##### 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, 2005
 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




---



##### 



ENERGYSOUTH, INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2005
  Page No.PART I: FINANCIAL INFORMATIONItem 1
    
    
    
    Financial Statements:(a)
    
    Unaudited Condensed Consolidated Balance Sheets December 31, 2005 and 2004 and September 30, 2005
    
    
    3 - 4(b)
    
    Unaudited Condensed Consolidated Statements of Income Three Months Ended December 31, 2005 and 2004
    
    
    5(c)
    
    Unaudited Condensed Consolidated Statements of Cash Flows Three Months Ended December 31, 2005 and 2004
    
    
    6(d)
    
    Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7 - 19Item 2
    
    
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20 - 28Item 3
    
    
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4
    
    
    
    Controls and
Procedures
    
    
    29 - 30PART II: OTHER INFORMATIONItem 4
    
    
    
    Submission of
Matters to a Vote of Security Holders
    
    
    31Item 5
    
    
    
    Other Information
    
    
    31Item 6
    
    
    
    Exhibits
    
    
    32Storage Service AgreementCertification Pursuant to Section 302 - CEOCertification Pursuant to Section 302 - CFOCertification Pursuant to Section 906 - CEOCertification Pursuant to Section 906 - CFOPress Release
  2




---



##### Table of Contents



PART 1. FINANCIAL INFORMATION
 
 ITEM 1: FINANCIAL STATEMENTS
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 EnergySouth, Inc.
    
    December 31,
    
    
    September 30,In Thousands
        
    2005
    
    
    2004
    
    
    2005(Unaudited)ASSETSCurrent AssetsCash and Cash Equivalents
    
    $
    3,037
    
    
    $
    8,981
    
    
    $
    9,662ReceivablesGas
    
    
    16,642
    
    
    
    12,237
    
    
    
    7,568Unbilled Revenue
    
    
    7,238
    
    
    
    7,534
    
    
    
    1,777Merchandise
    
    
    2,176
    
    
    
    2,329
    
    
    
    2,123Other
    
    
    1,366
    
    
    
    878
    
    
    
    1,468Allowance for Doubtful Accounts
    
    
    (1,422
    )
    
    
    (1,143
    )
    
    
    (1,029
    )Materials, Supplies, and Merchandise, net (At Average Cost)
    
    
    1,279
    
    
    
    1,464
    
    
    
    1,319Gas Stored Underground (At Average Cost)
    
    
    4,518
    
    
    
    5,617
    
    
    
    5,666Regulatory Assets
    
    
    792
    
    
    
    1,803
    
    
    
    323Deferred Income Taxes
    
    
    2,334
    
    
    
    1,247
    
    
    
    3,784Prepayments
    
    
    1,231
    
    
    
    1,026
    
    
    
    1,814Total Current Assets
    
    
    39,191
    
    
    
    41,973
    
    
    
    34,475Property, Plant, and Equipment
    
    
    286,004
    
    
    
    276,270
    
    
    
    283,605Less: Accumulated Depreciation and Amortization
    
    
    80,154
    
    
    
    72,556
    
    
    
    77,982Property, Plant, and Equipment  Net
    
    
    205,850
    
    
    
    203,714
    
    
    
    205,623Construction Work in Progress
    
    
    8,861
    
    
    
    243
    
    
    
    6,265Total Property, Plant, and Equipment
    
    
    214,711
    
    
    
    203,957
    
    
    
    211,888Other AssetsPrepaid Pension Cost
    
    
    883
    
    
    
    1,045
    
    
    
    939Deferred Charges
    
    
    570
    
    
    
    651
    
    
    
    390Prepayments
    
    
    1,234
    
    
    
    942
    
    
    
    1,249Regulatory Assets
    
    
    292
    
    
    
    579
    
    
    
    333Merchandise Receivables Due After One Year
    
    
    3,264
    
    
    
    3,494
    
    
    
    3,185Total Other Assets
    
    
    6,243
    
    
    
    6,711
    
    
    
    6,096Total
    
    $
    260,145
    
    
    $
    252,641
    
    
    $
    252,459
  3




---



##### Table of Contents



UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 EnergySouth, Inc.
    
