##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 Form 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For Quarter Ended December 31, 2006
 Commission File No. 0-29604
 ENERGYSOUTH, INC.
 
 Alabama
    
    58-2358943(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 2828 Dauphin Street, Mobile, Alabama 36606
(Address of principal executive office) (Zip Code)
 251-450-4774
 þ o
  o þ o
 o þ




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##### 



ENERGYSOUTH, INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2006
  Page No.PART I: FINANCIAL INFORMATIONItem 1
    
    Financial Statements:(a)
    
    Unaudited Condensed Consolidated Balance Sheets December 31, 2006 and 2005 and September 30, 2006
    
    3-4(b)
    
    Unaudited Condensed Consolidated Statements of Income Three Months Ended December 31, 2006 and 2005
    
    5(c)
    
    Unaudited Condensed Consolidated Statements of Cash Flows Three Months Ended December 31, 2006 and 2005
    
    6(d)
    
    Notes to Unaudited Condensed Consolidated Financial Statements
    
    7-17Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    18-24Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    25Item 4
    
    Controls and Procedures
    
    26PART II: OTHER INFORMATIONItem 1A
    
    Risk Factors
    
    27Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    27-28Item 5
    
    Other Information
    
    28Item 6
    
    Exhibits
    
    28Certification Pursuant to Section 302 - Chief Executive OfficerCertification Pursuant to Section 302 - Chief Financial OfficerCertification Pursuant to Section 906 - Chief Executive OfficerCertification Pursuant to Section 906 - Chief Financial OfficerPress Release
  2




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PART 1. FINANCIAL INFORMATION
 
 ITEM 1:
    
    FINANCIAL STATEMENTS
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 EnergySouth, Inc.
    
    December 31,
    
    September 30,In Thousands
    
    2006
    
    2005
    
    2006(Unaudited)ASSETSCurrent AssetsCash and Cash Equivalents
    
    $
    288
    
    
    $
    1,426
    
    
    $
    1,272Restricted Cash
    
    
    1,742
    
    
    
    1,611
    
    
    
    1,742ReceivablesGas
    
    
    13,823
    
    
    
    16,642
    
    
    
    5,454Unbilled Revenue
    
    
    4,868
    
    
    
    7,238
    
    
    
    1,492Merchandise
    
    
    2,145
    
    
    
    2,176
    
    
    
    2,013Other
    
    
    662
    
    
    
    1,366
    
    
    
    1,522Allowance for Doubtful Accounts
    
    
    (1,427
    )
    
    
    (1,422
    )
    
    
    (1,074
    )Materials, Supplies, and Merchandise, net (At Average Cost)
    
    
    1,373
    
    
    
    1,279
    
    
    
    1,523Gas Stored Underground (At Average Cost)
    
    
    6,401
    
    
    
    4,518
    
    
    
    6,612Regulatory Assets
    
    
    2,452
    
    
    
    792
    
    
    
    2,083Deferred Income Taxes
    
    
    469
    
    
    
    2,334
    
    
    
    433Prepaid Taxes
    
    
    1,092
    
    
    
    
    
    
    
    2,609Prepayments
    
    
    1,462
    
    
    
    1,231
    
    
    
    2,265Total Current Assets
    
    
    35,350
    
    
    
    39,191
    
    
    
    27,946Property, Plant, and Equipment
    
    
    299,564
    
    
    
    286,004
    
    
    
    295,503Less: Accumulated Depreciation and Amortization
    
    
    88,093
    
    
    
    80,154
    
    
    
    85,848Property, Plant, and Equipment  Net
    
    
    211,471
    
    
    
    205,850
    
    
    
    209,655Construction Work in Progress
    
    
    20,897
    
    
    
    8,861
    
    
    
    18,915Total Property, Plant, and Equipment
    
    
    232,368
    
    
    
    214,711
    
    
    
    228,570Other AssetsPrepaid Pension Cost
    
    
    800
    
    
    
