##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For the Fiscal Year Ended December 31, 2007
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 Commission File No. 0-19279
 EVERFLOW EASTERN PARTNERS, L.P.
 (Exact name of registrant as specified in its charter)
 Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    34-1659910
(I.R.S. Employer
Identification No.)
 585 West Main Street 
P.O. Box 629
Canfield, Ohio
(Address of principal executive offices)
    
    44406
(Zip Code)
 Registrants telephone number, including area code: 330-533-2692
  Title of each class
    
    Name of each exchange
on which registered
   Units of Limited Partnership Interest
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



PART I
 ITEM 1. BUSINESS
 Introduction
  Exchange Offer
   The Company
 Description of the Business
 General
 Subsidiaries
 -1-




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Current Operations
   Business Plan
 Acquisition of Prospects
  -2-




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Acquisition of Producing Properties
  Funding for Activities
  Registrants Common Equity and
Related Stockholder Matters
  -3-




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Marketing
 Oil
   Natural Gas
  -4-




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##### 



Dominion
    
    
    IGS
    
    
    TotalWeighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Year Ending
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageDecember 31:
    
    BCF
    
    
    Price/MCF
    
    
    BCF
    
    
    Price/MCF
    
    
    BCF
    
    
    Price/MCF2008
    
    
    1.54
    
    
    $
    9.45
    
    
    
    0.74
    
    
    $
    9.37
    
    
    
    2.28
    
    
    $
    9.422009
    
    
    1.35
    
    
    
    9.55
    
    
    
    0.70
    
    
    
    9.59
    
    
    
    2.05
    
    
    
    9.562010
    
    
    0.90
    
    
    
    9.58
    
    
    
    0.39
    
    
    
    9.58
    
    
    
    1.29
    
    
    
    9.583.79
    
    
    $
    9.52
    
    
    
    1.83
    
    
    $
    9.50
    
    
    
    5.62
    
    
    $
    9.51
   -5-




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Seasonality
 Title to Properties
 Competition
   -6-




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Regulation of Oil and Gas Industry
   -7-




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Environmental Regulation
  Operating Hazards and Uninsured Risks
 -8-




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Conflicts of Interest
  Employees
 -9-




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ITEM 1A. RISK FACTORS
  Natural gas and crude oil prices fluctuate widely, and low prices for an extended period of time
are likely to have a material adverse impact on our business.
   
    
    the level of consumer product demand;
    
    weather conditions;
    
    political conditions in natural gas and crude oil producing regions,
including the Middle East;
 -10-




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##### 




    
    the ability of the members of the Organization of Petroleum Exporting
Countries to agree to and maintain oil price and production controls;
    
    the price of foreign imports;
    
    actions of governmental authorities;
    
    pipeline capacity constraints;
    
    inventory storage levels;
    
    domestic and foreign governmental regulations;
    
    the price, availability and acceptance of alternative fuels; and
    
    overall economic conditions.
  We have identified numerous material weaknesses in our internal control over financial reporting.
    -11-




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##### 



Drilling natural gas and crude oil wells is a high-risk activity.
  
    
    unexpected drilling conditions, pressure or irregularities in formations;
    
    equipment failures or accidents;
    
    adverse weather conditions;
    
    compliance with governmental requirements; and
    
    shortages or delays in the availability of drilling rigs or crews and
the delivery of equipment.
  
    
    the availability of sufficient capital resources to us and the other
participants for the drilling of the prospects;
    
    economic and industry conditions at the time of drilling, including
prevailing and anticipated prices for natural gas and crude oil and
the availability of drilling rigs and crews;
 -12-




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##### 




    
    our financial resources and results; and
    
    the availability of leases and permits on reasonable terms for the prospects.
  Reserve estimates depend on many assumptions that may prove to be inaccurate. Any material
inaccuracies in our reserve estimates or underlying assumptions could cause the quantities and net
present value of our reserves to be overstated.
  
    
    the quality and quantity of available data;
    
    the interpretation of that data;
    
    the accuracy of various mandated economic assumptions; and
    
    the judgment of the persons preparing the estimate.
   -13-




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Our future performance depends on our ability to find or acquire additional natural gas and crude
oil reserves that are economically recoverable.
    We may incur substantial impairment write-downs.
   -14-




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We face a variety of hazards and risks that could cause substantial financial losses.
  
    
    blowouts, surface cratering and explosions;
    
    mechanical problems;
    
    uncontrolled flows of natural gas, crude oil or well fluids;
    
    fires;
    
    formations with abnormal pressures;
    
    pollution and other environmental risks; and
    
    natural disasters.
   We have limited control over the activities on properties we do not operate.
  -15-




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##### 



Terrorist activities and the potential for military and other actions could adversely affect our
business.
  Our ability to sell our natural gas and crude oil production could be materially harmed if we fail
to obtain adequate services such as transportation and processing.
  Competition in our industry is intense, and many of our competitors have substantially greater
financial and technological resources than we do, which could adversely affect our competitive
position.
  The loss of key personnel could adversely affect our ability to operate.
  -16-




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We are subject to complex laws and regulations, including environmental regulations, which can
adversely affect the cost, manner or feasibility of doing business.
  Members of our management team own a significant number of partnership units, giving them
influence or control, and the interests of these individuals could differ from those of other
unitholders .
  ITEM
1B. UNRESOLVED STAFF COMMENTS
  -17-




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ITEM
2. PROPERTIES
   Reserves Reported to Other Agencies
 Proved Reserves (1)
 Oil (BBLS)
    
    Gas (MCF)Proved Developed
    
    
    746,000
    
    
    
    44,910,000Proved Undeveloped
    
    
    
    
    
    
    Total
    
    
    746,000
    
    
    
    44,910,000
 
 (1)
    
    The Company has not determined proved reserves
associated with its proved undeveloped acreage which are not
deemed significant at December 31, 2007. A reconciliation of
the Companys proved reserves is included in the Notes to the
Financial Statements. Standardized
Measure of Discounted Future Net Cash Flows (1)
 (Thousands)Future cash inflows from sales of oil and gas
    
    $
    396,218Future production and development costs
    
    
    124,727Future asset retirement obligations, net of salvage
    
    
    10,037Future income tax expense
    
    
    5,655Future net cash flows
    
    
    255,799Effect of discounting future net cash flows
at 10% per annum
    
    
    122,307Standardized measure of discounted future
net cash flows
    
    $
    133,492
 
 (1)
    
    See the Notes to the Financial Statements for additional
information. -18-




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##### 



Production
 AverageProduction
    
    Sales Price
    
    Average Lifting CostOil (BBLS)
    
    Gas (MCFS)
    
    per BBL
    
    per MCF
    

per
Equivalent MCF(1)2007
    
    
    70,000
    
    
    
    3,228,000
    
    
    $
    66.06
    
    
    $
    9.19
    
    
    $
    1.052006
    
    
    72,000
    
    
    
    3,500,000
    
    
    
    62.60
    
    
    
    8.51
    
    
    
    .962005
    
    
    72,000
    
    
    
    3,878,000
    
    
    
    52.40
    
    
    
    7.42
    
    
    
    .83
 
 (1)
    
    Oil production is converted to MCF equivalents at the rate of 6 MCF per BBL (barrel). Productive Wells
 Gross Wells
    
    Net WellsOil(1)
    
    Gas(1)
    
    Total
    
    Oil(1)
    
    Gas(1)
    
    Total168
    
    
    1,151
    
    
    
    1,319
    
    
    
    84
    
    
    
    756
    
    
    
    840
 
 (1)
    
    Oil wells are those wells which generate
the majority of their revenues from oil production; gas
wells are those wells which generate the majority of their
revenues from gas production. Acreage
 -19-




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##### 



Drilling Activity
 Development
Wells(1)Productive
    
    DryGross
    
    Net
    
    Gross
    
    Net2007
    
    
    73
    
    
    
    28.54
    
    
    
    2
    
    
    
    .362006
    
    
    36
    
    
    
