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U.S. Securities And Exchange Commission Washington, D.C. 20549
 FORM 10-KSB þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2004o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the transition period fromto
 Commission File No. 0-6529 DOUBLE EAGLE PETROLEUM CO. 
  Maryland
    
    83-0214692(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)777 Overland Trail (P.O. Box 766) Casper, Wyoming
    
    82601(Address of principal executive offices)
    
    (Zip Code)
 Issuers telephone number, including area code (307) 237-9330 Securities registered pursuant to Section 12(b) of the Act: Title of each class
    
    Name of each exchange on which registeredNone
    
    None
 Securities registered pursuant to Section 12(g) of the Act:
$.10 Par Value Common Stock 
 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of

the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ No o Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B
contained in this form, and no disclosure will be contained, to the best of registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. þ Issuers revenues for the fiscal year ended December 31, 2004 were $13,267,073. The aggregate market value of the voting stock held by non-affiliates computed based on the
average of the closing bid and asked prices of such stock as of March 16, 2005, was $184,901,979.* (APPLICABLE ONLY TO CORPORATE REGISTRANTS) The number of shares outstanding of each of the issuers classes of common equity as of March
16, 2005 was as follows: $.10 Par Value Common Stock
    
    8,548,404




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Double Eagle Petroleum Co.
Form 10-KSB for the year Ended December 31, 2004  
 Table of Contents PART IItems 1. and 2.
    
    Description of Business and Properties
    
    
    2Item 3.
    
    Legal Proceedings
    
    
    16Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    16PART IIItem 5.
    
    Market for Common Equity and Related Stockholder Matters
    
    
    17Item 6.
    
    Managements Discussion and Analysis or Plan of Operations
    
    
    18Item 7.
    
    Financial Statements
    
    
    F-1Item 8.
    
    Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    26Item 8A.
    
    Controls and Procedures
    
    
    26Item 8B.
    
    Other Information
    
    
    26PART IIIItem 9.
    
    Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act
    
    
    27Item 10.
    
    Executive Compensation
    
    
    29Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    34Item 12.
    
    Certain Relationships and Related Transactions
    
    
    35Item 13.
    
    Exhibits
    
    
    35Item 14.
    
    Principal Accountant Fees and Services
    
    
    36Signatures
    
    
    
    
    38Exhibits
    
    
    
    
    
    


Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification Pursuant to Section 906Restated Audit Committee CharterCode of Business Conduct and EthicsWhistleblower Procedures
  i




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PART I 
 ITEMS 1 and 2. DESCRIPTION OF BUSINESS AND PROPERTIES Overview Double Eagle Petroleum Co., which was formed as a Wyoming Corporation on January 13, 1972, and
reincorporated in February 2001 in the State of Maryland, explores for, develops, produces and
sells crude oil and natural gas. The Company concentrates its activities in areas in which it
believes it has accumulated detailed geologic knowledge and developed significant management
experience. Current areas of exploration and development activity for the Company include the
Green River Basin in southwestern Wyoming, the Powder River Basin in northeastern Wyoming, the
Washakie Basin in south central Wyoming, the Wind River Basin in central Wyoming, and the Christmas
Meadows area in northeastern Utah. As of December 31, 2004, the Company owned interests in a total
of 524 producing wells, with natural gas constituting approximately 96 percent of its production
and oil constituting
approximately four percent (assuming six mcf of gas production equals one barrel of oil production). The Company also has undeveloped acreage in other basins and is
evaluating the possibility of additional activity in other areas. See Principal Areas Of Oil And
Gas Activity. Effective February 4, 2003, the Company changed its fiscal year end from August 31 to December 31.
Unless otherwise stated, references contained in this report to fiscal year 2002 are based on an
August 31 year end, and fiscal years thereafter are based on a December 31 year end. Forward-Looking Statements This Form 10-KSB includes forward-looking statements within the meaning of Section 27A of the
Securities Act Of 1933, as amended (the Securities Act), and Section 21E of the Securities
Exchange Act Of 1934, as amended (the Exchange Act). All statements other than statements of
historical fact, included in this Form 10-KSB are forward-looking statements. These
forward-looking statements include, without limitation, statements located under ITEMS 1 AND 2.
DESCRIPTION OF BUSINESS AND PROPERTIESBusiness Strategy, Principal Areas Of Oil And Gas
Activity, Zeolite Claims, and Reserves, ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS  Financial Conditions, Liquidity And Capital
Resources, and Notes to the Financial Statements located elsewhere herein regarding the Companys
financial position and liquidity, the amount of and its ability to make debt service payments, its
strategies, financial instruments, and other matters. In addition, the words believe, may,
could, will, when, estimate, continue, anticipate, intend, expect
and similar expressions, as they relate to Double Eagle, our business or our management, are
intended to identify forward-looking statements. Although the Company believes that the
expectations reflected in these forward-looking statements are reasonable, it can give no assurance
that these expectations will prove to be correct. Important factors that could cause actual
results to differ materially from the Companys expectations are disclosed in this Form 10-KSB,
including without limitation in the Risk Factors section below and in conjunction with the
forward-looking statements included in this Form 10-KSB. The Companys intentions and expectations described in this Form 10-KSB with respect to possible
exploration and other testing activities concerning properties in which it holds interests may be
deemed to be forward-looking statements. These statements are made based on managements current
assessment of the exploratory merits of the particular property in light of
the geological information available at the time and based on the Companys relative interest in
the property and its estimate of its share of the exploration costs. Subsequently obtained
information concerning the merits of any property as well as 2




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changes in estimated exploration costs
and ownership interests may result in revisions to managements expectations and intentions, and
thus the Company may delete one or more of these intended exploration activities. Further,
circumstances beyond the Companys control may cause such prospects to be eliminated from further
consideration as exploration prospects. Actual results could differ materially from these forward-looking statements as a result of, among
other things:  
    failure to obtain, or a decline in, oil or gas production, or a decline in
oil or gas prices,
    incorrect estimates of required capital expenditures,
    increases in the cost of drilling, completion and gas collection or other
costs of production and operations,
    an inability to meet growth projections, and
    other risk factors set forth under Risk Factors in this annual report. Business Strategy The Companys strategy is to increase its cash flow and oil and gas reserves by developing and
marketing oil and gas prospects. Upon marketing a prospect to another entity, the Company will
attempt to receive a promoted or carried interest in the initial well for the prospect. The
Company will then participate proportionately in the drilling of any development wells on the
prospect. During 2004, we expended a significant amount of time evaluating oil and gas producing
properties for acquisition. We believe that acquisitions could provide a way for the Company to
grow, and these efforts are intended to continue during 2005. The Company intends to balance its
evaluation efforts with its exploration and development plans. The Company owns interests varying from very small percentages to large percentages in its oil and
gas prospects. These interests and prospects are described below under Principal Areas Of Oil And
Gas Activity. They are owned directly by the Company, and the remaining interests in these
prospects are owned by various industry partners. During 2005, we intend to develop our prospects
using our cash balances, together with cash flow from operations, our bank line of credit, and,
possibly, sales of a portion of our interests to industry partners. If our available cash from
these sources does not satisfy our need for capital, our activities may be limited to a lower level
or we may attempt to raise additional capital. We anticipate that any limitations on our
activities would include expending smaller amounts in our principal areas of activity, attempting
to sell a larger portion of our interests in our prospects, and retaining a royalty interest or a
smaller working interest in those prospects that we believe we would be able to retain if we were
not limited by our available cash. Raising additional capital is generally dilutive to existing
stockholders and never certain of success. We have focused our efforts on exploration for and development of natural gas reserves that
constitute approximately 95% of our total existing reserves as of December 31, 2004. The demand for
natural gas as a primary source of domestic energy is increasing and is becoming the preferred fuel
for the future. Double Eagle has worked to assemble an array of exploration and development projects that range
from offset locations of existing fields to high risk wildcat ventures with large but uncertain
potential. We intend to use most of our available capital funds on projects having lower risk and
to seek to find industry partners to pay part or all of our drilling costs for the exploration of
the higher risk plays. This strategy is intended to provide the Company and its stockholders with
exposure to virtually all levels of risk profiles in the oil and gas business. 3




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Wyoming Acreage by Geologic Basin December 31, 2004Basin
    
    Gross Acres
    
    
    Net AcresWind River
    
    
    28,709
    
    
    
    3,686Powder River
    
    
    41,144
    
    
    
    5,168Washakie
    
    
    123,833
    
    
    
    50,886Green River
    
    
    35,974
    
    
    
    3,823Southwestern Wyoming
    
    
    159,807
    
    
    
    54,709
 PRINCIPAL AREAS OF OIL AND GAS ACTIVITY SUMMARY In 2004, the Mesa Unit on the Pinedale Anticline produced 34% of our production and at year end
constituted 63% of our proved reserves. Cow Creek Unit in the Eastern Washakie coal bed natural
gas play produced 54% of our production in 2004 and constituted 30.5% of our proved reserves at
year end. In 2005, we will concentrate our efforts on: (1) drilling the initial test well on our Christmas
Meadows Prospect, (2) developing the facilities and infrastructure in the Eastern Washakie coal bed
natural gas play to prepare for a major development drilling program in 2006, after the
Environmental Impact Study is completed, (3) continuing the development of the tight gas sands on
the Pinedale Anticline, and (4) drilling additional deep tests at Cow Creek. SOUTHWESTERN WYOMING We own interests in 159,807 gross acres in the natural gas prone basins of southwestern
Wyoming. Two developing areas, the Pinedale Anticline and the eastern Washakie Coal Bed natural
gas play, accounted for over 93.5% of our proved reserves as of December 31, 2004, and over 88% of
our 2004 production. Continued drilling is expected in these two areas in 2005. PINEDALE ANTICLINE The Pinedale Anticline is in southwestern Wyoming, 10 miles south of the town of Pinedale. In the
late 1960s, a subsidiary of Questar Corporation, Wexpro, drilled three wells in the Mesa Unit. The
wells encountered gas, but the tight formations would not yield gas at a commercial rate. We
entered the Pinedale Anticline in 1991, acquiring working and overriding royalty interests from
Arco. We also acquired undeveloped leasehold acreage that we sold to Ultra in 1997, retaining an
overriding royalty interest. In September 1998, we acquired additional working interests from
KCS Mountain Resources. The area remained idle until late 1997 when a new operator, Ultra Petroleum,
drilled three wells and used new fracture stimulation techniques developed 20 miles south in the
prolific Jonah Field. The production rates were substantially greater than with prior efforts.
Wexpros sister company, Questar Exploration, took over operations from Ultra on the Mesa Unit
lands and began an aggressive development project. Two of the first three wells in this project
were drilled on our leasehold in the Mesa B Participating Areain which we have an interest. The
first well drilled by Questar, the Mesa #3, reached total depth of 13,055 feet on October 4, 1999.
The Mesa #3 and the subsequent Mesa #6 well were both completed with initial 4




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production rates in
excess of 11 million cubic feet per day. In 2004, the three Participating Areas of the Mesa Unit
produced a total of 56.2 billion cubic feet of natural gas and 439,364 barrels of oil. Our net
production from the Mesa Unit in 2004 was 793 million cubic feet and 4,431 barrels of oil. In the Mesa A Participating Area, where we have an overriding royalty interest, there were 13
producing wells that produced a total of 13.5 million cubic feet of natural gas and 127 barrels of
oil in 2004 to our interest. We have an overriding royalty interest of .312% with a net acre
position of at least 1.875 net acres under a gross of 600 acres in the A Participating Area. In the Mesa B
Participating Area, where we have an 8% working interest in the
shallow producing formations and a 12.5%
working interest in the deep producing formations, there were 24 producing wells that produced 503
million cubic feet of natural gas and 3,863 barrels of oil in 2004 to our interest. We have a net
acre position of 100 net acres under a gross of 800 acres in the B Participating Area. In the Mesa C Participating Area, where we have a carried 6.4% working interest after payout, 13
wells produced 277 million cubic feet and 441 barrels of oil per day in 2004 to our interest. We
have 65.27 net acres under gross of 1,000 acres in the C Participating Area. Payout is on a
block basis and will occur whenever profits exceed costs within the participating area. Therefore,
it appears that we will move in and out of payout as additional wells are drilled. At year end, we had working interests or overriding royalty interests in 4,840 acres in and around
this developing natural gas field. An expansion of the Kern River Pipeline, which was completed in
May 2003, connects this field to a large and expanding gas market in southern California. It is
anticipated that this property will continue to produce significant revenues for us in the future. EASTERN WASHAKIE COAL BED NATURAL GAS PROJECT This play is a 40-mile long trend located in south central Wyoming, from the town of Baggs at the
south end, and to the town of Rawlins at the north end. Over 100 wells have been drilled by Double
Eagle or Anadarko to evaluate the potential of the Mesaverde coal beds in this trend. The Mesaverde
coals in this area differ from those found in the Powder River Basin in that they are thinner
zones, but have higher gas content much like the coal beds found in the Uinta Basin of Utah where
there are several very successful coal bed projects. Nevertheless, the productivity of coal beds is
dependent not only on specific natural gas content, but also on favorable permeability to natural
gas. Several wells in our Eastern Washakie play have shown extended production of over 500 mcfpd
with over 1,000 barrels of water per day. The Company has acquired interests in 60,081 acres
(29,661 net acres) and controls operations on over 250 undrilled locations on 80 acre spacing.
Results from the early exploratory drilling by these companies have been very encouraging. The
following descriptions are of development areas along the fairway for this play. COW CREEK FIELD We acquired the Cow Creek Field in the heart of the Eastern Washakie Coal Bed Natural Gas Project
from KCS Mountain Resources in April 1999. The field had one producing gas well, the Cow Creek
#1-12, which was producing, sporadically, 140,000 cubic feet of gas per day from the Dakota and
Frontier Formations at 8,000 feet. In the year 2000, we re-completed two wells in the Mesaverde
coals. One of these wells produced at an average rate of 58,000 cubic feet per day during August
2000. The other well was converted to a water injection well. We drilled four additional
locations in August 2001 and began selling gas in
November 2001. While drilling the wells, we
encountered excellent gas shows and the coals were cored to evaluate the gas contents. We drilled
four additional wells in September 2002, and we completed 5




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and connected them to the sales line in
November 2002. We drilled five additional wells in the fall of 2003, and began producing them in
2004. On March 17, 2004, nine coal bed wells produced 4.848 million cubic feet of gas and sold
4.530 million cubic feet of natural gas. On March 17, 2005, fourteen coal bed wells, including the
nine that were producing the prior year, produced 6.626 million cubic feet of natural gas and sold
6.086 million cubic feet of natural gas. The water to gas ratio is dropping in each of the wells,
although the volume of water has not diminished significantly. The five wells drilled around the
existing producing wells in the fall of 2003 have helped draw down the reservoir pressure, and we
believe they will increase the gas volumes along the crest of the structure. We look forward to
being able to drill additional wells in this pod to properly test the economic potential of these
coals. Additional drilling is currently on hold until the Environmental Impact Study is completed
which is expected in the fourth quarter of 2005. Total production at the Cow Creek Unit in 2003
was 490 million cubic feet net to us and 1,448 million cubic feet net to us in 2004. SUN DOG UNIT The Sun Dog Unit is adjacent to and east of Cow Creek Field. Anadarko operates the unit in which
Double Eagle has an interest in 1,378 acres. Anadarko initially drilled ten wells in which Double
Eagle had no financial interest. The ten wells have been producing since July 2002 and appear to
have started the desorption process. In 2005, Anadarko has drilled two additional producers on
acreage in which Double Eagle has an interest. Our interest in these two wells will translate into
a small interest in these two wells and the previous ten producers, all of which together comprise
the Sun Dog Unit. We have not received the final accounting to know our exact interest in the
twelve producing wells at the Sun Dog Unit. The success of this area, which is not as structurally
advantaged as Cow Creek, helps in evaluating our similar acreage. Additional drilling is scheduled
in the Sun Dog Unit after completion of the Environmental Impact Statement. During 2004, the ten
wells at the Sun Dog Unit produced a total of 1,084 million cubic feet of gas, or an average of 297
mcf per well per day. In December 2004, the wells averaged 453 mcf per day. DOTY MOUNTAIN POD The Doty Mountain Pod is a coal bed methane pilot project located six miles to the northeast of the
Cow Creek Field. Anadarko operates the unit in which Double Eagle has an interest in 3,280 acres.
Anadarko drilled and completed 24 wells in this pod and was completing the infrastructure at the
end of 2004. Gas sales began in March 2005. The Mesaverde coals at Doty Mountain were thicker than
at Cow Creek and had higher gas contents. Permeability was measured at over 150 millidarcies in
the main coal. We are optimistic about this project, and we expect to have 25.9% working interest
in the twenty-four wells after the Participating Area is established. OTHER UNITS Double Eagle also has small interests in the Brown Cow, Blue Sky, Jolly Roger and Red Rim Units
that are all operated by Anadarko. As of December 31, 2004, no significant gas sales had occurred
from these units. ROCKY MOUNTAIN OVERTHRUST The Rocky Mountain Overthrust runs from Canada to Mexico and consists of many traps created as the
Pacific Continental plate was thrust over the Continental Plate. Traps creating oil and gas fields
have been located primarily in Canada and Wyoming, and several large fields have been discovered by
other companies since the 1970s. The region is still relatively unexplored because, despite large
reserve potential, exploration in this area is very expensive and risky, and seismic data has not
been very reliable. 6




