##### 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 quarterly period ended March 31, 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.)
 777 Overland Trail, P.O. Box 766, Casper, Wyoming
    
    82602(Address of principal executive offices)
    
    (Zip code)
 307-237-9330
 
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
  Class
    
    Outstanding as of May 1, 2008Common stock, $.10 par value
    
    9,148,105




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##### 



PagePART I. Financial Information:Item 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2008 (Unaudited)
and December 31, 2007
    
    
    2Consolidated Statements of Operations for the Three Months
Ended March 31, 2008 and 2007 (Unaudited)
    
    
    3Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 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
    
    
    16Item 4. Controls and Procedures
    
    
    17PART II. Other Information:Item 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 6. Exhibits
    
    
    17Signatures
    
    
    18Exhibit 31.1Exhibit 32
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ITEM 1. FINANCIAL STATEMENTS
  
 (Amounts in thousands of dollars except share and per share data)
 March 31,
    
    
December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    177
    
    
    $
    125Cash held in escrow
    
    
    580
    
    
    
    719Accounts receivable
    
    
    17,241
    
    
    
    3,664Assets from price risk management
    
    
    652
    
    
    
    Other current assets
    
    
    593
    
    
    
    586Total current assets
    
    
    19,243
    
    
    
    5,094Oil and gas properties and equipment, successful efforts method:Developed properties
    
    
    64,181
    
    
    
    61,394Wells in progress
    
    
    24,738
    
    
    
    29,768Gas transportation pipeline
    
    
    5,465
    
    
    
    5,465Undeveloped properties
    
    
    3,147
    
    
    
    3,147Corporate and other assets
    
    
    1,787
    
    
    
    1,58599,318
    
    
    
    101,359Less accumulated depreciation, depletion and amortization
    
    
    (25,798
    )
    
    
    (24,785
    )Net properties and equipment
    
    
    73,520
    
    
    
    76,574Deferred tax asset
    
    
    1,791
    
    
    
    2,873Other assets
    
    
    56
    
    
    
    56TOTAL ASSETS
    
    $
    94,610
    
    
    $
    84,597LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    7,069
    
    
    $
    8,584Accrued expenses
    
    
    2,528
    
    
    
    2,079Liabilities from price risk management
    
    
    3,692
    
    
    
    474Accrued production taxes
    
    
    1,375
    
    
    
    969Total current liabilities
    
    
    14,664
    
    
    
    12,106Line of credit
    
    
    12,968
    
    
    
    3,445Asset retirement obligation
    
    
    1,565
    
    
    
    1,449Liabilities from price risk management
    
    
    1,267
    
    
    
    1,001Total liabilities
    
    
    30,464
    
    
    
    18,001Preferred stock, $0.10 par value; 10,000,000 shares authorized;
1,610,000 shares issued and outstanding as of
March 31, 2008 and December 31, 2007
    
    
    37,972
    
    
    
    37,972Stockholders equity:Common stock, $0.10 par value; 50,000,000 shares authorized;
9,148,105 shares issued and outstanding as of
March 31, 2008 and December 31, 2007
    
    
    915
    
    
    
    915Additional paid-in capital
    
    
    33,768
    
    
    
    33,670Accumulated deficit
    
    
    (3,554
    )
    
    
    (4,486
    )Accumulated other comprehensive loss
    
    
    (4,955
    )
    
    
    (1,475
    )Total stockholders equity
    
    
    26,174
    
    
    
    28,624TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    94,610
    
    
    $
    84,597
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(Amounts in thousands of dollars except share and per share data)
 Three months ended March 31,2008
    
    
    2007RevenuesOil and gas sales
    
    $
    6,796
    
    
    $
    4,616Transportation revenue
    
    
    364
    
    
    
    207Price risk management activities
    
    
    107
    
    
    
    Other income, net
    
    
    49
    
    
    
    121Total revenues
    
    
    7,316
    
    
    
    4,944Costs and expensesProduction costs
    
    
    1,104
    
    
    
    1,465Production taxes
    
    
    800
    
    
    
    567Exploration expenses including dry hole costs
    
    
    481
    
    
    
