UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December
31, 2008
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission
File No. 1-33571
 DOUBLE EAGLE PETROLEUM CO.
  Maryland
    
    83-0214692(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
      Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  Title of each class
    
    Name of each exchange on which registered$.10 Par Value Common Stock
$.10 Par Value Series A Cumulative Preferred Stock
    
    NASDAQ Global Select Market
NASDAQ Global Select Market
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ
  .




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PAGEPART IItems 1. and 2.
    
    Business and Properties
    
    
    3General
    
    
    3Overview and Strategy
    
    
    3Operations
    
    
    4Reserves
    
    
    9Production
    
    
    10Delivery Contracts
    
    
    11Productive Wells
    
    
    13Drilling Activity
    
    
    13Finding and Development Costs
    
    
    13Acreage
    
    
    14Other Significant Developments Since December 31, 2007
    
    
    15Marketing and Major Customers
    
    
    15Title to Properties
    
    
    16Seasonality
    
    
    16Competition
    
    
    16Government Regulations
    
    
    16Cautionary Information About Forward-looking Statements
    
    
    17Employees and Office Space
    
    
    18Available Information
    
    
    18Glossary
    
    
    19Item 1A.
    
    Risk Factors
    
    
    20Item 1B.
    
    Unresolved Staff Comments
    
    
    25Item 3.
    
    Legal Proceedings
    
    
    25Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    25PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    26Item 6.
    
    Selected Financial Data
    
    
    29Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    46Item 8.
    
    Financial Statements and Supplementary Data
    
    
    48Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    48Item 9A.
    
    Controls and Procedures
    
    
    48Item 9B.
    
    Other Information
    
    
    51PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    51Item 11.
    
    Executive Compensation
    
    
    51Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    51Item 11.
    
    Certain Relationships and Related Transactions
    
    
    51Item 14.
    
    Principal Accountant Fees and Services
    
    
    51PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    51
 2




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##### 



PART I
 
 ITEMS 1. AND 2. BUSINESS AND PROPERTIES
 
 General
  
 Overview and Strategy
     3




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##### 



Operations
   Basin
    
    Gross Acres
    
    Net AcresWashakie Basin
    
    
    122,581
    
    
    
    42,210Huntington Basin
    
    
    192,975
    
    
    
    185,731Greater Green River Basin
    
    
    38,530
    
    
    
    3,264Powder River Basin
    
    
    32,993
    
    
    
    2,956Wind River Basin
    
    
    50,227
    
    
    
    2,243Other
    
    
    88,187
    
    
    
    29,475Total
    
    
    525,493
    
    
    
    265,879
  The Atlantic Rim Coal Bed Natural Gas Project
  4




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Catalina Unit
     5




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##### 



Doty Mountain Unit
  Sun Dog Unit
  Other Units
  The Pinedale Anticline in the Green River Basin of Wyoming
      6




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The Wind River Basin in central Wyoming
  Madden Anticline
    th
  South Waltman
  South Sand Draw
  7




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The Moxa Arch and Other Areas in Southwest Wyoming
  Eastern Washakie Midstream Pipeline LLC
  Exploration Projects
  The Christmas Meadows Prospect in Utah
  Atlantic Rim Exploratory Tests
    Nevada
  8




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##### 



Reserves
  9




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##### 



2008
    
    
    2007
    
    
    2006Proved developed oil reserves (Bbls)
    
    
    295,698
    
    
    
    253,478
    
    
    
    254,346Proved undeveloped oil reserves (Bbls)
    
    
    124,491
    
    
    
    159,334
    
    
    
    105,819Total proved oil reserves (Bbls)
    
    
    420,189
    
    
    
    412,812
    
    
    
    360,165Proved developed gas reserves (Mcf)
    
    
    63,007,126
    
    
    
    44,782,553
    
    
    
    30,075,467Proved undeveloped gas reserves (Mcf)
    
    
    23,323,694
    
    
    
    26,471,312
    
    
    
    18,421,252Total proved gas reserves (Mcf)
    
    
    86,330,820
    
    
    
    71,253,865
    
    
    
    48,496,719Total proved gas equivalents (Mcfe) (1)
    
    
    88,851,954
    
    
    
    73,730,737
    
    
    
    50,657,709Present value of estimated future net cash flows
before income taxes, discounted at 10% (2)
    
    $
    155,766
    
    
    $
    182,594
    
    
    $
    67,639Reconciliation of non-GAAP financial measure:PV-10
    
    $
    155,766
    
    
    $
    182,594
    
    
    $
    67,639Less: Undiscounted income taxes
    
    
    (58,313
    )
    
    
    (96,370
    )
    
    
    (42,578
    )Plus: 10% discount factor
    
    
    24,602
    
    
    
    44,075
    
    
    
    24,972Discounted income taxes
    
    
    (33,711
    )
    
    
    (52,295
    )
    
    
    (17,606
    )Standardized measure of discounted future
net cash flows
    
    $
    122,055
    
    
    $
    130,299
    
    
    $
    50,033
 
 (1)
    
    Oil is converted to Mcf of gas equivalent at one barrel per six Mcf.(2)
    
    The present value of estimated future net cash flows as of each date 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, 2008, 2007, and 2006, respectively, were $4.51 per
MMBtu and $38.67 per barrel of oil; $5.99 per MMBtu and $86.67 per barrel of oil; and $4.70
per MMBtu and $51.29 per barrel of oil.  
 Production
  10




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##### 



For the Year Ended December 31,2008
    
    2007
    
    2006Quantities:Oil (Bbls)
    
    
    25,668
    
    
    
    13,963
    
    
    
    12,729Gas (MMcf)
    
    
    6,560
    
    
    
    2,928
    
    
    
    3,141Average sales priceOil ($/Bbl)
    
    $
    77.24
    
    
    $
    63.17
    
    
    $
    57.90Gas ($/Mcf)
    
    $
    6.08
    
    
    $
    5.18
    
    
    $
    5.57Average Production Cost ($/Mcfe)
    
    $
    1.13
    
    
    $
    1.89
    
    
    $
    1.11Average Production Tax ($/Mcfe)
    
    $
    0.70
    
    
    $
    0.64
    
    
    $
    0.69
 
 Delivery Contracts
  11




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##### 



FORWARD SALES CONTRACTS
 RemainingContractual
    
    Daily
    
    
    
    
    
    
    
    
    
    PriceProperty
    
    Volume
    
    Production
    
    Term
    
    Price
    
    Index (1)Catalina
    
    
    151,000
    
    
    
    1,000
    
    
    
    06/07-05/09
    
    
    $
    5.47
    
    
    CIG181,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    5.84
    
    
    CIG362,000
    
    
    
    2,000
    
    
    
    07/07-06/09
    
    
    $
    5.69
    
    
    CIG304,000
    
    
    
    1,000
    
    
    
    11/07-10/09
    
    
    $
    5.66
    
    
    CIG270,000
    
    
    
    3,000
    
    
    
    11/08-03/09
    
    
    $8.85 floor/
    
    CIG$13.05 ceilingAtlantic Rim
    
    
    212,000
    
    
    
    1,000
    
    
    
    08/07-07/09
    
    
    $
    6.15
    
    
    CIGPinedale Anticline
    
    
    181,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    6.41
    
    
    CIGCompany Total
    
    
    1,661,000
 
 (1)
    
    CIG refers to the Colorado Interstate Gas price as quoted on the first day of each month.   Other Economic Hedges
   RemainingContractual
    
    Daily
    
    
    
    
    
    
    
    
    
    PriceType of Contract
    
    Volume
    
    Production
    
    Term
    
    Price
    
    Index (1)Costless Collar
    
    
    270,000
    
    
    
    3,000
    
    
    
    11/08-3/09
    
    
    $6.50 floor/$13.50 ceiling
    
    CIGOption
    
    
    450,000
    
    
    
    5,000
    
    
    
    11/08-3/09
    
    
    $10.50 floor
    
    NYMEXFixed Price Swap
    
    
    450,000
    
    
    
    5,000
    
    
    
    11/08-3/09
    
    
    $2.27 CIG basis hedge
    
    NYMEXFixed Price Swap
    
    
    2,920,000
    
    
    
    8,000
    
    
    
    1/09-12/09
    
    
    $
    7.34
    
    
    CIGFixed Price Swap
    
    
    2,920,000
    
    
    
    8,000
    
    
    
    1/11-12/11
    
    
    $
    7.07
    
    
    CIGTotal
    
    
    7,010,000
 
 (1)
    
    NYMEX refers to quoted prices on the New York Mercantile Exchange. CIG refers to the
Colorado Interstate Gas price as quoted on the first day of each month.   12




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##### 



Productive Wells
  Oil
    
    GasState
    
    Gross
    
    Net
    
    Gross
    
    NetWyoming
    
    
    86
    
    
    
    5.9940
    
    
    
    1,006
    
    
    
    96.3472Other
    
    
    28
    
    
    