    December 31,
    
    
    September 30,In Thousands, Except Share Data
    
    2005
    
    
    2004
    
    
    2005(Unaudited)LIABILITIES AND CAPITALIZATIONCurrent LiabilitiesCurrent Maturities of Long-Term Debt
    
    $
    4,815
    
    
    $
    5,037
    
    
    $
    5,213Notes Payable
    
    
    1,500
    
    
    
    6,175Accounts Payable
    
    
    13,014
    
    
    
    8,653
    
    
    
    6,235Dividends Declared
    
    
    1,686
    
    
    
    1,555
    
    
    
    1,684Customer Deposits
    
    
    1,212
    
    
    
    1,321
    
    
    
    1,294Taxes Accrued
    
    
    6,198
    
    
    
    3,024
    
    
    
    6,037Interest Accrued
    
    
    524
    
    
    
    559
    
    
    
    970Regulatory Liabilities
    
    
    5,904
    
    
    
    5,314
    
    
    
    6,704Other
    
    
    1,042
    
    
    
    1,014
    
    
    
    1,150Total Current Liabilities
    
    
    35,895
    
    
    
    32,652
    
    
    
    29,287Other LiabilitiesAccrued Postretirement Benefit Cost
    
    
    834
    
    
    
    570
    
    
    
    762Deferred Income Taxes
    
    
    21,861
    
    
    
    22,053
    
    
    
    22,626Deferred Investment Tax Credits
    
    
    231
    
    
    
    257
    
    
    
    236Regulatory Liabilities
    
    
    12,800
    
    
    
    12,031
    
    
    
    12,576Other
    
    
    1,206
    
    
    
    1,371
    
    
    
    1,597Total Other Liabilities
    
    
    36,932
    
    
    
    36,282
    
    
    
    37,79772,827
    
    
    
    68,934
    
    
    
    67,084CapitalizationStockholders EquityCommon Stock, $.01 Par Value
(Authorized 20,000,000 Shares; Outstanding
December 2005 - 7,906,000;
December 2004 - 7,835,000;
September 2005 - 7,898,000 Shares)
    
    
    79
    
    
    
    78
    
    
    
    79Capital in Excess of Par Value
    
    
    27,732
    
    
    
    26,364
    
    
    
    27,457Retained Earnings
    
    
    77,737
    
    
    
    70,382
    
    
    
    74,952Grantor Trust, at cost
    
    
    (1,608
    )
    
    
    (1,406
    )
    
    
    (1,539
    )Deferred Compensation Liability
    
    
    1,608
    
    
    
    1,406
    
    
    
    1,539Total Stockholders Equity
    
    
    105,548
    
    
    
    96,824
    
    
    
    102,488Minority Interest
    
    
    5,035
    
    
    
    4,733
    
    
    
    5,308Long-Term Debt
    
    
    76,735
    
    
    
    82,150
    
    
    
    77,579Total Capitalization
    
    
    187,318
    
    
    
    183,707
    
    
    
    185,375Total
    
    $
    260,145
    
    
    $
    252,641
    
    
    $
    252,459
  4




---



##### Table of Contents



UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three MonthsENERGYSOUTH, INC.
    
    Ended December 31,In Thousands, Except Per Share Data
    
    2005
    
    
    2004Operating RevenuesGas Revenues
    
    $
    43,211
    
    
    $
    34,802Merchandise Sales
    
    
    1,292
    
    
    
    1,185Other
    
    
    309
    
    
    
    380Total Operating Revenues
    
    
    44,812
    
    
    
    36,367Operating ExpensesCost of Gas
    
    
    23,059
    
    
    
    14,922Cost of Merchandise
    
    
    959
    
    
    
    959Operations and Maintenance
    
    
    6,299
    
    
    
    6,496Depreciation
    
    
    2,642
    
    
    
    2,550Taxes, Other Than Income Taxes
    
    
    2,873
    
    
    
    2,452Total Operating Expenses
    
    
    35,832
    
    
    
    27,379Operating Income
    
    
    8,980
    
    
    
    8,988Other Income and (Expense)Interest Expense
    
    
    (1,736
    )
    
    
    (1,872
    )Allowance for Borrowed Funds Used During Construction
    
    
    175
    
    
    
    3Interest Income
    
    
    77
    
    
    
    32Minority Interest
    
    
    (238
    )
    
    
    (228
    )Total Other Income (Expense)
    
    
    (1,722
    )
    
    
    (2,065
    )Income Before Income Taxes
    
    
    7,258
    
    
    
    6,923Income Taxes
    
    
    2,773
    
    
    
    2,607Net Income
    
    $
    4,485
    
    
    $
    4,316Earnings Per ShareBasic
    
    $
    0.57
    
    
    $
    0.55Diluted
    
    $
    0.56
    
    
    $
    0.54Average Common Shares OutstandingBasic
    
    
    7,905
    
    
    
    7,833Diluted
    
    
    7,953
    
    
    
    7,938
  5




---



##### Table of Contents








UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


Three MonthsEnergySouth, Inc.
    