    160General and administrative
    
    
    908
    
    
    
    808Depreciation, depletion and amortization
    
    
    1,014
    
    
    
    1,384Total costs and expenses
    
    
    4,307
    
    
    
    4,384Income from operations
    
    
    3,009
    
    
    
    560Interest expense, net
    
    
    (64
    )
    
    
    (155
    )Income before income taxes
    
    
    2,945
    
    
    
    405Provision for deferred income taxes
    
    
    (1,082
    )
    
    
    (170
    )NET INCOME
    
    $
    1,863
    
    
    $
    235Preferred stock dividends
    
    
    931
    
    
    
    Net Income attributable to common stock
    
    $
    932
    
    
    $
    235Net income per common share:Basic
    
    $
    0.10
    
    
    $
    0.03Diluted
    
    $
    0.10
    
    
    $
    0.03Weighted average shares outstanding:Basic
    
    
    9,148,105
    
    
    
    9,018,882Diluted
    
    
    9,148,933
    
    
    
    9,026,483
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(Amounts in thousands of dollars)
 Three months ended March 31,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    1,863
    
    
    $
    235Adjustments to reconcile net income to net cash from
operating activities:Depreciation, depletion, amortization and accretion
of asset retirement obligation
    
    
    1,118
    
    
    
    1,390Abandonment of non-producing properties
    
    
    40
    
    
    
    24Provision for deferred taxes
    
    
    1,082
    
    
    
    170Non-cash employee stock option expense
    
    
    98
    
    
    
    73Non-cash gain on derivative contracts
    
    
    (652
    )
    
    
    Gain on sale of working interest in non-producing property
    
    
    
    
    
    
    (98
    )Changes in current assets and liabilities:Decrease (Increase) in deposit held in escrow
    
    
    139
    
    
    
    (612
    )Decrease (Increase) in accounts receivable
    
    
    (2,147
    )
    
    
    17Decrease (Increase) in other current assets
    
    
    (7
    )
    
    
    (50
    )Increase (Decrease) in accounts payable
    
    
    1,290
    
    
    
    (3,229
    )Increase (Decrease) in accrued expenses
    
    
    (767
    )
    
    
    1,564Increase in accrued production taxes
    
    
    406
    
    
    
    104NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    2,463
    
    
    
    (412
    )Cash flows from investing activities:Additions of producing properties and equipment, net
    
    
    (10,801
    )
    
    
    (5,672
    )Additions of corporate and non-producing properties
    
    
    (202
    )
    
    
    (174
    )Proceeds from sale of non-producing properties
    
    
    
    
    
    
    244NET CASH USED IN INVESTING ACTIVITIES
    
    
    (11,003
    )
    
    
    (5,602
    )Cash flows from financing activities:Net proceeds from sale of common stock
    
    
    
    
    
    
    10,046Dividends on preferred stock
    
    
    (931
    )
    
    
    Net borrowings (repayments) on line of credit
    
    
    9,523
    
    
    
    (4,320
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    8,592
    
    
    
    5,726Change in cash and cash equivalents
    
    
    52
    
    
    
    (288
    )Cash and cash equivalents at beginning of period
    
    
    125
    
    
    
    611CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    177
    
    
    $
    323Supplemental disclosure of cash and non-cash transactions:Cash paid for interest
    
    $
    67
    
    
    $
    192Interest capitalized
    
    $
    106
    
    
    $
    27Rebill to joint interest partners for well costs
associated with unitization of Catalina
    
    $
    11,426
    
    
    $
    Additions to developed properties included in current liabilities
    
    $
    3,900
    
    
    $
    6,178Stock option expense
    
    $
    98
    
    
    $
    73
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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. 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 financial statements were reclassified to conform to the 2008
unaudited consolidated financial statement presentation.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 should be read in conjunction with the
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 expands the
disclosure required by SFAS 133 , Accounting for Derivative Instruments and Hedging Activities,
regarding an entitys derivative instruments and hedging activities. The standard is effective
for fiscal years and interim periods beginning after November 15, 2008 and early adoption is
encouraged. The adoption of SFAS 161 will impact disclosures only and will not have an impact
on the Companys financial position, results of operations or cash flows.2.
    