    11.44
    
    
    
    1
    
    
    
    .202005
    
    
    54
    
    
    
    18.16
    
    
    
    2
    
    
    
    .46
 
 (1)
    
    All wells are located in the United States. All
wells are development wells. No exploratory wells were drilled. Present Activities
 Delivery Commitments
 Company Headquarters
 ITEM 3. LEGAL PROCEEDINGS
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  -20-




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PART II
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
 Market
  Distribution History
  Repurchase Right
  -21-




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##### 



ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    

2003(1)Revenue
    
    $
    34,835,438
    
    
    $
    34,847,915
    
    
    $
    33,114,351
    
    
    $
    25,670,760
    
    
    $
    21,834,446Net Income
    
    
    23,505,248
    
    
    
    23,142,714
    
    
    
    22,968,275
    
    
    
    16,403,297
    
    
    
    11,951,300Net Income Per Unit
    
    
    4.12
    
    
    
    4.04
    
    
    
    3.99
    
    
    
    2.84
    
    
    
    2.06Total Assets
    
    
    75,123,907
    
    
    
    72,462,307
    
    
    
    71,329,497
    
    
    
    61,481,489
    
    
    
    58,136,578Debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Distributions Per Unit
    
    
    4.00
    
    
    
    3.75
    
    
    
    2.50
    
    
    
    2.25
    
    
    
    1.25
 
 (1)
    
    See Note 1G to the 2003 consolidated financial statements. The cumulative effect of change
in accounting principle was $471,545. -22-




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##### 



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 General
    Liquidity and Capital Resources
 Financial Position
   -23-




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##### 



December 31, 2007
    
    
    December 31, 2006Amount
    
    
    %
    
    
    Amount
    
    
    %(Amounts in Thousands)
    
    
    (Amounts in Thousands)Working capital
    
    $
    16,815
    
    
    
    24
    %
    
    $
    22,148
    
    
    
    31
    %Property and equipment (net)
    
    
    54,491
    
    
    
    76
    
    
    
    48,347
    
    
    
    69Other
    
    
    78
    
    
    
    
    
    
    
    83
    
    
    
    Total
    
    $
    71,384
    
    
    
    100
    %
    
    $
    70,578
    
    
    
    100
    %Deferred income taxes
    
    $
    400
    
    
    
    
    %
    
    $
    435
    
    
    
    1
    %Long-term liabilities
    
    
    1,934
    
    
    
    3
    
    
    
    1,744
    
    
    
    2Partners equity
    
    
    69,050
    
    
    
    97
    
    
    
    68,399
    
    
    
    97Total
    
    $
    71,384
    
    
    
    100
    %
    
    $
    70,578
    
    
    
    100
    %
 Cash Flows from Operating, Investing and Financing Activities
  -24-




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##### 



2007
    
    
    2006Dollars
    
    
    %
    
    
    Dollars
    
    
    %(Amounts in Thousands)Operating Activities:Net income before adjustments
    
    $
    23,505
    
    
    
    76
    %
    
    $
    23,143
    
    
    
    66
    %Adjustments
    
    
    5,336
    
    
    
    17
    
    
    
    6,176
    
    
    
    18Cash flow from operations before
working capital changes
    
    
    28,841
    
    
    
    93
    
    
    
    29,319
    
    
    
    84Changes in working capital
    
    
    703
    
    
    
    2
    
    
    
    (199
    )
    
    
    (1
    )Net cash provided by
operating activities
    
    
    29,544
    
    
    
    95
    
    
    
    29,120
    
    
    
    83Investing Activities:Proceeds received on receivables
from employees
    
    
    77
    
    
    
    
    
    
    
    53
    
    
    
    Advances disbursed to employees
    
    
    (527
    )
    
    
    (2
    )
    
    
    (89
    )
    
    
    Purchase of investments
    
    
    (17,513
    )
    
    
    (56
    )
    
    
    (15,500
    )
    
    
    (44
    )Proceeds on sale of investments
    
    
    20,288
    
    
    
    66
    
    
    
    7,101
    
    
    
    20Purchase of property and equipment
    
    
    (10,472
    )
    
    
    (34
    )
    
    
    (4,471
    )
    
    
    (13
    )Proceeds on disposal of property
and equipment
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    Net cash used by investing
activities
    
    
    (8,100
    )
    
    
    (26
    )
    
    
    (12,906
    )
    
    
    (37
    )Financing Activities:Distributions
    
    
    (22,843
    )
    
    
    (74
    )
    
    
    (21,463
    )
    
    
    (61
    )Repurchase and retirement of Units
    
    
    (11
    )
    
    
    
    
    
    
    (699
    )
    
    
    (2
    )Net cash used by financing activities
    
    
    (22,854
    )
    
    
    (74
    )
    
    
    (22,162
    )
    
    
    (63
    )Net decrease in cash and equivalents
    
    $
    (1,410
    )
    
    
    (5
    )%
    
    $
    (5,948
    )
    
    
    (17
    )%
 Note:
    
    All items in the previous table are calculated as a percentage of total cash sources. Total
cash sources include the following items, if positive: cash flow from operations before
working capital changes, changes in working capital, net cash provided by investing activities
and net cash provided by financing activities, plus any decrease in cash and equivalents.
  -25-




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-26-




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##### 



-27-




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##### 



Results of Operations
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Revenues:Oil and gas sales
    
    
    98
    %
    
    
    98
    %
    
    
    98
    %Well management and operating
    
    
    2
    
    
    
    2
    
    
    
    2Total Revenues
    
    
    100
    
    
    
    100
    
    
    
    100Expenses:Production costs
    
    
    11
    
    
    
    11
    
    
    
    11Well management and operating
    
    
    1
    
    
    
    
    
    
    
    1Depreciation, depletion and amortization
    
    
    15
    
    
    
    16
    
    
    
    15Accretion expense
    
    
    
    
    
    
    1
    
    
    
    Abandonment of oil and gas properties
    
    
    1
    
    
    
    
    
    
    
    General and administrative
    
    
    6
    
    
    
    6
    
    
    
    5Other income
    
    
    (2
    )
    
    
    (2
    )
    
    
    (1
    )Income taxes
    
    
    1
    
    
    
    2
    
    
    
    Total Expenses
    
    
    33
    
    
    
    34
    
    
    
    31Net income
    
    
    67
    %
    
    
    66
    %
    
    
    69
    %
   -28-




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-29-




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Application of Critical Accounting Policies
 Property and Equipment
     -30-




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Asset Retirement Obligations
   Revenue Recognition
  -31-




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##### 



Inflation and Changes in Prices
    -32-




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  -33-




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##### 



EVERFLOW EASTERN PARTNERS, L. P.
 2007 CONSOLIDATED FINANCIAL REPORT
 F-1




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##### 



PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    F-3FINANCIAL
STATEMENTS 
Consolidated balance sheets
    
    
    F-4  F-5Consolidated statements of income
    
    
    F-6Consolidated statements of partners equity
    
    
    F-7Consolidated statements of cash flows
    
    
    F-8Notes to consolidated financial statements
    
    
    F-9  F-25
  F-2




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##### 



Report of Independent Registered Public Accounting Firm
 
     
 F-3




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##### 



2007
    
    
    2006ASSETSCURRENT ASSETSCash and equivalents
    
    $
    6,014,105
    
    
    $
    7,424,183Investments
    
    
    6,074,433
    
    
    
    8,580,618Accounts receivable:Production
    
    
    7,805,148
    
    
    
    7,833,519Employees
    
    
    607,230
    
    
    
    157,093Joint venture partners
    
    
    42,771
    
    
    
    6,035Other
    
    
    11,230
    
    
    
    31,308Total current assets
    
    
    20,554,917
    
    
    
    24,032,756PROPERTY AND EQUIPMENTProved properties (successful efforts accounting method)
    
    
    151,057,527
    
    
    
    140,443,938Pipeline and support equipment
    
    
    527,227
    
    
    
    528,193Corporate and other
    
    
    1,816,106
    
    
    
