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, 2008
 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
    
    34-1659910(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 585 West Main StreetP.O. Box 629Canfield, Ohio
    
    44406(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: 330-533-2692
  Name of each exchangeTitle of each class
    
    on which registered
   Units of Limited Partnership Interest
 Yes o No þ
 Yes o No 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
  -1-




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Subsidiaries
  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/MCF2009
    
    
    1.39
    
    
    $
    9.49
    
    
    
    0.74
    
    
    $
    9.49
    
    
    
    2.13
    
    
    $
    9.492010
    
    
    1.28
    
    
    
    9.01
    
    
    
    0.66
    
    
    
    8.84
    
    
    
    1.94
    
    
    
    8.952011
    
    
    0.46
    
    
    
    8.00
    
    
    
    0.33
    
    
    
    8.10
    
    
    
    0.79
    
    
    
    8.043.13
    
    
    $
    9.07
    
    
    
    1.73
    
    
    $
    8.98
    
    
    
    4.86
    
    
    $
    9.04
   -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
  The current global and United States economic and financial crises may have impacts on our business
and financial condition that we currently cannot predict.
    -10-




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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;
    
    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.
   -11-




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We have identified numerous material weaknesses in our internal control over financial reporting.
      -12-




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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;
    
    our financial resources and results; and
    
    the availability of leases and permits on reasonable terms for the prospects.
   -13-




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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.
   Our future performance depends on our ability to find or acquire additional natural gas and crude
oil reserves that are economically recoverable.
     -14-




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We may incur substantial impairment write downs.
   Disruptions in the financial and credit markets may adversely impact the availability and cost of
credit as well as our ability to raise additional capital, which could adversely affect our
business, results of operations and financial condition.
   -15-




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We depend on certain key customers for sales of our natural gas and crude oil. To the extent these
customers reduce the volumes of natural gas and crude oil they purchase from us, our revenues and
cash available for distributions could decline.
  Many of our leases are in areas that have been partially depleted or drained by offset wells .
  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.
  -16-




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We have limited control over the activities on properties we do not operate.
  Terrorist activities and the potential for military and other actions could adversely affect our
business.
   -17-




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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.
  We are subject to complex laws and regulations, including environmental regulations, which can
adversely affect the cost, manner or feasibility of doing business.
   -18-




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Members of our management team own a significant number of partnership units and are in a
position to significantly influence the outcome of matters requiring a unitholder vote .
  ITEM
1B. UNRESOLVED STAFF COMMENTS
  ITEM
2. PROPERTIES
   Reserves Reported to Other Agencies
  -19-




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Proved Reserves (1)
 Oil (BBLS)
    
    
    Gas (MCF)Proved Developed
    
    
    693,000
    
    
    
    41,132,000Proved Undeveloped
    
    
    
    
    
    
    Total
    
    
    693,000
    
    
    
    41,132,000
 
 (1)
    
    The Company has not determined proved reserves
associated with its proved undeveloped acreage which are not
deemed significant at December 31, 2008. 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
 (Thousands)Future cash inflows from sales of oil and gas
    
    $
    282,923Future production and development costs
    
    
    (107,649
    )Future asset retirement obligations, net of salvage
    
    
    (11,610
    )Future income tax expense
    
    
    (3,369
    )Future net cash flows
    
    
    160,295Effect of discounting future net cash flows
at 10% per annum
    
    
    (71,681
    )Standardized measure of discounted future
net cash flows
    
    $
    88,614
 
 (1)
    
    See the Notes to the Financial Statements for additional information.  -20-




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

per Equivalent MCF (1)2008
    
    
    76,000
    
    
    
    3,530,000
    
    
    $
    96.80
    
    
    $
    9.67
    
    
    $
    1.032007
    
    
    70,000
    
    
    
    3,228,000
    
    
    
    66.06
    
    
    
    9.19
    
    
    
    1.052006
    
    
    72,000
    
    
    
    3,500,000
    
    
    
    62.60
    
    
    
    8.51
    
    
    
    0.96
 
 (1)
    
    Oil production is converted to MCF equivalents at the rate of 6 MCF per BBL (barrel). Productive Wells
 Gross Wells
    
    Net Wells(1)
    
    (1)
    
    
    
    (1)
    
    (1)Oil
    
    Gas
    
    Total
    
    Oil
    
    Gas
    
    Total86
    
    
    1,325
    
    
    1,411
    
    
    50
    
    
    829
    
    
    879
 
 (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
  -21-




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Drilling Activity
 Development Wells(1)Productive
    
    
    DryGross
    
    
    Net
    
    
    Gross
    
    
    Net2008
    
    
    91
    
    
    
    38.11
    
    
    
    
    
    
    
    2007
    
    
    73
    
    
    
    28.54
    
    
    
    2
    
    
    
    0.362006
    
    
    36
    
    
    
    11.44
    
    
    
    1
    
    
    
    0.20
 
 (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
   -22-




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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
   -23-




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ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Revenue
    
    $
    42,069,515
    
    
    $
    34,835,438
    
    
    $
    34,847,915
    
    
    $
    33,114,351
    
    
    $
    25,670,760Net Income
    
    
    24,117,868
    
    
    
    23,505,248
    
    
    
    23,142,714
    
    
    
    22,968,275
    
    
    
    16,403,297Net Income Per Unit
    
    
    4.23
    
    
    
    4.12
    
    
    
    4.04
    
    
    
    3.99
    
    
    
    2.84Total Assets
    
    
    83,441,393
    
    
    