    Earnings per share of common stockBasic earnings per share of common stock (EPS) is calculated by dividing net income
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
attributable to common stock by the weighted average number of shares of common stock
outstanding adjusted for the dilutive impact of outstanding stock options and grants by
including the effect of outstanding vested and unvested options and grants in the average number
of common shares outstanding during the period. Income attributable to common stock is
calculated as net income 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
quarters ended March 31, 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 Quarter Ended March 31,2008
    
    
    2007Net income
    
    $
    1,863
    
    
    $
    235Preferred stock dividends
    
    
    931
    
    
    
    Income attributable to common stock
    
    $
    932
    
    
    $
    235Weighted average shares:Weighted average shares  basic
    
    
    9,148,105
    
    
    
    9,018,882Dilution effect of stock options
outstanding at the end of period
    
    
    828
    
    
    
    7,601Weighted average shares  diluted
    
    
    9,148,933
    
    
    
    9,026,483Earnings per common share:Basic
    
    $
    0.10
    
    
    $
    0.03Diluted
    
    $
    0.10
    
    
    $
    0.03
 The following options, which could be potentially dilutive in future periods, were not included
in the computation of diluted net income per share because the effect would have been
anti-dilutive for the periods indicated:
 For the Quarter Ended March 31,2008
    
    
    2007Options to purchase common stock
    
    
    10,902
    
    
    
    37,260
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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:
 
    
    Level 1  Quoted prices (unadjusted) for identical assets or liabilities in active
markets.
    
    Level 2  Quoted prices for similar assets or liabilities in active markets; quoted
prices for identical or similar assets or liabilities in markets that are not active; and
model-derived valuations whose inputs or significant value drivers are observable.
    
    Level 3  Significant
inputs to the valuation model are unobservable.
 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. The Company has entered into
fixed delivery contracts which expire at various dates through October 2009. Certain of these
fixed delivery contracts are accounted for as cash flow hedges with the change in market value
being recognized as either an asset or liability in the Consolidated Balance Sheet and changes
in the fair value recorded each period in other comprehensive income or current earnings. At
March 31, 2008, the Company also had a futures contract in place which does not qualify as a
cash flow hedge with the changes in the fair value subsequent to the initial measurement flowing
through earnings. Although the Companys derivative instruments are valued using public
indexes, the instruments themselves are traded with third-party counterparties and are not
openly traded on an exchange. As such, the Companys derivatives have been classified as Level
2The 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
    
    $
    
    
    
    $
    652
    
    
    $
    
    
    
    $
    652Total assets at fair value
    
    $
    
    
    
    $
    652
    
    
    $
    
    
    
    $
    652LiabilitiesDerivative instruments
    
    $
    
    
    
    $
    4,959
    
    
    $
    
    
    
    $
    4,959Total liabilities at fair value
    
    $
    
    
    
    $
    4,959
    
    
    $
    
    
    
    $
    4,959
 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 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 did not recognize any impairment charges
during the quarters ended March 31, 2008 and 2007.
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5.
    
    Income TaxesAt March 31, 2008, the Company has a net operating loss carryforward for income tax
reporting purposes of approximately $30.7 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 March 31, 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 CreditAs part of our cash management program, effective August 1, 2006, the Company 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 March 31, 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 4.125%, and the balance outstanding of $12,968
million was used to fund capital expenditures primarily in the Pinedale Anticline and the
Atlantic Rim Areas. 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 March 31, 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 quarters ended March 31, 2008 and 2007, interest expense on our line of credit totaled
$0 and $182, respectively. We capitalized interest costs of $106 and $27 for the quarters ended
March 31, 2008 and 2007, respectively.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.8.
    
