the carrying value is written down to the estimated fair value. Individual assets are grouped
for impairment purposes at the lowest level for which there are identifiable cash flows that are
largely independent of the cash flows of other groups of assets, generally on a field-by-field
basis. The fair value of impaired assets is determined based on quoted market prices in active
markets, if available, or upon the present values of expected future cash flows using discount
rates commensurate with the risks involved in the asset group. The long-lived assets of the
Company, which are subject to periodic evaluation, consist primarily of oil and gas properties
and undeveloped leaseholds. The Company recognized an impairment charge of $0 and $91 during
the three months ended June 30, 2008 and 2007, respectively, and $0 and $91 during the six
months ended June 30, 2008 and 2007, respectively.5.
    
    Income TaxesAt June 30, 2008, the Company has a net operating loss carry forward for income tax
reporting purposes of approximately $27.4 million that will begin to expire in 2021. Although
Double Eagle is required to record income tax expense for financial reporting purposes, the
Company does not anticipate any payments of current tax liabilities in the near future.The Company recognizes interest and penalties related to uncertain tax positions in income tax
expense. As of June 30, 2008, the Company made no provision for interest or penalties related
to uncertain tax positions. The Company files income tax returns in the U.S. federal
jurisdiction and various states. There are currently no federal or state income tax
examinations underway for these jurisdictions. Furthermore, the Company is no longer subject to
U.S. federal income tax examinations by the Internal Revenue service for tax years before 2003
and for state and local tax authorities for years before 2002. The Companys tax years of 2003
and forward are subject to examination by federal and state taxing authorities.6.
    
    Line of CreditThe Company has entered into a $50 million revolving line of credit collateralized by oil and
gas producing properties, replacing the previously existing revolving line of credit. The
borrowing base increased to $35 million from $25 million, pursuant to the debt modification
agreement dated July 1, 2007, and all outstanding balances on the line of credit mature on July
31, 2010. As of June 30, 2008, the interest rate on the line of credit, calculated in
accordance with the agreement at 1.125% below the posted Wall Street Journal Prime Rate, was
3.875%, and the balance outstanding of $19.2 million was used to fund capital expenditures
primarily in the Atlantic Rim units and the Pinedale Anticline. Our expenditures in the
Atlantic Rim were for the continued development of the Catalina Unit, for which we are the
operator, and for our non-operated properties in the Doty Mountain and Sun Dog Units.We are subject to certain financial and non-financial covenants with respect to the above credit
facility, including a requirement to maintain a current ratio, plus the line of credit
availability, of at least 1.0 to 1.0. As of June 30, 2008, we were in compliance with all the
covenants. If our covenants are violated, and we are unable to negotiate a waiver or amendment
thereof, the lender would have the right to declare an event of default, terminate the remaining
commitment and accelerate all principal and interest outstanding.For the three months ended June 30, 2008 and 2007, we recognized no interest expense on our line
of credit. We capitalized interest costs of $188 and $230 for the three months ended June 30,
2008 and 2007, respectively. For the six months ended
June 30, 2008 and 2007, interest expense on our line of credit totaled $0 and $155,
respectively. We capitalized interest costs of $293 and $257 for the six months ended June 30,
2008 and 2007, respectively.
  8




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##### Table of Contents



7.
    
    Series A Cumulative Preferred StockIn the third quarter of 2007, the Company completed a public offering of 1,610,000 shares of
9.25% Series A Cumulative Preferred Stock at a price to the public of $25.00 per share.Holders of the Series A Preferred Stock are entitled to receive, when and as declared by the
Board of Directors, dividends at a rate of 9.25% per annum ($2.3125 per annum per share). The
Series A Preferred Stock does not have any stated maturity date and will not be subject to any
sinking fund or mandatory redemption provisions, except, under some circumstances upon a Change
of Ownership or Control. Except pursuant to the special redemption upon a Change or Ownership
or Control, we may not redeem the Series A Preferred Stock prior to June 30, 2012. On or after
June 30, 2012, we may redeem the Series A Preferred Stock for cash at our option, in whole or
from time to time in part, at a redemption price of $25.00 per share, plus accrued and unpaid
dividends (whether or not earned or declared) to the redemption date. The shares of Series A
Preferred Stock are classified outside of permanent equity on the accompanying Consolidated
Balance Sheets due to the following redemption provision. Following a Change of Ownership or
Control of us by a person or entity, other than by a Qualifying Public Company, we will be
required to redeem the Series A Preferred Stock within 90 days after the date on which the
Change of Ownership or Control occurred for cash, at the following price per share, plus accrued
and unpaid dividends.In the event of liquidation, the holders of the Series A Preferred Stock will have the right to
receive $25.00 per share, plus all accrued and unpaid dividends, before any payments are made to
the holders of our common stock.
 Redemption Date on or Before
    