    1,776,217153,400,860
    
    
    
    142,748,348Less accumulated depreciation, depletion, amortization
and write down
    
    
    98,909,416
    
    
    
    94,401,69954,491,444
    
    
    
    48,346,649OTHER ASSETS
    
    
    77,546
    
    
    
    82,902$
    75,123,907
    
    
    $
    72,462,307
  F-4




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##### 



2007
    
    
    2006LIABILITIES AND PARTNERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    2,579,389
    
    
    $
    929,373Accrued expenses
    
    
    1,160,354
    
    
    
    955,260Total current liabilities
    
    
    3,739,743
    
    
    
    1,884,633DEFERRED INCOME TAXES
    
    
    400,000
    
    
    
    435,000ASSET RETIREMENT OBLIGATIONS
    
    
    1,933,704
    
    
    
    1,743,707COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    LIMITED PARTNERS EQUITY, SUBJECT TO REPURCHASE
RIGHTAuthorized  8,000,000 unitsIssued and outstanding  5,643,268 units and 5,644,094 units,
respectively
    
    
    68,239,103
    
    
    
    67,595,381GENERAL PARTNERS EQUITY
    
    
    811,357
    
    
    
    803,586Total partners equity
    
    
    69,050,460
    
    
    
    68,398,967$
    75,123,907
    
    
    $
    72,462,307
  F-5




---



##### 



2007
    
    
    2006
    
    
    2005REVENUESOil and gas sales
    
    $
    34,275,635
    
    
    $
    34,282,448
    
    
    $
    32,557,169Well management and operating
    
    
    556,061
    
    
    
    559,962
    
    
    
    555,093Other
    
    
    3,742
    
    
    
    5,505
    
    
    
    2,08934,835,438
    
    
    
    34,847,915
    
    
    
    33,114,351DIRECT COST OF REVENUESProduction costs
    
    
    3,820,544
    
    
    
    3,760,391
    
    
    
    3,563,389Well management and operating
    
    
    234,583
    
    
    
    209,289
    
    
    
    227,249Depreciation, depletion and amortization
    
    
    5,136,780
    
    
    
    5,473,789
    
    
    
    4,805,380Accretion expense
    
    
    212,798
    
    
    
    237,147
    
    
    
    131,554Abandonment of oil and gas properties
    
    
    223,592
    
    
    
    78,752
    
    
    
    97,983Total direct cost of revenues
    
    
    9,628,297
    
    
    
    9,759,368
    
    
    
    8,825,555GENERAL AND ADMINISTRATIVE EXPENSE
    
    
    2,005,335
    
    
    
    2,000,493
    
    
    
    1,511,487Total cost of revenues
    
    
    11,633,632
    
    
    
    11,759,861
    
    
    
    10,337,042INCOME FROM OPERATIONS
    
    
    23,201,806
    
    
    
    23,088,054
    
    
    
    22,777,309OTHER INCOMEInterest income and investment earnings
    
    
    691,129
    
    
    
    725,231
    
    
    
    271,520Gain (loss) on disposal of property and equipment
    
    
    13,145
    
    
    
    (34,526
    )
    
    
    4,086704,274
    
    
    
    690,705
    
    
    
    275,606INCOME BEFORE INCOME TAXES
    
    
    23,906,080
    
    
    
    23,778,759
    
    
    
    23,052,915INCOME TAX EXPENSE (BENEFIT)Current
    
    
    435,832
    
    
    
    201,045
    
    
    
    84,640Deferred
    
    
    (35,000
    )
    
    
    435,000
    
    
    
    400,832
    
    
    
    636,045
    
    
    
    84,640NET INCOME
    
    $
    23,505,248
    
    
    $
    23,142,714
    
    
    $
    22,968,275Allocation of Partnership Net IncomeLimited Partners
    
    $
    23,229,076
    
    
    $
    22,871,548
    
    
    $
    22,700,247General Partner
    
    
    276,172
    
    
    
    271,166
    
    
    
    268,028$
    23,505,248
    
    
    $
    23,142,714
    
    
    $
    22,968,275Net income per unit
    
    $
    4.12
    
    
    $
    4.04
    
    
    $
    3.99
  F-6




---



##### 



2007
    
    
    2006
    
    
    2005PARTNERS EQUITY  JANUARY 1
    
    $
    68,398,967
    
    
    $
    67,418,555
    
    
    $
    59,055,110Net income
    
    
    23,505,248
    
    
    
    23,142,714
    
    
    
    22,968,275Cash distributions ($4.00 per unit in 2007, $3.75 per
unit in 2006 and $2.50 per unit in 2005)
    
    
    (22,843,116
    )
    
    
    (21,462,846
    )
    
    
    (14,370,636
    )Repurchase and retirement of Units
    
    
    (10,639
    )
    
    
    (699,456
    )
    
    
    (234,194
    )PARTNERS EQUITY  DECEMBER 31
    
    $
    69,050,460
    
    
    $
    68,398,967
    
    
    $
    67,418,555
  F-7




---



##### 



2007
    
    
    2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    23,505,248
    
    
    $
    23,142,714
    
    
    $
    22,968,275Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation, depletion and amortization
    
    
    5,211,169
    
    
    
    5,544,428
    
    
    
    4,850,207Accretion expense
    
    
    212,798
    
    
    
    237,147
    
    
    
    131,554Abandonment of oil and gas properties
    
    
    223,592
    
    
    
    78,752
    
    
    
    97,983(Gain) loss on disposal of property and equipment
    
    
    (13,145
    )
    
    
    34,526
    
    
    
    (4,086
    )Investment earnings
    
    
    (269,335
    )
    
    
    (181,711
    )
    
    
    Deferred income taxes
    
    
    (35,000
    )
    
    
    435,000
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (8,365
    )
    
    
    342,680
    
    
    
    (2,522,313
    )Other current assets
    
    
    20,078
    
    
    
    9,092
    
    
    
    (1,382
    )Other assets
    
    
    5,356
    
    
    
    28,499
    
    
    
    12,569Accounts payable
    
    
    559,516
    
    
    
    (695,002
    )
    
    
    847,840Accrued expenses
    
    
    132,040
    
    
    
    144,220
    
    
    
    48,950Total adjustments
    
    
    6,038,704
    
    
    
    5,977,631
    
    
    
    3,461,322Net cash provided by operating activities
    
    
    29,543,952
    
    
    
    29,120,345
    
    
    
    26,429,597CASH FLOWS FROM INVESTING ACTIVITIESProceeds received on receivables from employees
    
    
    76,507
    
    
    
    53,108
    
    
    
    41,009Advances disbursed to employees
    
    
    (526,644
    )
    
    
    (89,400
    )
    
    
    (124,000
    )Purchase of investments
    
    
    (17,512,480
    )
    
    
    (15,499,907
    )
    
    
    Proceeds on sale of investments
    
    
    20,288,000
    
    
    
    7,101,000
    
    
    
    Purchase of property and equipment
    
    
    (10,472,558
    )
    
    
    (4,470,584
    )
    
    
    (6,400,874
    )Proceeds on disposal of property and equipment
    
    
    46,900
    
    
    
    
    
    
    
    10,500Net cash used by investing activities
    
    
    (8,100,275
    )
    
    
    (12,905,783
    )
    
    
    (6,473,365
    )CASH FLOWS FROM FINANCING ACTIVITIESDistributions
    
    
    (22,843,116
    )
    
    
    (21,462,846
    )
    
    
    (14,370,636
    )Repurchase and retirement of Units
    
    
    (10,639
    )
    
    
    (699,456
    )
    
    
    (234,194
    )Net cash used by financing activities
    
    
    (22,853,755
    )
    
    
    (22,162,302
    )
    
    
    (14,604,830
    )NET (DECREASE) INCREASE IN CASH AND
EQUIVALENTS
    
    
    (1,410,078
    )
    
    
    (5,947,740
    )
    
    
    5,351,402CASH AND EQUIVALENTS  JANUARY 1
    
    
    7,424,183
    
    
    
    13,371,923
    
    
    
    8,020,521CASH AND EQUIVALENTS  DECEMBER 31
    
    $
    6,014,105
    
    
    $
    7,424,183
    
    
    $
    13,371,923Supplemental disclosures of cash flow information:Cash paid during the year for:Income taxes
    
    $
    382,531
    
    
    $
    289,305
    
    
    $
    70,000
  F-8




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies
 A.
    