    Comprehensive IncomeThe components of comprehensive income were as follows:
 For the Quarter Ended March 31,2008
    
    
    2007Net income
attributable to common stock
    
    $
    1,863
    
    
    $
    235Change in derivative instrument
fair value, net of tax benefit of $0
    
    
    (4,025
    )
    
    
    Reclassification to earnings
    
    
    545
    
    
    
    Comprehensive income (loss)
    
    $
    (1,617
    )
    
    $
    235
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The components of accumulated other comprehensive were as follows:
 March 31,
    
    
    December 31,2008
    
    
    2007Net change in derivative instrument fair
value, net of tax benefit of $0 and $0
    
    $
    (4,955
    )
    
    $
    (1,475
    )Total accumulated other comprehensive loss, net
    
    $
    (4,955
    )
    
    $
    (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.
    
    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 March 31, 2008 and December 31, 2007
totaled $580 and $719, respectively.10.
    
    Accounts ReceivableThe Company had accounts receivable
of $17.2 million at March 31, 2008. The balance includes
approximately $11.4 million of amounts due from our joint
interest partners at the Catalina Unit. The $11.4 million
receivable represents the recovery of the capital expenditures associated
with the decreased working interest.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.
  9




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (Amounts in thousands of dollars, except amounts per unit of production)
  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;
 
    
    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.
    10




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##### Table of Contents



Business Overview and Strategy
     (Amounts in thousands of dollars, except amounts per unit of production):
 
    
    Average Daily ProductionDuring the quarter ended March 31, 2008, average daily net production increased 16% to
9,877 Mcfe, as compared to average daily production of 8,506 Mcfe during the same prior
year period. The fluctuations in production by major operating area are discussed below.Atlantic Rim.During the quarter ended March 31, 2008, average daily net production at
the Atlantic Rim increased 12% to 5,220 Mcfe, as compared to 4,677 Mcfe during the same
prior year period, largely resulting from production from 10 new wells which were on-line
at our Catalina Unit properties during the first quarter. Average daily net production
at our Catalina Unit increased 16% to 4,715 Mcfe, as compared to 4,054 Mcfe during the
same prior year period. Operational issues due to severe winter weather resulted in
unscheduled workovers and decreased production during the first quarter of 2007. Average
daily production at our Sun Dog and Doty Mountain units decreased to 505 Mcfe, as
compared to average daily production of 623 Mcfe during the same prior year period. The
operator at the Sun Dog Unit has informed us that it plans to bring on the 52 wells
drilled during the 2007 drilling program during the second quarter of 2008. The operator
also intends to drill a combined total of 121 wells in the Sun Dog and Doty Mountain
Units .Pinedale Anticline. During the quarter ended March 31, 2008, average daily production at
Pinedale increased 31% to 3,361 Mcfe, as compared to 2,557 Mcfe in the prior year. These
increases are primarily due to the addition of four Mesa wells which were brought on-line
during the third quarter of 2007. The operator at the Mesa Units has informed us that it
intends to have 17 wells completed between April and July 2008 and plans to drill an
additional 18 wells in the second half of 2008.
  11




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##### Table of Contents



Madden Deep Unit. During the quarter ended March 31, 2008, our average daily net
production at the Madden Deep Unit decreased to 201 Mcfe, as compared to 652 Mcfe in the
quarter ending March 31, 2007. The decrease was largely due to operational issues at the
sour gas plant and the resulting decreased production during the quarter.
    
    Oil and Gas SalesDuring the first quarter ended March 31, 2008, net oil and gas sales increased 47% to
$6,796, as compared to $4,616 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 March 31, 2008, the average CIG price increased 35% as
compared to the same prior year period, due primarily to the cold weather and withdrawal
from storage. In comparison, our average gas price received increased
25%, to $7.56 from
$6.03, 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.
 OVERVIEW OF FINANCIAL CONDITION AND LIQUIDITY
 Liquidity and Capital Resources
   March 31,
    
    
    December 31,2008
    
    
    2007Financial Position SummaryCash and cash equivalents
    
    $
    177
    
    
    $
    125Working capital
    
    $
    4,579
    
    
    $
    (7,012
    )Line of credit outstanding
    
    $
    12,968
    
    
    $
    3,445Stockholders equity
    
    $
    26,174
    
    
    $
    28,624RatiosLong-term
debt to total capital ratio
    
    
    33.1
    %
    
    
    10.7
    %Total debt to equity ratio
    
    
    49.5
    %
    
    
    12.0
    %
   12




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##### Table of Contents



Cash flow activities
  Quarter ended March 31,2008
    
    
    2007Cash provided by (used in):Operating Activities
    
    $
    2,463
    
    
    $
    (412
    )Investing Activities
    
    
    (11,003
    )
    