    Redemption PriceJune 30, 2008
    
    $
    26.00June 30, 2009
    
    $
    25.75June 30, 2010
    
    $
    25.50June 30, 2011
    
    $
    25.25June 30, 2012 or thereafter
    
    $
    25.00
 8.
    
    Comprehensive IncomeThe components of comprehensive income (loss) were as follows:
 For the Three Months Ended June 30,
    
    
    For the Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
(loss) attributable to common stock
    
    $
    2,342
    
    
    $
    (507
    )
    
    $
    3,273
    
    
    $
    (268
    )Change in derivative instrument
fair value, net of tax benefit of $0
    
    
    (2,366
    )
    
    
    
    
    
    
    (6,391
    )
    
    
    Reclassification to earnings
    
    
    930
    
    
    
    
    
    
    
    1,475
    
    
    
    Comprehensive loss
    
    $
    906
    
    
    $
    (507
    )
    
    $
    (1,643
    )
    
    $
    (268
    )
 The components of accumulated other comprehensive loss were as follows:
 June 30,
    
    
    December 31,2008
    
    
    2007Net change in derivative instrument fair value,
net
of tax benefit of $0 and $0
    
    $
    (6,391
    )
    
    $
    (1,475
    )Total accumulated other comprehensive loss, net
    
    $
    (6,391
    )
    
    $
    (1,475
    )
 The Company did not record a tax benefit on the change in derivative instrument fair value due
as the tax benefit is not likely to be realized given the Companys operating loss carryforwards
and timing of the derivative contract settlements.
  9




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##### Table of Contents



9.
    
    Cash Held in EscrowThe Company has received deposits representing partial prepayments of the expected capital
expenditures from third party working interest owners in the Table Top Unit #1 (Christmas
Meadows) exploration project. The unexpended portion of the deposits at June 30, 2008 and
December 31, 2007 totaled $613 and $719, respectively.10.
    
    Accounts ReceivableThe Company had an accounts receivable balance of $20.7 million at June 30, 2008. The balance
includes approximately $9.9 million of amounts due from our joint interest partners at the
Catalina Unit relating to the recovery of prior capital expenditures incurred by the Company and
resulted from the decrease in our working interest associated with the formation of the Catalina
Unit participating area. The remaining balance consisted primarily of normal production
receivables from third party operators of $7.4 million.11.
    
    Intercompany Note ReceivableThe Company sold transportation assets located in the Cow Creek Field, at cost, to Eastern
Washakie Midstream, LLC, a wholly owned subsidiary, in exchange for an intercompany note
receivable bearing interest of 5% per annum, maturing on January 31, 2028. The note and related
interest are fully eliminated in consolidation.12.
    