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CHRISTMAS MEADOWS PROSPECT Christmas Meadows is a structural dome in the southwest corner of the prolific Green River Basin,
in Summit County, Utah. The dome is overlain by the Wyoming Overthrust Belt and the North Flank
Thrust of the Uinta Mountains. After nearly ten years of addressing various regulatory hurdles in
this environmentally sensitive area, Double Eagle and its partner, John Lockridge, intend to drill
this prospect in 2005. The Christmas Meadows Prospect has a long history. In the 1970s Gulf noted the structure on a
regional seismic grid. Further seismic surveys by Gulf, American Quasar, Amoco, Chevron, Sohio,
and others support the existence of the structural dome. Amoco staked a location to test the
structure to 19,000 feet in 1982, but had still not been issued a permit in 1986 when it abandoned
its efforts. Double Eagle acquired its first leasehold in the prospect in 1984. Chevron formed a
federal unit in 1989 and staked a well but abandoned its efforts in 1994 after not getting a
permit or offset acreage offered for sale. Chevron turned the project over to Amerac, who
designated Double Eagle as its agent. Double Eagle has purchased the Chevron leasehold and has
farmouts from Amerac (now Unit Corp.) and Judy Yates, and finally acquired the open offset acreage
at a BLM auction in November 2003. Combined with new leases purchased at lease sales, Double Eagle
and Lockridge control 41,237 acres, of which 23,577 acres are included in the Table Top Federal
Exploratory Unit. Prospective formations range from depths of 5,000 to 23,000 feet, and range in age from
Mississippian to Cretaceous. Source rocks, reservoir rocks, structural timing, seal, as well as
structure all remain to be determined through the drill bit, but we are encouraged by our analysis
of analogous fields in the Wyoming Overthrust Belt and the Green River Basin. The initial well is
projected to a depth of 16,000 feet, and we believe it has a high risk, high reward potential.
There is also engineering risk to consider, as there is a time deadline once operations commence
and the overlying structure is complex and potentially difficult to drill. The Company has expended considerable resources in preparing to drill this prospect, projected to
spud in summer 2005. The update of the EIS was completed in January 2005, clearing the final
regulatory hurdle to commence operations. Forest Service has informed us that operations may
commence as soon after July 1, 2005 as moisture levels in the soil permit. Along with our partners, we have acquired licenses to six 2D seismic lines, or 60 miles. Five of the
lines, or 53 miles, were reprocessed with state-of-the-art pre-stack depth migration. Imaging and
understanding of the structure has improved as a result. Double Eagle now owns 61% interest in the prospect and is the operator. It is the companys
intention to retain 25% working interest, and Double Eagle is actively seeking partners for the
remaining 36%. SAGE CREEK PROSPECT We hold a 60% working interest in 1,892 acres of leases in the Sage Creek Prospect in the
southwestern Montana portion of the overthrust belt. We believe that this area appears to have
potential similar to other areas in the Wyoming portion of the overthrust belt. Amoco, Exxon and
Marathon did seismic work and drilled wells in this area during the 1980s, but found no commercial
deposits. Our main emphasis is directed at testing a well location that was permitted in 1986 by
Amoco, but was never drilled. This area is close to a Wilderness Study Area, and the Bureau of Land
Management is conducting an environmental impact statement and updating its Resource Management
Plan prior to offering oil and gas leases. This process is expected to be completed in August 2005.
Our current leasehold is suspended until then. 7




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WIND RIVER BASIN Located in central Wyoming, the Wind River Basin is home to Wyomings first oil production,
which began in 1884. Since that time, numerous fields have been discovered in the Basin, including
two very large natural gas accumulations, the Madden Anticline and the Cave Gulch Fields. We have
interests in 28,709 gross acres and 3,686 net acres of leases in this Basin. MADDEN ANTICLINE The Madden Anticline is located in central Wyoming, 65 miles west of the town of Casper. The
anticline is 20 miles long and six miles wide laying in the deepest part of the Wind River Basin.
Two large natural gas fields, Madden and Long Butte, are being drilled and developed on the
anticline. The Madden and Long Butte Units were merged in 2004, but the Long Butte Unit Mesaverde
and Cody Participating Areas have remained separate and are operated by Moncrief. The Madden Unit
is operated by Burlington. We own a significant working interest in 1,571 acres on the anticline
and interests that are restricted in depth and size in an additional 12,000 acres. Madden Field and Long Butte Field In 2004, the Madden Field was combined with the Long Butte Field, and produced over 152 billion
cubic feet of natural gas, making the fields cumulative production over one trillion cubic feet
from six formations at depths of 3,000 to 25,000 feet. In 2004, our net production at Madden was
12,815 mcf. The units primary operator, Burlington Resources, plans to drill a number of
additional wells to produce from the lower Fort Union and the deep Madison. We operate and produce
from one lower Fort Union well and one upper Fort Union well. The Company will produce these two
wells to evaluate the potential for offsets. Since the Long Butte Field was combined with Madden Field, we will have the opportunity to
participate in the deep Paleozoic producing wells and the associated gas plant. We are currently
evaluating the economics of paying the costs of joining this large and expensive producing area. We
had net production from the Long Butte Participating Areas of 22,313 mcf in 2004. SOUTH SAND DRAW The South Sand Draw Field is located in the southern portion of the Wind River Basin approximately
36 miles southeast of Riverton, Wyoming. We have been acquiring leases near the field for five
years and currently have 1,054 acres under lease, in which our working interest is 75%. In October
1999, we and our partner acquired the final lease and drilled a 6,500 foot test well in Spring
2001. The South Sand Draw Unit #11-36 was completed as a Muddy Sandstone producer and in October
2001 began selling gas. Additional drillable prospects exist on the east side of our leasehold and
may be drilled in 2005. Our net production at South Sand Draw was 31,110 mcf in 2004. 8




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MINING ZEOLITE CLAIMS Since 1972, we have owned mining claims covering 320 acres of land in Lander County, Nevada and 640
acres of land in Owyhee County, Idaho. Due to natural outcrops, other sampling and analysis, the
claims are believed to overlie significant deposits of clinoptilolite, which is one of 34 naturally
occurring zeolites. Although the existence of these deposits has been indicated for some time, no
commercial mining operations have been conducted on the claims because significant markets for
zeolites have not yet been developed. Zeolites currently are utilized commercially for small
consumption items such as cat litter, deodorant and aquarium filter material, but the amount of
consumption from these markets has not justified large scale production to date. In 2001, we had
the opportunity to submit bids to supply zeolite for several wastewater projects. While we were not
successful in securing these particular bids, we will continue to respond to opportunities of this
nature. We also joined with another company to formulate a Zeolite/Bentonite mixture designed as an
improved cat litter. We intend to continue our efforts to find an industrial use for our zeolites. PRODUCTION The following table sets forth oil and gas production from our net interests in producing
properties for the year ended December 31, 2004 and December 31, 2003. Year ended December 31,2004
    
    
    2003QuantitiesOil (Bbls)
    
    
    16,886
    
    
    
    17,344Gas (Mcf)
    
    
    2,559,557
    

    
    
    1,320,850Average Sales PriceOil ($/Bbl)
    
    
    37.59
    
    
    
    28.37Gas ($/Mcf)
    
    
    4.85
    
    
    
    4.23Average Production Cost ($/Mcfe)
    
    
    0.81
    
    
    
    0.72Average Production Tax ($/Mcfe)
    
    
    0.62
    
    
    
    0.51
 Our oil and gas production is sold on the spot market or sold at the monthly index except for six
firm commitment contracts. These contracts commit us to sell 2,188,000 mmbtus of gas related to
these contracts over a 27 month period beginning January 1, 2005. The quantity, term and price per
mmbtu are as follows: 9




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PriceQuantity Per Day
    
    Term
    
    
    ($/Mmbtu)1,000 Mmbtu
    
    
    1/05 - 4/05
    
    
    
    5.311,000 Mmbtu
    
    
    1/05 - 10/06
    
    
    
    5.501,000 Mmbtu
    
    
    1/05 - 10/05
    
    
    
    5.80500 Mmbtu
    
    
    2/05 - 1/06
    
    
    
    5.30500 Mmbtu
    
    
    2/05 - 1/06
    
    
    
    5.301,000 Mmbtu
    
    
    4/05 - 3/07
    
    
    
    6.00
 During the year ended December 31, 2004, purchases by Summit Energy, LLC represented more than 76
percent of our total revenues. We believe the Company would be able to locate alternate customers
in the event of the loss of this customer. Reserve Replacement Costs For the one year period
ending December 31, 2004, the Company increased its reserves by 15.2 bcfe.
During the same period, Double Eagle expended $8.7 million in finding and development costs,
defined as development and exploration costs incurred by the Company during 2004. This activity
resulted in a one year finding and development cost in 2004 of $.57 per mcfe. Proved undeveloped
reserves represented 75% of the increase in total reserves. The increase in proved undeveloped
reserves is largely attributed to two areas, Double Eagles operated field at Cow Creek, and the
Mesa C, a non operated field, where Double Eagles carried working interest paid out in April 2004.
After an Environmental Impact Study is completed and filed which is expected to occur by the end of
2005, Double Eagle intends to continue its development drilling program at Cow Creek in 2006.
Drilling on the Mesa C Unit is expected to continue over the next five years during which time the
drilling of 20 new wells is planned. For the most recent three
year and four month period including the 12 months ended December 31, 2004,
December 31, 2003, and August 31, 2002, we added 30.97 bcfe of reserves and expended $23.81
million. During the three year and four month period, the Company achieved a finding and
development cost of $.77 per mcfe. Productive Wells The following table categorizes certain information concerning the productive wells in which
the Company owned
an interest as of December 31, 2004. We operate 23 wells in the State of Wyoming.
We do not operate wells in any other State . 10




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##### Table of Contents



Oil
    
    
    GasGross
    
    
    Net
    
    
    Gross
    
    
    NetColorado
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    .0590Mississippi
    
    
    2
    
    
    
    .0009
    
    
    
    
    
    
    
    Montana
    
    
    2
    
    
    
    .0960
    
    
    
    
    
    
    
    North Dakota
    
    
    23
    
    
    
    .2965
    
    
    
    
    
    
    
    Oklahoma
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Utah
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    .0200Wyoming
    
    
    86
    
    
    
    5.994
    
    
    
    406
    
    
    
    21.2781Total
    
    
    113
    
    
    
    6.3874
    
    
    
    411
    
    
    
    21.3571
 Wells Drilled We drilled or participated in the drilling of wells as set forth in the following table for
the periods indicated. In certain of the wells in which we participate, we have an overriding
royalty interest and no working interest . Year Ended December 31,2004
    
    
    2003Gross
    
    
    Net
    
    
    Gross
    
    
    NetExploratoryOil
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Gas
    
    
    38
    
    
    
    6.61
    
    
    
    1
    
    
    
    .02Dry Holes
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    .86Salt Water Disposal
    
    
    2
    
    
    
    .52
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subtotal
    
    
    41
    
    
    
    7.13
    
    
    
    2
    
    
    
    .88DevelopmentOil
    
    
    1
    
    
    
    .03
    
    
    
    2
    
    
    
    .04Gas
    
    
    64
    
    
    
    2.78
    
    
    
    34
    
    
    
    5.37Dry Holes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Salt Water Disposal
    
    
    4
    
    
    
    1.14
    
    
    
    
    
    
    
    Other
    
    
    1
    
    
    
    .05
    
    
    
    
    
    
    
    Subtotal
    
    
    70
    
    
    
    4.00
    
    
    
    36
    
    
    
    5.41Total
    
    
    111
    
    
    
    11.13
    
    
    
    38
    
    
    
    6.29
 All our drilling activities are conducted on a contract basis with independent drilling
contractors. 11




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##### Table of Contents



RESERVES The reserves at December 31, 2004 and December 31, 2003 presented below were reviewed by
Netherland, Sewell and Associates. All reserves are located within the continental United States.
The reserve estimates are developed using geological and engineering data and interests and burdens
information developed by the Company. Reserve estimates are inherently imprecise and are
continually subject to revisions based on production history, results of additional exploration and
development, prices of oil and gas, and other factors. The outside reserve engineers reviewed over
99% of our reserves. The notes following the table should be read in connection with the reserve
estimates. Oil & Gas Reserves (1)
    
    December 31,2004
    
    
    2003Proved Developed Oil Reserves (Bbls)
    
    
    181,397
    
    
    
    179,228Proved Undeveloped Oil Reserves (Bbls)
    
    
    96,658
    
    
    
    29,729Total Proved Oil Reserves (Bbls)
    
    
    278,055
    
    
    
    208,957Proved Developed Gas Reserves (Mcf)
    
    
    17,161,577
    
    
    
    16,055,045Proved Undeveloped Gas Reserves (Mcf)
    
    
    17,773,169
    
    
    
    6,763,935Total Proved Gas Reserves (Mcf)
    
    
    34,934,746
    
    
    
    22,818,980Total Proved Gas Equivalents (Mcfe) (3)
    
    
    36,603,076
    
    
    
    24,072,722Present Value of Estimated Future Net Revenues
Before Income Taxes, Discounted At 10% (2) (4)
    
    $
    68,604,700
    
    
    $
    56,325,300
   (1)
    
    The Companys annual reserve reports are prepared as of the last day of the Companys
fiscal year.(2)
    
    The present value of estimated future net revenues as of each period shown was calculated
using oil and gas prices being received by each respective property as of that date. The
average prices utilized for December 31, 2003 and 2004, respectively, were $5.75 per mcf and
$30.20 per barrel of oil (2003), and $5.51 per mcf and $40.25 per barrel of oil (2004).(3)
    
    Oil is converted to mcf of gas equivalent at one barrel equals 6,000 cubic feet.(4)
    
    The Present Value of Estimated Future Net Revenues Before Income Taxes Discounted At 10%,
is referred to as the Standardized Measure. Reference should be made to the supplemental oil and gas information included in this Form 10-KSB
for additional information pertaining to the Companys proved oil and gas reserves as of the end of
each of the last three fiscal years. 12




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##### Table of Contents



ACREAGE The following tables set forth the gross and net acres of developed and undeveloped oil and
gas leases in which the Company had working interests and royalty interests as of December 31,
2004. The category of Undeveloped Acreage in the tables includes leasehold interests that may
have been classified as containing proved undeveloped reserves. Working Interests Developed
    