    Ended December 31,In Thousands
    
    2005
    
    
    2004Cash Flows from Operating ActivitiesNet Income
    
    $
    4,485
    
    
    $
    4,316Adjustments to Reconcile Net Income to Net Cash Provided by Operating ActivitiesDepreciation and Amortization
    
    
    2,736
    
    
    
    2,646Provision for Losses on Receivables and Inventory
    
    
    322
    
    
    
    179Provision for Deferred Income Taxes
    
    
    682
    
    
    
    (127
    )Minority Interest
    
    
    238
    
    
    
    228Stock-Based Employee Compensation Expense
    
    
    85Changes in Operating Assets and Liabilities:Receivables
    
    
    (14,741
    )
    
    
    (12,077
    )Inventory
    
    
    1,214
    
    
    
    (1,318
    )Payables
    
    
    6,306
    
    
    
    2,618Taxes
    
    
    161
    
    
    
    711Deferred Purchased Gas Adjustment
    
    
    (1,888
    )
    
    
    1,790Other
    
    
    627
    
    
    
    1,228Net Cash Provided by Operating Activities
    
    
    227
    
    
    
    194Cash Flows from Investing ActivitesCapital Expenditures
    
    
    (5,228
    )
    
    
    (1,495
    )Net Cash Used in Investing Activities
    
    
    (5,228
    )
    
    
    (1,495
    )Cash Flows from Financing ActivitesRepayment of Long-Term Debt
    
    
    (1,241
    )
    
    
    (3,752
    )Changes in Short-Term Borrowings
    
    
    1,500
    
    
    
    6,175Payment of Dividends
    
    
    (1,492
    )
    
    
    (1,468
    )Dividend Reinvestment
    
    
    88
    
    
    
    110Exercise of Stock Options
    
    
    23
    
    
    
    17Excess Tax Benefits from Share Based Payments
    
    
    10Partnership Distributions to Minority Interest Holders
    
    
    (512
    )
    
    
    (264
    )Net Cash Provided/(Used) by Financing Activities
    
    
    (1,624
    )
    
    
    818Net Decrease in Cash and Cash Equivalents
    
    
    (6,625
    )
    
    
    (483
    )Cash and Cash Equivalents at Beginning of Period
    
    
    9,662
    
    
    
    9,464Cash and Cash Equivalents at End of Period
    
    $
    3,037
    
    
    $
    8,981Noncash Transactions from Investing and Financing Activities:Accruals for Capital Expenditures
    
    $
    379
    
    
    $
    558Dividend Payments Held in Escrow
    
    $
    1,685
    
    
    $
    1,478


6




---



##### Table of Contents



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Principles of Consolidation
  Note 2. Basis of Presentation
   7




---



##### Table of Contents



Twelve MonthsEnergySouth, Inc.
    
    Ended December 31,In Thousands, Except Per Share Data
    
    2005
    
    2004Operating Revenues
    
    $
    133,051
    
    
    $
    119,623Cost of Gas
    
    
    55,303
    
    
    
    44,199Cost of Merchandise
    
    
    2,765
    
    
    
    2,807Operations and Maintenance Expense
    
    
    25,117
    
    
    
    25,284Depreciation Expense
    
    
    10,214
    
    
    
    9,828Taxes, Other Than Income Taxes
    
    
    9,076
    
    
    
    8,457Operating Income
    
    
    30,576
    
    
    
    29,048Interest Expense
    
    
    (7,147
    )
    
    
    (7,739
    )Allowance for Borrowed Funds Used
During Construction
    
    
    382
    
    
    
    14Interest Income
    
    
    304
    
    
    
    86Less: Minority Interest
    
    
    (948
    )
    
    
    (837
    )Income Before Income Taxes
    
    $
    23,167
    
    
    $
    20,572Income Taxes
    
    
    9,157
    
    
    
    7,756Net Income
    
    $
    14,010
    
    
    $
    12,816Earnings Per ShareBasic
    
    $
    1.78
    
    
    $
    1.64Diluted
    
    $
    1.77
    
    
    $
    1.62Average Common Shares OutstandingBasic
    
    
    7,872
    
    
    
    7,795Diluted
    
    
    7,926
    
    
    
    7,893
 Note 3. Stock-Based Compensation
   8




---



##### Table of Contents



Three MonthsEnergySouth, Inc.
    