    0.4394
    
    
    
    5
    
    
    
    0.0855Total
    
    
    114
    
    
    
    6.4334
    
    
    
    1,011
    
    
    
    96.4327
 
 Drilling Activity
  For the Year Ended December 31,2008
    
    2007
    
    2006Gross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetExploratoryOil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gas
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    0.50
    
    
    
    2
    
    
    
    1.26Dry Holes
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    0.98
    
    
    
    1
    
    
    
    0.33Water Injection
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    1.48
    
    
    
    3
    
    
    
    1.59DevelopmentOil
    
    
    1
    
    
    
    0.05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gas
    
    
    178
    
    
    
    27.59
    
    
    
    223
    
    
    
    35.06
    
    
    
    87
    
    
    
    7.32Dry Holes
    
    
    1
    
    
    
    0.69
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    0.21Water Injection
    
    
    14
    
    
    
    5.42
    
    
    
    9
    
    
    
    2.72
    
    
    
    4
    
    
    
    0.82Other
    
    
    5
    
    
    
    2.67
    
    
    
    1
    
    
    
    0.08
    
    
    
    
    
    
    
    199
    
    
    
    36.42
    
    
    
    233
    
    
    
    37.86
    
    
    
    92
    
    
    
    8.35Total
    
    
    199
    
    
    
    36.42
    
    
    
    235
    
    
    
    39.34
    
    
    
    95
    
    
    
    9.94
  
 Finding and Development Costs
  13




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##### 



As of December 312008
    
    
    2007
    
    
    2006Proved Developed (MMcfe)
    
    
    17,196
    
    
    
    21,888
    
    
    
    11,863Proved Undeveloped (MMcfe)
    
    
    9,441
    
    
    
    23,317
    
    
    
    (1,468
    )Total Proved Reserves Added
    
    
    26,637
    
    
    
    45,205
    
    
    
    10,395One year finding and development
costs per Mcfe
    
    $
    1.47
    
    
    $
    0.99
    
    
    $
    1.54
   
 Acreage
  Developed Acres (1)
    
    Undeveloped Acres (2)
    
    Total AcresState
    
    Gross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetWyoming
    
    
    121,101
    
    
    
    9,125
    
    
    
    109,950
    
    
    
    46,021
    
    
    
    231,051
    
    
    
    55,146Nevada
    
    
    
    
    
    
    
    
    
    
    192,975
    
    
    
    185,731
    
    
    
    192,975
    
    
    
    185,731Other
    
    
    2,906
    
    
    
    66
    
    
    
    51,612
    
    
    
    22,681
    
    
    
    54,518
    
    
    
    22,747Total
    
    
    124,007
    
    
    
    9,191
    
    
    
    354,537
    
    
    
    254,433
    
    
    
    478,544
    
    
    
    263,624
  Developed Acres (1)
    
    Undeveloped Acres (2)
    
    Total AcresState
    
    Gross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetWyoming
    
    
    10,464
    
    
    
    162
    
    
    
    27,763
    
    
    
    1,547
    
    
    
    38,227
    
    
    
    1,709Other
    
    
    3,089
    
    
    
    63
    
    
    
    5,633
    
    
    
    483
    
    
    
    8,722
    
    
    
    546Total
    
    
    13,553
    
    
    
    225
    
    
    
    33,396
    
    
    
    2,030
    
    
    
    46,949
    
    
    
    2,255
 
 (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. 14




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Expiring AcreageFiscal Year
    
    Gross
    
    Net2009
    
    
    26,392
    
    
    
    9,0562010
    
    
    30,085
    
    
    
    12,2752011 and thereafter
    
    
    469,016
    
    
    
    244,548Total
    
    
    525,493
    
    
    
    265,879
 
 Other Significant Developments since December 31, 2007
   
 Marketing and Major Customers
   15




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Title to Properties
  
 Seasonality
   
 Competition
  
 Government Regulations
    16




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Environmental Laws and Regulations
   
 Cautionary Information about Forward-Looking Statements
  
    
    The changing political environment in which we operate
    
    Our ability to continue to develop our Atlantic Rim project;
    
    Our ability to obtain, or a decline in, oil or gas production, or a decline in oil or
gas prices;
    
    Our ability to maintain adequate liquidity in connection with low oil and gas prices;
 17




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
    
    Incorrect estimates of required capital expenditures;
    
    Increases in the cost of drilling, completion and gas collection or other costs of
production and operations;
    
    Our ability to increase our natural gas and oil reserves;
    
    The amount and timing of capital deployment in new investment opportunities;
    
    The volumes of production from our oil and gas development properties, which may be
dependent upon issuance by federal, state, and tribal governments, or agencies thereof, of
drilling, environmental and other permits, and the availability of specialized contractors,
work force, and equipment;
    
    Our future capital requirements and availability of capital resources to fund capital
expenditures;
    
    Our ability to successfully integrate and profitably operate any future acquisitions;
    
    The possibility that we may be required to take impairment charges to reduce the
carrying value of some of our long-lived assets when indicators of impairment emerge;
    
    Numerous uncertainties inherent in estimating quantities of proved oil and gas reserves
and actual future production rates and associated costs;
    
    Our ability to remedy any deficiencies that may be identified in the review of our
internal controls;
    
    The credit worthiness of third-parties which we enter into business agreements with;
    
    General economic conditions, including the current financial crisis, tax rates or
policies and inflation rates;
    
    Changes in or compliance with laws and regulations, particularly those relating to
taxation, safety and protection of the environment;
    
    Weather and other natural phenomena;
    
    Industry and market changes, including the impact of consolidations and changes in
competition;
    
    The effect of accounting policies issued periodically by accounting standard-setting
bodies;
    
    The actions of third party co-owners of interests in properties in which we also own an
interest;
    
    The cost and effects on our business, including insurance, resulting from terrorist
actions or natural disasters and responses to such actions or events;
    
    The volatility of our stock price; and
    
    The outcome of any future litigation or similar disputes and the impact on any such
outcome or related settlements.
   
 Employees and Office Space
  
 Available Information
 http://www.dble.us/
 
 18




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http://www.dble.us/
 Information on our website is not incorporated by reference into this Form 10-K and should not be
considered a part of this document.
 
 Glossary
  Bbl.
 Bcf.
 Bcfe.
 Darcy.
 Development well.
 Dry hole
 Estimated net proved reserves.
 Exploratory well.
 Farmout
 Field.
 Gross acre.
 Gross well.
 MBbl.
 Mcf.
 Millidarcy.
 Mcfe
 MMcf.
 19




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##### 



MMcfe.
 MMBtu.
 Net acres or net wells.
 Permeability.
 Productive well.
 Proved developed reserves.
 Proved reserves.
 Proved undeveloped reserves.
 PV-10 value.
 Recompletion.
 Royalty.
 Royalty interest.
 Undeveloped acreage.
 Working interest
 
 ITEM 1A. RISK FACTORS
  20




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##### 



We may be unable to develop our existing acreage due to the change in the current political
environment and administration.
  We may be unable to further develop our coal bed methane projects in the Atlantic Rim, which would
have a significant adverse effect on our current growth opportunities.
  We cannot predict the future price of oil and natural gas and an extended decline in prices could
hurt our profitability, financial condition and ability to grow.
  We may be unable to fund our planned capital expenditures.
  21




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##### 




    
    general economic and financial market conditions;
    
    oil and natural gas prices; and
    
    our market value and operating performance.
  Our credit facility has borrowing base restrictions, which could adversely affect our operations.
   The unavailability or high cost of drilling rigs, equipment, supplies, personnel and other oil
field services could adversely affect our ability to execute our exploration and development plans
on a timely basis and within our budget.
  We do not control all of our operations and development projects.
   
    
    timing and amount of capital expenditures;
    
    expertise and financial resources;
    
    inclusion of other participants in drilling wells; and
    
    use of technology.
  Competition in the oil and natural gas industry is intense, and many of our competitors have
greater financial and other resources than we do.
  
    
    seeking to acquire desirable producing properties or new leases for future exploration;
    
    seeking to acquire the equipment and expertise necessary to develop and operate our
properties; and
    
    Retention and hiring of skilled employees.
 22




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##### 



We could be adversely impacted by a variety of changes in the oil and gas market which are beyond
our control.
  We may be unable to find additional reserves, which would adversely impact our ability to sustain
production levels.
  New government regulation and environmental risks could increase our cost of doing business.
  
    
    prevention of waste;
    
    discharge of materials into the environment;
    
    conservation of oil and natural gas, pollution, permits for drilling operations,
drilling bonds, reports concerning operations;
    
    spacing of wells; and
    
    unitization and pooling of properties.
  The exploration, development and operation of oil and gas properties involve substantial risks that
may result in a total loss of investment.
  
    
    unexpected drilling conditions;
    
    pressure or irregularities in formations;
    
    equipment failures or accidents;
    
    adverse changes in prices;
    
    weather conditions;
    
    shortages in experienced labor; and
    
    shortages or delays in the delivery of equipment.
  23




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##### 




    
    unusual or unexpected geological formations, pressures, equipment failures or accidents,
fires, explosions, blowouts, cratering, pollution and other environmental risks;
    
    shortages or delays in the availability of drilling rigs and the delivery of equipment;
and
    
    loss of circulation of drilling fluids or other conditions.
  Our industry experiences numerous operating hazards that could result in substantial losses.
   Our prices, net income and cash flows may be impacted adversely by new taxes.
  Our reserves and future net revenues may differ significantly from our estimates.
  Acquisitions are a part of our business strategy and are subject to the risks and uncertainties of
evaluating recoverable reserves and potential liabilities.
   24




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##### 



We depend on key personnel.
  Declining economic conditions could negatively impact our business.
  The trading volatility and price of our common stock may be affected by many factors.
  