    
    Undeveloped
    
    
    TotalAcres (1)
    
    
    Acres (2)
    
    
    AcresState
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetColorado
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    80
    
    
    
    80
    
    
    
    80Montana
    
    
    29
    
    
    
    1
    
    
    
    2,277
    
    
    
    1,174
    
    
    
    2,306
    
    
    
    1,175North Dakota
    
    
    2,240
    
    
    
    49
    
    
    
    2,560
    
    
    
    64
    
    
    
    4,800
    
    
    
    113Utah
    
    
    637
    
    
    
    16
    
    
    
    45,573
    
    
    
    25,923
    
    
    
    46,210
    
    
    
    25,939Wyoming
    
    
    73,554
    
    
    
    4,339
    
    
    
    121,680
    
    
    
    57,711
    
    
    
    195,234
    
    
    
    62,050Other
    
    
    
    
    
    
    
    
    
    
    49,838
    
    
    
    49,838
    
    
    
    49,838
    
    
    
    49,838Total
    
    
    76,460
    
    
    
    4,405
    
    
    
    222,008
    
    
    
    134,790
    
    
    
    298,468
    
    
    
    139,195
 Royalty Interests Developed
    
    
    Undeveloped
    
    
    TotalAcres (1)
    
    
    Acres (2)
    
    
    AcresState
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetColorado
    
    
    155
    
    
    
    5
    
    
    
    1,920
    
    
    
    320
    
    
    
    2,075
    
    
    
    325Mississippi
    
    
    160
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    160
    
    
    
    1Montana
    
    
    611
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    611
    
    
    
    15North Dakota
    
    
    1,523
    
    
    
    40
    
    
    
    5,313
    
    
    
    243
    
    
    
    6,836
    
    
    
    283Oklahoma
    
    
    640
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    640
    
    
    
    2Utah
    
    
    
    
    
    
    
    
    
    
    51,311
    
    
    
    51
    
    
    
    51,311
    
    
    
    51Wyoming
    
    
    9,823
    
    
    
    162
    
    
    
    29,189
    
    
    
    1,528
    
    
    
    39,012
    
    
    
    1,690Total
    
    
    12,912
    
    
    
    225
    
    
    
    87,733
    
    
    
    2,142
    
    
    
    100,645
    
    
    
    2,367
   (1)
    
    Developed acreage is acreage assigned to producing wells for the spacing unit of the
producing formation. Developed acreage in certain of the Companys properties that include
multiple formations with different well spacing requirements may be considered undeveloped for
certain formations, but have only been included as developed acreage in the presentation
above.(2)
    
    Undeveloped acreage is lease acreage on which wells have not been drilled or completed to a
point that would permit the production of commercial quantities of oil and gas regardless of
whether such acreage contains proved reserves. Substantially all of the leases summarized in the preceding table will expire at the end of their
respective primary terms unless the existing leases are renewed or production has been obtained
from the acreage subject to the lease prior to that date, in which event the lease will remain in
effect
until the cessation of production. The following table sets forth the gross and net acres subject
to leases summarized in the preceding table that will expire during the periods indicated: 13




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##### Table of Contents



Year Ending
    
    Expiring AcreageGross
    
    
    NetDecember 31, 2005
    
    
    17,511
    
    
    
    11,830December 31, 2006
    
    
    11,414
    
    
    
    4,657December 31, 2007 and later
    
    
    370,188
    
    
    
    125,075
 Risk Factors In evaluating the Company, careful consideration should be given to the following risk factors, in
addition to the other information included or incorporated by reference in this annual report. Each
of these risk factors could adversely affect our business, operating results and financial
condition, as well as adversely affect the value of an investment in our common stock. In addition,
the Forward-Looking Statements located in this Form 10-KSB, and the forward-looking statements
included or incorporated by reference herein describe additional uncertainties associated with our
business. We have had operating losses in the past We have reported net losses for the fiscal years ended August 31, 2002 and for other previous
years, as well as for the 4-month period ended December 31, 2002. There is no assurance that our
current or future operations will be profitable. We depend on a key employee We are highly dependent on the services of Stephen H. Hollis, our President and Chief Executive
Officer. The loss of Mr. Hollis could have a material adverse effect on us. We do carry key man
life insurance on Mr. Hollis in the amount of $1,000,000. We cannot predict the future price of oil and natural gas Our revenues, profitability and liquidity are substantially dependent upon prevailing prices for
natural gas and oil, which can be extremely volatile and in recent years have been depressed by
excess total domestic and imported supplies. Prices also are affected by actions of state and local
agencies, the United States and foreign governments, and international cartels. In addition, sales
of oil and natural gas are seasonal in nature, leading to substantial differences in cash flow at
various times throughout the year. These external factors and the volatile nature of the energy
markets make it difficult to estimate future prices of oil and natural gas. Any substantial or
extended decline in the price of oil and/or natural gas would have a material adverse effect on our
financial condition and results of operations, including reduced cash flow and borrowing capacity.
All of these factors are beyond our control. We could be adversely impacted by changes in the oil and gas market The marketability of our oil and gas production depends in part upon the availability,
proximity and capacity of gas gathering systems, pipelines and processing facilities. Federal and
state regulation of oil and gas production and transportation, general economic conditions, changes
in supply and changes in demand 14




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##### Table of Contents



all could adversely affect our ability to produce and market its oil and natural gas. If market
factors were to change dramatically, the financial impact could be substantial because we would
incur expenses without receiving revenues from the sale of production. The availability of markets
is beyond our control. We may be unable to find additional reserves Our revenues depend on whether we acquire or find additional reserves. Unless we acquire
properties containing proved reserves or conduct successful exploration and development activities,
or both, our proved reserves will decline as reserves are produced. Our planned exploration and
development projects may not result in significant additional reserves. We may be unable to drill
productive wells at low reserve replacement costs. Our stock price may be adversely impacted by our choice of accounting method We use the successful efforts method for capitalizing costs of completed oil and gas wells.
Under the successful efforts method, only the costs attributable to successful exploratory wells
and the costs of development wells within a producing field are reflected in property and
equipment. Producing and non-producing properties are evaluated periodically and, if conditions
warrant, an impairment allowance is provided. The impairment allowance is a one-time charge to
earnings which does not impact cash flow from operating activities, but may result in a negative
impression in the investment community and lower stock prices. Oil and gas operations are inherently risky The nature of the oil and gas business involves a variety of risks, including the risks of
operating hazards such as fires, explosions, cratering, blow-outs, and encountering formations with
abnormal pressures. The occurrence of any of these risks could result in losses. We maintain
insurance against some, but not all, of these risks. Management believes that the level of
insurance against these risks is reasonable and is in accordance with customary industry practices.
The occurrence of a significant event, however, that is not fully insured could have a material
adverse effect on our financial position and results of operations. New government regulation and environmental risks could increase our costs The production and sale of oil and gas are subject to a variety of federal, state and local
government regulations. These include:  
    the prevention of waste
    the discharge of materials into the environment
    the conservation of oil and natural gas, pollution, permits for drilling
operations, drilling bonds, reports concerning operations
    the spacing of wells
    the unitization and pooling of properties Many jurisdictions have at various times imposed limitations on the production of oil and gas by
restricting the rate of flow for oil and gas wells below their actual capacity to produce. Because
current regulations covering our operations are subject to change at any time, and despite our
belief that we are in substantial compliance with applicable environmental and other government
laws and regulations, we may incur significant costs for compliance in the future. 15




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##### Table of Contents



Our prices may be impacted adversely by new taxes The federal, state and local governments in which we operate impose taxes on the oil and gas
products we sell. In the past, there has been a significant amount of discussion by legislators
and presidential administrations concerning a variety of energy tax proposals. In addition, many
states have raised state taxes on energy sources and additional increases may occur. We cannot
predict whether any of these measures would have an adverse impact on oil and natural gas prices. Our reserves and future net revenues may differ significantly from our estimates This Form 10-KSB contains estimates of our reserves and future net revenues. We prepared these
estimates and they were then reviewed by an independent petroleum engineer. The estimates of
reserves and future net revenues are not exact and are based on many variable and uncertain
factors; therefore, the estimates may vary substantially from the actual amounts depending, in
part, on the assumptions made and may be subject to adjustment either up or down in the future.
The actual amounts of production, revenues, taxes, development expenditures, operating expenses,
and quantities of recoverable oil and gas reserves to be encountered may vary substantially from
the estimated amounts. In addition, estimates of reserves are extremely sensitive to the market
prices for oil and gas. There is limited liquidity in our shares There is a limited market for our shares and an investor cannot expect to liquidate his investment
regardless of the necessity of doing so. The prices of our shares are highly volatile. This could
have an adverse effect on developing and sustaining the market for our securities. In addition,
there is no assurance that an investor will be in a position to borrow funds using our shares as
collateral. 
 ITEM 3. LEGAL PROCEEDINGS We are not a party to any pending legal proceeding (nor is our property subject of a pending legal
proceeding) other than routine litigation incidental to our business that may arise from time to
time. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 16




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##### Table of Contents



PART II 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information. Our Common Stock is traded in the over-the-counter market and listed
on the Nasdaq SmallCap Stock Market under the symbol DBLE. The range of high and low sales prices for our Common Stock for each quarterly period from January
1, 2002 through December 31, 2004, as reported by Nasdaq, is as follows: Common Stock (DBLE)($ / Share)Quarter Ended
    
    High
    
    
    LowMarch 31, 2002
    
    
    4.61
    
    
    
    3.44June 30, 2002
    
    
    5.10
    
    
    
    4.05September 30, 2002
    
    
    4.05
    
    
    
    2.78December 31, 2002
    
    
    6.11
    
    
    
    3.60March 31, 2003
    
    
    7.65
    
    
    
    5.54June 30, 2003
    
    
    7.95
    
    
    
    6.04September 30, 2003
    
    
    12.20
    
    
    
    7.40December 31, 2003
    
    
    16.46
    
    
    
    10.11March 31, 2004
    
    
    16.60
    
    
    
    12.26June 30, 2004
    
    
    15.45
    
    
    
    12.20September 30, 2004
    
    
    18.36
    
    
    
    13.60December 31, 2004
    
    
    20.43
    
    
    
    14.48
 On March 16, 2005, the closing sales price for the Common Stock as reported by Nasdaq was $21.78
per share. Holders On March 16, 2005, the number of holders of record of common stock was 1,536. Dividends We have not paid any cash dividends since our inception. We anticipate that
all earnings will be retained for the development of our business and that no cash dividends will
be paid on our Common Stock in the foreseeable future. Equity Compensation Plan Information The following table provides information as of December 31, 2004 with respect to shares of common
stock that may be issued under Double Eagles existing equity compensation plans. We have four
equity compensation plans  the 1996 Stock Option Plan, the 2000 Stock Option Plan, the 2002 Stock
Option Plan and the 2003 Stock Option and Compensation Plan. 17




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##### Table of Contents



(a)
    
    
    (b)
    
    
    (c)Number of
    
    
    
    
    
    
    Number of securitiessecurities to be
    
    
    Weighted-
    
    
    remaining availableissued upon
    
    
    average
    
    
    for future issuanceexercise of
    
    
    exercise price
    
    
    under equityoutstanding
    
    
    of outstanding
    
    
    compensation plansoptions,
    
    
    options,
    
    
    (excluding securitieswarrants and
    
    
    warrants and
    
    
    reflected in columnPlan category
    
    rights
    
    
    rights
    
    
    (a)Equity Compensation
plans approved by
security holders
    
    
    275,843
    
    
    
    $14.32
    
    
    
    395,371
    (1)Equity Compensation
plans not approved
by security holders
    
    
    5,000
    (2)
    
    
    6.15
    
    
    
    Total
    
    
    280,843
    
    
    
    10.97
    
    
    
    395,371
 (1) Represents no shares available for issuance under the 1996 Stock Option Plan, no shares for
issuance under the 2000 Stock Option Plan, 125,371 shares available for issuance under the 2002
Stock Option Plan and 270,000 shares available for issuance under the 2003 Stock Option and
Compensation Plan. (2) Certain options were granted to directors and officers outside of our plans which were not
approved by shareholders. These options vest over a three year period from the grant date and
expire three to five years from the grant date. Recent Sales of Unregistered Securities None 
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS Forward-Looking Statements This Form 10-KSB includes forward-looking statements within the meaning of Section 27A of the
Securities Act Of 1933, as amended (the Securities Act), and Section 21E of the Securities
Exchange Act Of 1934, as amended (the Exchange Act). All statements other than statements of
historical fact, included in this Form 10-KSB are forward-looking statements. These
forward-looking statements include, without limitation, statements located under ITEMS 1 AND 2.
DESCRIPTION OF BUSINESS AND PROPERTIES  Business Strategy,   Principal Areas Of Oil And Gas
Activity,   Zeolite Claims, and   Reserves, ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  Financial Conditions, Liquidity And Capital
Resources, and Notes to the Financial Statements located elsewhere herein regarding the Companys
financial position and liquidity, the amount of and its ability to make debt service payments, its
strategies, financial instruments, and other matters. In addition, the words believe, may,
could, will, 18




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##### Table of Contents



when, estimate, continue, anticipate, intend, expect and similar
expressions, as they relate to Double Eagle, our business or our management, are intended to
identify forward-looking statements. Although the Company believes that the expectations reflected
in these forward-looking statements are reasonable, it can give no assurance that these
expectations will prove to be correct. Important factors that could cause actual results to differ
materially from the Companys expectations are disclosed in this Form 10-KSB, including without
limitation in the   Risk Factors section below and in conjunction with the forward-looking
statements included in this Form 10-KSB. The Companys intentions and expectations described in this Form 10-KSB with respect to possible
exploration and other testing activities concerning properties in which it holds interests may be
deemed to be forward-looking statements. These statements are made based on managements current
assessment of the exploratory merits of the particular property in light of the geological
information available at the time and based on the Companys relative interest in the property and
its estimate of its share of the exploration costs. Subsequently obtained information concerning
the merits of any property as well as changes in estimated exploration costs and ownership
interests may result in revisions to managements expectations and intentions, and thus the Company
may delete one or more of these intended exploration activities. Further, circumstances beyond the
Companys control may cause such prospects to be eliminated from further consideration as
exploration prospects. Actual results could differ materially from these forward-looking statements as a result of, among
other things:  
    failure to obtain, or a decline in, oil or gas production, or a decline in oil or gas prices,
    incorrect estimates of required capital expenditures,
    increases in the cost of drilling, completion and gas collection or other
costs of production and operations,
    an inability to meet growth projections, and
    other risk factors set forth under   Risk Factors in this annual report. OVERVIEW Double Eagle Petroleum Co. (Double Eagle or the Company) is a rapidly growing independent
energy company engaged in the exploration, development, and production of natural gas and crude oil
in the Rocky Mountain Basins of the western United States. The Companys principal properties are
located in Southwestern Wyoming. The Company aggressively pursues development primarily in the
conventional deep gas reserves and production from the Pinedale Anticline and the shallow coal bed
methane reserves and production in the Eastern Washakie Basin. The Company seeks to increase its reserves, production, revenues, and cash flow by focusing on: (i)
new coal bed methane development and enhancement of our field facilities in the Eastern Washakie
Basin, (ii) continued participation in the development of the Mesa Field on the Pinedale Anticline,
(iii) selective pursuit of high potential exploration projects, and (iv) selected acquisition
opportunities in areas where we have accumulated detailed geological knowledge and developed
significant management expertise. During 2004, the Company achieved improved results in several fundamental and strategic areas:  
    Production increased 87% in 2004, from 1.4 bcfe in 2003 to 2.7 bcfe during 2004.
The coal bed methane production at Cow Creek field accounted for 78% of the increase
where the Companys average daily production increased 196%, from 1,340 mcf per day
in 2003 to 3,968 mcf per day in 2004. 19