    Organization  Everflow Eastern Partners, L. P. (Everflow) is a
Delaware limited partnership which was organized in September 1990 to engage in the
business of oil and gas acquisition, exploration, development and production.
Everflow was formed to consolidate the business and oil and gas properties of
Everflow Eastern, Inc. (EEI) and subsidiaries and the oil and gas properties
owned by certain limited partnership and working interest programs managed or
sponsored by EEI (EEI Programs or the Programs).Everflow Management Limited, LLC, an Ohio limited liability company, is the
general partner of Everflow and, as such, is authorized to perform all acts
necessary or desirable to carry out the purposes and conduct of the business of
Everflow. The members of Everflow Management Limited, LLC are Everflow Management
Corporation (EMC), two individuals who are Officers and Directors of EEI and
Sykes Associates, LLC a limited liability company managed by Robert F. Sykes, the
Chairman of the Board of EEI. EMC is an Ohio corporation formed in September 1990
and is the managing member of Everflow Management Limited, LLC.B.
    
    Principles of Consolidation  The consolidated financial statements
include the accounts of Everflow and its wholly-owned subsidiaries, including EEI
(collectively, the Company), which are accounted for under the proportional
consolidation method. All significant accounts and transactions between the
consolidated entities have been eliminated.C.
    
    Use of Estimates  The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.D.
    
    Fair Value of Financial Instruments  The fair values of cash and
equivalents, investments, accounts receivable, accounts payable and other
short-term obligations approximate their carrying values because of the short
maturity of these financial instruments. The carrying values of the Companys
long-term obligations approximate their fair value. In accordance with Statement
of Financial Accounting Standards (SFAS) No. 107, Disclosure About Fair Value of
Financial Instruments, rates available at balance sheet dates to the Company are
used to estimate the fair value of existing obligations.E.
    
    Cash and Equivalents  The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be cash
equivalents. The Company maintains at various financial institutions cash and
equivalents which may exceed federally insured amounts and which may, at times,
significantly exceed balance sheet amounts due to float.
 F-9




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 F.
    
    Investments  The Companys investments consist of commercial paper
with original maturity dates of greater than three months, which are recorded at
their amortized cost. Interest earnings on investments amounted to approximately
$269,300 and $181,700 during the years ended December 31, 2007 and 2006,
respectively. The Company did not hold any investments during 2005.G.
    
    Property and Equipment  The Company uses the successful efforts
method of accounting for oil and gas exploration and production activities. Under
successful efforts, costs to acquire mineral interests in oil and gas properties,
to drill and equip development wells and related asset retirement costs are
capitalized. Costs of development wells (on properties the Company has no further
interest in) that do not find proved reserves and geological and geophysical costs
are expensed. The Company has not participated in exploratory drilling and owns no
interest in unproved properties.Capitalized costs of proved properties, after considering estimated dismantlement
and abandonment costs and estimated salvage values, are amortized by the
unit-of-production method based upon estimated proved developed reserves.
Depletion, depreciation and amortization on proved properties amounted to
$5,096,584, $5,434,719 and $4,728,556 for the years ended December 31, 2007, 2006
and 2005, respectively.On sale or retirement of a unit of a proved property (which generally constitutes
the amortization base), the cost and related accumulated depreciation, depletion,
amortization and write down are eliminated from the property accounts, and the
resultant gain or loss is recognized.The Company evaluates its oil and gas properties for impairment annually. SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
requires that long-lived assets (including oil and gas properties) and certain
identifiable intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Everflow utilizes a field by field basis for assessing impairment of
its oil and gas properties. The Company wrote down oil and gas properties by
approximately $223,600, $79,000 and $98,000 during 2007, 2006 and 2005,
respectively, to provide for impairment on certain of its oil and gas properties.Additions to proved properties include amounts offset by accounts payable (see
Note 2), and asset retirement obligations (see Note 1.H).Pipeline and support equipment and other corporate property and equipment are
recorded at cost and depreciated principally on the straight-line method over
their estimated useful lives (pipeline and support equipment  10 to 15 years,
other corporate equipment  3 to 7 years, other corporate property  building and
improvements with a cost of $1,209,523  40 years). Depreciation on pipeline and
support equipment amounted to $40,196, $39,070 and $76,824 for the years ended
December 31, 2007, 2006 and 2005, respectively. Depreciation on other corporate
property and equipment, included in general and administrative expense, amounted
to $74,389, $70,639 and $44,827 for the years ended December 31, 2007, 2006 and
2005, respectively.
 F-10




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 G.
    
    Property and Equipment (Continued)Maintenance and repairs of property and equipment are expensed as incurred. Major
renewals and improvements are capitalized, and the assets replaced are retired.H.
    
    Asset Retirement Obligations  The Company follows SFAS No. 143,
Accounting for Asset Retirement Obligations, which requires the fair value of a
liability for an asset retirement obligation to be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. For the
Company, these obligations include dismantlement, plugging and abandonment of oil
and gas wells and associated pipelines and equipment. The associated asset
retirement costs are capitalized as part of the carrying amount of the long-lived
asset. The liability is accreted to its then present value each period, and the
capitalized cost is depleted over the estimated useful life of the related asset.The estimated liability is based on historical experience in dismantling, plugging
and abandoning wells, estimated remaining lives of those wells based on reserves
estimates, estimates of the external cost to dismantle, plug and abandon the wells
in the future and federal and state regulatory requirements. The liability is
discounted using an assumed credit-adjusted risk-free interest rate. Revisions to
the liability will likely occur due to: changes in estimates of dismantlement,
plugging and abandonment costs; changes in estimated remaining lives of the wells;
changes in federal or state regulations regarding plugging and abandonment
requirements; and other factors. At December 31, 2005, the Company made
significant revisions in estimates of plugging costs, discount rate, inflation
rate and remaining lives of wells.The Company has no assets legally restricted for purposes of settling its asset
retirement obligations. The Company has determined that there are no other
material retirement obligations associated with tangible long-lived assets.The schedule below is a reconciliation of the Companys liability for the years
ended December 31:
 2007
    
    
    2006Beginning of Period
    
    $
    2,103,707
    
    
    $
    1,854,996Liabilities incurred
    
    
    50,853
    
    
    
    31,033Liabilities settled
    
    
    (53,654
    )
    
    
    (19,469
    )Accretion expense
    
    
    212,798
    
    
    
    237,147Total
    
    $
    2,313,704
    
    
    $
    2,103,707
 F-11




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 H.
    
    Asset Retirement Obligations (Continued)At December 31, 2007 and 2006, the asset retirement obligations are included in
accrued expenses (current portion) and asset retirement obligations (non-current
portion) in the Companys consolidated balance sheets. The current portion of the
asset retirement obligations were $380,000 and $360,000 at
December 31, 2007 and 2006, respectively.I.
    
    Revenue Recognition  The Company recognizes oil and gas revenues when
production is sold to a purchaser at a fixed or determinable price, when delivery
has occurred, title and risk of loss have transferred to the purchaser, and
collectibility of the revenue is reasonably assured. The Company utilizes the
sales method to account for gas production volume imbalances. Under this method,
income is recorded based on the Companys net revenue interest in production taken
for delivery. The Company had no material gas imbalances at December 31, 2007 and
2006. Other revenue is recognized at the time services are rendered, the Company
has a contractual right to such revenue and collection is reasonably assured.The Company participates (and may act as drilling contractor) with unaffiliated
joint venture partners and employees in the drilling, development and operation of
jointly owned oil and gas properties. Each owner, including the Company, has an
undivided interest in the jointly owned property(ies). Generally, the joint
venture partners and employees participate on the same drilling/development cost
basis as the Company and, therefore, no revenue, expense or income is recognized
on the drilling and development of the properties. Accounts receivable from joint
venture partners and employees consist principally of drilling and development
costs the Company has advanced or incurred on behalf of joint venture partners and
employees (see Note 7). Accounts payable to joint venture partners consist
principally of drilling and development advances the Company has received on
behalf of joint venture partners. The Company earns and receives monthly
management and operating fees from certain joint venture partners and employees
after the properties are completed and placed into production.J.
    