    Commitments and Contingent LiabilitiesLitigationDouble Eagle Petroleum Co.; Antelope Energy Company LLC; E. Cecile Martin f/k/a Cecile Hurt;
Hurt Properties, L.P.; James R. Hurt; John D. Traut, LLC; and Newfield Exploration Company vs.
Burlington Resources Oil & Gas Company, LP, a division of ConocoPhillips Company; ConocoPhillips
Company, a Delaware corporation.The Company, along with other plaintiffs, filed a lawsuit on
August 24, 2007, in the District Court of Fremont County, Wyoming, against BR and other
defendants who own working interests in the Madden Deep Unit. The Company and the other
plaintiffs in the case are asserting that, under the gas balancing agreement, they are entitled
to receive either monetary damages or their respective shares of the natural gas produced from
the Madden Deep Unit over at least the period February 1, 2002 through June 30, 2007. The
Company has recognized the sales and has recorded a related account receivable of $292, net of
allowance for uncollectible amounts, for the period November 1, 2006 through June 30, 2007. The
ultimate outcome of this lawsuit cannot be determined at this time and, as a result, the Company
has not recognized any amount of sales proceeds for the period February 1, 2002 through October
30, 2006. Sulfur sales are not subject to a gas balancing agreement, and, accordingly, we
received the proceeds for our share of sulfur sales dating back to February 2002 and continue to
receive our respective share on an on-going basis.
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  FORWARD-LOOKING STATEMENTS
 This Quarterly Report on Form 10-Q includes forward-looking statements as defined by the
Securities and Exchange Commission, or SEC. We make these forward-looking statements in reliance
on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts, included in this
Form 10-Q that address activities, events or developments that we expect, believe or anticipate
will or may occur in the future are forward-looking statements. These forward-looking statements
are based on assumptions which we believe are reasonable based on current expectations and
projections about future events and industry conditions and trends affecting our business. However,
whether actual results and developments will conform to our expectations and predictions is subject
to a number of risks and uncertainties that, among other things, could cause actual results to
differ materially from those contained in the forward-looking statements, including without
limitation the Risk Factors set forth in our Annual Report on Form 10-K for the year ended December
31, 2007 including the following:
 
    
    Increases in the cost of drilling, completion and gas collection or other costs of
production and operations;
    
    Our ability to continue to develop our coal bed methane projects in the Atlantic Rim;
    
    Our ability to obtain, or a decline in, oil or gas production, or a decline in oil or
gas prices;
    
    Revisions to estimates of required capital expenditures;
  10




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##### Table of Contents




    
    Our ability to increase our natural gas and oil reserves;
    
    The amount and timing of capital deployment in new investment opportunities;
    
    The volumes of production from our oil and gas development properties, which may be
dependent upon issuance by federal, state, and tribal governments, or agencies thereof, of
drilling, environmental and other permits, and the availability of specialized
contractors, work force, and equipment;
    
    Our future capital requirements and availability of capital resources to fund capital
expenditures;
    
    The possibility that we may be required to take impairment charges to reduce the
carrying value of some of our long-lived assets when indicators of impairment emerge;
    
    Numerous uncertainties inherent in estimating quantities of proved oil and gas reserves
and actual future production rates and associated costs;
    
    Our ability to remedy any deficiencies that may be identified in the review of our
internal controls;
    
    Unexpected changes in credit worthiness of third-parties which we enter into business
agreements with;
    
    General economic and political conditions, including tax rates or policies and
inflation rates;
    
    Changes in or compliance with laws and regulations, particularly those relating to
taxation, safety and protection of the environment;
    
    Weather and other natural phenomena;
    
    Industry and market changes, including the impact of consolidations and changes in
competition;
    
    The effect of accounting policies issued periodically by accounting standard-setting
bodies;
    
    The actions of third party co-owners of interests in properties in which we also own an
interest;
    
    The cost and effects on our business, including insurance, resulting from terrorist
actions or natural disasters and responses to such actions or events; and
    
    The outcome of any future litigation or similar disputes and the impact on any such
outcome or related settlements.
   Business Overview and Strategy
    11




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##### Table of Contents



(Amounts in thousands of dollars, except amounts per unit of
production):
 