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##### Table of Contents




    Oil and gas sales increased 115% in 2004, from $6.1 million in 2003, to $13.1
million in 2004. Production increases accounted for 75% of the increase and
increased prices
accounted for the remaining 25% increase.
    Net income after taxes increased 315% from $0.97 million for 2003, to $4.03
million in 2004. Net cash provided by operating activities increased 130%, from
$3.24 million in 2003 to $7.43 million in 2004.
    After accounting for 2004 production of 2.7 bcfe, the Companys proved reserves
increased 63% as year end reserves increase from 24.1bcfe at December 31, 2003 to
36.6 bcfe at December 31, 2004. The Company replaced over 575% of its production in
2004 at a finding and development cost of $0.57 per Mcfe without acquiring existing
reserves from third parties.
    The Company incurred $8.4 million in development costs during the year. Major
project spending included $3.2 million at Cow Creek to complete
five wells drilled
in 2003, and expand both power generation and compression facilities. The
Company also participated in new development drilling in the Mesa Field of the
Pinedale for $2.3 million and additional drilling in the Eastern Washakie for
$2.6 million. FACTORS AFFECTING FINANCIAL CONDITION AND LIQUIDITY Liquidity and Capital Resources During 2004, we improved our liquidity by increasing our working capital by 153%, from
$281,000 at December 31, 2003 to $710,000 at December 31, 2004. Our working capital decreased in
the fourth quarter of 2004 primarily due to significant development activity during the period. As
a result, $3.05 million of capital additions were financed through accounts payable and accrued
liabilities at the end of the year. Consequently, our current liabilities increased 46% over our
current liabilities at December 31, 2003. We anticipate that current cash reserves and first
quarter 2005 cash flow will be adequate to satisfy the Companys current obligations at year end.
The Company has no long term debt at December 31, 2004. We expect our current cash reserves,
future operating cash flow, and if necessary, availability from our line of credit will provide
adequate resources to develop our major natural gas projects in the Eastern Washakie Basin and the
Pinedale Anticline of Wyoming. Net cash flow provided by operating activities for 2004 was $7,435,000, representing a 130%
increase over the $3,239,000 net cash flow provided by operating activities for the same period
last year. Revenues increased 116% while operating expenses excluding non cash expenses of
depreciation, depletion, amortization, and impairment increased only 75%. During 2004, the
Company incurred $8.40 million on development projects, which included $3.05 million in current
liabilities at December 31, 2004. The Company also funded $2.56 million of property additions from
the fourth quarter of 2003 which were included in accounts payable at December 31, 2003. The 2004
capital additions were funded through cash flow from operations, existing cash reserves and an
increase in current liabilities at year end. 20




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##### Table of Contents



The Company incurred $3.17 million to complete wells, stimulate production, and expand our power
generation and field compression facilities at Cow Creek during 2004. We also participated in the
continued drilling of new development wells operated by Questar/Wexpro in the Pinedale Anticline
both in the Mesa B Unit and the Mesa C Unit where Double Eagle has a carried working interest.
Capital expenditures in the Mesa Units aggregated $2.26 million. Additionally, we expended $2.60
million through participation in 24 new coal bed methane wells drilled by Anadarko at Doty
Mountain, which is six miles northeast of our current production at Cow Creek. The additional
facilities and well servicing at Cow Creek increased production in the first quarter of 2005. On
March 17, 2005, the Cow Creek Field produced 6.6 Mcf of natural gas and sold 6.1 Mcf natural gas.
New development drilling in the Mesa Field of the Pinedale Anticline during the second half of 2004
increased our net production in that field by 50% in the fourth quarter of 2004 to over 2.2 Mcfe
per day net to the Company. Production at Doty Mountain is currently not commercial during the
dewatering phase. Capital Requirements As in 2004, the Company plans to manage its capital budget with the objective of funding
capital expenditures with internal cash flow. The capital budget for 2005 is $8.9 million, which we
are anticipating will increase production. The projected spending will continue to focus on
additional development drilling in the Mesa Units on the Pinedale Anticline, further development
drilling in the Eastern Washakie Basin, and several exploration projects, including the Christmas
Meadows prospect in northeastern Utah. In the Mesa B Participating Area of the Mesa Field, the
Company participated in the drilling of 6 new development wells during the third quarter of 2004.
The Companys working interest in each of these wells is approximately 9%. The Company intends to
spend $1.5 to $2.0 million on new development drilling at Mesa in 2005. The Company also intends to
participate in new drilling activity in coal bed methane projects operated by Anadarko in Eastern
Washakie. Additionally, the Company has committed to spend approximately $1.2 million on new power
generation equipment at Cow Creek and approximately $700,000 to drill an exploratory well to test
the Cow Creek and Deep Creek sands. If no commercial gas is found, the well will be used as an
injection well. The primary exploratory project scheduled during 2005 is the drilling of the
Christmas Meadows prospect in late summer. The Company is currently reviewing
its strategic alternatives with respect to the operation and participation in the project. Line of Credit The Company maintains a line of credit with its banking affiliate secured by its oil and gas
properties. Currently the Company has $9 million of availability on the line which may be adjusted
annually for changes in reserves and production pricing. Interest on future borrowings against the
line would be assessed at the Banks prime rate. The line has been inactive since the last quarter
of 2003. RESULTS OF OPERATIONS Year Ended December 31, 2004 Compared with the Year Ended December 31, 2003 Oil and gas sales volume and price comparisons for the indicated periods are set forth below. 21




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##### Table of Contents



Year Ended
    
    
    Year Ended
    
    
    Percent
    
    
    PercentDecember 31, 2004
    
    
    December 31, 2003
    
    
    Change
    
    
    ChangeProduct
    
    Volume
    
    
    Price
    
    
    Volume
    
    
    Price
    
    
    Volume
    
    
    PriceGas
    
    
    2,559,557
    
    
    $
    4.85
    
    
    
    1,320,850
    
    
    $
    4.23
    
    
    
    +94
    %
    
    
    +15
    %Oil (bbls)
    
    
    16,846
    
    
    $
    37.59
    
    
    
    17,344
    
    
    $
    28.37
    
    
    
    -3
    %
    
    
    +33
    %Mcfe
    
    
    2,660,871
    
    
    $
    4.90
    
    
    
    1,424,914
    
    
    $
    4.26
    
    
    
    +87
    %
    
    
    +18
    %
 Oil and gas sales increased 115% in 2004, compared with 2003, to $13,058,000 from $6,081,000.
The increase is due primarily to a 87% increase in gas production, most of which occurred at Cow
Creek, our coal bed methane development project in the Eastern Washakie Basin in South Central
Wyoming. The Companys total average daily production increased to 7,290 mcfe in 2004 compared
with average daily production of 3,904 mcfe during 2003. Gas prices continued to escalate during
the year and averaged $5.10 per mcf during the fourth quarter of 2004. The increased revenues
associated with higher levels of production also brought about a corresponding increase in total
operating costs and depletion expense. However, the gross margin per mcfe remains at economically
favorable levels, increasing in 2004 by $.38 per mcfe, a 20 % increase over the gross margin per
mcfe in 2003. Per Mcfe2004
    
    
    2003Average Revenue
    
    
    4.91
    
    
    
    4.27Production & Ad Valorem
    
    
    1.46
    
    
    
    1.23Depletion
    
    
    1.14
    
    
    
    1.11Total Operating Costs
    
    
    2.60
    
    
    
    2.34Gross Margin
    
    
    2.31
    
    
    
    1.93
 Cash flow per mcfe, defined as gross margin plus depletion, increased by $.40 per mcfe, or
13%, from $3.04 per mcfe in 2003 to $3.45 per mcfe in 2004. Future Gas Sales Contracts The Company currently does not enter into hedging agreements as a means of reducing the impact
of price volatility. However, we have entered into fixed delivery contracts for approximately 45%
of our current daily production at December 31, 2004. As of January 1, 2005, the Company has the
following open sales delivery contracts associated with future production: (Volume and Daily
Production are expressed in mcfs) 22




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##### Table of Contents



AverageDaily
    
    
    
    
    
    
    PriceProperty
    
    Volume
    
    
    Production
    
    
    Term
    
    
    ($/mcf)Cow Creek
    
    
    120,000
    
    
    
    1,000
    
    
    
    1/05 -  4/05
    
    
    
    5.31669,000
    
    
    
    1,000
    
    
    
    1/05 - 10/06
    
    
    
    5.50182,500
    
    
    
    500
    
    
    
    2/05 -   1/06
    
    
    
    5.30730,000
    
    
    
    1,000
    
    
    
    4/05 -   3/07
    
    
    
    6.00Total Cow Creek
    
    
    1,701,500Mesa
    
    
    304,000
    
    
    
    1,000
    
    
    
    1/05  -10/05
    
    
    
    5.80182,500
    
    
    
    500
    
    
    
    2/05  - 1/06
    
    
    
    5.30Total Mesa
    
    
    486,500Total Company
    
    
    2,188,000
 The forward gas sales delivery contracts will generate a weighted average price of $5.68 per
mcf for 2.2 bcf of contracted gas sold over the next 27 months beginning in the first quarter of
2005. Mesa C Carried Working Interest The Companys carried working interest in Participating Area C in the Mesa Unit of the
Pinedale Anticline was determined by the operator, Wexpro Company, to have paid out in April 2004.
Since the payout, we have recognized monthly production from the participating area of
approximately 30,000 mcf per month resulting in incremental revenues of $1.4 million in 2004. Under
the terms of the Participating Area agreement, production revenue earned by the Company could be
temporarily interrupted as new drilling costs are incurred and the property reverts to a pre
payout status. New drilling was undertaken by the operator during 2004. However, production
revenues from the unit offset the capital costs incurred and did not significantly effect our
monthly cash flow for our interest in the participating area. Other Expenses General and administrative expenses increased 27% to $1,581,000 in 2004 compared to $1,250,000 in
2003. The Company incurred additional costs in 2004, in part because of maintaining a Denver office
for a full year in 2004, compared to eight months in 2003. In addition, the Company relocated its
Denver area office to the business district in downtown Denver and increased its office space by
70%. The increase in general and administrative expense is also attributable to additional
employees hired in Denver to accommodate corporate growth. Overall, general and administrative
expense per mcfe decreased in 2004 compared to 2003 by 27%, from $.88 per mcfe in 2003 to $.59 per
mcfe in 2004. The Company impaired the value of its interest in a non-producing property, Cave Gulch, by $155,000
during 2004, as no progress was made to develop the property by the operator. The Company had
previously impaired its cost in the property by $142,000 at December 31, 2003. The property is now
fully impaired. 23




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##### Table of Contents



Income Taxes During the second half of
2004, the Company recorded income tax expense of $450,000.
The income tax expense has been recognized because the Company has fully offset its net deferred
tax asset of $1,048,000 as of December 31, 2003. This deferred tax estimate is attributed to
sustained operating profits which offsets the previously established valuation allowance. Although
the Company expects to continue to generate losses for tax purposes, the Companys sustained net
operating income has resulted in a deferred tax position as required under generally accepted
accounting principles. If the Company continues to generate operating income, as expected, it will
be required to recognize deferred tax expense at an effective rate of approximately 34% throughout
the year. Net Income The increased gas production, higher gas prices, and the related increased gross margin per mcfe
generated a 315% increase in net income after provision for taxes during 2004 compared to 2003. Net
income escalated to $4.03 million, or $.47 per diluted share in 2004 from $.97 million, or $.14 per
diluted share in 2003. Similarly, net cash flow from operating activities, increased 130% when
comparing net cash flow from operating activities of $7.43 million in 2004 to $3.24 million during
2003. Critical Accounting Policies and Estimates The Companys discussion and analysis of its financial condition and results of operations are
based on financial statements prepared in accordance with accounting principles generally accepted
in the United States. The preparation of its financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses. The Company recognizes oil and gas revenues for only its ownership percentage of total production
in the period delivered under the entitlement method. Reclassification Certain reclassifications
have been made to the 2003 financial statements to conform to the
2004 presentation. Such reclassifications had no effect on net income. We believe the following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our financial statements. Reserve Estimates Our estimates of oil and natural gas reserves, by necessity, are projections based on geological
and engineering data, and there are uncertainties inherent in the interpretation of such data as
well as the projection of future rates of production and the timing of development expenditures.
Reserve engineering is a subjective process of estimating underground accumulations of oil and
natural gas that are difficult to measure. The accuracy of any reserve estimate is a function of
the quality of available data, engineering and geological interpretation and judgment. Estimates of
economically recoverable oil and natural gas reserves and future net cash flows necessarily depend
upon a number of variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of regulations by
governmental agencies and assumptions governing future oil and natural gas prices, future operating
costs, severance and excise taxes, development costs and workover and remedial costs, all of which
may in fact vary considerably from actual results. For these reasons, estimates of the economically
recoverable quantities of oil and natural gas attributable to any particular group of properties,
classifications of such reserves based on risk of recovery, and estimates of the future net cash
flows expected there from may vary substantially. Any significant variance in the assumptions could
materially affect the estimated quantity and value of the reserves, which could affect the carrying
value of our oil and gas properties and/or the rate of depletion of the oil and gas properties. 24




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##### Table of Contents



Actual production, revenues and expenditures with respect to our reserves will likely vary from
estimates, and such variances may be material. Many factors will affect actual net cash flows, including  
    the amount and timing of actual production
    supply and demand for natural gas
    curtailments or increases in consumption by natural gas purchasers
    changes in governmental regulations or taxation Property, Equipment and Depreciation We follow the successful efforts method of accounting for oil and gas properties. Under this
method, all costs incurred in connection with the exploration for and development of oil and gas
reserves are capitalized. Under this method, leasehold costs are capitalized as incurred. Costs of
productive wells, unsuccessful developmental wells and the related costs of productive leases are
capitalized and amortized on a unit-of-production basis through depletion, depreciation, and
amortization over the life of the associated oil and gas reserves Exploratory expenses, including
geological and geophysical expenses, and delay rentals are charged to expense as incurred.
Exploratory drilling costs are capitalized but changed to expense if the well is determined to be
unsuccessful. Oil and gas property costs are periodically evaluated for possible impairment. Impairments are
recognized when management determines that a propertys net book value can not be realized based
upon current estimates of expected future cash flows. Depletion, depreciation, and amortization of
oil and gas properties and the periodic assessment for impairment are based on underlying oil and
gas reserve estimates and future cash flows using current oil and gas prices combined with
operating and development costs. Costs associated with production and general corporate activities
are expensed in the period incurred. New Accounting
Pronouncements The Company intends to adopt
SFAS 123R issued by the FASB in December 2004. The
effective date of SFAS 123R for public companies is for interim
or annual periods beginning after June 15, 2005. The
pronouncement addresses the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. 25




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##### Table of Contents



DOUBLE EAGLE PETROLEUM CO. 
 ITEM 7. FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION Index PageNumbers(1) Report of Registered Independent Public Accounting Firm
    
    
    F-2Financial Statements:Balance Sheets as of December 31, 2004 and 2003
    
    
    F-3Statements of Operations for the years ended
December 31, 2004 and 2003
    
    
    F-4Statements of Changes in Stockholders Equity for the year
ended December 31, 2004 and 2003
    
    
    F-5Statements of Cash Flows for the years ended
December 31, 2004 and 2003
    
    
    F-6Notes to Financial Statements
    
    
    F-7 - F-16(2) Supplemental Oil and Gas Information (Unaudited)
    
    
    F-17 - F-19
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Shareholders and Board of Directors
Double Eagle Petroleum Co.
Casper, Wyoming We have audited the accompanying balance sheets of Double Eagle Petroleum Co. as of December 31,
2004 and 2003, and the related statements of operations, stockholders equity, and cash flows for
the years ended December 31, 2004 and December 31, 2003. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits in accordance with auditing standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Double Eagle Petroleum Co. as of December 31, 2004 and 2003 and
the results of its operations and its cash flows for the years ended December 31, 2004 and 2003 in
conformity with US generally accepted accounting principles. HEIN & ASSOCIATES LLP
Denver, Colorado
March 11, 2005 F-2