    883
    
    
    
    819Prepaid Postretirement Benefit
    
    
    573
    
    
    
    
    
    
    
    578Deferred Charges
    
    
    413
    
    
    
    570
    
    
    
    286Prepayments
    
    
    1,128
    
    
    
    1,234
    
    
    
    1,233Regulatory Assets
    
    
    151
    
    
    
    292
    
    
    
    193Merchandise Receivables Due After One Year
    
    
    3,110
    
    
    
    3,264
    
    
    
    3,055Total Other Assets
    
    
    6,175
    
    
    
    6,243
    
    
    
    6,164Total
    
    $
    273,893
    
    
    $
    260,145
    
    
    $
    262,680
  3




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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 EnergySouth, Inc.
    
    December 31,
    
    September 30,In Thousands, Except Share Data
    
    2006
    
    2005
    
    2006(Unaudited)LIABILITIES AND CAPITALIZATIONCurrent LiabilitiesCurrent Maturities of Long-Term Debt
    
    $
    5,680
    
    
    $
    4,815
    
    
    $
    5,619Notes Payable
    
    
    7,375
    
    
    
    1,500
    
    
    
    5,300Accounts Payable
    
    
    12,992
    
    
    
    13,014
    
    
    
    7,355Dividends Declared
    
    
    1,830
    
    
    
    1,686
    
    
    
    1,828Customer Deposits
    
    
    1,285
    
    
    
    1,212
    
    
    
    1,170Taxes Accrued
    
    
    1,788
    
    
    
    6,198
    
    
    
    2,987Interest Accrued
    
    
    593
    
    
    
    524
    
    
    
    900Regulatory Liabilities
    
    
    7,646
    
    
    
    5,904
    
    
    
    5,980Other
    
    
    1,067
    
    
    
    1,042
    
    
    
    1,149Total Current Liabilities
    
    
    40,256
    
    
    
    35,895
    
    
    
    32,288Other LiabilitiesAccrued Postretirement Benefit Cost
    
    
    
    
    
    
    834Deferred Income Taxes
    
    
    25,692
    
    
    
    21,861
    
    
    
    25,235Deferred Investment Tax Credits
    
    
    211
    
    
    
    231
    
    
    
    216Regulatory Liabilities
    
    
    9,669
    
    
    
    12,800
    
    
    
    9,496Asset Retirement Obligation
    
    
    5,818
    
    
    
    
    
    
    
    5,818Other
    
    
    1,408
    
    
    
    1,206
    
    
    
    1,382Total Other Liabilities
    
    
    42,798
    
    
    
    36,932
    
    
    
    42,14783,054
    
    
    
    72,827
    
    
    
    74,435CapitalizationStockholders Equity
Common Stock, $.01 Par Value
(Authorized 20,000,000 Shares;
Outstanding
December 2006  7,957,000;
December 2005  7,906,000;
September 2006  7,947,000 Shares)
    
    
    80
    
    
    
    79
    
    
    
    79Capital in Excess of Par Value
    
    
    29,555
    
    
    
    27,732
    
    
    
    29,092Retained Earnings
    
    
    84,704
    
    
    
    77,737
    
    
    
    81,919Grantor Trust, at cost
    
    
    (1,792
    )
    
    
    (1,608
    )
    
    
    (1,733
    )Deferred Compensation Liability
    
    
    1,792
    
    
    
    1,608
    
    
    
    1,733Total Stockholders Equity
    
    
    114,339
    
    
    
    105,548
    
    
    
    111,090Minority Interest
    
    
    6,045
    
    
    
    5,035
    
    
    
    5,794Long-Term Debt
    
    
    70,455
    
    
    
    76,735
    
    
    
    71,361Total Capitalization
    
    
    190,839
    
    
    
    187,318
    
    
    
    188,245Total
    
    $
    273,893
    
    
    $
    260,145
    
    
    $
    262,680
  4




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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three MonthsENERGYSOUTH, INC.
    