    Income Taxes  Everflow is not a tax-paying entity and the net taxable
income or loss, other than the taxable income or loss allocable to EEI, which is a
C corporation owned by Everflow, will be allocated directly to its respective
partners. The Company is not able to determine the net difference between the tax
bases and the reported amounts of Everflows assets and liabilities due to separate
tax elections that were made by owners of the working interests and limited
partnership interests that comprised Programs.As referred to in Note 5, EEI accounts for income taxes under SFAS No. 109, Accounting for Income
Taxes. Income taxes are provided for all items (as they relate to EEI) in the Consolidated
Statements of Income regardless of the period when such items are reported for income tax purposes.
SFAS No. 109 provides that deferred tax assets and liabilities be recognized for temporary
differences between the financial reporting basis and tax basis of certain of EEIs assets and
liabilities. In addition, SFAS No. 109 requires that deferred tax assets and liabilities be
measured using enacted tax rates expected to apply to taxable income in the years
 F-12




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 J.
    
    Income Taxes (Continued)in which the temporary differences are expected to be recovered or settled. The
impact on deferred taxes of changes in tax rates and laws, if any, is reflected in
the financial statements in the period of enactment. In some situations, SFAS No.
109 permits the recognition of expected benefits of utilizing net operating loss
and tax credit carryforwards.In June 2006, the Financial Accounting Standards Board (FASB) issued Financial
Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes 
an Interpretation of FASB Statement No. 109. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements in
accordance with SFAS No. 109. FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return and also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition.The Company adopted the provisions of FIN 48 on January 1, 2007. The
implementation of FIN 48 did not have a material impact on the Companys financial
statements, since EEI is the only tax paying entity and represents less than 10%
of the Companys total taxable income. There were no unrecognized tax benefits as
of the date of adoption of FIN 48 and therefore, there is no anticipated effect
upon the Companys effective tax rate. Interest, if any, under FIN 48 will be
classified in the financial statements as a component of interest expense and
statutory penalties, if any, will be classified as a component of general and
administrative expense.As of December 31, 2007, the Companys income tax years from 2004 and thereafter
remain subject to examination by the Internal Revenue Service, as well as the Ohio
Department of Taxation.K.
    
    Allocation of Income and Per Unit Data  Under the terms of the
limited partnership agreement, initially, 99% of revenues and costs were allocated
to the unitholders (the limited partners) and 1% of revenues and costs were
allocated to the general partner. The allocation changes as unitholders elect to
exercise the repurchase right (see Note 4).Earnings and distributions per limited partner Unit have been computed based on
the weighted average number of Units outstanding during the year for each year
presented. Average outstanding Units for earnings and distributions per Unit
calculations amount to 5,643,681, 5,659,386 and 5,682,776 in 2007, 2006 and 2005,
respectively.L.
    
    New Accounting Standards  In September 2006, the FASB issued SFAS No.
157, Fair Value Measurements. This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. This Statement applies
under other accounting pronouncements that require or permit fair value
measurements, where fair value has been determined to be the relevant measurement
attribute. This statement is effective for fiscal periods beginning after
November 15, 2007. Adoption of this standard is not expected to materially impact
the Companys financial statements.
 F-13




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 L.
    
    New Accounting Standards (Continued)In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108),
Considering the Effects of Prior Year Misstatements in Current Year Financial
Statements. SAB 108 provides guidance for quantifying and assessing the
materiality of misstatements of financial statements, including uncorrected
misstatements that were not material to prior years financial statements. SAB
108 is effective for fiscal years ending after November 15, 2006. The adoption of
SAB 108 did not have a material effect on the Companys financial statements and
related disclosures.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities  Including an amendment of FASB
Statement No. 115. This Statement permits the option to choose to measure
selected financial assets and liabilities at fair value. If the fair value option
is elected, reporting of unrealized gains and losses on those assets and
liabilities occurs in each subsequent reporting date. This statement is effective
for fiscal years beginning after November 15, 2007. The Company is currently
assessing the impact, if any, that the adoption of SFAS No. 159 will have on its
financial statements.M.
    
    Reclassifications  Certain prior year amounts have been reclassified
to conform with the current years presentation.
 Note 2. Current Liabilities
  2007
    
    
    2006Accounts Payable:Drilling
    
    $
    1,090,500
    
    
    $
    Production and related other
    
    
    737,284
    
    
    
    469,164Joint venture partners
    
    
    384,686
    
    
    
    90,834Other
    
    
    366,919
    
    
    
    369,375$
    2,579,389
    
    
    $
    929,373Accrued Expenses:Payroll and retirement contributions
    
    $
    610,229
    
    
    $
    565,162Current portion of asset retirement obligations
    
    
    380,000
    
    
    
    360,000Federal, state and local taxes
    
    
    170,125
    
    
    
    30,098$
    1,160,354
    
    
    $
    955,260
 Note 3. Credit Facilities and Long-Term Debt
  F-14




---



##### 



Note 3. Credit Facilities and Long-Term Debt (Continued)
   Note 4. Partners Equity
    F-15




---



##### 



Note 4. Partners Equity (Continued)
  Per UnitCalculated
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitsPrice for
    
    Less
    
    
    
    
    
    
    
    
    
    OutstandingRepurchase
    
    Interim
    
    Net
    
    # of Units
    
    FollowingYear
    
    Right
    
    Distributions
    
    Price Paid
    
    Repurchased
    
    Repurchase2004
    
    $
    13.44
    
    
    $
    1.00
    
    
    $
    12.44
    
    
    
    23,865
    
    
    
    5,690,8742005
    
    $
    15.46
    
    
    $
    1.00
    
    
    $
    14.46
    
    
    
    16,196
    
    
    
    5,674,6782006
    
    $
    24.37
    
    
    $
    1.50
    
    
    $
    22.87
    
    
    
    30,584
    
    
    
    5,644,0942007
    
    $
    14.88
    
    
    $
    2.00
    
    
    $
    12.88
    
    
    
    826
    
    
    
    5,643,268
  Note 5. Provision for Income Taxes
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Provision based on the
statutory rate (for taxable
income up to $10,000,000)
    
    $
    8,128,000
    
    
    
    34.0
    
    
    $
    8,085,000
    
    
    
    34.0
    
    
    $
    7,838,000
    
    
    
    34.0Tax effect of:Non-taxable status of the
Programs and Everflow
    
    
    (7,656,000
    )
    
    
    (32.0
    )
    
    
    (7,413,000
    )
    
    
    (31.2
    )
    
    
    (7,301,000
    )
    
    
    (31.7
    )Excess statutory depletion
    
    
    (110,000
    )
    
    
    (0.5
    )
    
    
    (99,000
    )
    
    
    (0.4
    )
    
    
    (99,000
    )
    
    
    (0.4
    )Graduated tax rates, state
income tax, tax credits
and other  net
    
    
    38,832
    
    
    
    0.2
    
    
    
    63,045
    
    
    
    0.3
    
    
    
    (353,360
    )
    
    
    (1.5
    )Total
    
    $
    400,832
    
    
    
    1.7
    
    
    $
    636,045
    
    
    
    2.7
    
    
    $
    84,640
    
    
    
    0.4
  F-16




---



##### 



Note 6. Retirement Plan
  Note 7. Related Party Transactions
  Note 8. Business Segments, Risks and Major Customers
    F-17