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##### Table of Contents



DOUBLE EAGLE PETROLEUM CO.
BALANCE SHEETS 
 December 31,2004
    
    
    2003ASSETSCurrent assetsCash and cash equivalents
    
    $
    3,669,950
    
    
    $
    2,920,846Accounts receivable
    
    
    2,171,102
    
    
    
    1,049,643Other current assets
    
    
    328,677
    
    
    
    50,730Total current assets
    
    
    6,169,729
    
    
    
    4,021,219Properties and equipmentDeveloped properties
    
    
    32,293,958
    
    
    
    24,376,469Undeveloped properties
    
    
    3,026,168
    
    
    
    3,017,954Corporate and other
    
    
    624,153
    
    
    
    441,77327,836,196Less accumulated depreciation, depletion and impairment
    
    
    (11,185,792
    )
    
    
    (8,533,685
    )Net properties and equipment
    
    
    24,758,487
    
    
    
    19,302,511Other assets
    
    
    41,125
    
    
    
    631,187Total assets
    
    $
    30,969,341
    
    
    $
    23,954,917LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    1,597,224
    
    
    $
    3,256,375Accrued expenses
    
    
    2,890,630
    
    
    
    139,502Accrued production taxes
    
    
    971,710
    
    
    
    344,234Total current liabilities
    
    
    5,459,564
    
    
    
    3,740,111Non current liabilitiesAsset retirement obligation
    
    
    406,865
    
    
    
    358,500Deferred tax liability
    
    
    176,000
    
    
    
    Total non current liabilities
    
    
    582,865
    
    
    
    358,500Total liabilities
    
    
    6,042,429
    
    
    
    4,098,611Commitments
and contingencies (note 3 and 4)Common stock, $.10 par value; 10,000,000 shares authorized; issued
and outstanding8,488,404 shares in 2004 and 8,334,404 in 2003
    
    
    848,840
    
    
    
    833,440Capital in excess of par value
    
    
    21,224,393
    
    
    
    20,197,390Retained earnings (deficit)
    
    
    2,853,679
    
    
    
    (1,174,524
    )Total stockholders equity
    
    
    24,926,912
    
    
    
    19,856,306Total liabilities and stockholders equity
    
    $
    30,969,341
    
    
    $
    23,954,917
 See accompanying notes to financial statements. F-3




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##### Table of Contents



DOUBLE EAGLE PETROLEUM CO.
STATEMENTS OF OPERATIONS 
 Year Ended December 31,2004
    
    
    2003RevenuesOil and gas sales
    
    $
    13,057,906
    
    
    $
    6,080,880Other income
    
    
    209,167
    
    
    
    57,532Total revenues
    
    
    13,267,073
    
    
    
    6,138,412Costs and ExpensesProduction costs
    
    
    2,155,600
    
    
    
    1,026,591Production taxes
    
    
    1,644,770
    
    
    
    731,418Exploration expenses, including dry holes
    
    
    323,822
    
    
    
    231,244General and administrative
    
    
    1,581,192
    
    
    
    1,249,520Depreciation, depletion, and amortization of oil and gas
properties
    
    
    2,908,058
    
    
    
    1,582,603Impairment of producing properties
    
    
    155,321
    
    
    
    170,309Cost of non-producing leases sold
    
    
    
    
    
    
    10,776Total costs and expenses
    
    
    8,768,763
    
    
    
    5,002,461Income from operations
    
    
    4,498,310
    
    
    
    1,135,951Other income (expense)Interest income (expense)
    
    
    26,928
    
    
    
    (174,629
    )Other
    
    
    (47,035
    )
    
    
    Total other income (expense)
    
    
    (20,107
    )
    
    
    (174,629
    )Income before income taxes
    
    
    4,478,203
    
    
    
    961,322Provision for deferred taxes
    
    
    450,000
    
    
    
    Income before cumulative effect of change in accounting
principle
    
    
    4,028,203
    
    
    
    961,322Cumulative effect of change in accounting principle
    
    
    
    
    
    
    10,500Net income
    
    $
    4,028,203
    
    
    $
    971,822Income per share before cumulative effect of change in
accounting principle  basic and diluted
    
    
    .47
    
    
    $
    .14Cumulative effect of change in accounting principle
    
    
    
    
    
    
    Net income per common share  basic and diluted
    
    $
    .47
    
    
    $
    .14Weighted average shares outstanding  basic
    
    
    8,469,852
    
    
    
    7,027,426Weighted average shares outstanding  diluted
    
    
    8,599,020
    
    
    
    7,163,206
 See accompanying notes to financial statements. F-4




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##### Table of Contents



DOUBLE EAGLE PETROLEUM CO.
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
For the two years ended December 31, 2004 
 Additional
    
    
    
    
    
    
    TotalOutstanding
    
    
    Common
    
    
    Paid In
    
    
    Retained
    
    
    StockholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    EquityBalance at
December 31, 2002
    
    
    6,521,518
    
    
    $
    652,152
    
    
    $
    7,786,183
    
    
    $
    (2,146,346
    )
    
    
    6,291,989Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    971,822
    
    
    
    971,822Common stock
Issued:Private placement
    
    
    1,295,000
    
    
    
    129,500
    
    
    
    11,464,785
    
    
    
    
    
    
    
    11,594,285Exercise of warrants
    
    
    300,500
    
    
    
    30,050
    
    
    
    383,138
    
    
    
    
    
    
    
    413,188Options exercised
and shares issued for
compensation
    
    
    217,386
    
    
    
    21,738
    
    
    
    563,284
    
    
    
    
    
    
    
    585,022Balance at
December 31, 2003
    
    
    8,334,404
    
    
    $
    833,440
    
    
    $
    20,197,390
    
    
    $
    (1,174,524
    )
    
    $
    19,856,306Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,028,203
    
    
    
    4,028,203Options exercised
and shares issued for
compensation
    
    
    154,000
    
    
    
    15,400
    
    
    
    1,026,821
    
    
    
    
    
    
    
    1,042,221Balance at
December 31, 2004
    
    
    8,488,404
    
    
    
    848,840
    
    
    
    21,224,211
    
    
    
    2,853,679
    
    
    
    24,926,730
 See accompanying notes to financial statements. F-5




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##### Table of Contents



DOUBLE EAGLE PETROLEUM CO.
STATEMENTS OF CASH FLOWS 
 Year ended December 31,2004
    
    
    2003Cash Flows from Operating ActivitiesNet income
    
    $
    4,028,203
    
    
    $
    971,822Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation,
depletion, amortization and accretion of asset retirement obligation
    
    
    2,923,479
    
    
    
    1,588,603Abandonments and impairments
    
    
    289,963
    
    
    
    190,154Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (10,500
    )Gain on sale of other assets
    
    
    (141,451
    )
    
    
    (24,296
    )Directors fees paid in stock
    
    
    54,240
    
    
    
    24,600Deferred income taxes
    
    
    450,000
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,121,459
    )
    
    
    (175,748
    )Prepaid expenses
    
    
    (277,947
    )
    
    
    (25,565
    )Accounts payable and accrued expenses
    
    
    602,039
    
    
    
    500,824Accrued production taxes
    
    
    627,476
    
    
    
    198,991Net cash provided by operating activities
    
    
    7,434,543
    
    
    
    3,238,885Cash Flows from investing activitiesProceeds from sales of properties and assets
    
    
    269,143
    
    
    
    35,072Other asset
    
    
    10,000
    
    
    
    (40,000
    )Additions of producing properties and equipment
    
    
    (7,331,311
    )
    
    
    (6,478,831
    )Acquisitions of corporate and non-producing properties
    
    
    (325,236
    )
    
    
    (2,284,923
    )Net cash used in investing activities
    
    
    (7,377,404
    )
    
    
    (8,768,682
    )Cash flows from financing activitiesIssuance of common stock
    
    
    
    
    
    
    11,594,285Exercise of options and warrants
    
    
    714,162
    
    
    
    973,610Net borrowings under line of credit arrangements
    
    
    
    
    
    
    2,850,000Repayment of long-term debt
    
    
    
    
    
    
    (7,100,000
    )Other
    
    
    (22,197
    )
    
    
    Net cash provided by financing activities
    
    
    691,965
    
    
    
    8,317,895Increase in cash and cash equivalents
    
    
    749,104
    
    
    
    2,788,098Cash and cash equivalents at beginning of period
    
    
    2,920,846
    
    
    
    132,748Cash and cash equivalents at end of period
    
    $
    3,669,950
    
    
    $
    2,920,846Supplemental disclosures of cash and non-cash
transactionsCash paid during the year for interest
    
    $
    503
    
    
    $
    193,508Additions to developed properties included in accounts
payable and accrued liabilities
    
    $
    3,050,000
    
    
    $
    1,980,000Additions to developed properties for retirement obligations
    
    $
    55,141
    
    
    $
    352,500Additions to other assets included in accounts payable
    
    $
    
    
    
    $
    580,062Directors fees paid in stock
    
    
    54,240
    
    
    $
    24,600Cashless exercise of options
    
    $
    
    
    
    $
    164,430Equity
contribution related to exercise of non-qualified options
    
    $
    273,818
    
    
    
    
 See accompanying notes to financial statements. F-6




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DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS 
  1.
    BusinessDouble Eagle was incorporated under Wyoming law in 1972 and reincorporated under Maryland
law in February 2001. The Company explores for, develops,
produces and sells crude oil and natural gas and maintains offices in Casper, Wyoming and Denver,
Colorado.2.
    Summary of Significant Accounting PoliciesCash and Cash EquivalentsCash in excess of daily requirements is invested in money markets and certificates of
deposit with maturities of 90 days or less. Such investments are deemed to be cash
equivalents for purposes of the financial statements.Revenue RecognitionThe Company recognizes oil and gas revenues for only its ownership percentage of total
production in the period delivered under the entitlement method.Oil and Gas PropertiesDouble Eagle uses the successful efforts method of accounting for oil and gas producing
activities. Under this method, acquisition costs for proved and unproved properties are
capitalized when incurred. Exploration costs, including geological and geophysical costs,
the costs of carrying and retaining unproved properties and exploratory dry hole drilling
costs, are expensed. Development costs, including the costs to drill and equip development
wells, and successful exploratory drilling costs that locate proved reserves, are
capitalized. In addition, the Company limits the total amount of unamortized capitalized
costs for each property to the value of future net revenues, based on current prices and
costs.Depreciation, depletion and amortization of the capitalized costs for producing oil and
gas properties are computed on the units-of-production method based on proved oil and gas
reserves. Depletion, depreciation and amortization of oil and gas
properties for the years ended December 31, 2004
and 2003, was $2,857,372 and $1,550,239, respectively. Double Eagle invests in unevaluated
oil and gas properties for the purpose of exploration and development of proved reserves.
The costs of unproved leases which become productive are reclassified to proved properties
when proved reserves are discovered on the property. Unproved oil and gas interests are
carried at the lower of cost or estimated fair market value and are not subject to
amortization.Change in Accounting PrincipleIn June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations,
which addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement costs. The
standard applies to legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and normal use of the asset.
The Companys asset retirement obligations relate primarily to the retirement of oil and
gas properties and related production facilities, lines and other equipment used in the
field operations.SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred, if a reasonable estimate of fair value
can be made. The fair value of the liability is added to the carrying amount of the
associated asset. This additional carrying F-7




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DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS (continued) 
 amount is then depreciated over the life of the asset. The liability increases due to the passage
of time based on the time value of money until the obligation is settled. SFAS No. 143 was adopted by the Company as of July 1, 2003. The implementation of SFAS No. 143
resulted in a cumulative effect of change in accounting principle of $10,500. During 2003, an
increase of $353,000 in oil and gas properties reflected the present value of the future asset
retirement obligation and an offsetting increase in liabilities represents the establishment of
an asset retirement obligation liability. For the years ended December 31, 2004 and 2003, an
expense of $15,000 and $6,000, respectively was recorded as accretion expense on the liability.
During 2004, the Company recorded an additional $55,000 increase in
oil and gas properties and asset retirement obligation liability to
reflect the present value of plugging liability on new wells. A reconciliation of the changes in the Companys liability from adoption at July 1, 2003 to
December 31, 2004 is as follows: Liability from adoption of SFAS No. 143 July 1, 2003
    
    $
    352,500Accretion expense for 2003
    
    
    6,000Asset retirement obligation as of December 31, 2003
    
    
    358,500Liabilities incurred (net)
    
    
    32,944Accretion expense for 2004
    
    
    15,421Asset retirement obligation as of December 31, 2004
    
    $
    406,865
 Other Equipment Office facilities, equipment and vehicles are recorded at cost. Depreciation is recorded using
straight-line and accelerated methods over the estimated useful lives of 10 to 30 years for
office facilities, 3 to 10 years for office equipment, and
7 years for vehicles. Depreciation expense for the years ended
December 31, 2004 and 2003 was $50,686 and $32,364, respectively. Impairment of Long-Lived Assets SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, requires that an
asset be evaluated for impairment when the carrying amount of an asset exceeds the sum of the
undiscounted estimated future cash flows of the asset. In accordance with the provisions of
SFAS 144, the Company reviews the carrying values of its long-lived assets whenever events or
changes in circumstances indicate that such carrying values may not be recoverable. If, upon
review, the sum of the undiscounted pretax cash flows is less than the carrying value of the
asset group, the carrying value is written down to estimated fair value. Individual assets are
grouped for impairment purposes at the lowest level for which there are identifiable cash flows
that are largely independent of the cash flows of other groups of assets, generally on a
field-by-field basis. The fair value of impaired assets is determined based on quoted market
prices in active markets, if available, or upon the present values of expected future cash flows
using discount rates commensurate with the risks involved in the asset group. The long-lived
assets of the Company, which are subject to evaluation, consist primarily of oil and gas
properties. The Company recognized a non-cash charge on producing properties during the years
ending December 31, 2004 and 2003 of $155,321 and $170,309, respectively for those properties
with carrying values exceeding the expected undiscounted future net cash flows. Other Assets Included in other assets in 2003 is a deposit of $580,000 for oil and gas compressors, installed
in early 2004. F-8




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DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS (continued) 
 Stock Based Compensation The Company has elected to follow APB Opinion No. 25 and related interpretations in accounting
for its stock options and grants to employees and directors since the alternative fair market
value accounting provided for under Statement of Financial Accounting Standards (SFAS) No. 123
requires use of grant valuation models that were not developed for use in valuing employee stock
options and grants. Under APB Opinion No. 25, if the exercise price of the Company stock grants
and options equal the fair value of the underlying stock on the date of grant, no compensation
expenses are recognized. If compensation costs for the Companys stock-based compensation plans had been determined based
on the fair value at the grant dates for awards under those plans consistent with the method of
SFAS No. 123, then the Companys net income and net income per share would have been adjusted to
the pro forma amounts indicated below: Year Ended December 31,2004
    
    
    2003Net income as reported
    
    $
    4,028,203
    
    
    $
    971,822Deduct: stock based
compensation cost under
SFAS 123
    
    
    (233,323
    )
    
    
    (62,963
    )Pro Forma net income
    
    
    3,794,880
    
    
    
    908,859Reported net income per
common share  basic and
diluted
    
    
    .47
    
    
    
    .14Pro forma net income per
common share basic and
diluted
    
    
    .44
    
    
    
    .13
 Pro forma information regarding net income is required by SFAS 123. The fair value of options
granted was estimated using the Black-Scholes valuation model. The following weighted average
assumptions were used for the years ended December 31, 2004 and December 31, 2003. Year Ended December 31,2004
    
    2003Volatility
    
    
    71
    %
    
    
    55
    %Expected life of options (in years)
    
    
    8
    
    
    
    3Dividend Yield
    
    
    
    
    