    
    Average Daily ProductionDuring the three months ended June 30, 2008, our total average daily net production
increased 99% to 16,419 Mcfe as compared to average daily production of 8,270 Mcfe
during the same prior year period. Total average daily production during the six months
ended June 30, 2008 increased 58% to 13,148 Mcfe as compared to average daily
production of 8,388 Mcfe during the same prior year period. The fluctuations in
production by major operating area are discussed below.Atlantic Rim.During the three months ended June 30, 2008, average daily net
production at the Atlantic Rim increased 146% to 11,109 Mcfe, as compared to 4,513 Mcfe
during the same prior year period, largely resulting from production from 23 new wells
which came on-line at our Catalina Unit properties during the first half of 2008.
Average daily net production at our Catalina Unit increased 151% to 10,002 Mcfe, as
compared to 3,992 Mcfe during the same prior year period. Average daily production net
to our interest at the Sun Dog and Doty Mountain units increased to
112% to 1,107 Mcfe,
as compared to average daily production of 521 Mcfe during the same prior year period.
The increase is due to production from 47 new Sun Dog Unit wells which were drilled as
part of the 2007 drilling program. The operator at the Sun Dog Unit has informed us
that it plans to bring on an additional 13 wells drilled during the 2007 drilling
program during the second half of 2008. The operator has also informed us that it has
revised downward its total 2008 drilling program in the Sun Dog and Doty Mountain units
from 121 wells to 72 wells.During the six months ended June 30, 2008, average daily net production at the Atlantic
Rim increased 78% to 8,165 Mcfe, as compared to 4,595 Mcfe during the six months ended
June 30, 2007. The increase is primarily the result of the production from 23 new
wells which came on-line at our Catalina Unit properties during the first half of 2008.
Average daily net production at our Catalina Unit increased 83% to 7,359 Mcfe, as
compared to 4,023 Mcfe during the same prior year period. Average daily production at
the Sun Dog and Doty Mountain units increased 41% to 806 Mcfe from 572 Mcfe in the six
months ended June 30, 2007.Pinedale Anticline. Average daily production at the Pinedale Anticline
increased 75% to 3,961 Mcfe for the quarter ended June 30, 2008, as compared to 2,261
Mcfe in the second quarter of 2007. The increase is primarily due to the addition of
four new Mesa wells in the third quarter of 2007 and 10 new Mesa wells during the first
half of 2008. The operator at the Mesa Units has informed us that it intends to have 8
additional wells completed in the third quarter of 2008 and plans to drill an
additional 18 wells in the second half of 2008.During the six months ended June 30, 2008, average daily production at the Pinedale
Anticline increased 52% to 3,661 Mcfe as compared to 2,408 Mcfe in the six months ended
June 30, 2007, due to the added production from the wells brought on-line in the third
quarter of 2007 and first half of 2008 as noted above.Madden Deep Unit. During the three and six months ended June 30, 2008, our
average daily net production at the Madden Deep Unit was 455 Mcfe and 328 Mcfe,
respectively compared to 675 Mcfe and 664 Mcfe in three and six months ended June 30,
2007, respectively. The decrease in the three and six month periods ended June 30,
2008 was largely due to operational issues at the sour gas plant and capacity
constraints, both resulting in a temporary decrease in production.
    
    Oil and Gas SalesDuring the quarter ended June 30, 2008, net oil and gas sales increased 265% to
$12,456, as compared to $3,417 during the same prior year period. Total revenue was
impacted both by higher average gas prices and increased production volumes as
discussed above. During the quarter ended June 30, 2008, the average CIG price
increased 130% as compared to the same prior year period. In comparison, our average
gas price received increased 71%, to $7.54 from $4.40, for the same period. The
overall average increase in price that
we experienced was less than the average CIG price increase due primarily to the fixed
delivery contracts we have in place. See additional comments in Contracted Volumes
below.During the six months ended June 30, 2008, net oil and gas sales increased 140% to
$19,252, as compared to $8,033 during the same prior year period. Total revenue was
impacted both by higher average gas prices and increased production volumes as
discussed above. During the six months ended June 30, 2008, the average CIG gas price
increased 73% as compared to the same prior year period. The higher prices are
attributable to the weather, gas transportation constraints in the Rocky Mountain
region, gas storage injection, as well as the overall economic environment. The
average gas price we received increased 40%, to $7.23 from $5.18 as compared to the
same prior year period. The overall average increase in price that we experienced was
less than the average CIG price increase due primarily to the fixed delivery contracts
we have in place.
  12




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##### Table of Contents



OVERVIEW OF FINANCIAL CONDITION AND LIQUIDITY
 Liquidity and Capital Resources
   June 30,
    