    Ended December 31,In Thousands, Except per Share Data
    
    2004Net Income, as reported
    
    $
    4,316Deduct:Total stock-based employee compensation expense
determined under fair value based method
for all awards, net of related tax effects
    
    
    45Pro forma net income
    
    $
    4,271Earnings per share:Basic  as reported
    
    $
    0.55Basic  pro forma
    
    $
    0.55Diluted  as reported
    
    $
    0.54Diluted  pro forma
    
    $
    0.54
   9




---



##### Table of Contents



Weighted
    
    WeightedAverage
    
    Average
    
    AggregateExercise
    
    Remaining
    
    IntrinsicShares
    
    Price
    
    Life
    
    ValueOutstanding at September 30, 2005
    
    
    299,589
    
    
    $
    20.979
    
    
    7.44  yearsGranted
    
    
    
    
    
    
    Exercised
    
    
    (1,725
    )
    
    
    13.547Forfeited
    
    
    
    
    
    
    Outstanding at December 31, 2005
    
    
    297,864
    
    
    $
    21.022
    
    
    7.21 years
    
    $
    2,013,000Exercisable at December 31, 2005
    
    
    126,901
    
    
    $
    16.307
    
    
    5.71 years
    
    $
    1,456,000Remaining reserved for grant at
December 31, 2005
    
    
    307,575
    Note 4. Retirement Plans and Other Benefits
  10




---



##### Table of Contents



Pension
    
    
    PostretirementBenefits
    
    
    BenefitsFor the three months ended December 31, (in thousands)
    
    
    2005
    
    
    
    2004
    
    
    
    2005
    
    
    
    2004Service cost
    
    $
    240
    
    
    $
    227
    
    
    $
    55
    
    
    $
    43Interest cost
    
    
    464
    
    
    
    448
    
    
    
    83
    
    
    
    79Amortization of prior service cost
    
    
    23
    
    
    
    24
    
    
    
    (11
    )
    
    
    (11
    )Amortization of unrecognized gain
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    15Expected return on plan assets
    
    
    (672
    )
    
    
    (643
    )
    
    
    (71
    )
    
    
    (68
    )Net periodic benefit cost (credit)
    
    $
    55
    
    
    $
    56
    
    
    $
    74
    
    
    $
    58
   Note 5. Rates and Regulatory Matters
  11




---



##### Table of Contents



force majeure
 12




---



##### Table of Contents



13




---



##### Table of Contents



December 31,
    
    
    December 31,
    
    
    September 30,2005
    
    
    2004
    
    
    2005Current
    
    
    Noncurrent
    
    
    Current
    
    
    Noncurrent
    
    
    Current
    
    
    NoncurrentAssetsDeferred Purchase Gas Adjustment
    
    $
    509
    
    
    
    
    
    
    $
    1,479ESR Fund
    
    
    167
    
    
    $
    292
    
    
    
    167
    
    
    $
    458
    
    
    $
    167
    
    
    $
    333Bad Debt Reserve
    
    
    100
    
    
    
    
    
    
    
    133
    
    
    
    100
    
    
    
    133Other
    
    
    16
    
    
    
    
    
    
    
    24
    
    
    
    21
    
    
    
    23Regulatory Assets
    
    $
    792
    
    
    $
    292
    
    
    $
    1,803
    
    
    $
    579
    
    
    $
    323
    
    
    $
    333LiabilitiesBad Debt Reserve
    
    
    
    
    
    
    
    
    
    $
    15ESR Fund
    
    $
    1,000
    
    
    
    
    
    
    
    884
    
    
    
    
    
    
    $
    975Deferred Investment Tax Credit
    
    
    15
    
    
    $
    117
    
    
    
    16
    
    
    $
    133
    
    
    
    15
    
    
    $
    121RSE Adjustment
    
    
    322
    
    
    
    
    
    
    
    258
    
    
    
    
    
    
    
    433Gross Receipt Tax Collections
    
    
    4,407
    
    
    
    
    
    
    
    4,001
    
    
    
    
    
    
    
    3,751Deferred Purchase Gas Adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,379Accrued Dismantling Costs
    
    
    
    
    
    
    12,683
    
    
    
    
    
    
    
    11,898
    
    
    
    
    
    
    
    12,455Other
    
    
    160
    
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    151Regulatory Liabilities
    
    $
    5,744
    
    
    $
    12,800
    
    
    $
    5,174
    
    
    $
    12,031
    
    
    $
    6,704
    
    
    $
    12,576
   Note 6. Earnings Per Share
  14




---



##### Table of Contents



Three MonthsEnergySouth, Inc.
    