    75,123,907
    
    
    
    72,462,307
    
    
    
    71,329,497
    
    
    
    61,481,489Debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Distributions Per Unit
    
    
    3.00
    
    
    
    4.00
    
    
    
    3.75
    
    
    
    2.50
    
    
    
    2.25
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 General
     -24-




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Liquidity and Capital Resources
 Financial Position
    December 31, 2008
    
    
    December 31, 2007Amount
    
    
    %
    
    
    Amount
    
    
    %(Amounts in Thousands)
    
    
    (Amounts in Thousands)Working capital
    
    $
    19,679
    
    
    
    25
    %
    
    $
    16,815
    
    
    
    24
    %Property and equipment (net)
    
    
    59,928
    
    
    
    75
    
    
    
    54,491
    
    
    
    76Other
    
    
    78
    
    
    
    
    
    
    
    78
    
    
    
    Total
    
    $
    79,685
    
    
    
    100
    %
    
    $
    71,384
    
    
    
    100
    %Deferred income taxes
    
    $
    360
    
    
    
    
    %
    
    $
    400
    
    
    
    
    %Long-term liabilities
    
    
    3,568
    
    
    
    5
    
    
    
    1,934
    
    
    
    3Partners equity
    
    
    75,757
    
    
    
    95
    
    
    
    69,050
    
    
    
    97Total
    
    $
    79,685
    
    
    
    100
    %
    
    $
    71,384
    
    
    
    100
    %
 Cash Flows from Operating, Investing and Financing Activities
   -25-




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2008
    
    
    2007Dollars
    
    
    %
    
    
    Dollars
    
    
    %(Amounts in Thousands)Operating Activities:Net income before adjustments
    
    $
    24,118
    
    
    
    63
    %
    
    $
    23,505
    
    
    
    76
    %Adjustments
    
    
    11,645
    
    
    
    37
    
    
    
    5,336
    
    
    
    17Cash flow from operations before
working capital changes
    
    
    35,763
    
    
    
    100
    
    
    
    28,841
    
    
    
    93Changes in working capital
    
    
    (133
    )
    
    
    
    
    
    
    703
    
    
    
    2Net cash provided by
operating activities
    
    
    35,630
    
    
    
    100
    
    
    
    29,544
    
    
    
    95Investing Activities:Proceeds received on receivables
from employees
    
    
    250
    
    
    
    1
    
    
    
    77
    
    
    
    Advances disbursed to employees
    
    
    (688
    )
    
    
    (2
    )
    
    
    (527
    )
    
    
    (2
    )Purchase of investments
    
    
    
    
    
    
    
    
    
    
    (17,513
    )
    
    
    (56
    )Proceeds on sale of investments
    
    
    6,076
    
    
    
    17
    
    
    
    20,288
    
    
    
    66Purchase of property and equipment
    
    
    (15,423
    )
    
    
    (43
    )
    
    
    (10,472
    )
    
    
    (34
    )Proceeds on disposal of property
and equipment
    
    
    4
    
    
    
    
    
    
    
    47
    
    
    
    Net cash used by investing
activities
    
    
    (9,781
    )
    
    
    (27
    )
    
    
    (8,100
    )
    
    
    (26
    )Financing Activities:Distributions
    
    
    (17,103
    )
    
    
    (48
    )
    
    
    (22,843
    )
    
    
    (74
    )Repurchase and retirement of Units
    
    
    (308
    )
    
    
    (1
    )
    
    
    (11
    )
    
    
    Net cash used by financing
activities
    
    
    (17,411
    )
    
    
    (49
    )
    
    
    (22,854
    )
    
    
    (74
    )Net increase (decrease) in cash
and equivalents
    
    $
    8,438
    
    
    
    24
    %
    
    $
    (1,410
    )
    
    
    (5
    )%
 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.
  -26-




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-27-




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-28-




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Results of Operations
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenues:Oil and gas sales
    
    
    99
    %
    
    
    98
    %
    
    
    98
    %Well management and operating
    
    
    1
    
    
    
    2
    
    
    
    2Total Revenues
    
    
    100
    
    
    
    100
    
    
    
    100Expenses:Production costs
    
    
    10
    
    
    
    11
    
    
    
    11Well management and operating
    
    
    1
    
    
    
    1
    
    
    
    Depreciation, depletion and amortization
    
    
    18
    
    
    
    15
    
    
    
    16Accretion expense
    
    
    
    
    
    
    
    
    
    
    1Write down (impairment) and
abandonment of oil and gas properties
    
    
    9
    
    
    
    1
    
    
    
    General and administrative expense
    
    
    5
    
    
    
    6
    
    
    
    6Other income
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )Income tax expense
    
    
    1
    
    
    
    1
    
    
    
    2Total Expenses
    
    
    43
    
    
    
    33
    
    
    
    34Net income
    
    
    57
    %
    
    
    67
    %
    
    
    66
    %
    -29-




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-30-




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Application of Critical Accounting Policies
 Property and Equipment
    -31-




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Asset Retirement Obligations
    -32-




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Revenue Recognition
  Inflation and Changes in Prices
    -33-




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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
   -34-




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EVERFLOW EASTERN PARTNERS, L. P.
 2008 CONSOLIDATED FINANCIAL REPORT
  F-1




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PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    F-3FINANCIAL STATEMENTSConsolidated 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-26
  F-2




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Report of Independent Registered Public Accounting Firm
 
     
  F-3




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2008
    
    
    2007ASSETSCURRENT ASSETSCash and equivalents
    
    $
    14,451,825
    
    
    $
    6,014,105Investments
    
    
    