    
    Risk free interest rate
    
    
    3.0
    %
    
    
    2.6
    %
 F-9




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DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS (continued) 
  Income TaxesIncome taxes are determined under an asset and liability approach. The Company follows the
asset and liability method of accounting for deferred income taxes. Deferred tax assets and
liabilities are determined based upon the temporary differences between the financial statement
and tax basis of assets and liabilities.Per Share AmountsBasic net income per share is computed using the weighted average number of common shares
outstanding during the period. Diluted net income per share reflects the potential dilution
that would occur if options or other contracts such as outstanding warrants to issue common
stock were exercised using the average market price for the companys stock for the period.
Total potential dilutive shares at December 31, 2004 and 2003, were 136,676 and 261,486,
respectively. In a year in which a net loss occurs, the conversion of options or other
contracts such as options and warrants are ignored as the conversion would be antidilutive.Accounting EstimatesThe preparation of financial statements in conformity with accounting principles generally
accepted in the United States 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.
Significant estimates used in the presentation of these financial statements include estimated
lives of assets and timing and costs associated with the Companys asset retirement obligation.
Other significant estimates also include proved oil and gas reserves quantities and the
associated present value of estimated future cash flows which are the basis for the calculation
of the depreciation, depletion and impairment for oil and gas properties.Receivables and Credit PoliciesThe Company has joint interest billing receivables representing reimbursable operating expenses
and other costs due from third party working interest owners in wells that the Company operates.
The receivable is recognized when the cost is incurred and the related Companys share of the
cost is recorded. The Company also has trade receivables related to oil and gas sales that are
normally due approximately 45 days after production. The Company periodically reviews its
accounts receivable for collectablity and implements timely collection efforts as necessary.New Accounting PronouncementsThe Company intends to adopt SFAS 123R issued by the FASB in
December 2004. The effective date of SFAS 123R for public companies
is for interim or annual periods beginning after June 15, 2005. The
pronouncement addresses the accounting for transactions in which an
entity exchanges its equity instruments for goods or services.3.
    Line of CreditThe Company maintains a $9 million revolving line of credit collateralized by oil and gas
producing properties as part of its cash management program. The interest rate on the line of
credit is at the prime rate published in the Wall Street Journal. The interest rate on the line
of credit was 5.25% at December 31, 2004. The line of credit matures on April 30, 2006. During
the year ended December 31, 2003, the Company took advances against the line totaling
$2,850,000. On October 31, 2003, the line was fully paid and no additional draws against the
line have been made. The Company had no balances outstanding under this line of credit at
December 31, 2004 or December 31, 2003. F-10




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DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS (continued)  4. Commitments and Contingencies Gas Sales Commitments The Company committed to sell 2,188,000 Mmbtu of gas over a 27 month period beginning January 1,
2005 under six contracts for quantities, terms, and prices as described below. Should the
Company be unable to deliver the gas, which is not anticipated, it would be required to purchase
such amounts on the open market to fulfill the terms of these contracts. PriceQuantity Per Day
    
    Term
    
    
    ($/Mmbtu)1,000 Mmbtu
    
    
    1/05 - 4/05
    
    
    
    5.311,000 Mmbtu
    
    
    1/05 - 10/06
    
    
    
    5.501,000 Mmbtu
    
    
    1/05 - 10/05
    
    
    
    5.80500 Mmbtu
    
    
    2/05 - 1/06
    
    
    
    5.30500 Mmbtu
    
    
    2/05 - 1/06
    
    
    
    5.301,000 Mmbtu
    
    
    4/05 - 3/07
    
    
    
    6.00
 Major Customers Sales to one major unaffiliated customer for years ended December 31, 2004 and December 31,
2003, are $9,881,000 and $4,587,000, respectively. The Company, however, believes that it is
not dependent upon this customer due to the nature of its product, but as described above, has
entered into sales contracts with this customer to deliver gas. The Company has no other single
customer that accounted for 10% or more of revenues in 2004 or 2003. Lease Commitments In October 2004, the company entered into a 42 month operating lease agreement for approximately
3,900 square feet of office space in Denver, Colorado. The lease agreement requires payments of
approximately $61,300 in 2005, $66,900 in 2006, $72,500 in 2007 and $30,900 in 2008. Rent
expense for the Denver office was approximately $5,900 in the two months ended December 31,
2004. The Company also, leases office facilities in Littleton, Colorado under an operating lease
agreement that expires April 30, 2006. The lease agreement requires payments of $33,000 in 2005
and $11,000 in 2006. Effective February 1, 2005, the Company entered into a 16 month sub lease
agreement for its Littleton facilities. The Company receives monthly payments of $2,069 for
this space that will aggregate $33,100 over the remaining
term of the lease. The sublease substantially offsets the lease
obligation and no further accrual has been recorded. Rent expense for this facility in 2004 and 2003 was $31,000 and $20,000
respectively. The Company has no other capital leases and no operating lease commitments. Employee Benefit Plan The Company maintains a Simplified Employee Pension Plan covering substantially all employees
meeting minimum eligibility requirements. Employer contributions are determined solely at
managements discretion. Employer contributions for years ended 2004 and 2003 were $38,898 and
$24,260, respectively. F -11




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DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS (continued)  5. Income Taxes The tax effects of temporary differences that gave rise to significant portions of the deferred
tax liabilities and deferred tax assets as of December 31, 2004 and December 31, 2003 were as
follows: Year Ended December 31,2004
    
    
    2003Deferred tax assets:Net operating loss carry-forwards
    
    $
    1,700,000
    
    
    $
    1,921,000Percentage depletion carry-forward
    
    
    146,000
    
    
    
    160,000Asset
retirement obligation
    
    
    138,000
    
    
    
    123,0001,984,000
    
    
    
    2,204,000Deferred tax
liabilities  net difference in oil and gas properties
    
    
    (2,160,000
    )
    
    
    (1,156,000
    )Net deferred
tax asset (liability)
    
    
    (176,000
    )
    
    
    1,048,000Valuation allowance:
    
    
    
    
    
    
    (1,048,000
    )Net deferred tax assets
    
    $
    (176,000
    )
    
    $
    
 At December 31, 2004, the Company had a net operating loss carryforward for regular income tax
reporting purposes of approximately $5 million, which will begin expiring in 2007. Reconciliation of the Companys effective tax rate of 10% to the expected federal tax rate of
34% is as follows: 2004
    
    
    2003Expected Federal Tax Rate
    
    
    34%
    
    
    
    34%Permanent Differences  Change in Valuation Allowance
    
    
    (24%)
    
    
    
    (34%)Effective Tax Rate
    
    
    10%
    
    
    
    0%
 F -12




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DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS (continued)  6. Stockholders Equity Sale of Common Stock  Private Placement In October 2003, the Company initiated a private placement of its common stock and sold
1,295,000 shares of restricted stock at $9.00 per share. In connection with the offering, the
Company incurred $61,000 of costs against the gross proceeds of $11,655,000. Since that time, the Company has registered with the Securities and Exchange Commission the resale of these shares under a registration statement on Form S-3 that became effective July 9, 2004. Stock Options Stock option plans approved by the stockholders provide for granting of options to employees,
directors and others for purchase of common stock generally at prices between the bid and
ask prices at the time of grant. Generally, options granted prior to 2004 expire three years
after the date of grant. On March 23, 2004 the Company issued stock options to senior
management that vest twenty percent each year on the anniversary of
the grant over the next five years beginning one year from the date
of issue.
The options from the 2004 grant expire five years after the grants vest. The changes in the
outstanding stock options during the years ended December 31, 2004 and 2003 are summarized as
follows: December 31, 2004
    
    
    December 31, 2003Weighted Average
    
    
    
    
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceBeginning of period
    
    
    180,626
    
    
    $
    5.43
    
    
    
    203,786
    
    
    $
    3.75Granted
    
    
    176,100
    
    
    
    13.90
    
    
    
    61,486
    
    
    
    8.19Exercised/Purchased
    
    
    (74,140
    )
    
    
    4.75
    
    
    
    (84,646
    )
    
    
    3.20Expired
    
    
    (6,743
    )
    
    
    14.83
    
    
    
    
    
    
    
    End of period
    
    
    275,843
    
    
    $
    14.32
    
    
    
    180,626
    
    
    $
    5.43Unoptioned shares
Available at year end
    
    
    395,371
    
    
    
    
    
    
    
    564,728Number of shares
exercisable
    
    
    156,676
    
    
    
    
    
    
    
    180,626
 F -13




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DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS (continued)  Stock Options (continued) On occasion, the Board of Directors grants stock options not covered under the plans approved by
the stockholders to individuals and companies that perform services for the Company. The
changes in the outstanding stock options during the year ended December 31, 2004 and
2003 are summarized as follows: December 31, 2004
    
    
    December 31, 2003Weighted Average
    
    
    
    
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceBeginning of year
    
    
    80,860
    
    
    $
    4.54
    
    
    
    305,964
    
    
    $
    4.49Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised for cash
    
    
    75,860
    
    
    
    4.44
    
    
    
    (91,854
    )
    
    
    3.25Cashless exercise
    
    
    
    
    
    
    
    
    
    
    (32,886
    )
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    (100,364
    )
    
    
    4.68End of year
    
    
    5,000
    
    
    $
    6.15
    
    
    
    80,860
    
    
    $
    4.54
 The fair value per share of options granted, as determined under the Black Scholes method, in
2004 and 2003, were $10.09 and $3.07, respectively. During 2003, the Company issued 32,886 shares of common stock under a cashless exercise of
100,000 options based on the difference between the market price at the date of exercise and the
option price. No expense was recorded, as the fair value of the options immediately prior to
exercise equaled the fair value of the stock received. Total options
outstanding as of December 31, 2004 are 280,843. The options and weighted
average exercise prices are as follows: Weighted AverageExpiration
    
    Shares
    
    
    Exercise PriceYear 2005
    
    
    60,000
    
    
    $
    3.80Year 2006
    
    
    44,733
    
    
    $
    8.19Year 2009
    
    
    13,333
    
    
    $
    14.88Year 2010 or later
    
    
    162,777
    
    
    $
    14.06Total
    
    
    280,843
 F -14




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DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS (continued)  Stock Warrants In December 1998, the Company issued 374,750 warrants at $1.375 per share between the bid and
ask prices on the day of grant. By December 31, 2003, all warrants were exercised prior to
their expiration date. 7. Related Party Transactions A company owned by an individual who was a member of the board of directors until June 8,
2004 acted as the operator on a property owned by Double Eagle. That company also performs
services on other producing properties in which Double Eagle owns an interest and on
drilling projects in which Double Eagle participates. Amounts paid by Double Eagle to the
company were $50,205 and $68,241 for the years ended December 31, 2004 and 2003,
respectively. 8. Oil and Gas Activities Capitalized Costs Relating to Oil and Gas Producing Activities The aggregate amount of capitalized costs relating to crude oil and natural gas producing
activities and the aggregate amount of related accumulated depreciation, depletion and
amortization at December 31, 2004 and December 31, 2003 are as follows: December 31,2004
    
    
    2003Developed properties
    
    $
    32,293,958
    
    
    $
    24,376,469Undeveloped properties
    
    
    3,026,168
    
    
    
    3,017,95435,320,126
    
    
    
    27,394,423Accumulated
depreciation, depletion
and impairment allowance
    
    
    (10,947,541
    )
    
    
    (8,346,123
    )Net capitalized costs
    
    $
    24,372,585
    
    
    $
    19,048,300
 Costs incurred in Oil and Gas Property Acquisitions, Exploration and Development Activities Costs incurred in property acquisitions, exploration, and development activities for the year
ended December 31, 2004 and 2003 were as follows: December 31,2004
    
    
    2003Property acquisitions  unproved
    
    $
    297,323
    
    
    $
    2,287,510Exploration
    
    
    323,822
    
    
    
    231,244Development
    
    
    8,366,749
    
    
    
    7,564,244Total
    
    $
    8,987,894
    
    
    $
    10,082,998
 F -15




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##### Table of Contents



DOUBLE EAGLE PETROLEUM CO.
NOTES TO FINANCIAL STATEMENTS (continued)  Results of Operations from Oil and Gas Producing Activities The results of operations for the Companys oil and gas producing activities for the year ended
December 31, 2004 and 2003 were: December 31,2004
    
    
    2003Operating revenues
    
    $
    13,057,906
    
    
    $
    6,080,880Costs and expensesProduction
    
    
    3,800,370
    
    
    
    1,758,009Exploration
    
    
    323,822
    
    
    
    231,244Depreciation, depletion and impairment
    
    
    3,012,692
    
    
    
    1,720,5487,136,884
    
    
    
    3,709,801Income before Income Taxes
    
    $
    5,921,022
    
    
    $
    2,371,079
 F -16




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DOUBLE EAGLE PETROLEUM CO. 
   Oil and Gas Reserves The reserves at December 31, 2004 and December 31, 2003 presented below were reviewed by Netherland
Sewell and Associates. All reserves are located within the continental United States. The reserve
estimates are developed using geological and engineering data and interests and burden information
developed by the Company. Reserve estimates are inherently imprecise and are continually subject
to revisions based on production history, results of additional exploration and development, prices
of oil and gas, and other factors. Estimated net quantities of proved developed reserves of oil and gas for the year ended December
31, 2004 and 2003, are as follows: December 31,2004
    
    
    2003Natural Gas (Mcf)Beginning of year
    
    
    22,818,980
    
    
    
    16,810,164Revisions of prior estimates
    
    
    13,606
    
    
    
    (2,013,517
    )Extensions and discoveries
    
    
    14,661,717
    
    
    
    9,343,183Production
    
    
    (2,559,557
    )
    
    
    (1,320,850
    )End of year
    
    
    34,934,746
    
    
    
    22,818,980Proved developed reserves
    
    
    17,161,577
    
    
    
    16,055,045% of proved developed reserves
    
    
    49
    %
    
    
    70
    %
 December 31,2004
    
    
    2003Oil (Barrels)Beginning of year
    
    
    208,957
    
    
    
    222,473Revisions of prior estimates
    
    
    16,062
    
    
    
    (25,115
    )Extensions and discoveries
    
    
    89,886
    
    
    
    28,943Sales of reserves in place
    
    
    (19,964
    )
    
    
    Production
    
    
    (16,886
    )
    
    
    (17,344
    )End of year
    
    
    278,055
    
    
    
    208,957Proved developed reserves
    
    
    163,765
    
    
    
    179,228% of proved developed reserves
    
    
    59
    %
    
    
    86
    %
 95% of the proved developed gas reserves and 100% of the proved developed oil reserves were in
producing status as of December 31, 2004. F -17




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DOUBLE EAGLE PETROLEUM CO. 
 Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves The following information has been developed utilizing procedures prescribed by SFAS 69
Disclosures About Oil and Gas Producing Activities and based on natural gas and crude oil
reserves and production volumes estimated by the Company. It may be useful for certain comparison
purposes, but should not be solely relied upon in evaluating the Company or its performance.
Further, information contained in the following table should not be considered as representative or
realistic assessments of future cash flows, nor should the Standardized Measure of Discounted
Future Net Cash Flows be viewed as representative of the current value of the Company. The Company believes that the following factors should be taken into account in reviewing the
following information: (1) future costs and selling prices will probably differ from those required
to be used in these calculations; (2) due to future market conditions and governmental regulations,
actual rates of production achieved in future years may vary significantly from the rate of
production assumed in these calculations; (3) selection of a 10% discount rate is arbitrary and may
not be reasonable as a measure of the relative risk inherent in realizing future net oil and gas
revenues; and (4) future net revenues may be subject to different rates of income taxation. Under the Standardized Measure, future cash inflows were estimated by applying year-end oil and gas
prices to the estimated future production of year-end proved reserves. Futures cash inflows were
reduced by estimated future development and production costs based upon year-end costs in order to
arrive at net cash flow before tax. Future income tax expense has been computed by applying
year-end statutory rates to future pretax net cash flows and the utilization of net operating loss
carry-forwards. Use of a 10% discount rate is required by SFAS 69. As of December 31, 2004, the
average spot daily price of natural gas was $5.515 as compared to monthly index prices of $6.13 at
OPAL and $6.20 for CIG. Management does not rely solely upon the following information in making investment and operating
decisions. Such decisions are based upon a wide range of factors, including estimates of probable,
as well as proved reserves, and varying price and cost assumptions considered more representative
of a range of possible economic conditions that may be anticipated. Standardized Measure is as follows: December 31,2004
    