    Ended December 31,In Thousands, Except Per Share Data
    
    2006
    
    2005Operating RevenuesGas Revenues
    
    $
    37,659
    
    
    $
    43,211Merchandise Sales
    
    
    960
    
    
    
    1,292Other
    
    
    311
    
    
    
    309Total Operating Revenues
    
    
    38,930
    
    
    
    44,812Operating ExpensesCost of Gas
    
    
    16,432
    
    
    
    23,059Cost of Merchandise
    
    
    749
    
    
    
    959Operations and Maintenance
    
    
    7,356
    
    
    
    6,299Depreciation
    
    
    2,762
    
    
    
    2,642Taxes, Other Than Income Taxes
    
    
    2,633
    
    
    
    2,873Total Operating Expenses
    
    
    29,932
    
    
    
    35,832Operating Income
    
    
    8,998
    
    
    
    8,980Other Income and (Expense)Interest Expense
    
    
    (1,679
    )
    
    
    (1,736
    )Allowance for Borrowed Funds Used During Construction
    
    
    358
    
    
    
    175Interest Income
    
    
    18
    
    
    
    77Minority Interest
    
    
    (274
    )
    
    
    (238
    )Total Other Income (Expense)
    
    
    (1,577
    )
    
    
    (1,722
    )Income Before Income Taxes
    
    
    7,421
    
    
    
    7,258Income Taxes
    
    
    2,807
    
    
    
    2,773Net Income
    
    $
    4,614
    
    
    $
    4,485Earnings Per ShareBasic
    
    $
    0.58
    
    
    $
    0.57Diluted
    
    $
    0.57
    
    
    $
    0.56Average Common Shares OutstandingBasic
    
    
    7,954
    
    
    
    7,905Diluted
    
    
    8,031
    
    
    
    7,953
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three MonthsEnergySouth, Inc.
    
    Ended December 31,In Thousands
    
    2006
    
    2005Cash Flows from Operating ActivitiesNet Income
    
    $
    4,614
    
    
    $
    4,485Adjustments to Reconcile Net Income to Net Cash
Provided by Operating ActivitiesDepreciation and Amortization
    
    
    2,860
    
    
    
    2,736Provision for Losses on Receivables and Inventory
    
    
    295
    
    
    
    322Provision for Deferred Income Taxes
    
    
    418
    
    
    
    682Minority Interest
    
    
    274
    
    
    
    238Stock-Based Employee Compensation Expense
    
    
    158
    
    
    
    85Changes in Operating Assets and Liabilities:Receivables
    
    
    (11,411
    )
    
    
    (14,741
    )Inventory
    
    
    356
    
    
    
    1,214Payables
    
    
    5,658
    
    
    
    7,152Taxes
    
    
    317
    
    
    
    161Deferred Purchased Gas Adjustment
    
    
    (370
    )
    
    
    (1,888
    )Other
    
    
    2,581
    
    
    
    627Net Cash Provided by Operating Activities
    
    
    5,750
    
    
    
    1,073Cash Flows from Investing ActivitesCapital Expenditures
    
    
    (6,357
    )
    
    
    (5,868
    )Net Cash Used in Investing Activities
    
    
    (6,357
    )
    
    
    (5,868
    )Cash Flows from Financing ActivitesRepayment of Long-Term Debt
    
    
    (844
    )
    
    
    (1,241
    )Changes in Short-Term Borrowings
    
    
    2,075
    
    
    
    1,500Payment of Dividends
    
    
    (1,830
    )
    
    
    (1,699
    )Dividend Reinvestment
    
    
    86
    
    
    
    88Exercise of Stock Options
    
    
    116
    
    
    
    23Excess Tax Benefits from Share Based Payments
    
    
    43
    
    
    
    10Partnership Distributions to Minority Interest Holders
    
    
    (23
    )
    