    
    December 31,2008
    
    
    2007Financial Position SummaryCash and cash equivalents
    
    $
    265
    
    
    $
    125Working capital
    
    $
    (585
    )
    
    $
    (7,012
    )Line of credit outstanding
    
    $
    19,184
    
    
    $
    3,445Stockholders equity
    
    $
    27,498
    
    
    $
    28,624RatiosLong-term debt to total capital ratio
    
    
    41.1
    %
    
    
    10.7
    %Total debt to equity ratio
    
    
    69.8
    %
    
    
    12.0
    %
  Cash flow activities
  Six Months Ended June 30,2008
    
    
    2007Cash provided by (used in):Operating Activities
    
    $
    10,470
    
    
    $
    2,582Investing Activities
    
    
    (24,484
    )
    
    
    (16,054
    )Financing Activities
    
    
    14,154
    
    
    
    12,966Net change in cash
    
    $
    140
    
    
    $
    (506
    )
  13




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##### Table of Contents



Off-Balance Sheet Arrangements
   Capital Requirements
  Line of Credit
      14




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##### Table of Contents



RESULTS OF OPERATIONS
 Three months ended June 30, 2008 compared to the three months ended June 30, 2007
 Oil and gas sales volume and price comparisons
 Three Months Ended June 30,
    
    
    Percent
    
    
    Percent2008
    
    
    2007
    
    
    Volume
    
    
    PriceVolume
    
    
    Average Price
    
    
    Volume
    
    
    Average Price
    
    
    Change
    
    
    ChangeProduct:Gas (Mcf)
    
    
    1,472,469
    
    
    $
    7.54
    
    
    
    731,411
    
    
    $
    4.40
    
    
    
    101
    %
    
    
    71
    %Oil (Bbls)
    
    
    3,613
    
    
    $
    116.15
    
    
    
    3,532
    
    
    $
    57.73
    
    
    
    2
    %
    
    
    101
    %Mcfe
    
    
    1,494,147
    
    
    $
    7.71
    
    
    
    752,601
    
    
    $
    4.54
    
    
    
    99
    %
    
    
    70
    %
      Transportation and other revenue
   15




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##### Table of Contents



Price Risk Management
  Oil and gas production expenses, depreciation, depletion and amortization
 Three Months Ended June 30,2008
    
    
    2007(in dollars per mcfe)Average price
    
    $
    7.71
    
    
    $
    4.54Production costs
    
    
    1.39
    
    
    
    2.18Production taxes
    
    
    1.03
    
    
    
    0.58Depletion and amortization
    
    
    1.93
    
    
    
    1.63Total operating costs
    
    
    4.35
    
    
    
    4.39Gross margin
    
    $
    3.36
    
    
    $
    0.15Gross margin percentage
    
    
    44
    %
    
    
    3
    %
   Pipeline operating costs
  General and administrative
  Income taxes
   16




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##### Table of Contents



Six months ended June 30, 2008 compared to the six months ended June 30, 2007
 Oil and gas sales volume and price comparisons
 Six Months Ended June 30,
    
    
    Percent
    
    
    Percent2008
    
    
    2007
    
    
    Volume
    
    
    PriceVolume
    
    
    Average Price
    
    
    Volume
    
    
    Average Price
    
    
    Change
    
    
    ChangeProduct:Gas (Mcf)
    
    
    2,338,457
    
    
    $
    7.23
    
    
    
    1,474,940
    
    
    $
    5.18
    
    
    
    59
    %
    
    
    40
    %Oil (Bbls)
    
    
    9,077
    
    
    $
    96.40
    
    
    
    7,200
    
    
    $
    55.01
    
    
    
    26
    %
    
    
    75
    %Mcfe
    
    
    2,392,919
    
    
    $
    7.43
    
    
    
    1,518,139
    
    
    $
    5.29
    
    
    
    58
    %
    
    
    40
    %
      Transportation and other revenue
  Price Risk Management
   17




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##### Table of Contents



Oil and gas production expenses, depreciation, depletion and amortization
 Six Months Ended June 30,2008
    