    
    The current financial crisis, which has caused significant market volatility worldwide;
    
    Governmental action or inaction in light of key indicators of economic activity or
events that can significantly influence U.S. financial markets, and media reports and
commentary about economic or other matters, even when the matter in question does not
directly relate to our business; and
    
    Trading activity in our common stock, which can be a reflection of changes in the prices
for oil and gas, or market commentary or expectations about our business and overall
industry.
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  25




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##### 



PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURTIES.
 Common Stock
 Market Information.
  Quarter Ended
    
    High
    
    LowDecember 31, 2008
    
    $
    13.76
    
    
    $
    4.02September 30, 2008
    
    
    18.99
    
    
    
    12.55June 30, 2008
    
    
    19.91
    
    
    
    16.91March 31, 2008
    
    
    17.25
    
    
    
    13.05December 31, 2007
    
    $
    18.25
    
    
    $
    13.13September 30, 2007
    
    
    18.41
    
    
    
    13.77June 30, 2007
    
    
    21.10
    
    
    
    16.81March 31, 2007
    
    
    24.86
    
    
    
    17.59
  Holders
 Dividends
 Equity Compensation Plans.
 (c)Number of securities(a)
    
    
    
    
    
    
    remaining availableNumber of
    
    
    (b)
    
    
    for future issuancesecurities to be
    
    
    Weighted-
    
    
    under equityissued upon
    
    
    average
    
    
    compensation plansexercise of
    
    
    exercise price
    
    
    (excluding securitiesoutstanding
    
    
    of outstanding
    
    
    reflected in columnPlan category
    
    options
    
    
    options
    
    
    (a))Equity Compensation plans
approved by security holders
    
    
    626,897
    
    
    $
    15.68
    
    
    
    265,203
    (1)
 
 (1)
    
    Represents no shares available for issuance under the 1996 Stock Option Plan, the 2000 Stock
Option Plan, and 2002 Stock Option Plan; 18,099 shares available for issuance under the 2003 Stock
Option and Compensation Plan and 247,104 shares available for issuance under the 2007 Stock
Incentive Plan. 26




---



##### 



Performance graphComparison of Five-Year Cumulative Total Return Among
Double Eagle Petroleum Co., the Standard and Poors 500 Stock Index, and the Peer Group Index
Total Return (Stock Price Plus Reinvested Dividends)
 
 December 31,January 1, 2004
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008Double Eagle
Petroleum
    
    $
    100.00
    
    
    $
    126.62
    
    
    $
    133.77
    
    
    $
    160.98
    
    
    $
    103.34
    
    
    $
    46.03Peer Group
    
    $
    100.00
    
    
    $
    116.77
    
    
    $
    166.32
    
    
    $
    139.08
    
    
    $
    120.76
    
    
    $
    45.73S&P500
    
    $
    100.00
    
    
    $
    108.99
    
    
    $
    112.26
    
    
    $
    127.55
    
    
    $
    132.06
    
    
    $
    81.23
   Series A Cumulative Preferred Stock
 Market Information.
 27




---



##### 



Quarter Ended
    
    High
    
    LowDecember 31, 2008
    
    $
    21.35
    
    
    $
    14.00September 30, 2008
    
    
    19.75
    
    
    
    18.79June 30, 2008
    
    
    27.00
    
    
    
    25.50March 31, 2008
    
    
    30.20
    
    
    
    23.40December 31, 2007
    
    $
    26.95
    
    
    $
    24.50September 30, 2007
    
    
    28.25
    
    
    
    23.56
  Holders
 Dividends
 Redemption Provisions.
 Redemption Date on or Before
    
    Redemption PriceJune 30, 2009
    
    $
    25.75June 30, 2010
    
    $
    25.50June 30, 2011
    
    $
    25.25June 30, 2012 or thereafter
    
    $
    25.00
 Liquidation Preference.
 Voting Rights.
 28




---



##### 



ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004(In thousands, except per share and volume data)Statement of Operations InformationTotal operating revenues
    
    $
    49,578
    
    
    $
    17,197
    
    
    $
    19,032
    
    
    $
    20,496
    
    
    $
    13,267Income (loss) from operations (1)
    
    $
    15,949
    
    
    $
    (17,909
    )
    
    $
    3,695
    
    
    $
    5,985
    
    
    $
    4,451Net income (loss)
    
    $
    10,381
    
    
    $
    (11,603
    )
    
    $
    2,109
    
    
    $
    3,965
    
    
    $
    4,028Net income (loss) attributable to common stock
    
    $
    6,658
    
    
    $
    (13,413
    )
    
    $
    2,109
    
    
    $
    3,965
    
    
    $
    4,028Net income (loss) per common share:Basic
    
    $
    0.73
    
    
    $
    (1.47
    )
    
    $
    0.24
    
    
    $
    0.46
    
    
    $
    0.48Diluted
    
    $
    0.73
    
    
    $
    (1.47
    )
    
    $
    0.24
    
    
    $
    0.46
    
    
    $
    0.47Balance Sheet InformationTotal assets
    
    $
    171,989
    
    
    $
    84,597
    
    
    $
    64,406
    
    
    $
    44,211
    
    
    $
    30,969Line of credit
    
    $
    24,639
    
    
    $
    3,445
    
    
    $
    13,221
    
    
    $
    3,000
    
    
    $
    Total long-term liabilities
    
    $
    33,011
    
    
    $
    5,895
    
    
    $
    17,184
    
    
    $
    5,732
    
    
    $
    583Stockholders equity
    
    $
    54,903
    
    
    $
    28,624
    
    
    $
    33,042
    
    
    $
    29,778
    
    
    $
    24,927Cash Flow InformationNet cash provided by (used in):Operating activities
    
    $
    22,904
    
    
    $
    5,166
    
    
    $
    10,951
    
    
    $
    10,319
    
    
    $
    7,434Investing activities
    
    $
    (40,778
    )
    
    $
    (42,056
    )
    
    $
    (22,241
    )
    
    $
    (16,259
    )
    
    $
    (7,377
    )Financing activities
    
    $
    17,749
    
    
    $
    36,404
    
    
    $
    10,470
    
    
    $
    3,701
    
    
    $
    692Total proved reservesOil (MBbl)
    
    
    420
    
    
    
    413
    
    
    
    360
    
    
    
    329
    
    
    
    278Gas (MMcf)
    
    
    86,331
    
    
    
    71,254
    
    
    
    48,497
    
    
    
    47,234
    
    
    
    34,935MMcfe
    
    
    88,852
    
    
    
    73,731
    
    
    
    50,657
    
    
    
    49,207
    
    
    
    36,603Net production volumesOil (Bbl)
    
    
    25,668
    
    
    
    13,963
    
    
    
    12,729
    
    
    
    15,470
    
    
    
    16,886Gas (Mcf)
    
    
    6,559,662
    
    
    
    2,928,335
    
    
    
    3,140,653
    
    
    
    2,976,094
    
    
    
    2,559,557Mcfe
    
    
    6,713,670
    
    
    
    3,012,113
    
    
    
    3,217,027
    
    
    
    3,068,914
    
    
    
    2,660,873
 
 (1)
    
    Effective January 1, 2006, Double Eagle adopted the provisions of Statement of Financial
Accounting Standards No. 123 (revised 2004)  Share-Based Payment (SFAS
123(R)), 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (Amounts in thousands of dollars, except share, per share data, and amounts per unit of production)
 The following discussion includes forward-looking statements. Such statements are described in the
section entitled Forward-Looking Statements on page 17 of this Form 10-K.
 BUSINESS OVERVIEW
   29




---



##### 



Developments since December 31, 2007:
   
    
    At our Company-operated Catalina Unit, located within the Atlantic Rim, we completed
and brought on-line a total of 32 new producing wells. Twenty-seven of the new wells were
drilled as part of the 2007 drilling program, and were completed and brought on-line for
production during the first six months of 2008. In the third and fourth quarter of 2008,
we also drilled 24 additional potential producing wells as part of our 2008 drilling
season, of which five were completed and producing by December 31, 2008. One of the 24
potential producing wells drilled was determined to be a developmental dry hole and was
plugged and abandoned. This well encountered a major structural fault, resulting in the
absence of mesaverde coals at that location. Knowing the location of this fault of the
fault will assist us in locating future well positions. Wells beyond this fault are
believed to be productive. We expect to have the remaining wells completed and available
for production by the end of the first quarter 2009. Upon reaching the total drilled
depth of the 24 wells spud in the 2008 drilling program, our working interest in the
Catalina Unit decreased from 73.84% to 68.35%. Our working interest will continue to
adjust upon expansion of the unit.
    