    
    (512
    )Net Cash Used by Financing Activities
    
    
    (377
    )
    
    
    (1,831
    )Net Decrease in Cash and Cash Equivalents
    
    
    (984
    )
    
    
    (6,626
    )Cash and Cash Equivalents at Beginning of Period
    
    
    1,272
    
    
    
    8,052Cash and Cash Equivalents at End of Period
    
    $
    288
    
    
    $
    1,426Noncash Transactions from Investing Activities:Accruals for Capital Expenditures
    
    $
    1,324
    
    
    $
    379
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1.
    
    Principles of Consolidation
  Note 2.
    
    Basis of Presentation
   7




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Twelve MonthsEnergySouth, Inc.
    
    Ended December 31,In Thousands, Except Per Share Data
    
    2006
    
    2005Operating Revenues
    
    $
    129,985
    
    
    $
    133,051Cost of Gas
    
    
    50,625
    
    
    
    55,303Cost of Merchandise
    
    
    2,940
    
    
    
    2,765Operations and Maintenance Expense
    
    
    27,082
    
    
    
    25,117Depreciation Expense
    
    
    10,723
    
    
    
    10,214Taxes, Other Than Income Taxes
    
    
    9,113
    
    
    
    9,076Operating Income
    
    
    29,502
    
    
    
    30,576Interest Expense
    
    
    (6,755
    )
    
    
    (7,147
    )Allowance for Borrowed Funds Used
During Construction
    
    
    1,194
    
    
    
    382Interest Income
    
    
    109
    
    
    
    304Less: Minority Interest
    
    
    (1,149
    )
    
    
    (948
    )Income Before Income Taxes
    
    $
    22,901
    
    
    $
    23,167Income Taxes
    
    
    8,736
    
    
    
    9,157Net Income
    
    $
    14,165
    
    
    $
    14,010Earnings Per ShareBasic
    
    $
    1.78
    
    
    $
    1.78Diluted
    
    $
    1.77
    
    
    $
    1.77Average Common Shares OutstandingBasic
    
    
    7,936
    
    
    
    7,872Diluted
    
    
    7,997
    
    
    
    7,926
 Note 3.
    
    Stock-Based Compensation
   8




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Weighted
    
    Weighted
    
    AggregateAverage
    
    Average
    
    IntrinsicExercise
    
    Remaining
    
    ValueShares
    
    Price
    
    Life
    
    (in thousands)Outstanding at September 30,
2006*
    
    
    332,337
    
    
    $
    23.148
    
    
    6.82 years
    
    $
    3,523Granted
    
    
    
    
    
    
    Exercised
    
    
    (6,175
    )
    
    
    18.709Forfeited
    
    
    (4,200
    )
    
    
    27.052Outstanding at December 31,
2006*
    
    
    321,962
    
    
    $
    23.446
    
    
    6.57 years
    
    $
    5,447Exercisable at December 31, 2006
    
    
    153,251
    
    
    $
    18.412
    
    
    5.72 years
    
    $
    3,324Remaining reserved for grant
at December 31, 2006
    
    
    252,000
 
 *
    
    Includes 81,059 shares outstanding under the 1992 Amended and Restated Stock Option Plan.    Note 4.
    
    Retirement Plans and Other Benefits
  9




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Pension
    
    PostretirementBenefits
    
    BenefitsFor the three months ended December 31, (in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Service cost
    
    $
    220
    
    
    $
    240
    
    
    $
    39
    
    
    $
    55Interest cost
    
    
    479
    
    
    
    464
    
    
    
    48
    
    
    
    83Amortization of prior service cost
    
    
    
    
    
    
    23
    
    
    
    (19
    )
    
    
    (11
    )Amortization of loss
    
    
    23
    
    
    
    
    
    
    
    6
    
    
    
    18Expected return on plan assets
    
    
    (703
    )
    
    
    (672
    )
    
    
    (72
    )
    
    
    (71
    )Net periodic benefit cost
    
    $
    19
    
    
    $
    55
    
    
    $
    2
    
    
    $
    74
   Note 5.
    