    
    
    
    6,074,433Accounts receivable:Production
    
    
    7,568,917
    
    
    
    7,805,148Employees
    
    
    1,045,515
    
    
    
    607,230Joint venture partners
    
    
    353,039
    
    
    
    42,771Other
    
    
    15,980
    
    
    
    11,230Total current assets
    
    
    23,435,276
    
    
    
    20,554,917PROPERTY AND EQUIPMENTProved properties (successful efforts accounting method)
    
    
    167,562,754
    
    
    
    151,057,527Pipeline and support equipment
    
    
    555,564
    
    
    
    527,227Corporate and other
    
    
    2,020,829
    
    
    
    1,816,106170,139,147
    
    
    
    153,400,860Less accumulated depreciation, depletion, amortization
and write down
    
    
    110,210,576
    
    
    
    98,909,41659,928,571
    
    
    
    54,491,444OTHER ASSETS
    
    
    77,546
    
    
    
    77,546$
    83,441,393
    
    
    $
    75,123,907
   F-4




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##### 



2008
    
    
    2007LIABILITIES AND PARTNERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    1,761,683
    
    
    $
    2,579,389Accrued expenses
    
    
    1,994,696
    
    
    
    1,160,354Total current liabilities
    
    
    3,756,379
    
    
    
    3,739,743DEFERRED INCOME TAXES
    
    
    360,000
    
    
    
    400,000ASSET RETIREMENT OBLIGATIONS
    
    
    3,567,665
    
    
    
    1,933,704COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    LIMITED PARTNERS EQUITY, SUBJECT TO REPURCHASE
RIGHTAuthorized - 8,000,000 unitsIssued and outstanding - 5,624,293 units
and 5,643,268 units,
respectively
    
    
    74,864,217
    
    
    
    68,239,103GENERAL PARTNERS EQUITY
    
    
    893,132
    
    
    
    811,357Total partners equity
    
    
    75,757,349
    
    
    
    69,050,460$
    83,441,393
    
    
    $
    75,123,907
   F-5




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##### 



2008
    
    
    2007
    
    
    2006REVENUESOil and gas sales
    
    $
    41,469,978
    
    
    $
    34,275,635
    
    
    $
    34,282,448Well management and operating
    
    
    596,339
    
    
    
    556,061
    
    
    
    559,962Other
    
    
    3,198
    
    
    
    3,742
    
    
    
    5,50542,069,515
    
    
    
    34,835,438
    
    
    
    34,847,915DIRECT COST OF REVENUESProduction costs
    
    
    4,124,563
    
    
    
    3,820,544
    
    
    
    3,760,391Well management and operating
    
    
    254,811
    
    
    
    234,583
    
    
    
    209,289Depreciation, depletion and amortization
    
    
    7,515,445
    
    
    
    5,136,780
    
    
    
    5,473,789Accretion expense
    
    
    212,800
    
    
    
    212,798
    
    
    
    237,147Write down/impairment and abandonment of
oil and gas properties
    
    
    3,876,903
    
    
    
    223,592
    
    
    
    78,752Total direct cost of revenues
    
    
    15,984,522
    
    
    
    9,628,297
    
    
    
    9,759,368GENERAL AND ADMINISTRATIVE EXPENSE
    
    
    1,958,384
    
    
    
    2,005,335
    
    
    
    2,000,493Total cost of revenues
    
    
    17,942,906
    
    
    
    11,633,632
    
    
    
    11,759,861INCOME FROM OPERATIONS
    
    
    24,126,609
    
    
    
    23,201,806
    
    
    
    23,088,054OTHER INCOMEInterest income and investment earnings
    
    
    343,705
    
    
    
    691,129
    
    
    
    725,231Gain (loss) on disposal of property and
equipment
    
    
    3,500
    
    
    
    13,145
    
    
    
    (34,526
    )347,205
    
    
    
    704,274
    
    
    
    690,705INCOME BEFORE INCOME TAXES
    
    
    24,473,814
    
    
    
    23,906,080
    
    
    
    23,778,759INCOME TAX EXPENSE (BENEFIT)Current
    
    
    395,946
    
    
    
    435,832
    
    
    
    201,045Deferred
    
    
    (40,000
    )
    
    
    (35,000
    )
    
    
    435,000355,946
    
    
    
    400,832
    
    
    
    636,045NET INCOME
    
    $
    24,117,868
    
    
    $
    23,505,248
    
    
    $
    23,142,714Allocation of Partnership Net IncomeLimited Partners
    
    $
    23,834,006
    
    
    $
    23,229,076
    
    
    $
    22,871,548General Partner
    
    
    283,862
    
    
    
    276,172
    
    
    
    271,166$
    24,117,868
    
    
    $
    23,505,248
    
    
    $
    23,142,714Net income per unit
    
    $
    4.23
    
    
    $
    4.12
    
    
    $
    4.04
   F-6




---



##### 



2008
    
    
    2007
    
    
    2006PARTNERS EQUITY  JANUARY 1
    
    $
    69,050,460
    
    
    $
    68,398,967
    
    
    $
    67,418,555Net income
    
    
    24,117,868
    
    
    
    23,505,248
    
    
    
    23,142,714Cash distributions ($3.00 per unit in 2008,
$4.00 per
unit in 2007 and $3.75 per unit in 2006)
    
    
    (17,102,635
    )
    
    
    (22,843,116
    )
    
    
    (21,462,846
    )Repurchase and retirement of Units
    
    
    (308,344
    )
    