    
    2003Future Cash Inflows
    
    $
    202,358,000
    
    
    $
    136,525,000Future Production Costs
    
    
    (60,424,000
    )
    
    
    (34,734,000
    )Future Development Costs
    
    
    (9,465,000
    )
    
    
    (3,593,000
    )Future Income Tax
    
    
    (32,972,000
    )
    
    
    (23,508,000
    )Future net cash flows
    
    
    99,497,000
    
    
    
    74,690,00010% Discount
    
    
    (47,967,000
    )
    
    
    (31,849,000
    )Discounted Future Net Cash Flows
    
    $
    51,530,000
    
    
    $
    42,841,000
 F -18




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DOUBLE EAGLE PETROLEUM CO.
SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)  The following is an analysis of the changes in the Standardized Measure: Years Ended December 31,2004
    
    
    2003Balance, beginning of the year
    
    $
    42,841,000
    
    
    $
    14,563,000Sales of oil and gas, net of production costs
    
    
    (9,258,000
    )
    
    
    (4,323,000
    )Extensions and discoveries
    
    
    28,865,000
    
    
    
    23,423,000Net change in sales prices, net of production
costs
    
    
    (4,122,000
    )
    
    
    21,171,000Previously estimated development cost incurred
    
    
    2,115,000
    
    
    
    670,000Changes in future development costs
    
    
    (6,958,000
    )
    
    
    (1,307,000
    )Sales of reserves in place
    
    
    (766,000
    )
    
    
    Revisions of quantity estimates
    
    
    329,000
    
    
    
    (2,760,000
    )Accretion of discount
    
    
    4,284,000
    
    
    
    1,456,000Net change in income taxes
    
    
    (4,902,000
    )
    
    
    (9,538,000
    )Changes in rates of production and other
    
    
    (898,000
    )
    
    
    (514,000
    )Balance, end of the year
    
    $
    51,530,000
    
    
    $
    42,841,000
 F-19




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##### Table of Contents



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements between the Company and its independent auditors on any matter of
accounting principles or practices or financial statement disclosure or auditing scope or procedure
since the Companys inception of a nature which, if not resolved, would have caused the accountant
to make reference in connection with its report. 
 ITEM 8A. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures. Based on an evaluation carried out under the
supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, during the 90-day period prior to the filing of this report, our Chief
Executive Officer and Chief Financial Officer believe that our disclosure controls and procedures,
as of the date of this report, and as defined in Securities Exchange Act Rules 13a-14 and 15d-14,
are, to the best of their knowledge, effective. Changes in internal controls. Subsequent to the date of this evaluation, our Chief Executive
Officer and Chief Financial Officer are not aware of any significant changes in our internal
controls over financial reporting, including any corrective actions with regard to significant
deficiencies and material weakness, or in other factors that could significantly affect these
controls to ensure that information required to be disclosed by us, in reports that we file or
submit under the Securities Act, is recorded, processed, summarized, and reported within the time
periods specified in Securities and Exchange Commission rules and regulations. 
 ITEM 8B. OTHER INFORMATION None 26




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##### Table of Contents



PART III 
 ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT Directors and Executive Officers: The directors and executive officers of the Company are as follows: Name
    
    Age
    
    PositionsStephen H. Hollis
    
    
    54
    
    
    Chairman of The Board; President; and DirectorDavid C. Milholm
    
    
    55
    
    
    Chief Financial OfficerD. Steven Degenfelder
    
    
    48
    
    
    Vice PresidentC. K. Adams
    
    
    64
    
    
    Vice President of Engineering and ProductionBeth McBride
    
    
    47
    
    
    Vice President of ExplorationCarol A. Osborne
    
    
    53
    
    
    Corporate SecretaryRoy G. Cohee
    
    
    55
    
    
    DirectorThomas A. Prendergast
    
    
    70
    
    
    Director
 Stephen H. Hollis has served as the President and Chief Executive Officer of the Company since
January 1994 and previously served as a Vice-President of the Company from December 1989 through
January 1994. Mr. Hollis has served as a Director of the Company since December 1989. Mr. Hollis
has served as the Vice-President of Hollis Oil & Gas Co., a small oil and gas company, since
January 1994 and served as the President of Hollis Oil & Gas Co. from June 1986 through January
1994. Mr. Hollis was a geologist for an affiliate of United Nuclear Corporation from 1974 to 1977
and a consulting geologist from 1977 to 1979. In 1979, Mr. Hollis joined Marathon Oil Company and
held various positions until 1986, when he founded Hollis Oil & Gas Co. Mr. Hollis is a past
President of the Wyoming Geological Association and past President of the Rocky Mountain Section of
the AAPG. Mr. Hollis received a B.A. Degree in Geology from the University of Pennsylvania in 1972
and a Masters Degree in Geology from Bryn Mawr College in 1974. David C. Milholm has served as our Chief Financial Officer since May 1, 2003. Prior to joining the
Company, Mr. Milholm served as a financial consultant to several energy companies between 2001 and
2003. From 1995 to 2001, Mr. Milholm served as Vice President, Chief Operating Officer and Chief
Financial Officer of AlloSource, a Denver based biomedical company. Before that Mr. Milholm held
Controller positions with Western Gas Resources, BWAB Inc. and Wintershall Oil and Gas Corp. Mr.
Milholm began his career with Price Waterhouse Cooper in Denver where he became a Certified Public
Accountant. Mr. Milholm received his MBA from the University of Denver in 1973 and his BSBA in
Accounting from Colorado State University in 1972. D. Steven Degenfelder has served as a Vice President since February 1998. Mr. Degenfelder began
his career in the oil and gas business as a roustabout in the oil fields of southeast New Mexico.
After graduating from college, he held various land management positions with Marathon Oil Company
from 1979 to 1981, Paintbrush Petroleum Corporation from 1981 to 1985 and Tyrex Oil Company from
1985 to 1995, where he served as Vice President and Director. Mr. Degenfelder served as Deputy
Director of the Wyoming Office of State Lands and Investments from 1995 to 1997. He currently
serves on the Board of Directors of the Petroleum Association of Wyoming and is Chairman of the Natrona County Planning
and Zoning Commission. He is a member of the American Association of Professional Landmen and is
past 27




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President of the Wyoming Association of Professional Landmen. Mr. Degenfelder is a Certified
Professional Landman and received his degree in Business Administration from Texas Tech University
in 1979. C. K. (Keith) Adams began serving as Vice President of Engineering and Production in the Companys
Casper office in January 2005. Mr. Adams has over 40 years of experience in drilling, completion,
producing facilities design, construction and management of oil and gas operations. Mr. Adams
previously worked for Skelly Oil Company, Mobil Oil Corporation, LeClair Operating Company, and in
1971 through 1985 was a principal in McIlnay  Adams & Company, Inc. which he co-founded and
co-owned. During the period 1985 through 2005, Mr. Adams founded and operated Hydrocarbon
Engineers, a consulting engineering firm based in Casper, WY. From 1993  2005 Mr. Adams formed
and operated Intermountain Production LLC, a small independent oil and gas producer. Mr. Adams is
a Registered Professional Engineer in Wyoming and Colorado. He received his BS/Petroleum
Engineering degree from the University of Wyoming in 1964. Beth McBride began serving as Vice President of Exploration in the Companys Denver office in
January 2005. Ms. McBride served as a Director of the Company from January 25, 2001 until June 8,
2004. She has been President and member of the Board of Directors of Legacy Energy Corporation
since co-founding the company in 1990. Legacy Energy Corporation is a privately held oil and gas
exploration company in Denver, Colorado. Ms. McBride was a geophysicist for Superior Oil Company
in Houston, Texas from 1981 through 1984, and held various exploration positions with Mobil Oil
Corporation in Dallas, Texas and Denver, Colorado from 1985 to 1990. Ms. McBride received a B.Sc.
degree in Geophysical Engineering from Colorado School of Mines in 1980. Carol A. Osborne has served as the Secretary of the Company since January 1996 and previously
served as the Assistant Secretary of the Company from December 1989 until January 1996. In
addition, Ms. Osborne has served as the Companys Office Manager since 1981. Roy G. Cohee has served as a Director of the Company since January 25, 2001. He has served as
President of C & Y Transportation Co. since 1986. C & Y Transportation Co. started business in
Casper, Wyoming in 1966 and is a privately held company focused on the transportation and storage
of oil field equipment and supplies throughout the Western U.S. and Canada. Mr. Cohee has been
with C & Y Transportation Co. since its beginning in 1966. Mr. Cohee was elected to his first term
in the Wyoming House of Representatives in 1998 and currently in his second term and sits on the
House Highways and Transportation Committee and the House Revenue Committee. Thomas A. Prendergast is a Certified Public Accountant and graduated from Fordham University in
1955 with a Bachelor of Science Degree. He has served as a Director of the Company since July
2002. Since 1986, Mr. Prendergast has been Chairman of the Board of Scot Holdings, Inc., a Texas
based investment company. Mr. Prendergast also served as Chairman of Market Guide, Inc. until
September 1999, when it merged with another internet company. Mr. Prendergast has served as a
Director on 16 public boards in various industries. Mr. Prendergast was a founder and President of
the El Paso Community College in El Paso, Texas, where he served for thirteen years. 2004 Meetings and Committees of the Board of Directors Double Eagles Board of Directors held four meetings during the year ended December 31, 2004. Each
director attended at least 75% of the Board and committee meetings he or she was eligible to
attend. The standing committees of the board include the Audit Committee and the Compensation
Committee. The Audit Committee and the Compensation Committee each consists entirely of
non-employee directors. 28




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##### Table of Contents



The Board has not appointed a nominating committee. The Audit Committee reviews the adequacy of systems and procedures for preparing the financial
statements and the suitability of internal financial controls. The Audit Committee also reviews
and approves the scope and performance of the independent auditors work. Thomas A. Prendergast
and Roy G. Cohee serve as members of the Audit Committee and Thomas A. Prendergast serves as
chairman of the Audit Committee. The Audit Committee met four times during the year ended December
31, 2004. Audit Committee Financial Expert Thomas A. Prendergast qualifies as an audit committee financial expert, as defined by the
Securities Exchange Act, and serves on our audit committee. He is independent as defined by the
applicable listing standards of the Nasdaq Stock Market. Audit Committee Charter Our Board of Directors has adopted a written charter for the Audit Committee. The Committee will
review and assess the adequacy of the Audit Committee charter annually. Code of Ethics We have adopted a code of ethics that applies to our executive officers, including Mr. Hollis, our
President and Chief Executive Officer, and Mr. Milholm, our Chief Financial Officer. Section 16(a) Beneficial Ownership Reporting Compliance Section 16 (a) of the Securities Exchange Act of 1934, as amended requires our directors, executive
officers, and holders of more than 10% of our Common Stock to file with the Securities And Exchange
Commission initial reports of ownership and reports of changes in ownership of Common Stock and
other equity securities. We believe that during the fiscal year ended December 31, 2004, our
officers, directors and holders of more than 10% of our outstanding Common Stock complied with all
Section 16(a) filing requirements. In making these statements, we have relied upon the written
representations of our directors and officers. 
 ITEM 10. EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth in summary form the compensation received during each of our last
three completed fiscal years by Stephen H. Hollis, our Chief Executive Officer and President, David
C. Milholm, our Chief Financial Officer, D. Steven Degenfelder, Vice President and by Bob D. Brady,
Jr., former Vice President of the Company (collectively, the Named Executive Officers). Other
than the Named Executive Officers, no employee of the Company received total salary and bonus
exceeding $100,000 during any of the last three fiscal years. 29




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##### Table of Contents



Annual Compensation Long-TermCompensationLong-Term
    
    
    SecuritiesName and
    
    Year
    
    
    Salary (1)
    
    
    Bonus
    
    
    Compensation
    
    
    Underlying
    
    
    Other AnnualPrincipal Position
    
    Ended
    
    
    ($)
    
    
    ($)
    
    
    Restricted Stock
    
    
    Options
    
    
    Compensation ($)Stephen H. Hollis,
    
    
    2004
    
    
    
    135,000
    
    
    
    35,000
    
    
    
    
    
    
    
    35,000
    
    
    
    Chief Executive
    
    
    2003
    
    
    
    108,000
    
    
    
    68,592
    
    
    
    
    
    
    
    12,000
    
    
    
    Officer and President
    
    
    2002
    
    
    
    72,000
    
    
    
    48,000
    
    
    
    
    
    
    
    25,000
    
    
    
    David C. Milholm,
    
    
    2004
    
    
    
    97,500
    
    
    
    19,500
    
    
    
    
    
    
    
    40,000
    
    
    
    Chief Financial
    
    
    2003
    
    
    
    60,000
    
    
    
    10,000
    
    
    
    
    
    
    
    6,743
    
    
    
    Officer
    
    
    2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    D. Steven
    
    
    2004
    
    
    
    97,500
    
    
    
    19,500
    
    
    
    
    
    
    
    30,000
    
    
    
    Degenfelder, Vice
    
    
    2003
    
    
    
91,250
    
    
    
26,849
    
    
    
    
    
    
    
    10,000
    
    
    
    President
    
    
    2002
    
    
    
    101,901
    
    
    
35,441
    
    
    
    
    
    
    
    20,000
    
    
    
    Bob D. Brady, Jr.,
    
    
    2004
    
    
    
    18,333
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vice President (2)
    
    
    2003
    
    
    
    109,000
    
    
    
    13,000
    
    
    
    
    
    
    
    6,743
    
    
    
    2002
    
    
    
    72,674
    
    
    
    
    
    
    $
    48,000
    
    
    
    
    
    
    
    
   (1)
    
    The dollar value of base salary (cash and non-cash) received(2)
    
    Mr. Bradys employment with us terminated on February 20, 2004 Option Grants Table The following table sets forth information concerning individual grants of stock options made
during the fiscal year ended December 31, 2004 to the Companys Named Executive Officers. See
Stock Option Plans. 30




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##### Table of Contents



Option Grants for Year Ended December 31, 2004 % of TotalNumber
    
    Options GrantedOptions
    
    to Employees
    
    Exercise or Base
    
    ExpirationName
    
    Granted
    
    During the Year
    
    Price ($/Shares)
    
    DateStephen H. Hollis,
    
    35,000
    
    19.9%
    
    $14.00
    
    (1)Chief Executive Officer
and PresidentDavid C Milholm
    
    30,000
    
    22.7%
    
    $14.00
    
    (1)Chief Financial Officer
    
    10,000
    
    
    
    $6.31
    
    (2)40,000D. Steven Degenfelder
    
    30,000
    
    17.0%
    
    $14.00
    
    (1)Vice PresidentCarol Osborne
    
    20,000
    
    11.4%
    
    $14.00
    
    (1)Corporate SecretaryPeter M. Mueller
    
    32,500
    
    
    
    $15.20
    
    (3)Chief Operating Officer
    
    10,000
    
    
    
    $15.20
    
    (4)42,500
    
    24.2%
   (1)
    20% of the options issued vest each year for five years beginning March 23, 2005.(2)
    33% of the options issued vest each year for three years
beginning May 1, 2004. Each option will expire on the fifth
anniversary of the date it first became exercisable, if not exercised
earlier.(3)
    Mr. Muellers employment with the Company
terminated February 15, 2005. Each option will expire on the
fifth anniversary of the date it first became exercisable, if not
exercised earlier. Therefore, none of
the options issued will vest since the first vesting date for 20% of the issued options would
have been August 18, 2005.(4)
    The options vested at time of issue and had an expiration date of August 18, 2014. However,
the options must be exercised within 90 days of his termination.
The 90 days will elapse on
May 15, 2005. 31