    Rates and Regulatory Matters
   10




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force majeure
  11




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12




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December 31,
    
    December 31,
    
    September 30,2006
    
    2005
    
    2006Current
    
    Noncurrent
    
    Current
    
    Noncurrent
    
    Current
    
    NoncurrentAssetsDeferred Purchase Gas Adjustment
    
    $
    2,285
    
    
    
    
    
    
    $
    509
    
    
    
    
    
    
    $
    1,916ESR Fund
    
    
    167
    
    
    $
    125
    
    
    
    167
    
    
    $
    292
    
    
    
    167
    
    
    $
    167Asset Retirement Cost
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Other
    
    
    
    
    
    
    
    
    
    
    116Regulatory Assets
    
    $
    2,452
    
    
    $
    151
    
    
    $
    792
    
    
    $
    292
    
    
    $
    2,083
    
    
    $
    193LiabilitiesESR Fund
    
    $
    1,000
    
    
    
    
    
    
    $
    1,000
    
    
    
    
    
    
    $
    1,000Contract Buyout
    
    
    2,959
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,866Deferred Investment Tax Credit
    
    
    15
    
    
    $
    102
    
    
    
    15
    
    
    $
    117
    
    
    
    15
    
    
    $
    106RSE Adjustment
    
    
    
    
    
    
    
    
    
    
    322Weather Normalization Adjustment
    
    
    188Gross Receipt Tax Collections
    
    
    3,275
    
    
    
    
    
    
    
    4,407
    
    
    
    
    
    
    
    2,903Accrued Dismantling Costs
    
    
    
    
    
    
    9,567
    
    
    
    
    
    
    
    12,683
    
    
    
    
    
    
    
    9,390Other
    
    
    209
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    196Regulatory Liabilities
    
    $
    7,646
    
    
    $
    9,669
    
    
    $
    5,904
    
    
    $
    12,800
    
    
    $
    5,980
    
    
    $
    9,496
   Note 6. Earnings Per Share
  13




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Three MonthsEnergySouth, Inc.
    
    Ended December 31,In Thousands
    
    2006
    
    2005Weighted Average Common Shares
    
    
    7,954
    
    
    
    7,905Effect of Dilutive Securities:Options to Purchase Common Stock
    
    
    77
    
    
    
    48Diluted Average Common Shares
    
    
    8,031
    
    
    
    7,953
  Note 7. Segment Information
   For the three months ended
    
    Natural Gas
    
    Natural GasDecember 31, 2006 (in thousands):
    
    Distribution
    
    Storage
    
    Other
    
    Eliminations
    
    ConsolidatedOperating Revenues
    
    $
    33,333
    
    
    $
    5,388
    
    
    $
    1,271
    
    
    $
    (1,062
    )
    
    $
    38,930Cost of Gas
    
    
    17,494
    
    
    
    
    
    
    
    
    
    
    
    (1,062
    )
    
    
    16,432Cost of Merchandise
    
    
    
    
    
    
    
    
    
    
    749
    
    
    
    
    
    
    
    749Operations and Maintenance Expense
    
    
    5,746
    
    
    
    1,140
    
    
    
    470
    
    
    
    
    
    
    
    7,356Depreciation Expense
    
    
    2,120
    
    
    
    642
    
    
    
    
    
    
    
    
    
    
    
    2,762Taxes, Other Than Income Taxes
    
    
    2,376
    
    
    
    237
    
    
    
    20
    
    
    
    
    
    
    
    2,633Operating Income
    
    
    5,597
    
    
    
    3,369
    
    
    
    32
    
    
    
    
    
    
    
    8,998Interest Income
    
    
    1
    
    
    
    30
    
    
    