    
    (10,639
    )
    
    
    (699,456
    )PARTNERS EQUITY  DECEMBER 31
    
    $
    75,757,349
    
    
    $
    69,050,460
    
    
    $
    68,398,967
   F-7




---



##### 



2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    24,117,868
    
    
    $
    23,505,248
    
    
    $
    23,142,714Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation, depletion and amortization
    
    
    7,600,061
    
    
    
    5,211,169
    
    
    
    5,544,428Accretion expense
    
    
    212,800
    
    
    
    212,798
    
    
    
    237,147Write down/impairment and abandonment of
oil and gas properties
    
    
    3,876,903
    
    
    
    223,592
    
    
    
    78,752(Gain) loss on disposal of property and equipment
    
    
    (3,500
    )
    
    
    (13,145
    )
    
    
    34,526Investment earnings
    
    
    (1,567
    )
    
    
    (269,335
    )
    
    
    (181,711
    )Deferred income taxes
    
    
    (40,000
    )
    
    
    (35,000
    )
    
    
    435,000Changes in assets and liabilities:Accounts receivable
    
    
    (74,037
    )
    
    
    (8,365
    )
    
    
    342,680Other current assets
    
    
    (4,750
    )
    
    
    20,078
    
    
    
    9,092Other assets
    
    
    
    
    
    
    5,356
    
    
    
    28,499Accounts payable
    
    
    (63,268
    )
    
    
    559,516
    
    
    
    (695,002
    )Accrued expenses
    
    
    9,522
    
    
    
    132,040
    
    
    
    144,220Total adjustments
    
    
    11,512,164
    
    
    
    6,038,704
    
    
    
    5,977,631Net cash provided by operating activities
    
    
    35,630,032
    
    
    
    29,543,952
    
    
    
    29,120,345CASH FLOWS FROM INVESTING ACTIVITIESProceeds received on receivables from employees
    
    
    249,660
    
    
    
    76,507
    
    
    
    53,108Advances disbursed to employees
    
    
    (687,945
    )
    
    
    (526,644
    )
    
    
    (89,400
    )Purchase of investments
    
    
    
    
    
    
    (17,512,480
    )
    
    
    (15,499,907
    )Proceeds from sale of investments
    
    
    6,076,000
    
    
    
    20,288,000
    
    
    
    7,101,000Purchase of property and equipment
    
    
    (15,422,548
    )
    
    
    (10,472,558
    )
    
    
    (4,470,584
    )Proceeds from sale of property and equipment
    
    
    3,500
    
    
    
    46,900
    
    
    
    Net cash used by investing activities
    
    
    (9,781,333
    )
    
    
    (8,100,275
    )
    
    
    (12,905,783
    )CASH FLOWS FROM FINANCING ACTIVITIESDistributions
    
    
    (17,102,635
    )
    
    
    (22,843,116
    )
    
    
    (21,462,846
    )Repurchase and retirement of Units
    
    
    (308,344
    )
    
    
    (10,639
    )
    
    
    (699,456
    )Net cash used by financing activities
    
    
    (17,410,979
    )
    
    
    (22,853,755
    )
    
    
    (22,162,302
    )NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS
    
    
    8,437,720
    
    
    
    (1,410,078
    )
    
    
    (5,947,740
    )CASH AND EQUIVALENTS  JANUARY 1
    
    
    6,014,105
    
    
    
    7,424,183
    
    
    
    13,371,923CASH AND EQUIVALENTS  DECEMBER 31
    
    $
    14,451,825
    
    
    $
    6,014,105
    
    
    $
    7,424,183Supplemental disclosures of cash flow information:Cash paid during the year for:Income taxes
    
    $
    450,422
    
    
    $
    382,531
    
    
    $
    289,305
   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).
  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.In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
No. 157, Fair Value Measurements. SFAS No. 157 did not require any new fair
value measurements but provides enhanced guidance for using fair value to measure
assets and liabilities and expands disclosure with respect to fair value
measurements. This statement was originally effective for fiscal years beginning
after November 15, 2007. In February 2008, the FASB issued FSP 157-2 which deferred the effective
date of SFAS No. 157 for one year for certain nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at
fair value in the financial statements on a recurring basis. Effective January 1,
2008, the Company adopted SFAS No. 157, except for measurements of those
nonfinancial assets and liabilities subject to the one-year deferral, which
include impairments of intangible assets and other long-lived assets, and initial
measurement of asset retirement obligations and partial sales of proved
properties.
  F-9




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 D.
    
    Fair Value of Financial Instruments (Continued)In October 2008, the FASB issued FSP 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active, which clarifies the
application of SFAS No. 157 in a market that is not active and provides an example
to illustrate key considerations in determining the fair value of a financial
asset when the market for that financial asset is not active. FSP 157-3 was
effective upon issuance and any revisions resulting from a change in the valuation
technique or its application is to be accounted for as a change in accounting
estimate. Application of FSP 157-3 did not cause the Company to change valuation
techniques for assets and liabilities measured under SFAS No. 157 and, therefore,
had no effect on the Companys financial statements.Adoption of SFAS No. 157 as it relates to financial assets and liabilities did not
materially impact the Companys financial statements.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 on each subsequent reporting date. This statement is effective
for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159
did not have a material effect on the Companys financial statements and related
disclosures.
 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.
    