---



##### 



Note 8. Business Segments, Risks and Major Customers (Continued)
  Customer
    
    2007
    
    2006
    
    2005Dominion Field Services, Inc. (Dominion)
    
    
    41
    %
    
    
    40
    %
    
    
    40
    %Interstate Gas Supply, Inc. (IGS)
    
    
    19
    
    
    
    18
    
    
    
    18Ergon Oil Purchasing, Inc. (Ergon Oil)
    
    
    12
    
    
    
    12
    
    
    
    1272
    %
    
    
    70
    %
    
    
    70
    %
    F-18




---



##### 



Note 8. Business Segments, Risks and Major Customers (Continued)
  Dominion
    
    
    IGS
    
    
    TotalWeighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Year Ending
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageDecember 31:
    
    BCF
    
    
    Price/MCF
    
    
    BCF
    
    
    Price/MCF
    
    
    BCF
    
    
    Price/MCF2008
    
    
    1.54
    
    
    $
    9.45
    
    
    
    0.74
    
    
    $
    9.37
    
    
    
    2.28
    
    
    $
    9.422009
    
    
    1.35
    
    
    
    9.55
    
    
    
    0.70
    
    
    
    9.59
    
    
    
    2.05
    
    
    
    9.562010
    
    
    0.90
    
    
    
    9.58
    
    
    
    0.39
    
    
    
    9.58
    
    
    
    1.29
    
    
    
    9.583.79
    
    
    $
    9.52
    
    
    
    1.83
    
    
    $
    9.50
    
    
    
    5.62
    
    
    $
    9.51
  Note 9. Commitments and Contingencies
   F-19




---



##### 



Note 10. Selected Quarterly Financial Data (Unaudited)
  Quarters Ended 2007March 31
    
    June 30
    
    September 30
    
    December 31Revenues
    
    $
    9,164,861
    
    
    $
    8,456,717
    
    
    $
    8,052,070
    
    
    $
    9,161,790Income from operations
    
    
    6,085,253
    
    
    
    5,603,852
    
    
    
    5,247,491
    
    
    
    6,265,210Net income
    
    
    6,132,215
    
    
    
    5,679,660
    
    
    
    5,380,817
    
    
    
    6,312,556Net income per unit
    
    
    1.07
    
    
    
    0.99
    
    
    
    0.94
    
    
    
    1.12
 Quarters Ended 2006March 31
    
    June 30
    
    September 30
    
    December 31Revenues
    
    $
    9,539,090
    
    
    $
    8,079,677
    
    
    $
    8,607,349
    
    
    $
    8,621,799Income from operations
    
    
    6,821,042
    
    
    
    5,494,945
    
    
    
    5,896,245
    
    
    
    4,875,822Net income
    
    
    6,892,377
    
    
    
    5,634,514
    
    
    
    5,868,886
    
    
    
    4,746,937Net income per unit
    
    
    1.20
    
    
    
    0.98
    
    
    
    1.03
    
    
    
    0.83
  F-20




---



##### 



Note 11. Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited)
     Years ended December 31,2007
    
    
    2006
    
    
    2005Proved oil and gas properties
    
    $
    151,057,527
    
    
    $
    140,443,938
    
    
    $
    136,388,136Pipeline and support equipment
    
    
    527,227
    
    
    
    528,193
    
    
    
    532,229151,584,754
    
    
    
    140,972,131
    
    
    
    136,920,365Accumulated depreciation,
depletion,
amortization and write down
    
    
    98,399,963
    
    
    
    94,064,163
    
    
    
    88,767,760Net capitalized costs
    
    $
    53,184,791
    
    
    $
    46,907,968
    
    
    $
    48,152,605
 Years ended December 31,2007
    
    2006
    
    2005Property acquisition costs
    
    $
    588,641
    
    
    $
    173,704
    
    
    $
    321,395Development costs
    
    
    10,506,406
    
    
    
    4,101,986
    
    
    
    6,017,543
  F-21




---



##### 



Note 11. Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited) (Continued)
  Years ended December 31,2007
    
    
    2006
    
    
    2005Oil and gas sales
    
    $
    34,275,635
    
    
    $
    34,282,448
    
    
    $
    32,557,169Production costs
    
    
    (3,820,544
    )
    
    
    (3,760,391
    )
    
    
    (3,563,389
    )Depreciation, depletion and
amortization
    
    
    (5,136,780
    )
    
    
    (5,473,789
    )
    
    
    (4,805,380
    )Accretion expense
    
    
    (212,798
    )
    
    
    (237,147
    )
    
    
    (131,554
    )Abandonment of oil and gas properties
    
    
    (223,592
    )
    
    
    (78,752
    )
    
    
    (97,983
    )24,881,921
    
    
    
    24,732,369
    
    
    
    23,958,863Income tax expense
    
    
    500,000
    
    
    
    500,000
    
    
    
    260,000Results of operations for oil and gas
producing activities (excluding
corporate overhead and financing
costs)
    
    $
    24,381,921
    
    
    $
    24,232,369
    
    
    $
    23,698,863
  F-22




---



##### 



Note 11. Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited) (Continued)
  Oil
    
    Gas(BBLS)
    
    (MCF)Balance, January 1, 2005
    
    
    782,000
    
    
    
    49,350,000Extensions, discoveries and other
additions
    
    
    32,000
    
    
    
    1,355,000Production
    
    
    (72,000
    )
    
    
    (3,878,000
    )Revision of previous estimates
    
    
    61,000
    
    
    
    4,216,000Balance, December 31, 2005
    
    
    803,000
    
    
    
    51,043,000Extensions, discoveries and other
additions
    
    
    1,000
    
    
    
    808,000Production
    
    
    (72,000
    )
    
    
    (3,500,000
    )Revision of previous estimates
    
    
    (14,000
    )
    
    
    (5,345,000
    )Balance, December 31, 2006
    
    
    718,000
    
    
    
    43,006,000Extensions, discoveries and other
additions
    
    
    28,000
    
    
    
    2,672,000Production
    
    
    (70,000
    )
    
    
    (3,228,000
    )Revision of previous estimates
    
    
    70,000
    
    
    
    2,460,000Balance, December 31, 2007
    
    
    746,000
    
    
    
    44,910,000PROVED DEVELOPED RESERVES:December 31, 2004
    
    
    782,000
    
    
    
    49,350,000December 31, 2005
    
    
    803,000
    
    
    
    51,043,000December 31, 2006
    
    
    718,000
    
    
    
    43,006,000December 31, 2007
    
    
    746,000
    
    
    
    44,910,000
  F-23




---



##### 



Note 11. Supplemental Information Relating to Oil and Gas Producing Activities (Unaudited) (Continued)
 
 December 31,2007
    
    
    2006
    
    
    2005(Thousands of Dollars)Future cash inflows from sales of oil
and gas
    
    $
    396,218
    
    
    $
    313,397
    
    
    $
    566,186Future production and development
costs
    
    
    124,727
    
    
    
    107,322
    
    
    
    139,946Future asset retirement obligations,
net of
salvage
    
    
    10,037
    
    
    
    9,220
    
    
    
    9,145Future income tax expense
    
    
    5,655
    
    
    
    4,294
    
    
    
    8,997Future net cash flows
    
    
    255,799
    
    
    
    192,561
    
    
    
    408,098Effect of discounting future net cash
flows at 10% per annum
    
    
    122,307
    
    
    
    87,846
    
    
    
    219,835Standardized measure of discounted
future net cash flows
    
    $
    133,492
    
    
    $
    104,715
    
    
    $
    188,263
 
 Years Ended December 31,2007
    
    
    2006
    
    
    2005(Thousands of Dollars)Balance, beginning of year
    
    $
    104,715
    
    
    $
    188,263
    
    
    $
    119,089Extensions, discoveries and other
additions
    
    
    9,977
    
    
    
    1,947
    
    
    
    6,380Development costs incurred
    
    
    89
    
    
    
    412
    
    
    
    1,436Revision of quantity estimates
    
    
    8,865
    
    
    