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##### Table of Contents



Aggregated Option Exercises and Year-End Option Value Table.The following table sets forth information concerning each exercise of stock options during 2004
and unexercised options held by the Named Executive Officers at the year ended December 31, 2004.Aggregated Option Exercises for Year Ended December 31, 2004 and Year-End Option Values Value ofUnexercisedNumber of
    
    
    In-The-MoneyUnexercised Options
    
    
    Options atat Fiscal
    
    
    Fiscal Year-EndNumber of Shares
    
    
    
    
    
    
    Year-End (3)
    
    
    (4)Acquired
    
    
    Value
    
    
    Exercisable/
    
    
    Exercisable/Name
    
    On Exercise (1)
    
    
    Realized (2)
    
    
    Unexercisable
    
    
    UnexercisableStephen H. Hollis,
    
    
    50,000
    
    
    $
    580,950
    
    
    
    12,000/35,000
    
    
    $
    157,920/185,850Chief Executive
Officer and
PresidentD. Steven Degenfelder
    
    
    40,000
    
    
    
    470,760
    
    
    
    10,000/30,000
    
    
    
    131,600/159,300Carol Osborne
    
    
    20,000
    
    
    
    232,380
    
    
    
    6,000/20,000
    
    
    
    78,960/106,200
   (1)
    
    The number of shares received upon exercise of options during the year ended December 31,
2004.(2)
    
    With respect to options exercised during the Companys year ended December 31, 2004, the
dollar value of the difference between the option exercise price and the market value of the
option shares purchased on the date of the exercise of the options.(3)
    
    The total number of unexercised options held as of December 31, 2004, separated between those
options that were exercisable and those options that were not exercisable.(4)
    
    For all unexercised options held as of December 31, 2004, the aggregate dollar value of the
excess of the market value of the stock underlying those options over the exercise price of
those unexercised options, based on the closing price of the Companys Common Stock on
December 31, 2004. The closing bid price for the Companys Common Stock on December 31, 2004
was $ 19.31 per share. Stock Option Plans The 1996 Stock Option Plan. In May 1996, our Board of Directors approved our 1996 Stock Option Plan (the 1996 Plan), which
subsequently was approved by our stockholders. Pursuant to the 1996 Plan, we may grant options to
purchase an aggregate of 200,000 shares of our common stock to key employees, directors, and other
persons who have or are contributing to our success. The options granted pursuant to the 1996 Plan
may be either incentive options qualifying for beneficial tax treatment for the recipient or
non-qualified options. The 1996 Plan is administered by an option committee that determines the
terms of the options subject to the requirements of the 1996 Plan. At December 31, 2003, no
options to purchase shares of Common Stock were outstanding under the 1996 Plan and no additional options could be granted under the
1996 Plan. 32




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##### Table of Contents



The 2000 Stock Option Plan In December 1999, our Board of Directors approved the Companys 2000 Stock Option Plan (the 2000
Plan), which was subsequently approved by our stockholders. Pursuant to the 2000 Plan, we may
grant options to purchase an aggregate of 200,000 shares of our common stock to key employees,
directors, and other persons who have or are contributing to our success. The options granted
pursuant to the 2000 Plan may be either incentive options qualifying for beneficial tax treatment
for the recipient or non-qualified options. The 2000 Plan is administered by an option committee
that determines the terms of the options, subject to the requirements of the 2000 Plan. At
December 31, 2003, options to purchase 145,354 shares of Common Stock were outstanding under the
2000 Plan and no additional options to purchase could be granted under the 2000 Plan. The 2002 Stock Option Plan In December 2001, our Board of Directors approved our 2002 Stock Option Plan (the 2002 Plan),
which subsequently was approved by our stockholders. Pursuant to the 2002 Plan, we may grant
options to purchase an aggregate of 300,000 shares of our common stock to key employees, directors,
and other persons who have or are contributing to our success. The options granted pursuant to the
2002 Plan may be either incentive options qualifying for beneficial tax treatment for the recipient
or non-qualified options. The 2002 Plan is administered by an option committee that determines the
terms of the options subject to the requirements of the 2002 Plan. At December 31, 2003, options
to purchase 11,272 shares of Common Stock were outstanding under the 2002 Plan and options to
purchase an additional 284,728 shares could be granted under the 2002 Plan. 2003 Stock Option and Compensation Plan In November 2002, our Board of Directors approved our 2003 Stock Option And Compensation Plan (the
2003 Plan), which was subsequently approved by our stockholders. Pursuant to the 2003 Plan, we
may grant options to purchase an aggregate of 300,000 shares of our Common Stock to key employees,
directors, and other persons who have or are contributing to our success. The options granted
pursuant to the 2003 Plan may be incentive options qualifying for beneficial tax treatment for the
recipient or they may be non-qualified options. The 2003 Plan is administered by an option
committee that determines the terms of the options subject to the requirements of the 2003 Plan,
except that the option committee shall not administer the 2003 Plan with respect to automatic
grants of shares and options to directors of the Company who are not also employees of the Company
(Outside Directors). The option committee may be the entire Board or a committee of the Board.
Outside Directors automatically receive options to purchase 10,000 shares pursuant to the 2003 Plan
at the time of their election as an Outside Director and thereafter on the first business day after
each annual meeting of stockholders if still an Outside Director at that time. These Outside
Directors options are exercisable at the time of grant. The exercise price for options granted to
Outside Directors is equal to the fair market value of our common stock on the date of grant. All
options granted to Outside Directors expire three years after the date of grant. The 2003 Plan
also provides that Outside Directors will receive 2,000 shares of common stock at the time of their
election as an Outside Director and on the first business day after each annual meeting of
stockholders during the term of the 2003 Plan while they remain Outside Directors. At December 31,
2003, no options to purchase shares of common stock were outstanding and 20,000 shares of common
stock had been issued under the 2003 Plan, and options to purchase an additional 280,000 shares
could be granted under the Plan. Compensation of Outside Directors Outside Directors are paid $500 for each meeting of the Board of Directors that they attend. In
addition, each Outside Director will receive 2,000 shares of common stock and options to purchase
5,000 shares each 33




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##### Table of Contents



year pursuant to the 2003 Plan. Directors also are reimbursed for expenses
incurred in attending meetings and for other expenses incurred on our
behalf. In June 2004, we
issued 2,000 shares of common stock to each outside Director at that time and each Outside Director
at that time was granted options to purchase 5,000 shares of Common
Stock for $13.56 per share.
These options expire June 9, 2009. 
 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table summarizes certain information as of March 16, 2005 with respect to the
beneficial ownership of our common stock (i) by our directors, (ii) by stockholders known by us to
own 5% or more of our common stock, and (iii) by all executive officers and directors as a group. As of March 16, 2005Percentage ofClassName And Address of
    
    Number of
    
    BeneficiallyBeneficial Owner
    
    Shares
    
    OwnedStephen H. Hollis
    
    720,200(1)
    
    8.41%3350 Misty Mountain RoadCasper, Wyoming 82601Roy G. Cohee
    
    36,825(2)
    
    *2046 Rustic DriveCasper, Wyoming 82601Thomas A. Prendergast
    
    38,600(5)
    
    *725 Montoya OakEl Paso, Texas 79932Directors and Officers as a group
    
    988,756(1)(2)(Eight Persons)
    
    (3)(4)(5)
    
    11.49%Hollis Oil & Gas Co. (4)
    
    350,000
    
    4.09%
   *
    
    Less than one percent.(1)
    
    Includes options held by Mr. Hollis to purchase 12,000 shares for $6.15 per share that
expire on February 4, 2006 and options to purchase 7,000 for $14.00 that expire on March
23, 2010 and that became exercisable on March 23, 2005. In addition to 351,200 shares
owned directly by Mr. Hollis, the table above includes 350,000 shares of common stock
owned by Hollis Oil & Gas Co. Mr. Hollis is an officer, director and 51 percent owner of
Hollis Oil & Gas Co.(2)
    
    Includes options to purchase 5,000 shares for $6.15 per share that expire on February 4,
2006 and options to purchase 5,000 shares for $13.56 per share that expire on July 9,
2009. 34




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##### Table of Contents



(3)
    In addition to the shares described in footnotes (1), (2),
and (5), the shares owned by Directors and Executive Officers as a
group, includes (i) 30,270 shares, options to purchase 6,000 shares for $14.00 per share that expire on March 23, 2010 that became
exercisable on March 23, 2005 held by D. Steven Degenfelder, our Vice President; (iii) options
to purchase 6,743 shares for $14.83 per share that expire on November 11, 2006, options to
purchase 3,333 shares for $6.31 per share that expire on May 1, 2009, and options to purchase
6,000 shares for $14.00 per share that expire on March 23, 2010 and that became exercisable on
March 23, 2005 held by David C. Milholm, our Chief Financial Officer; and (iv) 30,100 shares
held by Beth McBride, our Vice President of Exploration.(4)
    The shares owned by Hollis Oil & Gas Company are shown or included as beneficially owned
three times in the table: once as beneficially owned by Hollis Oil & Gas Company, again
under the beneficial ownership of Mr. Hollis, and also as a part of the shares
beneficially owned by Directors and Executive Officers as a group.(5)
    Includes 24,600 shares beneficially owned of record by Scot Holding Inc., which is
wholly-owned by Mr. Prendergasts family of which Mr. Prendergast is a Director and
Chairman, 4,000 shares held by Mr. Prendergast and options to purchase 5,000 shares for
$6.15 per share that expire on February 4, 2006 and options to purchase 5,000 shares for
$13.56 per share that expire on June 9, 2009 held by Mr. Prendergast. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS A company owned by Ken M. Daraie, a member of the Board of Directors until June 8, 2004, acts
as operator on a property owned by us. That company also performs services on other producing
properties in which Double Eagle owns an interest and on drilling projects in which Double
Eagle participates. Amounts paid by Double Eagle to this company were
$50,205 and $68,241, for the year ended December 31, 2004 and
fiscal 2003, respectively. 
 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a)(1) and (a)(2) Financial Statements And Financial Statement Schedules See ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA  Index on page F-1(a) (a)(3) Exhibits. Exhibit Index Exhibit No.
    
    Description3.1(a)
    
    Articles of Incorporation filed with the Maryland Secretary of State on January 23, 2001
(incorporated by reference from Exhibit 3.1(a) of the Companys Annual Report on Form
10-KSB for the year ended August 31, 2001).3.1(b)
    
    Certificate of Correction filed with the Maryland Secretary of State on February 15,
2001 concerning the Articles of Incorporation (incorporated by reference from Exhibit
3.1(b) of the Companys Annual Report on Form 10-KSB for the year ended August 31, 2001).3.1(c)
    
    Articles of Merger filed with the Maryland Secretary of State on February 15, 2001
(incorporated by reference from Exhibit 3.1(c) of the Companys Annual Report on Form 10-
KSB for the year ended August 31, 2001).
 35




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##### Table of Contents



Exhibit No.
    
    Description3.1(d)
    
    Certificate of Correction filed with the Maryland Secretary of State (incorporated by
reference from Exhibit 3 of the Companys Quarterly Report on Form 10-QSB for the quarter
ended November 30, 2001).3.2
    
    Bylaws (incorporated by reference from Exhibit 3.2 of the Companys Annual Report on Form
10-KSB for the year ended August 31, 2001).4.1
    
    Form of Warrant Agreement concerning Common Stock Purchase Warrants (incorporated by
reference from Exhibit 4.3 of the Amendment No. 1 to the Registrants Registration
Statement on Form SB-2 filed on November 27, 1996, SEC Registration No. 333-14011).31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232
    
    Certification Pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 200299.1
    
    Restated Audit Committee Charter99.2
    
    Code of Business Conduct and Ethics99.3
    
    Whistleblower Procedures
 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit Fees The aggregate fees billed for professional services rendered by HEIN & Associates LLP
(HEIN) for its audit of our annual financial statements and its review of our financial
statements included in Forms 10-QSB in fiscal years 2004 and 2003 were $68,025 and $41,640
respectively. Audit Related Fees The aggregate fees billed for audit related services by HEIN in years 2004 and 2003 were
$4,360 and $ 0, respectively. These fees were accrued in connection with the implementation
of new accounting pronouncements. Tax Fees The aggregate fees billed by our independent auditors in each of years 2004 and 2003 for
professional services for tax compliance, tax advice or tax planning were $7,000 and $0,
respectively. 36




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All Other Fees There were no fees billed in by our independent auditors each of years 2003 and 2004 for
professional services other than the services described above. Audit Committee Pre-Approval Our Audit Committee Charter provides that either (i) the Audit Committee shall pre-approve
all auditing and non-auditing services of the independent auditor, subject to de minimus
exceptions for other than audit, review or attest services that are approved by the Audit
Committee prior to completion of the audit; or (ii) that the engagement of the independent
auditor be entered into pursuant to pre-approved policies and procedures established by the
Audit Committee, provided that the policies and procedures are detailed as to the
particular services and the Audit Committee is informed of each service. The Audit
Committee pre-approved 100% of HEIN fees for audit services in year 2003 and 2004.
Audit-related fees for services performed by HEIN in years 2003 and 2004 were not
recognized by us at the time of the engagement to be non-audit services. Except as
indicated above, there were no fees other than audit fees for years 2003 and 2004, and the
auditors engaged performed all the services described above with their full time permanent
employees. 37




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act Of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. DOUBLE EAGLE PETROLEUM CO.Date: March 31, 2005
    
    /s/ Stephen H. Hollis

Stephen H. Hollis,
Chief Executive Officer and President
 Pursuant to the requirements of the Securities Exchange Act Of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated. Date: March 31, 2005
    
    /s/ Stephen H. Hollis

Stephen H. Hollis,
Chief Executive Officer,
President and DirectorDate: March 31, 2005
    
    /s/ David C. Milholm

David C. Milholm
Chief Financial OfficerDate: March 31, 2005
    
    /s/Roy G. CoheeRoy G. Cohee, DirectorDate: March 31, 2005
    
    /s/Thomas A. PrendergastThomas A. Prendergast, Director
 38




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EXHIBIT INDEX Exhibit No.
    
    Description3.1(a)
    
    Articles of Incorporation filed with the Maryland Secretary of State on January 23, 2001
(incorporated by reference from Exhibit 3.1(a) of the Companys Annual Report on Form
10-KSB for the year ended August 31, 2001).3.1(b)
    
    Certificate of Correction filed with the Maryland Secretary of State on February 15,
2001 concerning the Articles of Incorporation (incorporated by reference from Exhibit
3.1(b) of the Companys Annual Report on Form 10-KSB for the year ended August 31, 2001).3.1(c)
    
    Articles of Merger filed with the Maryland Secretary of State on February 15, 2001
(incorporated by reference from Exhibit 3.1(c) of the Companys Annual Report on Form 10-
KSB for the year ended August 31, 2001).3.1(d)
    
    Certificate of Correction filed with the Maryland Secretary of State (incorporated by
reference from Exhibit 3 of the Companys Quarterly Report on Form 10-QSB for the quarter
ended November 30, 2001).3.2
    
    Bylaws (incorporated by reference from Exhibit 3.2 of the Companys Annual Report on Form
10-KSB for the year ended August 31, 2001).4.1
    
    Form of Warrant Agreement concerning Common Stock Purchase Warrants (incorporated by
reference from Exhibit 4.3 of the Amendment No. 1 to the Registrants Registration
Statement on Form SB-2 filed on November 27, 1996, SEC Registration No. 333-14011).31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232
    
    Certification Pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 200299.1
    
    Restated Audit Committee Charter99.2
    
    Code of Business Conduct and Ethics99.3
    
    Whistleblower Procedures