    At the Sun Dog Unit, in which the Company currently has a working interest of 9.75%, 64
wells were brought on-line for production during 2008. We also participated in the
drilling of 45 additional producing wells within the Sun Dog Unit. Drilling is complete
on these new wells, and the operator expects the wells to be completed and producing by
the end of the second quarter of 2009. At the Doty Mountain Unit, in which Double Eagle
has 18.00% working interest, the operator drilled 18 new producing wells during 2008. In
addition, the operator began a test pilot program for fracture stimulation of existing
wells. We are currently awaiting results of this study.
    
    In the Mesa B Unit at the Pinedale Anticline, 22 new wells were brought on-line
during the second and third quarters of 2008. We are also participating in the drilling
of 20 additional wells. These wells were spud in the fall of 2008, and are expected to be
completed in 2009 at a rate of four wells in May, four wells in August, four wells in
September, two wells in October, and six wells in November.
    
    In the Wind River Basin, we completed the Waltman 34-24 well in June, 2008. This well
is a 40-acre offset to the Chevron Waltman 96 well that has been producing since early
2007. However, due to unfavorable hole conditions, we were unable to install casing to
the wells total depth. The well was completed at a depth of 4,349-4,374 and we intend to
produce the upper gas zone in the second quarter of 2009. In August 2008, we began
drilling the Waltman 24-24 well. We expect to complete the well at a depth of between
8,500 and 9,100 feet, and to begin producing in both the upper and lower gas zones in the
second quarter of 2009.
    
    On the Moxa Arch, we participated in the drilling of 47 development wells in 2008, with
working interests ranging from 0.14% to 6.02% in 2008.
  30




---



##### 



Our Industry:
   
    
    We attempt to reduce our overall exposure to commodity price fluctuations through the
use of various fixed delivery contracts and other economic hedging instruments for some of
our production. The duration of our various hedging instruments depends on our view of
market conditions, available contract prices and our operating strategy. Use of such
hedging instruments may limit the risk of fluctuating cash flows. As of December 31, 2008,
we had sales delivery contracts in effect for approximately 61% of our current daily net
production.
    
    We have an inventory of attractive drilling locations, allowing us to grow reserves and
replace and expand production organically without having to rely solely on acquisitions.
Drilling opportunities in both the Atlantic Rim and the Pinedale Anticline are expected to
last for several years.
 Development Outlook for 2009:
  Atlantic Rim.
 Pinedale Anticline.
 31




---



##### 



Other.
   32




---



##### 



RESULTS OF OPERATIONS
  As of and for the year ended December 31,
    
    
    Percent change between years2008
    
    
    2007
    
    
    2006
    
    
    2007 to 2008
    
    
    2006 to 2007Total proved reservesOil (MBbl)
    
    
    420
    
    
    
    413
    
    
    
    360
    
    
    
    2
    %
    
    
    15
    %Gas (MMcf)
    
    
    86,331
    
    
    
    71,254
    
    
    
    48,497
    
    
    
    21
    %
    
    
    47
    %MMcfe
    
    
    88,852
    
    
    
    73,731
    
    
    
    50,657
    
    
    
    21
    %
    
    
    46
    %Net production volumesOil (Bbl)
    
    
    25,668
    
    
    
    13,963
    
    
    
    12,729
    
    
    
    84
    %
    
    
    10
    %Gas (Mcf)
    
    
    6,559,662
    
    
    
    2,928,335
    
    
    
    3,140,653
    
    
    
    124
    %
    
    
    -7
    %Mcfe
    
    
    6,713,670
    
    
    
    3,012,113
    
    
    
    3,217,027
    
    
    
    123
    %
    
    
    -6
    %Average daily productionMcfe
    
    
    18,343
    
    
    
    8,252
    
    
    
    8,814
    
    
    
    122
    %
    
    
    -6
    %Average price per unit productionOil (Bbl)
    
    $
    77.24
    
    
    $
    63.17
    
    
    $
    57.90
    
    
    
    22
    %
    
    
    9
    %Gas (Mcf)
    
    $
    6.08
    
    
    $
    5.18
    
    
    $
    5.57
    
    
    
    17
    %
    
    
    -7
    %Mcfe
    
    $
    6.23
    
    
    $
    5.33
    
    
    $
    5.67
    
    
    
    17
    %
    
    
    -6
    %Oil and gas production revenuesOil revenues
    
    $
    1,983
    
    
    $
    882
    
    
    $
    737
    
    
    
    125
    %
    
    
    20
    %Gas revenues
    
    
    37,166
    
    
    
    15,162
    
    
    
    17,491
    
    
    
    145
    %
    
    
    -13
    %Total
    
    $
    39,149
    
    
    $
    16,044
    
    
    $
    18,228
    
    
    
    144
    %
    
    
    -12
    %Oil and gas production costsProduction costs
    
    $
    7,601
    
    
    $
    5,696
    
    
    $
    3,560
    
    
    
    33
    %
    
    
    60
    %Production taxes
    
    
    4,701
    
    
    
    1,933
    
    
    
    2,209
    
    
    
    143
    %
    
    
    -12
    %Total
    
    $
    12,302
    
    
    $
    7,629
    
    
    $
    5,769
    
    
    
    61
    %
    
    
    32
    %Data on a per Mcfe basisAverage price (1)
    
    $
    6.23
    
    
    $
    5.33
    
    
    $
    5.67
    
    
    
    17
    %
    
    
    -6
    %Production costs
    
    
    1.13
    
    
    
    1.89
    
    
    
    1.11
    
    
    
    -40
    %
    
    
    70
    %Production taxes
    
    
    0.70
    
    
    
    0.64
    
    
    
    0.69
    
    
    
    9
    %
    
    
    -7
    %Depletion and amortization
    
    
    1.65
    
    
    
    1.51
    
    
    
    1.29
    
    
    
    9
    %
    
    
    17
    %Total operating costs
    
    
    3.48
    
    
    
    4.04
    
    
    
    3.09
    
    
    
    -14
    %
    
    
    31
    %Gross margin
    
    $
    2.75
    
    
    $
    1.29
    
    
    
    2.58
    
    
    
    113
    %
    
    
    -50
    %Gross margin percentage
    
    
    44
    %
    
    
    24
    %
    
    
    46
    %
    
    
    82
    %
    
    
    -47
    %
 
 (1)
    
    Our average gas price per Mcfe realized for the years ended December 31, 2008, 2007 and 2006
is calculated by summing a) production revenue received from third parties for sale of our
gas, included in the oil and gas sales line item on the Consolidated Statement of Operations,
b) settlement of our cash flow hedges included within oil and gas sales on the Consolidated
Statement of Operations and c) realized gain/loss on our economic hedges, which due to
accounting rules is included in our price risk management activities line on the Consolidated
Statement of Operations, totaling $2,698, $0 and $0, for the years ended December 31, 2008,
2007 and 2006, respectively. This amount is divided by the total Mcfe volume for the period. Year ended December 31, 2008 compared to the year ended December 31, 2007
 Oil and gas sales volume and price comparisons
  33




---



##### 



Transportation and gathering revenue
  Price risk management
  34




---



##### 



Oil and gas production expenses, depreciation, depletion and amortization
   Pipeline operating costs
  Dry hole and impairment
  General and administrative
  Income taxes
  35




---



##### 



Year ended December 31, 2007 compared to the year ended December 31, 2006
 Oil and gas sales volume and price comparisons
     Transportation and gathering revenue
  Oil and gas production expenses, depreciation, depletion and amortization
  36




---



##### 



Pipeline operating costs
  Dry hole and impairment
   General and administrative
  Income taxes
  LIQUIDITY AND CAPITAL RESOURCES
  Our Credit Facility at December 31, 2008
  37




---



##### 



Capital Expenditures
  Year Ended December 31,2008
    
    
    2007Property acquisition costs
    
    $
    30
    
    
    $
    316Exploration
    
    
    536
    
    
    
    3,600Development
    
    
    64,462
    
    
    
    41,337$
    65,028
    
    
    $
    45,253
 38




---



##### 



Year Ended December 31, 2008
      Year Ended December 31, 2007
   Calendar 2009
  39




---



##### 



Cash Flows
  As of and for the Years Ended December 31,
    
    Percent Change Between Years2008
    
    2007
    
    2006
    
    2007 to 2008
    
    2006 to 2007Financial informationWorking capital
    
    $
    (6,314
    )
    