    291
    
    
    
    (304
    )
    
    
    18Interest Expense
    
    
    (880
    )
    
    
    (976
    )
    
    
    (127
    )
    
    
    304
    
    
    
    (1,679
    )Capitalized Interest
    
    
    13
    
    
    
    345
    
    
    
    
    
    
    
    
    
    
    
    358Less: Minority Interest
    
    
    (22
    )
    
    
    (252
    )
    
    
    
    
    
    
    
    
    
    
    (274
    )Income Before Income Taxes
    
    $
    4,709
    
    
    $
    2,516
    
    
    $
    196
    
    
    
    
    
    
    $
    7,421
 14




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For the three months ended
    
    Natural Gas
    
    Natural GasDecember 31, 2005 (in thousands):
    
    Distribution
    
    Storage
    
    Other
    
    Eliminations
    
    ConsolidatedOperating Revenues
    
    $
    39,575
    
    
    $
    4,694
    
    
    $
    1,601
    
    
    $
    (1,058
    )
    
    $
    44,812Cost of Gas
    
    
    24,117
    
    
    
    
    
    
    
    
    
    
    
    (1,058
    )
    
    
    23,059Cost of Merchandise
    
    
    
    
    
    
    
    
    
    
    959
    
    
    
    
    
    
    
    959Operations and Maintenance Expense
    
    
    5,184
    
    
    
    720
    
    
    
    395
    
    
    
    
    
    
    
    6,299Depreciation Expense
    
    
    1,995
    
    
    
    647
    
    
    
    
    
    
    
    
    
    
    
    2,642Taxes, Other Than Income Taxes
    
    
    2,638
    
    
    
    214
    
    
    
    21
    
    
    
    
    
    
    
    2,873Operating Income
    
    
    5,641
    
    
    
    3,113
    
    
    
    226
    
    
    
    
    
    
    
    8,980Interest Income
    
    
    14
    
    
    
    62
    
    
    
    114
    
    
    
    (113
    )
    
    
    77Interest Expense
    
    
    (747
    )
    
    
    (1,049
    )
    
    
    (53
    )
    
    
    113
    
    
    
    (1,736
    )Capitalized Interest
    
    
    21
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    175Less: Minority Interest
    
    
    (30
    )
    
    
    (208
    )
    
    
    
    
    
    
    
    
    
    
    (238
    )Income Before Income Taxes
    
    $
    4,899
    
    
    $
    2,072
    
    
    $
    287
    
    
    
    
    
    
    $
    7,258
 Note 8. Commitments and Contingencies
 Normal Purchases and Normal Sales,
    15




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Mobile Gas
    
    Bay GasGas
    
    
    
    
    
    MinimumSupply
    
    Implemention of
    
    Payments for
    
    Construction
    
    TotalFiscal Year
    
    Contracts
    
    CIS Software
    
    Service Fees
    
    Contracts
    
    CommitmentsRemaining 2007
    
    $
    17,300
    
    
    $
    2,390
    
    
    $
    272
    
    
    $
    14,860
    
    
    $
    34,8222008
    
    
    1,807
    
    
    
    873
    
    
    
    363
    
    
    
    
    
    
    
    3,0432009
    
    
    1,141
    
    
    
    
    
    
    
    363
    
    
    
    
    
    
    
    1,5042010
    
    
    1,141
    
    
    
    
    
    
    
    363
    
    
    
    
    
    
    
    1,5042011
    
    
    815
    
    
    
    
    
    
    
    363
    
    
    
    
    
    
    
    1,1782012  and thereafter
    
    
    
    
    
    
    
    
    
    
    18,541
    
    
    
    
    
    
    
    18,541Total
    
    $
    22,204
    
    
    $
    3,263
    
    
    $
    20,265
    
    
    $
    14,860
    
    
    $
    60,592
   16




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Note 9. New Accounting Pronouncements
    17