    (11,822
    )
    
    
    15,809Sales of oil and gas, net of production
costs
    
    
    (30,455
    )
    
    
    (30,522
    )
    
    
    (28,994
    )Net change in income taxes
    
    
    (620
    )
    
    
    1,836
    
    
    
    (1,534
    )Net changes in prices and production
costs
    
    
    23,595
    
    
    
    (75,149
    )
    
    
    63,400Accretion of discount
    
    
    10,472
    
    
    
    18,826
    
    
    
    11,909Other
    
    
    6,854
    
    
    
    10,924
    
    
    
    768Balance, end of year
    
    $
    133,492
    
    
    $
    104,715
    
    
    $
    188,263
 F-24




---



##### 



Note 11. Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited) (Continued)
   F-25




---



##### 



ITEM 9A.(T) CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Managements Report on Internal Control Over Financial Reporting
   -34-




---



##### 



Internal Control-Integrated Framework
   1)
    
    We did not have adequate controls in place to establish and maintain an
effective control environment. Specifically, we did not establish and maintain
sufficient, documented and formalized consistent finance and accounting policies.
This material weakness in the control environment increases the likelihood of
material misstatements of our annual and interim financial statements that would not
be prevented or detected.2)
    
    We did not maintain sufficient, formalized written policies and procedures
governing the financial reporting process. Effective controls were not designed and
in place to provide reasonable assurance that accounts were complete and accurate and
agreed to the detailed supporting documentation.3)
    
    We did not maintain effective controls, including policies and procedures,
over accounting for property and equipment. Specifically, we do not have a
comprehensive formal policy regarding property and equipment. As a result, asset
retirements may not be identified and their values may not properly be assessed and
adjusted for based on their status in the proper accounting period. Additionally,
depletion, depreciation and amortization may not properly be
assessed and adjusted for within the framework of an effective control environment.4)
    
    We did not maintain effective controls over access by personnel to
information technology programs and systems. Specifically, we do not have adequate
policies
 -35-




---



##### 



and procedures to control security access, as well as a lack of independent
review of such access.
 Internal Control  Integrated Framework
  Changes in Internal Control Over Financial Reporting
  Remediation of Material Weaknesses in Internal Control Over Financial Reporting
  
    
    Management has communicated its endorsement and reinforced its commitment to maintaining
sound and effective internal controls over financial reporting;
    
    Many parameters for an effective control environment have been identified and drafted,
and plans are in place to enhance and formalize the parameters so sufficient, documented
and formalized finance and accounting policies can be established;
    
    Plans to formalize written policies and procedures governing the financial reporting
process are currently being reviewed so that reasonable assurance may be provided that
accounts are complete and accurate and agree to the detailed supporting documentation;
 -36-




---



##### 




    
    Additional effective control policies and procedures established as a result of the new
financial data reporting system implemented during 2006 will assist us in establishing and
maintaining effective policies and procedures governing the financial reporting process;
    
    A formalized written policy over the accounting for crude oil and natural gas production
accruals was finalized and implemented during 2007. As a result, management believes
procedures are now in place for accrued oil and gas production revenues to be properly
assessed and adjusted for within the framework of an effective control environment;
    
    Existing control policies and procedures over identified key accounting areas, such as
property and equipment, have been reviewed, and further design and formal documentation of
these and additional policies and procedures are being prepared;
    
    Additional personnel resources have been identified to address the shortfalls in
staffing to assist us with accounting, finance and information technology responsibilities.
An Internal Audit Manager was hired in September 2007 to provide oversight of the
assessment and assist with implementation of the remediation of our material weaknesses in
internal controls over financial reporting and the ineffectiveness of our disclosure
controls and procedures; and
    
    Additional control policies and procedures have been identified and are in the process
of being added to appropriately restrict and monitor access to our information technology
programs and systems.
  ITEM 9B. OTHER INFORMATION
  -37-




---



##### 



PART III
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    Directors and Officers of EEI and EMC
 Positions and
    
    Positions andName
    
    Age
    
    Offices with EEI
    
    Offices with EMCRobert F. Sykes
    
    
    84
    
    
    Chairman of the Board
    
    Chairman of the Board
and DirectorThomas L. Korner
    
    
    54
    
    
    President, Principal
Executive Officer
and Director
    
    President, Principal
Executive Officer
and DirectorWilliam A. Siskovic
    
    
    52
    
    
    Vice President, Secretary-
Treasurer, Principal
Financial and Accounting
Officer and Director
    
    Vice President, Secretary-
Treasurer, Principal
Financial and Accounting
Officer and Director
  -38-




---



##### 



Robert F. Sykes
 Thomas L. Korner
 William A. Siskovic
 Audit Committee
  -39-




---



##### 



REPORT OF THE AUDIT COMMITTEE
  Communication with Audit Committees
 Independence Discussions with Audit Committee
   Robert F. Sykes (Chairman)
Thomas L. Korner
William A. Siskovic -40-




---



##### 



Code of Ethics
   Section 16(a) Beneficial Ownership Compliance
  -41-




---



##### 



ITEM 11. EXECUTIVE COMPENSATION
  Overview of 2007 Executive Compensation Components
  
    
    base salary
    
    annual cash bonuses
    
    retirement and other benefits
 Base Salary
  Annual Cash Bonuses
    -42-




---



##### 



Retirement and Other Benefits
     Annual CompensationAll OtherName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compen-Principal Position
    
    Year
    
    Salary
    
    Bonus
    

sation(1)
    
    TotalThomas L. Korner
    
    
    2007
    
    
    $
    100,800
    
    
    $
    112,700
    
    
    $
    38,456
    (2)
    
    $
    251,956President and Principal
    
    
    2006
    
    
    
    100,800
    
    
    
    90,000
    
    
    
    35,969
    (2)
    
    
    226,769Executive Officer
    
    
    2005
    
    
    
    100,800
    
    
    
    77,500
    
    
    
    32,195
    (2)
    
    
    210,495William A. Siskovic
    
    
    2007
    
    
    $
    100,800
    
    
    $
    112,700
    
    
    $
    37,579
    (3)
    
    $
    251,079Vice President and
    
    
    2006
    
    
    
    100,800
    
    
    
    90,000
    
    
    
    35,200
    (3)
    
    
    226,000Principal Financial and
    
    
    2005
    
    
    
    100,800
    
    
    
    77,500
    
    
    
    32,066
    (3)
    
    
    210,366Accounting Officer
 
 No Named Executive Officer received personal benefits or perquisites during 2007, 2006 or 2005 in
excess of $10,000.(1)
    
    Includes amounts contributed under the Companys 401(K) Retirement Savings Plan. The Company
matched employees contributions to the 401(K) Retirement Savings Plan to the extent of 100%
of the first 6% of a participants salary reduction. Also includes amounts contributed under
the profit sharing component of the Companys 401(K) Retirement Savings Plan. The amounts
attributable to the Companys matching and profit sharing contributions vest immediately.
Includes amounts considered taxable wages with respect to personal use of a Company vehicle
and the Companys Group Term Life Insurance Plan.(2)
    
    During fiscal years ended December 31, 2007, 2006 and 2005, includes $21,306, $20,604, and
$18,304, respectively, contributed under the profit sharing component of the Companys 401(K)
Retirement Savings Plan, $12,822, $11,460 and $10,698, respectively, contributed by the
Company as matching contribution from the Companys 401(K) Retirement Savings Plan, $3,438,
$3,015 and $2,441, respectively, considered taxable wages with respect to personal use of a
Company vehicle and $690 each year considered taxable wages with respect to the Companys
Group Term Life Insurance Plan.(3)
    
    During fiscal years ended December 31, 2007, 2006 and 2005, includes $21,306, $20,604, and
$18,304, respectively, contributed under the profit sharing component of the Companys 401(K)
Retirement Savings Plan, $12,822, $11,460 and $10,698, respectively, contributed by the
Company as matching contribution from the Companys 401(K) Retirement Savings Plan, $2,561,
$2,246 and $2,554, respectively, considered taxable wages with respect to personal use of a
Company vehicle and $690, $690 and $450, respectively, considered taxable wages with respect
to the Companys Group Term Life Insurance Plan. -43-