    $
    (7,012
    )
    
    $
    (7,006
    )
    
    
    10
    %
    
    
    0
    %Line of credit
    
    $
    24,639
    
    
    $
    3,445
    
    
    $
    13,221
    
    
    
    615
    %
    
    
    -74
    %Stockholders equity
    
    $
    54,903
    
    
    $
    28,624
    
    
    $
    33,042
    
    
    
    92
    %
    
    
    -13
    %Net income (loss) attributable to common stock
    
    $
    6,658
    
    
    $
    (13,413
    )
    
    $
    2,109
    
    
    
    -150
    %
    
    
    -736
    %Net income (loss) per common share:Basic
    
    $
    0.73
    
    
    $
    (1.47
    )
    
    $
    0.24
    
    
    
    150
    %
    
    
    -713
    %Diluted
    
    $
    0.73
    
    
    $
    (1.47
    )
    
    $
    0.24
    
    
    
    150
    %
    
    
    -713
    %Net cash provided by
operating activities
    
    $
    22,904
    
    
    $
    5,166
    
    
    $
    10,951
    
    
    
    343
    %
    
    
    -53
    %Net cash used in
investing activities
    
    $
    (40,778
    )
    
    $
    (42,056
    )
    
    $
    (22,241
    )
    
    
    -3
    %
    
    
    89
    %Net cash provided by
financing activities
    
    $
    17,749
    
    
    $
    36,404
    
    
    $
    10,470
    
    
    
    -51
    %
    
    
    248
    %
 Net cash provided by operating activities
     Net cash used in investing activities
  40




---



##### 



Net cash used in financing activities
  Contractual Obligations
  One year
    
    
    2  3
    
    
    4  5
    
    
    More thanTotal
    
    
    or less
    
    
    Years
    
    
    Years
    
    
    5 YearsLine of credit (a)
    
    $
    24,639
    
    
    $
    
    
    
    $
    24,639
    
    
    $
    
    
    
    $
    Interest on line of credit (b)
    
    
    1,777
    
    
    
    1,124
    
    
    
    653
    
    
    
    
    
    
    
    Capital leases
    
    
    2,259
    
    
    
    753
    
    
    
    753
    
    
    
    753Operating leases
    
    
    7,430
    
    
    
    1,566
    
    
    
    3,138
    
    
    
    2,725
    
    
    
    Total contractual cash
commitments
    
    $
    36,105
    
    
    $
    3,443
    
    
    $
    29,183
    
    
    $
    3,478
    
    

    $
    
 
 (a)
    
    The amount listed reflects the balance outstanding as of December 31, 2008. Any
balance outstanding at July 31, 2010, is due at that time.(b)
    
    The interest rate assumed on the credit facility is 4.5% per annum, which is the floor
rate from our new credit facility that was effective February 26, 2009. Off-Balance Sheet Arrangements
   CONTRACTED VOLUMES
 Derivative Instruments
   41




---



##### 



FORWARD SALES CONTRACTS
 RemainingContractual
    
    
    Daily
    
    
    
    
    
    
    
    
    
    
    PriceProperty
    
    Volume
    
    
    Production
    
    
    Term
    
    
    Price
    
    
    Index (1)Catalina
    
    
    151,000
    
    
    
    1,000
    
    
    
    06/07-05/09
    
    
    $
    5.47
    
    
    CIG181,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    5.84
    
    
    CIG362,000
    
    
    
    2,000
    
    
    
    07/07-06/09
    
    
    $
    5.69
    
    
    CIG304,000
    
    
    
    1,000
    
    
    
    11/07-10/09
    
    
    $
    5.66
    
    
    CIG270,000
    
    
    
    3,000
    
    
    
    11/08-03/09
    
    
    $8.85 floor/$13.05 ceiling
    
    
    CIGAtlantic Rim
    
    
    212,000
    
    
    
    1,000
    
    
    
    08/07-07/09
    
    
    $
    6.15
    
    
    CIGPinedale Anticline
    
    
    181,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    6.41
    
    
    CIGCompany Total
    
    
    1,661,000
 
 (1)
    
    CIG refers to the Colorado Interstate Gas price as quoted on the first day of each month.   RemainingContractual
    
    
    Daily
    
    
    
    
    
    
    
    
    
    
    PriceType of Contract
    
    Volume
    
    
    Production
    
    
    Term
    
    
    Price
    
    
    Index (1)Costless Collar
    
    
    270,000
    
    
    
    3,000
    
    
    
    11/08-3/09
    
    
    $6.50 floor/$13.50 ceiling
    
    CIGOption
    
    
    450,000
    
    
    
    5,000
    
    
    
    11/08-3/09
    
    
    $10.50 floor
    
    NYMEXFixed Price Swap
    
    
    450,000
    
    
    
    5,000
    
    
    
    11/08-3/09
    
    
    $2.27 CIG basis hedge
    
    NYMEXFixed Price Swap
    
    
    2,920,000
    
    
    
    8,000
    
    
    
    1/09-12/09
    
    
    $
    7.34
    
    
    CIGFixed Price Swap
    
    
    2,920,000
    
    
    
    8,000
    
    
    
    1/11-12/11
    
    
    $
    7.07
    
    
    CIGTotal
    
    
    7,010,000
 
 (1)
    
    NYMEX refers to quoted prices on the New York Mercantile Exchange. CIG refers to the
Colorado Interstate Gas price as quoted on the first day of each month.    42




---



##### 



Other Volumes Contracted
  CRITICAL ACCOUNTING ESTIMATES
  Successful Efforts Method of Accounting
    Reserve Estimates
  43




---



##### 



Impairment of Long-Lived Assets
  Asset Retirement Obligation
  Derivative Instruments
   Fair Value of Measurements
 Recently Issued Accounting Pronouncements.
  44




---



##### 



Share-Based Compensation
    Recently Issued Accounting Pronouncements
   45




---



##### 



New Accounting Pronouncements
      
 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risks
   46




---



##### 



Commodity Price Risks
  Risk Policy and Control
     FORWARD SALES CONTRACTS
 RemainingContractual
    
    
    Daily
    
    
    
    
    
    
    
    
    
    
    PriceProperty
    
    Volume
    
    
    Production
    
    
    Term
    
    
    Price
    
    
    Index (1)Catalina
    
    
    151,000
    
    
    
    1,000
    
    
    
    06/07-05/09
    
    
    $
    5.47
    
    
    CIG181,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    5.84
    
    
    CIG362,000
    
    
    
    2,000
    
    
    
    07/07-06/09
    
    
    $
    5.69
    
    
    CIG304,000
    
    
    
    1,000
    
    
    
    11/07-10/09
    
    
    $
    5.66
    
    
    CIG270,000
    
    
    
    3,000
    
    
    
    11/08-03/09
    
    

    $8.85 floor/$13.05 ceiling
    
    
    CIGAtlantic Rim
    
    
    212,000
    
    
    
    1,000
    
    
    
    08/07-07/09
    
    
    $
    6.15
    
    
    CIGPinedale Anticline
    
    
    181,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    6.41
    
    
    CIGCompany Total
    
    
    1,661,000
 
 (1)
    
    CIG refers to the Colorado Interstate Gas price as quoted on the first day of each month.  47




---



##### 



RemainingContractual
    
    
    Daily
    
    
    
    
    
    
    
    
    
    
    PriceType of Contract
    
    Volume
    
    
    Production
    
    
    Term
    
    
    Price
    
    
    Index (1)Costless Collar
    
    
    270,000
    
    
    
    3,000
    
    
    
    11/08-3/09
    
    
    $6.50 floor/$13.50 ceiling
    
    CIGOption
    
    
    450,000
    
    
    
    5,000
    
    
    
    11/08-3/09
    
    
    $10.50 floor
    
    NYMEXFixed Price Swap
    
    
    450,000
    
    
    
    5,000
    
    
    
    11/08-3/09
    
    
    $2.27 CIG basis hedge
    
    NYMEXFixed Price Swap
    
    
    2,920,000
    
    
    
    8,000
    
    
    
    1/09-12/09
    
    
    $
    7.34
    
    
    CIGFixed Price Swap
    
    
    2,920,000
    
    
    
    8,000
    
    
    
    1/11-12/11
    
    
    $
    7.07
    
    
    CIGTotal
    
    
    7,010,000
 
 (1)
    
    NYMEX refers to quoted prices on the New York Mercantile Exchange. CIG refers to the
Colorado Interstate Gas price as quoted on the first day of each month.    
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  48




---



##### 



Managements Annual Report on Internal Control Over Financial Reporting
  (i)
    
    pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;(ii)
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and(iii)
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the financial statements.
  Internal
Control-Integrated Framework
  Changes in Internal Control over Financial Reporting
   49




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated
Framework Managements Report on Internal Control Over Financial Reporting
    Internal
Control  Integrated Framework
  HEIN & ASSOCIATES LLP
 
 50




---



##### 



ITEM 9B. OTHER INFORMATION
 .
 