    
    2007(in dollars per mcfe)Average price
    
    $
    7.43
    
    
    $
    5.29Production costs
    
    
    1.29
    
    
    
    2.02Production taxes
    
    
    0.98
    
    
    
    0.66Depletion and amortization
    
    
    1.59
    
    
    
    1.67Total operating costs
    
    
    3.86
    
    
    
    4.35Gross margin
    
    $
    3.57
    
    
    $
    0.94Gross margin percentage
    
    
    48
    %
    
    
    18
    %
   Pipeline operating costs
  General and administrative
  Income taxes
   18




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##### Table of Contents



CONTRACTED VOLUMES
    RemainingContractual
    
    
    Daily
    
    
    
    
    FixedProperty
    
    Volume
    
    
    Production
    
    
    Term
    
    Price/McfCatalina
    
    
    335,000
    
    
    
    1,000
    
    
    06/07-05/09
    
    $
    5.47365,000
    
    
    
    1,000
    
    
    07/07-06/09
    
    $
    5.84730,000
    
    
    
    2,000
    
    
    07/07-06/09
    
    $
    5.69488,000
    
    
    
    1,000
    
    
    11/07-10/09
    
    $
    5.66Atlantic Rim
    
    
    396,000
    
    
    
    1,000
    
    
    08/07-07/09
    
    $
    6.15Pinedale Anticline
    
    
    365,000
    
    
    
    1,000
    
    
    07/07-06/09
    
    $
    6.41Company Total
    
    
    2,679,000
  RemainingContractual
    
    
    DailyType of Contract
    
    Volume
    
    
    Production
    
    
    Term
    
    Fixed Price
    
    Price Index (1)Future
    
    
    453,000
    
    
    
    3,000
    
    
    11/08-3/09
    
    $9.53
    
    NYMEXCostless Collar
    
    
    246,000
    
    
    
    2,000
    
    
    5/08-10/08
    
    $6.50 floor/$10.00 ceiling
    
    CIGCostless Collar
    
    
    453,000
    
    
    
    3,000
    
    
    11/08-3/09
    
    $6.50 floor/$13.50 ceiling
    
    CIGCostless Collar
    
    
    615,000
    
    
    
    5,000
    
    
    7/08-10/08
    
    $10.00 floor/$17.00 ceiling
    
    NYMEXCostless Collar
    
    
    755,000
    
    
    
    5,000
    
    
    11/08-3/09
    
    $10.50 floor/$20.00 ceiling
    
    NYMEXTotal
    
    
    2,522,000
 (1)
    
    NYMEX refers to quoted prices on the New York Mercantile Exchange. CIG refers to the
Colorado Interstate Gas price as quoted on the first day of each month.     19




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Commodity Price Risks
   Interest Rate Risks
  
 ITEM 4. CONTROLS AND PROCEDURES
   
  
 ITEM 1. LEGAL PROCEEDINGS
   20




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##### Table of Contents



ITEM 1A. RISK FACTORS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 6. EXHIBITS
  Exhibit Number and Description:
 31.1
    
    Certification of Principal Executive Officer and Chief Financial Officer (Principal
Accounting Officer) pursuant to Rule 13a  14(a) and Rule 15a  14(a) of the Securities
Exchange Act, as amended.32
    
    Certification of the Principal Executive Officer and Chief Financial Officer (Principal
Accounting Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
  21




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##### Table of Contents



SIGNATURES
  DOUBLE EAGLE PETROLEUM CO.(Registrant)Date:  August 6, 2008
    By:
    /s/   Kurtis S. HooleyKurtis S. HooleyPrincipal Executive Officer  22




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##### Table of Contents



Exhibit Number
    
    DescriptionExhibit 31.1
    
    Certification of Principal Executive Officer and Chief
Financial Officer (Principal Accounting Officer) pursuant
to Rule 13a  14(a) and Rule 15a  14(a) of the Securities
Exchange Act, as amended.Exhibit 32
    
    Certification of Principal Executive Officer and Chief
Financial Officer (Principal Accounting Officer) pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes  Oxley Act of 2002.
  23