    Investments  The Companys investments at December 31, 2007 consisted
of commercial paper with original maturity dates greater than three months, which
were recorded at their amortized cost. Interest earnings on investments amounted
to approximately $1,600, $269,300 and $181,700 during the years ended December 31,
2008, 2007 and 2006, respectively. The Company did not hold any investments at
December 31, 2008.
 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.
  F-10




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 G.
    
    Property and Equipment (Continued)
 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
$7,472,399, $5,096,584 and $5,434,719 for the years ended December 31, 2008, 2007
and 2006, 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 $3,876,900, $223,600 and $78,800 during 2008, 2007 and 2006,
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 $1,407,300  39 to 40 years). Depreciation on
pipeline and support equipment amounted to $43,046, $40,196 and $39,070 for the
years ended December 31, 2008, 2007 and 2006, respectively. Depreciation on other
corporate property and equipment, included in general and administrative expense,
amounted to $84,616, $74,389 and $70,639 for the years ended December 31, 2008,
2007 and 2006, respectively.Maintenance and repairs of property and equipment are expensed as incurred. Major
renewals and improvements are capitalized, and the assets replaced are retired.
  F-11




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 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, 2008, the Company made
significant revisions in estimates of plugging costs, discount 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:
 2008
    
    
    2007Beginning of Period
    
    $
    2,313,704
    
    
    $
    2,103,707Liabilities incurred
    
    
    239,245
    
    
    
    50,853Liabilities settled
    
    
    (4,820
    )
    
    
    (53,654
    )Accretion expense
    
    
    212,800
    
    
    
    212,798Revisions in estimated cash flows
    
    
    2,006,736
    
    
    
    End of period
    
    $
    4,767,665
    
    
    $
    2,313,704
 At December 31, 2008 and 2007, asset retirement obligations of $4,767,665 and
$2,313,704 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 asset retirement obligations was $1,200,000 and $380,000 at
December 31, 2008 and 2007, respectively.
  F-12




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 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, 2008, 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 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.
  F-13




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 J.
    
    Income Taxes (Continued)In June 2006, the 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, 2008, the Companys income tax years from 2005 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 5,633,781, 5,643,681 and 5,659,386 in 2008, 2007 and 2006,
respectively.L.
    
    New Accounting Standards  In May 2008, the FASB issued SFAS No. 162,
The Hierarchy of Generally Accepted Accounting Principles. This Statement
identifies the sources of accounting principles and the framework for selecting the
principles used in the preparation of financial statements. This Statement is
effective 60 days following the SECs approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. The Company does not
expect the adoption of SFAS No. 162 to have a material effect on the financial
statements.
  F-14




---



##### 



Note 1. Organization and Summary of Significant Accounting Policies (Continued)
 L.
    
    New Accounting Standards (Continued)In December 2008 the SEC unanimously approved amendments to revise its oil and gas
reserves estimation and disclosure requirements. The amendments, among other
things:
 
    
    allows the use of new technologies to determine proved reserves;
    
    permits the optional disclosure of probable and possible reserves;
    
    modifies the prices used to estimate reserves for SEC disclosure
purposes to a 12-month average price instead of a period-end price;
and
    
    requires that if a third party is primarily responsible for preparing
or auditing the reserve estimates, the company make disclosures
relating to the independence and qualifications of the third party,
including filing as an exhibit any report received from the third
party.
   M.
    
    Reclassifications  Certain prior year amounts have been reclassified
to conform with the current years presentation.
  F-15




---



##### 



Note 2. Current Liabilities
  2008
    
    
    2007Accounts Payable:Production and related other
    
    $
    1,088,504
    
    
    $
    737,284Other
    
    
    337,117
    
    
    
    366,919Drilling
    
    
    336,062
    
    
    
    1,090,500Joint venture partners
    
    
    
    
    
    
    384,686$
    1,761,683
    
    
    $
    2,579,389Accrued Expenses:Current portion of asset retirement obligations
    
    $
    1,200,000
    
    
    $
    380,000Payroll and retirement contributions
    
    
    617,034
    
    
    
    610,229Federal, state and local taxes
    
    
    177,662
    
    
    
    170,125$
    1,994,696
    
    
    $
    1,160,354
 Note 3. Credit Facilities and Long-Term Debt
  Note 4. Partners Equity
    F-16




---



##### 



Note 4. Partners Equity (Continued)
   Per UnitCalculated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnitsPrice for
    
    
    Less
    
    
    
    
    
    
    
    
    
    
    OutstandingRepurchase
    
    
    Interim
    
    
    Net
    
    
    # of Units
    
    
    FollowingYear
    
    Right
    
    
    Distributions
    
    
    Price Paid
    
    
    Repurchased
    
    
    Repurchase2005
    
    $
    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
    
    
    
    5,643,2682008
    
    $
    17.75
    
    
    $
    1.50
    
    
    $
    16.25
    
    
    
    18,975
    
    
    
    5,624,293
   F-17




---



##### 



Note 5. Provision for Income Taxes
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Provision based on the
statutory rate (for taxable
income up to $10,000,000)
    
    $
    8,321,000
    
    
    
    34.0
    
    
    $
    8,128,000
    
    
    
    34.0
    
    
    $
    8,085,000
    
    
    
    34.0Tax effect of:Non-taxable status of the
Programs and Everflow
    
    
    (7,799,000
    )
    
    
    (31.9
    )
    
    
    (7,656,000
    )
    
    
    (32.0
    )
    
    
    (7,413,000
    )
    
    
    (31.2
    )Excess statutory depletion
    
    
    (129,000
    )
    
    
    (0.5
    )
    
    
    (110,000
    )
    
    
    (0.5
    )
    