 PART III
 Pursuant to instruction G(3) to Form 10-K, the following Items 10,11,12,11 and 14 are incorporated
by reference to the information provided in Double Eagles definitive proxy statement for the 2009
annual meeting of stockholders to be filed within 120 days from December 31, 2008.
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   
 ITEM 11. EXECUTIVE COMPENSATION
 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICE
 
 PART IV
 
 ITEM 15. EXHIBITS , FINANCIAL STATEMENT SCHEDULES
  Audit Report of Independent Registered Public Accounting Firm
    
    F-1Consolidated Balance Sheets
    
    F-2Consolidated Statements of Operations
    
    F-3Consolidated Statements of Cash Flows
    
    F-4Consolidated Statements of Stockholders Equity
    
    F-5Notes to Consolidated Financial Statements
    
    F-6
  Exhibits.
 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
 51




---



##### 



Exhibit No.
    
    DescriptionArticles 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).3.1(e)
    
    Certificate of Correction to the Articles of Incorporation, filed with the Maryland
Department of Assessments and Taxation on June 1, 2007 (incorporated by reference from
Exhibit 3.3 of the Companys Current Report of Form 8-K dated June 29, 2007).3.1(f)
    
    Articles of Amendment, filed with the Maryland Department of Assessments and Taxation on
June 26, 2007 (incorporated by reference from Exhibit 3.1 of the companys Current report
on Form 8-K dated June 29, 2007).3.1(g)
    
    Articles Supplementary, filed with the Maryland Department of Assessments and Taxation on
June 29, 2007 (incorporated by reference from Exhibit 3.2 of the Companys Current report
of Form 8-K dated June 29, 2007).3.1(h)
    
    Articles Supplementary of Junior Participating Preferred Stock, Series B, dated as of
August 21, 2007 (incorporated by reference from Exhibit 3.1 of the Companys Current report
of Form 8-K dated August 28, 2007).3.2(a)
    
    Bylaws of the Company (incorporated by reference from Exhibit 3.2 of the Companys Annual
Report on Form 10-KSB, filed for the year ended August 31, 2001).3.2(b)
    
    Bylaws of the Company, as amended and restated on March 14, 2007 (incorporated by
reference from Exhibit 3.2 of the Companys Current report on Form 8-K, filed on March 14,
2007).3.2(c)
    
    Second Amendment and Restated Bylaws of the Company (incorporated by reference from
Exhibit 3.2 of the Companys Current report on Form 8-K dated June 11, 2007).4.1(a)
    
    Form of Warrant Agreement concerning Common Stock Purchase Warrants (incorporated by
reference from Exhibit 4.3 of the Amendment No. 1 to the Companys Registration Statement
on Form SB-2 filed on November 27, 1996, SEC Registration No. 333-14011).4.1(b)
    
    Shareholder Rights Agreement, dated as of August 24, 2007 (incorporated herein by
reference to the Companys Current report on Form 8-A filed on August 24, 2007).4.1(c)
    
    Articles Supplementary, filed with the Maryland Department of Assessments and Taxation on
June 29, 2007 (incorporated by reference from Exhibit 3.2 of the Companys Current report
on Form 8-K dated June 29, 2007).4.1(d)
    
    Articles Supplementary of Junior Participating Preferred Stock, Series B, dated as of
August 21, 2007 (incorporated by reference from Exhibit 3.1 of the Companys Current report
of Form 8-K dated August 28, 2007).10.1(a)
    
    Debt Modification Agreement, effective August 1, 2006, including Commercial Loan
Agreement dated January 3, 2000, between Double Eagle Petroleum Co. and American National
Bank (filed as Exhibit
10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2006, and incorporated herein by reference).10.1(b)
    
    Debt Modification Agreement, effective July 1, 2007, between Double Eagle Petroleum Co.
and American National Bank (incorporated by reference from Exhibit 10.1 to the Companys
Current report on Form 8-K dated July 5, 2007).
 52




---



##### 



Exhibit No.
    
    Description10.1(c)
    
    Credit Agreement dated February 26, 2009 between Double Eagle Petroleum Co. and Bank of
Oklahoma, N.A. et.al (incorporated by reference from Exhibit 10.1 to the Companys Current
report on Form 8-K dated February 26, 2009).10.1(d)
    
    Promissory Term Note dated February 26, 2009 between Double Eagle Petroleum Co. and Bank of
Oklahoma, N.A. (incorporated by reference from Exhibit 10.2 to the Companys Current report on
Form 8-K dated February 26, 2009).10.1(e)
    
    Revolving Notes dated February 26, 2009 between Double Eagle Petroleum Co. and Bank of
Oklahoma, N.A. et.al (incorporated by reference from Exhibit 10.3 to the Companys Current
report on Form 8-K dated February 26, 2009).10.1(f)
    
    Double Eagle Petroleum Co. 2007 Stock Incentive Plan, Form of Incentive Stock Option
Agreement and Form of Non-Qualified Stock Option Agreement (incorporated by reference from
Exhibit 10.1, 10.2 and 10.3 to the Companys Current report on Form 8-K dated May 29,
2007).10.1(g)
    
    Employment Agreement between the Company and Richard Dole, dated September 4 2008
(incorporated by reference from Exhibit 10.1 of the Companys Current Report of Form 8-K dated
September 9, 2008).10.1(h)
    
    Employment Agreement between the Company and Kurtis Hooley, dated September 4, 2008
(incorporated by reference from Exhibit 10.2 of the Companys Current Report of Form 8-K dated
September 9, 2008).10.1(i)
    
    Employment Agreement between the Company and D. Steven Degenfelder, dated September 4, 2008
(incorporated by reference from Exhibit 10.3 of the Companys Current Report of Form 8-K dated
September 9, 2008).10.1(j)
    
    Employment Agreement between the Company and Robert Reiner, dated September 4, 2008
(incorporated by reference from Exhibit 10.4 of the Companys Current Report of Form 8-K dated
September 9, 2008).10.1(k)
    
    Employment Agreement between the Company and Aubrey Harper, dated September 4, 2008
(incorporated by reference from Exhibit 10.5 of the Companys Current Report of Form 8-K dated
September 9, 2008).14.1
    
    Code of Business Conduct and Ethics (filed as Exhibit 99.2 to the Companys Annual Report
on Form 10-KSB for the year ended December 31, 2004, and incorporated herein by reference).21.1*
    
    Subsidiaries of registrant.23.1*
    
    Consent of Hein & Associates LLP.23.2*
    
    Consent of Netherland, Sewell & Associates, Inc.31.1*
    
    Certification of Principal Executive Officer and Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Principal Accounting Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32*
    
    Certification Pursuant to 18 U.S.C. Section 1150 as adopted pursuant to section 906 of the
Sarbanes- Oxley Act of 2002.
 
 *
    
    Filed with this Form 10-K. 53




---



##### 



SIGNATURES
  DOUBLE EAGLE PETROLEUM CO.Date:  March 12, 2009
    /s/ Richard DoleRichard DoleChief Executive OfficerDate:  March 12, 2009
    /s/ Kurtis S. HooleyKurtis S. HooleyChief Financial Officer  Date: March 12, 2009
    /s/ Richard DolePrincipal Executive OfficerChief Executive OfficerDate: March 12, 2009
    /s/ Kurtis S. HooleyChief Financial OfficerPrincipal Accounting OfficerDate:   March 12, 2009
    /s/ Sigmund BalabanSigmund Balaban, DirectorDate:   March 12, 2009
    /s/ Roy G. CoheeRoy G. Cohee, DirectorDate:   March 12, 2009
    /s/ Brent HathawayBrent Hathaway, Director 54




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal Control  Integrated
Framework
 HEIN & ASSOCIATES LLP
 
 F-1




---



##### 



(Amounts in thousands of dollars except share and per share data)
 December 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    125Cash held in escrow
    
    
    605
    
    
    
    719Accounts receivable, net
    
    
    21,381
    
    
    
    3,664Assets from price risk management
    
    
    14,290
    
    
    
    Other current assets
    
    
    3,513
    
    
    
    586Total current assets
    
    
    39,789
    
    
    
    5,094Oil and gas properties and equipment, successful efforts method:Developed properties
    
    
    133,516
    
    
    
    61,394Wells in progress
    
    
    18,518
    
    
    
    29,768Gas transportation pipeline
    
    
    5,465
    
    
    
    5,465Undeveloped properties
    
    
    2,907
    
    
    
    3,147Corporate and other assets
    
    
    1,920
    
    
    
    1,585162,326
    
    
    
    101,359Less accumulated depreciation, depletion and amortization
    
    
    (35,253
    )
    
    
    (24,785
    )Net properties and equipment
    
    
    127,073
    
    
    
    76,574Deferred tax asset
    
    
    
    
    