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##### Table of Contents



Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The Company
  Results Of Operations
 Consolidated Earnings
   Natural Gas Distribution
    18




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19



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Natural Gas Storage
  20




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21




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##### Table of Contents



Other
   Income Taxes
  Liquidity and Capital Resources
   22




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##### Table of Contents



Remaining
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal YearsType of Contractual
    
    Fiscal Year
    
    Fiscal Year
    
    Fiscal Year
    
    Fiscal Year
    
    Fiscal Year
    
    2012 andObligations (in thousands):
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    thereafterLong-Term Debt
    
    $
    4,774
    
    
    $
    5,900
    
    
    $
    6,054
    
    
    $
    5,653
    
    
    $
    5,955
    
    
    $
    47,799Interest Payments
    
    
    5,061
    
    
    
    5,732
    
    
    
    5,247
    
    
    
    4,750
    
    
    
    4,279
    
    
    
    15,247Estimated Future Minimum
Payments for
Bay Gas Service Fees
    
    
    272
    
    
    
    363
    
    
    
    363
    
    
    
    363
    
    
    
    363
    
    
    
    18,541Construction Contracts for
Bay Gas 3rd Cavern Development
    
    
    14,860Implementation of CIS Software
    
    
    2,390
    
    
    
    873Gas Supply Contracts
    
    
    17,300
    
    
    
    1,807
    
    
    
    1,141
    
    
    
    1,141
    
    
    
    815Total
    
    $
    44,657
    
    
    $
    14,675
    
    
    $
    12,805
    
    
    $
    11,907
    
    
    $
    11,412
    
    
    $
    81,587
 23




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Critical Accounting Policies
  Forward-Looking Statements
  24




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Item 3
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
 Normal purchases and Normal sales,
    25




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##### Table of Contents



Item 4  CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control
  26




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PART II. OTHER INFORMATION
 
 Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The Annual Meeting of Stockholders of EnergySouth, Inc. was held on
January 26, 2007.(b)
    
    The following nominees were elected as Directors of the Company, to serve until
the 2010 Annual Meeting of Stockholders, by the votes indicated:
 Nominee
    
    For
    
    WithheldC. S. Dean Liollio
    
    
    7,225,013
    
    
    
    55,986J. D. Woodward
    
    
    7,239,193
    
    
    
    41,806Robert H. Rouse
    
    
    7,217,068
    
    
    
    63,931
  To Serve Until the AnnualDirector
    
    Meeting of Stockholders in the yearWalter A. Bell
    
    2008Harris V. Morrisette
    
    2008John C. Hope, III
    
    2009Judy A. Marston
    
    2009S. Felton Mitchell, Jr.
    
    2009Thomas B. Van Antwerp
    
    2009
  27




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##### Table of Contents



(c)
    
    At the Annual Meeting, shareholders voted on a proposal to change the state of
incorporation of EnergySouth, Inc. from Alabama to Delaware by merging EnergySouth,
Inc. into a wholly owned subsidiary incorporated in Delaware (the Merger). The
results of the vote on the Merger are as follows:
 Votes For:
    
    
    5,669,995Votes Against:
    
    
    324,610Abstentions:
    
    
    37,132Broker Non-Votes:
    
    
    1,249,262
  
 Item 5. Other Information
  PART II. OTHER INFORMATION
 
 Item 6. Exhibits
 Exhibit No.
    
    Description31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002  Chief Executive Officer31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002  Chief Financial Officer32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Chief Executive
Officer32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Chief Financial
Officer99.1
    
    Press release dated January 26, 2007
 28




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##### Table of Contents



SIGNATURES
  ENERGYSOUTH, INC.
(Registrant)Date: January 30, 2007
    /s/ C. S. LiollioC. S. LiollioPresident and Chief Executive
OfficerDate: January 30, 2007
    /s/ Charles P. HuffmanCharles P. HuffmanSenior Vice President and
Chief Financial Officer 29