    
    (99,000
    )
    
    
    (0.4
    )Graduated tax rates, state
income tax, tax credits
and other  net
    
    
    (37,054
    )
    
    
    (0.2
    )
    
    
    38,832
    
    
    
    0.2
    
    
    
    63,045
    
    
    
    0.3Total
    
    $
    355,946
    
    
    
    1.4
    
    
    $
    400,832
    
    
    
    1.7
    
    
    $
    636,045
    
    
    
    2.7
  Note 6. Retirement Plan
  Note 7. Related Party Transactions
  
  F-18




---



##### 



Note 8. Business Segments, Risks and Major Customers
     Customer
    
    2008
    
    
    2007
    
    
    2006Dominion Field Services, Inc. (Dominion)
    
    
    37
    %
    
    
    41
    %
    
    
    40
    %Interstate Gas Supply, Inc. (IGS)
    
    
    18
    
    
    
    19
    
    
    
    18Ergon Oil Purchasing, Inc. (Ergon Oil)
    
    
    17
    
    
    
    12
    
    
    
    1272
    %
    
    
    72
    %
    
    
    70
    %
    F-19




---



##### 



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/MCF2009
    
    
    1.39
    
    
    $
    9.49
    
    
    
    0.74
    
    
    $
    9.49
    
    
    
    2.13
    
    
    $
    9.492010
    
    
    1.28
    
    
    
    9.01
    
    
    
    0.66
    
    
    
    8.84
    
    
    
    1.94
    
    
    
    8.952011
    
    
    0.46
    
    
    
    8.00
    
    
    
    0.33
    
    
    
    8.10
    
    
    
    0.79
    
    
    
    8.043.13
    
    
    $
    9.07
    
    
    
    1.73
    
    
    $
    8.98
    
    
    
    4.86
    
    
    $
    9.04
  Note 9. Commitments and Contingencies
    F-20




---



##### 



Note 10. Selected Quarterly Financial Data (Unaudited)
  Quarters Ended 2008March 31
    
    
    June 30
    
    
    September 30
    
    
    December 31Revenues
    
    $
    10,434,868
    
    
    $
    11,225,534
    
    
    $
    11,504,165
    
    
    $
    8,904,948Income from operations
    
    
    7,279,151
    
    
    
    8,260,552
    
    
    
    8,565,973
    
    
    
    20,933Net income
    
    
    7,296,984
    
    
    
    8,240,888
    
    
    
    8,519,625
    
    
    
    60,371Net income per unit
    
    
    1.28
    
    
    
    1.44
    
    
    
    1.50
    
    
    
    0.01
 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
   F-21




---



##### 



Note 11. Supplemental Information Relating to Oil and Gas Producing Activities (Unaudited)
   
 Years ended December 31,2008
    
    
    2007
    
    
    2006Proved oil and gas properties
    
    $
    167,562,754
    
    
    $
    151,057,527
    
    
    $
    140,443,938Pipeline and support equipment
    
    
    555,564
    
    
    
    527,227
    
    
    
    528,193168,118,318
    
    
    
    151,584,754
    
    
    
    140,972,131Accumulated depreciation, depletion,
amortization and write down
    
    
    109,612,312
    
    
    
    98,399,963
    
    
    
    94,064,163Net capitalized costs
    
    $
    58,506,006
    
    
    $
    53,184,791
    
    
    $
    46,907,968
 Years ended December 31,2008
    
    
    2007
    
    
    2006Property acquisition costs
    
    $
    689,549
    
    
    $
    588,641
    
    
    $
    173,704Development costs
    
    
    13,605,540
    
    
    
    10,506,406
    
    
    
    4,101,986
   F-22




---



##### 



Note 11.
    
    Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited) (Continued)
  Years ended December 31,2008
    
    
    2007
    
    
    2006Oil and gas sales
    
    $
    41,469,978
    
    
    $
    34,275,635
    
    
    $
    34,282,448Production costs
    
    
    (4,124,563
    )
    
    
    (3,820,544
    )
    
    
    (3,760,391
    )Depreciation, depletion and
amortization
    
    
    (7,515,445
    )
    
    
    (5,136,780
    )
    
    
    (5,473,789
    )Accretion expense
    
    
    (212,800
    )
    
    
    (212,798
    )
    
    
    (237,147
    )Abandonment of oil and gas properties
    
    
    (3,876,903
    )
    
    
    (223,592
    )
    
    
    (78,752
    )25,740,267
    
    
    
    24,881,921
    
    
    
    24,732,369Income tax expense
    
    
    400,000
    
    
    
    500,000
    
    
    
    500,000Results of operations for oil and gas
producing activities (excluding
corporate overhead and financing
costs)
    
    $
    25,340,267
    
    
    $
    24,381,921
    
    
    $
    24,232,369
   F-23




---



##### 



Note 11.
    
    Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited) (Continued)
  Oil
    
    
    Gas(BBLS)
    
    
    (MCFS)Balance, January 1, 2006
    
    
    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
    
    
    
    44,910,000Extensions, discoveries and other
additions
    
    
    60,000
    
    
    
    2,553,000Production
    
    
    (76,000
    )
    
    
    (3,530,000
    )Revision of previous estimates
    
    
    (37,000
    )
    
    
    (2,801,000
    )Balance, December 31, 2008
    
    
    693,000
    
    
    
    41,132,000PROVED DEVELOPED RESERVES:December 31, 2005
    
    
    803,000
    
    
    
    51,043,000December 31, 2006
    
    
    718,000
    
    
    
    43,006,000December 31, 2007
    
    
    746,000
    
    
    
    44,910,000December 31, 2008
    
    
    693,000
    
    
    
    41,132,000
   F-24




---



##### 



Note 11.
    
    Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited) (Continued)
 
 December 31,2008
    
    
    2007
    
    
    2006(Thousands of Dollars)Future cash inflows from sales of oil
and gas
    
    $
    282,923
    
    
    $
    396,218
    
    
    $
    313,397Future production and development
costs
    
    
    (107,649
    )
    
    
    (124,727
    )
    
    
    (107,322
    )Future asset retirement obligations, net of
salvage
    
    
    (11,610
    )
    
    
    (10,037
    )
    
    
    (9,220
    )Future income tax expense
    
    
    (3,369
    )
    
    
    (5,655
    )
    
    
    (4,294
    )Future net cash flows
    
    
    160,295
    
    
    
    255,799
    
    
    
    192,561Effect of discounting future net cash
flows at 10% per annum
    
    
    71,681
    
    
    
    122,307
    
    
    
    87,846Standardized measure of discounted
future net cash flows
    
    $
    88,614
    
    
    $
    133,492
    
    
    $
    104,715
 
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Thousands of Dollars)Balance, beginning of year
    
    $
    133,492
    
    
    $
    104,715
    
    
    $
    188,263Extensions, discoveries and other
additions
    
    
    7,169
    
    
    
    9,977
    
    
    
    1,947Development costs incurred
    
    
    838
    
    
    
    89
    
    
    
    412Revision of quantity estimates
    
    
    (5,257
    )
    
    
    8,865
    
    
    
    (11,822
    )Sales of oil and gas, net of production
costs
    
    
    (37,345
    )
    
    
    (30,455
    )
    
    
    (30,522
    )Net change in income taxes
    
    
    1,069
    
    
    
    (620
    )
    
    
    1,836Net changes in prices and production
costs
    
    
    (32,977
    )
    
    
    23,595
    
    
    
    (75,149
    )Accretion of discount
    
    
    13,349
    
    
    
    10,472
    
    
    
    18,826Other
    
    
    8,276
    
    
    
    6,854
    
    
    
    10,924Balance, end of year
    
    $
    88,614
    
    
    $
    133,492
    
    
    $
    104,715
  F-25




---



##### 



Note 11.
    
    Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited) (Continued)
    F-26




---



##### 



ITEM 9A.(T) CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Managements Report on Internal Control Over Financial Reporting
   -35-




---



##### 



Internal Control-Integrated Framework
   1)
    
    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.2)
    
    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.3)
    
    We did not maintain sufficient, formalized policies governing the
testing and monitoring of key internal controls. As a result, tests of certain key
internal controls may not have been performed while other tests that were performed
may not have been adequately documented.
 Internal Control  Integrated Framework
  -36-




---



##### 



Changes in Internal Control Over Financial Reporting
  
    
    parameters were established and formalized to maintain an effective control
environment; specifically, policies were created to address integrity and ethical
values, board of directors, managements philosophy and operating style, organizational
structure, financial reporting competencies, authority and responsibility, and human
resources; and
    
    policies and procedures were formalized and implemented to control security access
by personnel to information technology programs and systems, as well as to provide for
an independent review of such access.
 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;
    
    parameters for an effective control environment have been established and formalized so
sufficient, documented and formalized finance and accounting policies can be established;
    
    policies and procedures have been formalized and implemented to control security access
by personnel to information technology programs and systems, as well as to provide for an
independent review of such access;
    
    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;
  -37-




---



##### 




    
    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; and
    
    additional personnel resources have been identified to address the shortfalls in
staffing to assist us with accounting, finance and information technology responsibilities.
In September 2007, an Internal Audit Manager was hired 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. In November 2008, a Staff Accountant was hired to further assist
with various accounting and internal controls compliance responsibilities.
  ITEM 9B. OTHER INFORMATION
   -38-




---



##### 



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
    
    
    85
    
    
    Chairman of the Board
    
    Chairman of the Board
and DirectorPeter H. Sykes
    
    
    52
    
    
    None
    
    DirectorThomas L. Korner
    
    
    55
    
    
    President, Principal
Executive Officer
and Director
    
    President, Principal
Executive Officer
and DirectorWilliam A. Siskovic
    
    
    53
    
    
    Vice President, Secretary-Treasurer, 
Principal
Financial and Accounting
Officer and Director
    
    Vice President, Secretary-Treasurer, Principal
Financial and Accounting
Officer and Director
  -39-




---



##### 



Robert F. Sykes
 Peter H. Sykes
 Thomas L. Korner
  -40-




---



##### 



William A. Siskovic
 Audit Committee
   -41-




---



##### 



REPORT OF THE AUDIT COMMITTEE
  Communication with Audit Committees
 Independence Discussions with Audit Committee
   Robert F. Sykes (Chairman)Peter H. SykesThomas L. KornerWilliam A. Siskovic
  -42-




---



##### 



Code of Ethics
   Section 16(a) Beneficial Ownership Compliance
   -43-




---



##### 



ITEM 11. EXECUTIVE COMPENSATION
  Overview of 2008 Executive Compensation Components
  
    
    base salary
 
    
    annual cash bonuses
 
    
    retirement and other benefits
 Base Salary
  Annual Cash Bonuses
     -44-




---



##### 



Retirement and Other Benefits
     Annual CompensationAll OtherName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compen-Principal Position
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    sation (1)
    