    
    2,873Assets from price risk management
    
    
    5,029
    
    
    
    Other assets
    
    
    98
    
    
    
    56TOTAL ASSETS
    
    $
    171,989
    
    
    $
    84,597LIABILITIES, PREFERRED STOCK, AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    35,488
    
    
    $
    8,584Accrued expenses
    
    
    6,794
    
    
    
    2,079Liabilities from price risk management
    
    
    
    
    
    
    474Accrued production taxes
    
    
    3,017
    
    
    
    969Capital lease obligations, current portion
    
    
    522
    
    
    
    Other current liabilities
    
    
    282
    
    
    
    Total current liabilities
    
    
    46,103
    
    
    
    12,106Line of credit
    
    
    24,639
    
    
    
    3,445Asset retirement obligation
    
    
    4,208
    
    
    
    1,449Liabilities from price risk management
    
    
    
    
    
    
    1,001Deferred tax liability
    
    
    2,470
    
    
    
    Capital lease obligations, long-term portion
    
    
    1,078
    
    
    
    Other long-term liabilities
    
    
    616
    
    
    
    Total liabilities
    
    
    79,114
    
    
    
    18,001Preferred stock, $0.10 par value; 10,000,000 shares authorized;
1,610,000 shares issued and outstanding as of
December 31, 2008 and December 31, 2007
    
    
    37,972
    
    
    
    37,972Stockholders equity:Common stock, $0.10 par value; 50,000,000 shares authorized;
9,192,356 and 9,148,105 shares issued and outstanding as of
December 31, 2008 and December 31, 2007, respectively
    
    
    919
    
    
    
    915Additional paid-in capital
    
    
    35,122
    
    
    
    33,670Retained earnings (accumulated deficit)
    
    
    2,172
    
    
    
    (4,486
    )Accumulated other comprehensive income (loss)
    
    
    16,690
    
    
    
    (1,475
    )Total stockholders equity
    
    
    54,903
    
    
    
    28,624TOTAL LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS EQUITY
    
    $
    171,989
    
    
    $
    84,597
  F-2




---



##### 



(Amounts in thousands of dollars except share and per share data)
 Year ended December 31,2008
    
    
    2007
    
    
    2006RevenuesOil and gas sales
    
    $
    39,149
    
    
    $
    16,044
    
    
    $
    18,228Transportation and gathering revenue
    
    
    4,788
    
    
    
    910
    
    
    
    523Price risk management activities
    
    
    5,329
    
    
    
    
    
    
    
    Other income
    
    
    312
    
    
    
    243
    
    
    
    281Total revenues
    
    
    49,578
    
    
    
    17,197
    
    
    
    19,032Costs and expensesProduction costs
    
    
    7,601
    
    
    
    5,696
    
    
    
    3,560Production taxes
    
    
    4,701
    
    
    
    1,933
    
    
    
    2,209Exploration expenses including dry hole costs
    
    
    911
    
    
    
    15,399
    
    
    
    530Pipeline operating costs
    
    
    2,596
    
    
    
    645
    
    
    
    170Impairment of equipment and properties
    
    
    743
    
    
    
    2,232
    
    
    
    General and administrative
    
    
    5,604
    
    
    
    4,133
    
    
    
    3,959Depreciation, depletion and amortization
    
    
    11,473
    
    
    
    5,068
    
    
    
    4,909Total costs and expenses
    
    
    33,629
    
    
    
    35,106
    
    
    
    15,337Income (loss) from operations
    
    
    15,949
    
    
    
    (17,909
    )
    
    
    3,695Interest (expense) income, net
    
    
    (225
    )
    
    
    163
    
    
    
    (187
    )Income (loss) before income taxes
    
    
    15,724
    
    
    
    (17,746
    )
    
    
    3,508(Provision) benefit for deferred income taxes
    
    
    (5,343
    )
    
    
    6,143
    
    
    
    (1,399
    )NET INCOME (LOSS)
    
    $
    10,381
    
    
    $
    (11,603
    )
    
    $
    2,109Preferred stock dividends
    
    
    (3,723
    )
    
    
    (1,810
    )
    
    
    Net income (loss) attributable to common stock
    
    $
    6,658
    
    
    $
    (13,413
    )
    
    $
    2,109Net income (loss) per common share:Basic
    
    $
    0.73
    
    
    $
    (1.47
    )
    
    $
    0.24Diluted
    
    $
    0.73
    
    
    $
    (1.47
    )
    
    $
    0.24Weighted average shares outstanding:Basic
    
    
    9,159,865
    
    
    
    9,114,622
    
    
    
    8,632,567Diluted
    
    
    9,161,985
    
    
    
    9,114,622
    
    
    
    8,655,587
  F-3




---



##### 



(Amounts in thousands of dollars)
 Year ended December 31,2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    10,381
    
    
    $
    (11,603
    )
    
    $
    2,109Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation, depletion, amortization and accretion of
asset retirement obligation
    
    
    11,648
    
    
    
    5,062
    
    
    
    4,909Abandonment of non-producing properties and leases
    
    
    743
    
    
    
    14,941
    
    
    
    20Bad debt expense
    
    
    
    
    
    
    559
    
    
    
    Non cash revenue from carried interest
    
    
    (1,665
    )
    
    
    
    
    
    
    Impairment of equipment and properties
    
    
    
    
    
    
    2,234
    
    
    
    Provision for deferred taxes
    
    
    5,343
    
    
    
    (6,143
    )
    
    
    1,399Directors fees paid in stock
    
    
    128
    
    
    
    90
    
    
    
    97Non-cash gain on derivative contracts
    
    
    (2,631
    )
    
    
    
    
    
    
    Non-cash employee stock option expense
    
    
    1,050
    
    
    
    362
    
    
    
    460Gain on sale of working interest in non-producing property
    
    
    (90
    )
    
    
    (98
    )
    
    
    Changes in current assets and liabilities:Decrease (Increase) in deposit held in escrow
    
    
    114
    
    
    
    (12
    )
    
    
    (707
    )Decrease (Increase) in accounts receivable
    
    
    (17,522
    )
    
    
    824
    
    
    
    (799
    )Decrease (Increase) in other current assets
    
    
    (2,871
    )
    
    
    223
    
    
    
    (591
    )Increase (Decrease) in accounts payable
    
    
    15,461
    
    
    
    (1,890
    )
    
    
    4,118Increase in accrued expenses
    
    
    47
    
    
    
    739
    
    
    
    502Increase (Decrease) in accrued production taxes
    
    
    2,768
    
    
    
    (122
    )
    
    
    (566
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    22,904
    
    
    
    5,166
    
    
    
    10,951Cash flows from investing activities:Additions of producing properties and equipment
    
    
    (44,378
    )
    
    
    (41,550
    )
    
    
    (21,861
    )Additions of corporate and non-producing properties
    
    
    (878
    )
    
    
    (750
    )
    
    
    (390
    )Proceeds from sales of properties and assets
    
    
    4,478
    
    
    
    244
    
    
    
    (Additions) reductions of other assets
    
    
    
    
    
    
    
    
    
    
    10NET CASH USED IN INVESTING ACTIVITIES
    
    
    (40,778
    )
    
    
    (42,056
    )
    
    
    (22,241
    )Cash flows from financing activities:Net proceeds from sale of common stock
    
    
    
    
    
    
    9,990
    
    
    
    Net proceeds from sale of preferred stock
    
    
    
    
    
    
    37,972
    
    
    
    Dividends paid on preferred stock
    
    
    (3,723
    )
    
    
    (1,810
    )
    
    
    Net borrowings/(payments) on line of credit
    
    
    21,194
    
    
    
    (9,776
    )
    
    
    10,221Proceeds from Company stock plans
    
    
    278
    
    
    
    28
    
    
    
    353Exercise of options/vesting of restricted shares
    
    
    
    
    
    
    
    
    
    
    (104
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    17,749
    
    
    
    36,404
    
    
    
    10,470Change in cash and cash equivalents
    
    
    (125
    )
    
    
    (486
    )
    
    
    (820
    )Cash and cash equivalents at beginning of period
    
    
    125
    
    
    
    611
    
    
    
    1,431CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    
    
    
    $
    125
    
    
    $
    611Supplemental disclosure of cash and non-cash transactions:Cash paid for interest
    
    $
    657
    
    
    $
    426
    
    
    $
    490Interest capitalized
    
    $
    705
    
    
    $
    279
    
    
    $
    293Receivables due from joint-interest partners related to
change in working interest
    
    $
    193
    
    
    $
    
    
    
    $
    Share-based compensation expense
    
    $
    1,178
    
    
    $
    452
    
    
    $
    557Additions to developed properties included in current liabilities
    
    $
    20,299
    
    
    $
    4,908
    
    
    $
    6,183Additions to developed properties for retirement obligations
    
    $
    2,584
    
    
    $
    757
    
    
    $
    171
  F-4




---



##### 



(Amounts in thousands of dollars except share data)
 AccumulatedShares of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    
    