    
    (5,602
    )Financing Activities
    
    
    8,592
    
    
    
    5,726Net change in cash
    
    $
    52
    
    
    $
    (288
    )
    Off-Balance Sheet Arrangements
   Capital Requirements
  Line of Credit
   13




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##### Table of Contents



RESULTS OF OPERATIONS
 Quarter ended March 31, 2008 compared to the quarter ended March 31, 2007
 Oil and gas sales volume and price comparisons
 Quarter Ended March 31,
    
    
    Percent
    
    
    Percent2008
    
    
    2007
    
    
    Volume
    
    
    PriceVolume
    
    
    Average Price
    
    
    Volume
    
    
    Average Price
    
    
    Change
    
    
    ChangeProduct:Gas (Mcf)
    
    
    865,988
    
    
    $
    6.69
    
    
    
    743,529
    
    
    $
    5.95
    
    
    
    16
    %
    
    
    12
    %Oil (Bbls)
    
    
    5,464
    
    
    $
    83.34
    
    
    
    3,668
    
    
    $
    52.40
    
    
    
    49
    %
    
    
    59
    %Mcfe
    
    
    898,772
    
    
    $
    7.56
    
    
    
    765,537
    
    
    $
    6.03
    
    
    
    17
    %
    
    
    25
    %
   14




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##### Table of Contents



Transportation and other revenue
  Oil and gas production expenses, depreciation, depletion and amortization
 Quarter Ended March 31,2008
    
    
    2007(in dollars per mcfe)Average price
    
    $
    7.56
    
    
    $
    6.03Production costs
    
    
    1.23
    
    
    
    1.86Production taxes
    
    
    0.89
    
    
    
    0.74Depletion and amortization
    
    
    1.03
    
    
    
    1.70Total operating costs
    
    
    3.15
    
    
    
    4.30Gross margin
    
    $
    4.41
    
    
    $
    1.73Gross margin percentage
    
    
    58
    %
    
    
    29
    %
   General and administrative
  Income taxes
  CONTRACTED VOLUMES
   15




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##### Table of Contents



RemainingContractual
    
    
    Daily
    
    
    
    
    
    
    FixedProperty
    
    Volume
    
    
    Production
    
    
    Term
    
    
    Price/McfCatalina
    
    
    426,000
    
    
    
    1,000
    
    
    
    06/07-05/09
    
    
    $
    5.47456,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    5.84912,000
    
    
    
    2,000
    
    
    
    07/07-06/09
    
    
    $
    5.69579,000
    
    
    
    1,000
    
    
    
    11/07-10/09
    
    
    $
    5.66Atlantic Rim
    
    
    487,000
    
    
    
    1,000
    
    
    
    08/07-07/09
    
    
    $
    6.15Pinedale Anticline
    
    
    456,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    6.41Company Total
    
    
    3,316,000
    RemainingContractual
    
    
    Daily
    
    
    
    
    
    
    Price
    
    
    PriceVolume
    
    
    Production
    
    
    Term
    
    
    Floor
    
    
    Ceiling368,000
    
    
    
    2,000
    
    
    
    5/08-10/08
    
    
    $
    6.50
    
    
    $
    10.00453,000
    
    
    
    3,000
    
    
    
    11/08-3/09
    
    
    $
    6.50
    
    
    $
    13.50Total
    
    
    821,000
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risks
   16




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##### Table of Contents



Commodity Price Risks
   
 ITEM 4. CONTROLS AND PROCEDURES
   
  
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 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.
  17




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##### Table of Contents



SIGNATURES
  DOUBLE EAGLE PETROLEUM CO.
                  (Registrant)Date: May 8, 2008
    By:
    /s/ Kurtis S. HooleyKurtis S. HooleyPrincipal Executive Officer  18




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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.
  19