    
    TotalThomas L. Korner
    
    
    2008
    
    
    $
    113,000
    
    
    $
    120,000
    
    
    $
    42,812
    (2)
    
    $
    275,812President and Principal
    
    
    2007
    
    
    
    100,800
    
    
    
    112,700
    
    
    
    38,456
    (2)
    
    
    251,956Executive OfficerWilliam A. Siskovic
    
    
    2008
    
    
    $
    113,000
    
    
    $
    120,000
    
    
    $
    40,541
    (3)
    
    $
    273,541Vice President and
    
    
    2007
    
    
    
    100,800
    
    
    
    112,700
    
    
    
    37,579
    (3)
    
    
    251,079Principal Financial andAccounting Officer
 
  (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, 2008 and 2007, includes $23,220 and $21,306,
respectively, contributed under the profit sharing component of the Companys 401(K)
Retirement Savings Plan, $13,800 and $12,822, respectively, contributed by the Company as
matching contribution from the Companys 401(K) Retirement Savings Plan, $4,402 and $3,438,
respectively, considered taxable wages with respect to personal use of a Company vehicle and
$1,390 and $690, respectively, considered taxable wages with respect to the Companys Group
Term Life Insurance Plan.(3)
    
    During fiscal years ended December 31, 2008 and 2007, includes $23,220 and $21,306,
respectively, contributed under the profit sharing component of the Companys 401(K)
Retirement Savings Plan, $13,800 and $12,822, respectively, contributed by the Company as
matching contribution from the Companys 401(K) Retirement Savings Plan, $2,831 and $2,561,
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.  -45-




---



##### 



Outstanding Equity Awards
  Director Compensation
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
   -46-




---



##### 



BENEFICIAL OWNERSHIP OF UNITS IN THE COMPANY,
EVERFLOW MANAGEMENT LIMITED, LLC AND EMC
 PercentageInterest inPercentage
    
    
    Everflow
    
    
    PercentageUnits in
    
    
    of Units in
    
    
    Management
    
    
    Interest inName of Holder
    
    Company
    
    
    Company(1)
    
    
    Limited, LLC(2)
    
    
    EMCRobert F. Sykes(3)(officer and director of EMC)
    
    
    1,056,464
    
    
    
    18.78
    
    
    
    50.0000
    
    
    
    50.0000Thomas L. Korner (officer and director of EMC)
    
    
    138,575
    
    
    
    2.46
    
    
    
    16.6667
    
    
    
    16.6667William A. Siskovic (officer and director of EMC)
    
    
    71,731
    
    
    
    1.28
    
    
    
    16.6667
    
    
    
    16.6667Richard M. Jones
    
    
    
    
    
    
    
    
    
    
    8.3333
    
    
    
    8.3333Brian A. Staebler
    
    
    
    
    
    
    
    
    
    
    8.3333
    
    
    
    8.33331,266,770
    
    
    
    22.52
    
    
    
    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, 79,639 Units held by the
Robert F. Sykes Living Trust, 78,995 held in the Catherine H. Sykes Living Trust, 54,991 Units
of the Company held by CSM Associates, 41,244 Units of the company held by DFS Associates,
41,244 Units of the company held by PHS Associates, and 27,496 Units of the Company held by
WCS Associates. CSM Associates, DFS Associates, PHS Associates and WCS Associates are New
York limited partnerships owned by the families of the four adult children of Robert F. Sykes. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
   -47-




---



##### 



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  December 31,2008
    
    
    2007Audit fees
    
    $
    135,115
    
    
    $
    146,906Audit related fees
    
    
    -0-
    
    
    
    -0-Tax fees
    
    
    -0-
    
    
    
    -0-All other fees
    
    
    -0-
    
    
    
    -0-Total
    
    $
    135,115
    
    
    $
    146,906
     -48-




---



##### 



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-26
 Financial Statements Schedules
  Exhibits
  Exhibits required by Item 601 of Regulation S-K
  Financial Statements Schedules required by Regulation S-X (17 CFR 210)
   -49-




---



##### 



SIGNATURES
  EVERFLOW EASTERN PARTNERS, L.P.By:
    
    EVERFLOW MANAGEMENT LIMITED, LLCGeneral PartnerBy:
    
    EVERFLOW MANAGEMENT CORPORATIONManaging MemberBy:
    
    /s/ Robert F. Sykes

Robert F. Sykes
    
    Director
    
    March 27, 2009By:
    
    /s/ Peter H. Sykes

Peter H. Sykes
    
    Director
    
    March 27, 2009By:
    
    /s/ Thomas L. Korner

Thomas L. Korner
    
    President and Director(principal
executive
officer)
    
    March 27, 2009By:
    
    /s/ William A. Siskovic

William A. Siskovic
    
    Vice President, Secretary-Treasurer
and
Director (principal
financial and accounting
officer)
    
    March 27, 2009




---



##### 



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
    
    Operating facility lease dated October 3, 1995 between
Everflow Eastern Partners, L.P. and A-1 Storage of
Canfield, Ltd.
    
    
    (2
    )10.2
    
    Articles of Organization of Everflow Management
Limited, LLC
    
    
    (4
    )10.3
    
    Amended and Restated Operating Agreement of Everflow
Management Limited, LLC dated December 31, 200814.1
    
    Code of Ethics21.1
    
    Subsidiaries of the Registrant
    
    
    (3
    )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 Quarterly
Report on
Form 10-Q for the third quarter ended September 30, 1995 (File No. 0-19279).(3)
    
    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).(4)
    
    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).  E-1