    Ended December 31,In Thousands
    
    
    2005
    
    
    
    2004Weighted Average Common Shares
    
    
    7,905
    
    
    
    7,833Effect of Dilutive Securities:Options to Purchase Common Stock
    
    
    48
    
    
    
    105Diluted Average Common Shares
    
    
    7,953
    
    
    
    7,938
  Note 7. Segment Information
   15




---



##### Table of Contents



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
    
    
    2
    
    
    
    58
    
    
    
    17
    
    
    
    
    
    
    
    77Interest Expense
    
    
    (660
    )
    
    
    (1,037
    )
    
    
    (39
    )
    
    
    
    
    
    
    (1,736
    )Allow. for Borrowed Funds Used
During Construction
    
    
    21
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    175Less: Minority Interest
    
    
    (30
    )
    
    
    (208
    )
    
    
    
    
    
    
    
    
    
    
    (238
    )Income Before Income Taxes
    
    $
    4,974
    
    
    $
    2,080
    
    
    $
    204
    
    
    
    
    
    
    $
    7,258
 For the three months ended
    
    Natural Gas
    
    
    Natural GasDecember 31, 2004 (in thousands):
    
    Distribution
    
    
    Storage
    
    
    Other
    
    
    Eliminations
    
    
    ConsolidatedOperating Revenues
    
    $
    31,058
    
    
    $
    4,782
    
    
    $
    1,565
    
    
    $
    (1,038
    )
    
    $
    36,367Cost of Gas
    
    
    15,960
    
    
    
    
    
    
    
    
    
    
    
    (1,038
    )
    
    
    14,922Cost of Merchandise
    
    
    
    
    
    
    
    
    
    
    959
    
    
    
    
    
    
    
    959Operations and Maintenance Expense
    
    
    5,296
    
    
    
    779
    
    
    
    421
    
    
    
    
    
    
    
    6,496Depreciation Expense
    
    
    1,926
    
    
    
    624
    
    
    
    
    
    
    
    
    
    
    
    2,550Taxes, Other Than Income Taxes
    
    
    2,211
    
    
    
    222
    
    
    
    19
    
    
    
    
    
    
    
    2,452Operating Income
    
    
    5,665
    
    
    
    3,157
    
    
    
    166
    
    
    
    
    
    
    
    8,988Interest Income
    
    
    1
    
    
    
    29
    
    
    
    2
    
    
    
    
    
    
    
    32Interest Expense
    
    
    (728
    )
    
    
    (1,088
    )
    
    
    (56
    )
    
    
    
    
    
    
    (1,872
    )Allow. for Borrowed Funds Used
During Construction
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Less: Minority Interest
    
    
    (35
    )
    
    
    (193
    )
    
    
    
    
    
    
    
    
    
    
    (228
    )Income Before Income Taxes
    
    $
    4,906
    
    
    $
    1,905
    
    
    $
    112
    
    
    
    
    
    
    $
    6,923
 Note 8. Commitments and Contingencies
 Normal Purchases and Normal Sales,
 16




---



##### Table of Contents



17




---



##### Table of Contents



Mobile Gas
    
    
    Bay GasGas
    
    
    MinimumFiscal
    
    Supply
    
    
    Payments for
    
    
    Construction
    
    
    TotalYear
    
    Contracts
    
    
    Service Fees
    
    
    Contracts
    
    
    Commitmentsremaining 2006
    
    $
    16,635
    
    
    $
    155
    
    
    $
    591
    
    
    $
    17,3812007
    
    
    1,187
    
    
    
    207
    
    
    
    
    
    
    
    1,3942008
    
    
    1,187
    
    
    
    207
    
    
    
    
    
    
    
    1,3942009
    
    
    1,187
    
    
    
    207
    
    
    
    
    
    
    