---



##### 



Outstanding Equity Awards
  Director Compensation
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  -44-




---



##### 



BENEFICIAL OWNERSHIP OF UNITS IN THE COMPANY,
EVERFLOW MANAGEMENT LIMITED, LLC AND EMC
 PercentageInterest inPercentage
    
    Everflow
    
    PercentageName
    
    Units
    
    of Units
    
    Management
    
    Interest inof Holder
    
    in Company
    
    in Company(1)
    
    Limited, LLC(2)
    
    EMCRobert F. Sykes(3)
    
    
    1,056,464
    
    
    
    18.72
    
    
    
    66.6666
    
    
    
    66.6666Thomas L. Korner
    
    
    138,575
    
    
    
    2.45
    
    
    
    16.6667
    
    
    
    16.6667William A. Siskovic
    
    
    71,731
    
    
    
    1.27
    
    
    
    16.6667
    
    
    
    16.6667All officers and directors as
a group (3 persons in EMC)
    
    
    1,266,770
    
    
    
    22.44
    
    
    
    100.0000
    
    
    
    100.0000
 
 (1)
    
    Does not include the interest in the Company owned indirectly by such individuals as
a result of their ownership in (i) the General Partner (based on its 1.18% interest in the
Company) or (ii) EMC (based on EMCs 1% managing members interest in the General Partner).(2)
    
    Includes the interest in the General Partner owned indirectly by such individuals as
a result of their share ownership in EMC resulting from EMCs 1% managing members interest in
the General Partner.(3)
    
    Includes 732,855 Units held by Sykes Associates, LLC, a New York limited liability
company owned by the four adult children of Mr. Sykes as members, 82,823 Units of the Company
held by the Robert F. Sykes Annuity Trust, 79,639 Units held by the Robert F. Sykes Living
Trust, 82,152 Units held by the Catherine H. Sykes Annuity Trust, and 78,995 held in the
Catherine H. Sykes Living Trust. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
   -45-




---



##### 



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  December 31,2007
    
    
    2006Audit fees
    
    $
    146,906
    
    
    $
    135,964Audit related fees
    
    
    -0-
    
    
    
    -0-Tax fees
    
    
    -0-
    
    
    
    -0-All other fees
    
    
    -0-
    
    
    
    -0-Total
    
    $
    146,906
    
    
    $
    135,964
    -46-




---



##### 



PART IV
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 Financial Statements
  Page(s)Report
of Independent Registered Public Accounting Firm
    
    F-3Balance
Sheets
    
    F-4  F-5Statements
of Income
    
    F-6Statements
of Partners Equity
    
    F-7Statements
of Cash Flows
    
    F-8Notes
to Financial Statements
    
    F-9  F-25
 Financial Statements Schedules
  Exhibits
  Exhibits required by Item 601 of Regulation S-K
  Financial Statements Schedules required by Regulation S-X (17 CFR 210)
  -47-




---



##### 



SIGNATURES
  EVERFLOW EASTERN PARTNERS, L.P.By:
    
    EVERFLOW MANAGEMENT LIMITED, LLC
General PartnerBy:
    
    EVERFLOW MANAGEMENT CORPORATION
Managing MemberBy:
    
    /s/ Robert F. Sykes
    
    
    
    Director
    
    March 18, 2008Robert F. SykesBy:
    
    /s/ Thomas L. Korner
    
    
    
    President and Director
    
    March 18, 2008Thomas L. Korner
    
    
    
    (principal executive
officer)By:
    
    /s/ William A. Siskovic
    
    
    
    Vice President,
    
    March 18, 2008William A. Siskovic
    
    
    
    Secretary-Treasurer
and Director (principal 
financial and accounting
officer)




---



##### 



Exhibit Index
 Exhibit No.
    
    Description3.1
    
    Certificate of Limited Partnership of the Registrant
dated September 13, 1990, as filed with the Delaware
Secretary of State on September 14, 1990
    
    
    (1
    )3.2
    
    Form of Agreement of Limited Partnership of the
Registrant
    
    
    (1
    )3.3
    
    General Partnership Agreement of Everflow
Management Company
    
    
    (1
    )3.4
    
    Articles of Incorporation of Everflow Management
Corporation
    
    
    (1
    )3.5
    
    Code of Regulations of Everflow Management
Corporation
    
    
    (1
    )3.6
    
    Shareholders Agreement for Everflow Management
Corporation
    
    
    (1
    )10.1
    
    Credit Agreement dated January 19, 1995 between
Everflow Eastern, Inc. and Everflow Eastern Partners, L.P.
and Bank One, Texas, National Association
    
    
    (2
    )10.2
    
    Operating facility lease dated October 3, 1995 between
Everflow Eastern Partners, L.P. and A-1 Storage of
Canfield, Ltd.
    
    
    (3
    )10.3
    
    Amendment to Credit Agreement dated February 23, 1996
between Everflow Eastern, Inc. and Everflow Eastern
Partners, L.P. and Bank One, Texas, National Association
    
    
    (5
    )10.4
    
    Second Amendment to Credit Agreement dated December 30,
1996 between Everflow Eastern, Inc. and Everflow Partners,
L.P. and Bank One, Texas, National Association
    
    
    (5
    )10.5
    
    Loan Modification Agreement dated June 16, 1997 between
Bank One, N.A., Bank One, Texas, N.A. and Everflow
Eastern, Inc. and Everflow Eastern Partners, L.P.
    
    
    (6
    )10.6
    
    Loan Modification Agreement dated May 29, 1998 between
Bank One, N.A., Successor to Bank One, Texas, N.A., and
Everflow Eastern, Inc. and Everflow Eastern Partners L.P.
    
    
    (7
    )10.7
    
    Articles of Organization of Everflow Management
Limited, LLC
    
    
    (8
    )
 E-1




---



##### 



Exhibit Index
 Exhibit No.
    
    Description10.8
    
    Operating Agreement of Everflow Management Limited,
LLC dated March 8, 1999
    
    
    (8
    )10.9
    
    Loan Modification Agreement dated May 25, 1999 between
Bank One, N.A., and Everflow Eastern, Inc. and Everflow
Eastern Partners, L.P.
    
    
    (9
    )10.10
    
    Loan Modification Agreement dated September 19, 2000,
between Bank One, N.A., and Everflow Eastern, Inc.
and Everflow Eastern Partners, L.P.
    
    
    (10
    )10.11
    
    Loan Modification Agreement dated August 28, 2001
between Bank One, N.A., and Everflow Eastern, Inc.
and Everflow Eastern Partners, L.P.
    
    
    (11
    )14.1
    
    Code of Ethics21.1
    
    Subsidiaries of the Registrant
    
    
    (4
    )31.1
    
    Certification of CEO Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of CFO Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated herein by reference to the appropriate exhibit to Registrants Registration
Statement on Form S-1 (Reg. No. 33-36919).(2)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1994 (File No. 0-19279).(3)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly
Report on Form 10-Q for the third quarter ended September 30, 1995 (File No. 0-19279).(4)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1995 (File No. 0-19279).(5)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1996 (File No. 0-19279).(6)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly
Report on Form 10-Q for the second quarter ended June 30, 1997 (File No. 0-19279).(7)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly
Report on Form 10-Q for the second quarter ended June 30, 1998 (File No. 0-19279).(8)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly
Report on Form 10-Q for the first quarter ended March 31, 1999 (File No. 0-19279).(9)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly
Report on Form 10-Q for the second quarter ended June 30, 1999 (File No. 0-19279).(10)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly
Report on Form 10-Q for the third quarter ended September 30, 2000 (File No. 0-19279).(11)
    
    Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly
Report on Form 10-Q for the third quarter ended September 30, 2001 (File No. 0-19279). E-2