    1,3942010 - and thereafter
    
    
    2,028
    
    
    
    6,836
    
    
    
    
    
    
    
    8,864Total
    
    $
    22,224
    
    
    $
    7,612
    
    
    $
    591
    
    
    $
    30,427
    18




---



##### Table of Contents



Note 9. New Accounting Pronouncements
   19




---



##### 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
   20




---



##### Table of Contents



21




---



##### Table of Contents



22




---



##### Table of Contents



Natural Gas Storage
   23




---



##### Table of Contents



24




---



##### Table of Contents



Other
   Income Taxes
  Liquidity and Capital Resources
   25




---



##### Table of Contents



26




---



##### Table of Contents



Remaining
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fiscal YearsType of Contractual
    
    Fiscal Year
    
    Fiscal Year
    
    Fiscal Year
    
    Fiscal Year
    
    2010 andObligations (in thousands):
    
    2006
    
    2007
    
    2008
    
    2009
    
    thereafterLong-Term Debt
    
    $
    3,971
    
    
    $
    5,019
    
    
    $
    5,300
    
    
    $
    5,454
    
    
    $
    61,806Interest Payments
    
    
    5,436
    
    
    
    6,242
    
    
    
    5,822
    
    
    
    5,382
    
    
    
    26,340Estimated Future Minimum Payments for
Bay Gas Service Fees
    
    
    155
    
    
    
    207
    
    
    
    207
    
    
    
    207
    
    
    
    6,836Construction Contracts for Bay Gas
3rd Cavern Development
    
    
    591Gas Supply Contracts
    
    
    16,635
    
    
    
    1,187
    
    
    
    1,187
    
    
    
    1,187
    
    
    
    2,028Total
    
    $
    26,788
    
    
    $
    12,655
    
    
    $
    12,516
    
    
    $
    12,230
    
    
    $
    97,010
 Critical Accounting Policies
  Forward-Looking Statements
  27




---



##### Table of Contents



28




---



##### Table of Contents



Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Normal purchases and Normal
sales,
    
 Item 4 CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  29




---



##### Table of Contents



Changes in Internal Control
  Limitations on the Effectiveness of Controls
  30




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The Annual Meeting of Stockholders of EnergySouth, Inc. was held on January 27, 2006.(b)
    
    The following nominees were elected as Directors of the Company, to serve
until the 2009 Annual Meeting of Stockholders, by the votes indicated:
 Nominee
    
    For
    
    WithheldJohn C. Hope, III
    
    6,853,739
    
    46,910Judy A. Marston
    
    6,846,516
    
    54,133S. Felton Mitchell, Jr.
    
    6,567,345
    
    333,304Thomas B. Van Antwerp
    
    6,854,421
    
    46,228
  To Serve Until the AnnualDirector
    
    Meeting of Stockholders in the yearJohn S. Davis
    
    2007Walter L. Hovell
    
    2007G. Montgomery Mitchell
    
    2007Robert H. Rouse
    
    2007Walter A. Bell
    
    2008Gaylord C. Lyon
    
    2008 *Harris V. Morrisette
    
    2008
 
 *
    
    The Companys Bylaws provide for mandatory retirement at the 2007 Annual Meeting of
Shareholders of any Director then in office who has reached the age of 72 prior to that date. Mr.
Lyon is subject to the provision and will retire from his office of Director of the Company at the
2007 Annual Meeting of Stockholders. 
 Item 5. Other Information
  31




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 6. Exhibits
 Exhibit No.
    
    Description10(u)
    
    Storage Service Agreement by and between Bay Gas
Storage Company, Ltd. and Tampa Electric Company made as
of the 14th day of October, 2005 and executed
on October 25, 2005 (1)31.1
    
    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 27, 2006
 
 (1)
    
    Confidential portions of this exhibit have been omitted and previously filed separately with
the Securities and Exchange Commission pursuant to a request for confidential treatment made in
accordance with Rule 24b-2 promulgated under the Securities and Exchange Act of 1934, as amended. 32




---



##### Table of Contents



SIGNATURES
  ENERGYSOUTH, INC.(Registrant)Date:
    
    February 1, 2006
    
    
    
    /s/ John S. DavisJohn S. Davis
President and
Chief Executive OfficerDate:
    
    February 1, 2006
    
    
    
    /s/Charles P. HuffmanCharles P. HuffmanSenior Vice President and
Chief Financial Officer
 33