    
    
    Additional Paid-
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersOutstanding
    
    
    Common Stock
    
    
    In Capital
    
    
    Earnings
    
    
    Income (loss)
    
    
    EquityBalance at
January 1, 2006
    
    
    8,590,604
    
    
    $
    859
    
    
    $
    22,101
    
    
    $
    6,818
    
    
    $
    
    
    
    $
    29,778Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,109
    
    
    
    
    
    
    
    2,109Stock options exercised
    
    
    44,500
    
    
    
    4
    
    
    
    349
    
    
    
    
    
    
    
    
    
    
    
    353Shares issued and expense
recognized for stock-
based compensation
    
    
    6,000
    
    
    
    1
    
    
    
    801
    
    
    
    
    
    
    
    
    
    
    
    802Balance at
December 31, 2006
    
    
    8,641,104
    
    
    
    864
    
    
    
    23,251
    
    
    
    8,927
    
    
    
    
    
    
    
    33,042Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,603
    )
    
    
    
    
    
    
    (11,603
    )Net change in derivative
instrument fair value, net
of tax benefit of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,475
    )
    
    
    (1,475
    )Total comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,078
    )Stock options exercised
    
    
    2,000
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    27Compensation expense from
common stock options
    
    
    
    
    
    
    
    
    
    
    362
    
    
    
    
    
    
    
    
    
    
    
    362Directors fees paid in stock
    
    
    5,001
    
    
    
    1
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    91Sale of common stock
    
    
    500,000
    
    
    
    50
    
    
    
    9,940
    
    
    
    
    
    
    
    
    
    
    
    9,990Dividends declared & paid
on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,810
    )
    
    
    
    
    
    
    (1,810
    )Balance at
December 31, 2007
    
    
    9,148,105
    
    
    
    915
    
    
    
    33,670
    
    
    
    (4,486
    )
    
    
    (1,475
    )
    
    
    28,624Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,381
    
    
    
    
    
    
    
    10,381Net change in derivative
instrument fair value, net
of tax benefit of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,253
    
    
    
    18,253Reclassification to earnings, net
of tax benefit of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    (88
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,546Stock options exercised
    
    
    15,000
    
    
    
    1
    
    
    
    275
    
    
    
    
    
    
    
    
    
    
    
    276Share-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    1,050
    
    
    
    
    
    
    
    
    
    
    
    1,050Directors fees paid in stock
    
    
    7,805
    
    
    
    1
    
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    128Issuance of common shares
upon restricted stock vesting
    
    
    21,446
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Dividends declared & paid
on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,723
    )
    
    
    
    
    
    
    (3,723
    )Balance at
December 31, 2008
    
    
    9,192,356
    
    
    $
    919
    
    
    $
    35,122
    
    
    $
    2,172
    
    
    $
    16,690
    
    
    $
    54,903
  F-5




---



##### 



DOUBLE EAGLE PETROLEUM CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Amounts in thousands of dollars except share and per share data)
 Business Description and Summary of Significant Accounting Policies
 Description of Operations and Basis of Presentation
     Cash and Cash Equivalents
  Cash Held in Escrow
  Accounts Receivable
  Use of Estimates in the Preparation of Financial Statements
  Concentration of Credit Risk
  F- 6




---



##### 



Revenue Recognition and Gas Balancing
  Oil and Gas Producing Activities
      (amounts in thousands).
 2008
    
    
    2007
    
    
    2006Beginning balance at January 1,
    
    $
    692
    
    
    $
    11,541
    
    
    $
    2,972Additions to capitalized exploratory well costs pending
the determination of proved reserves
    
    
    
    
    
    
    5,727
    
    
    
    11,203Reclassifications to wells, facilities and equipment
based on the determination of proved reserves
    
    
    (692
    )
    
    
    (1,666
    )
    
    
    (2,356
    )Capitalized exploratory well costs charged to expense
    
    
    
    
    
    
    (14,910
    )
    
    
    (278
    )Ending balance at December 31,
    
    $
    
    
    
    $
    692
    
    
    $
    11,541
 F- 7




---



##### 



Asset Retirement Obligations
    For the year ended December 31,2008
    
    
    2007Beginning asset retirement obligation
    
    $
    1,449
    
    
    $
    694Liabilities incurred
    
    
    995
    
    
    
    655Liabilities settled
    
    
    
    
    
    
    (9
    )Accretion expense
    
    
    175
    
    
    
    25Changes in ownership interest
    
    
    (77
    )
    
    
    Revision to estimated cash flows
    
    
    1,666
    
    
    
    84Ending asset retirement obligation
    
    $
    4,208
    
    
    $
    1,449
 Impairment of Long-Lived Assets
   Corporate and Other Assets
  F- 8




---



##### 



Major Customers
  Industry Segment and Geographic Information
  Employee Benefit Plan
  Income Taxes
  Earnings Per Share
   For the year ended December 31,2008
    
    
    2007
    
    
    2006Net income (loss)
    
    $
    10,381
    
    
    $
    (11,603
    )
    
    $
    2,109Preferred stock dividends
    
    
    (3,723
    )
    
    
    (1,810
    )
    
    
    Income (loss) attributable to common stock
    
    $
    6,658
    
    
    $
    (13,413
    )
    
    $
    2,109Weighted average shares:Weighted average shares  basic
    
    
    9,159,865
    
    
    
    9,114,622
    
    
    
    8,632,567Dilutive effect of stock options outstanding
at the end of period
    
    
    2,120
    
    
    
    
    
    
    
    23,020Weighted average shares  fully diluted
    
    
    9,161,985
    
    
    
    9,114,622
    
    
    
    8,655,587Earnings (loss) per share:Basic
    
    $
    0.73
    
    
    $
    (1.47
    )
    
    $
    0.24Diluted
    
    $
    0.73
    
    
    $
    (1.47
    )
    
    $
    0.24
 F- 9




---



##### 



For the years ended December 31,2008
    
    
    2007
    
    
    2006Potential common shares
    
    
    56,249
    
    
    
    6,643
    
    
    
    18,621
 Stock Based Compensation
  Shareholder Rights Plan
    Fair Value of Financial Instruments
  Derivative Financial Instruments
  F- 10




---



##### 



Other Comprehensive Income
   Recently Adopted Accounting Pronouncements
   New Accounting Pronouncements
   F- 11




---



##### 



The Hierarchy
of Generally Accepted Accounting Principles
  Line of Credit
     F- 12




---



##### 



Income Taxes
  For the year ended December 31,2008
    
    
    2007
    
    
    2006Current taxes
    
    $
    
    
    
    $
    
    
    
    $
    Deferred taxes
    
    
    5,343
    
    
    
    (6,143
    )
    
    
    1,399Total income tax expense
    
    $
    5,343
    
    
    $
    (6,143
    )
    
    $
    1,399
  As of December 31,2008
    
    
    2007Deferred tax assets:Net operating loss carry-forward
    
    $
    10,691
    
    
    $
    10,885Asset retirement obligation
    
    
    1,474
    
    
    
    272Share-based compensation
    
    
    167
    
    
    
    Accrued compensation
    
    
    94
    
    
    
    Allowance for doubtful accounts
    
    
    
    
    
    
    198Other
    
    
    5
    
    
    
    12,431
    
    
    
    11,355Deferred tax liabilities:Net gas imbalance receivable
    
    
    (32
    )
    
    
    (192
    )Net basis difference in oil and gas properties
    
    
    (14,869
    )
    
    
    (8,290
    )Net deferred tax asset (liability)
    
    $
    (2,470
    )
    
    $
    2,873
    For the year ended December 31,2008
    
    
    2007Expected federal tax rate
    
    
    35.00
    %
    
    
    35.00
    %Effect of non-deductibility of SFAS 123(R)
Incentive Stock Option Expense and
other permanent differences
    
    
    -1.06
    %
    
    
    -0.74
    %State tax rate and other
    
    
    0.04
    %
    
    
    0.36
    %Effective tax rate
    
    
    33.98
    %
    
    
    34.62
    %
  F- 13




---



##### 



Commitments and Contingencies
  Gas Contracts
   FORWARD SALES CONTRACTSRemainingContractual
    
    Daily
    
    
    
    
    
    
    
    
    
    PriceProperty
    
    Volume
    
    Production
    
    Term
    
    Price
    
    Index (1)Catalina
    
    
    151,000
    
    
    
    1,000
    
    
    
    06/07-05/09
    
    
    $
    5.47
    
    
    CIG181,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    5.84
    
    
    CIG362,000
    
    
    
    2,000
    
    
    
    07/07-06/09
    
    
    $
    5.69
    
    
    CIG304,000
    
    
    
    1,000
    
    
    
    11/07-10/09
    
    
    $
    5.66
    
    
    CIG270,000
    
    
    
    3,000
    
    
    
    11/08-03/09
    
    
    $8.85 floor/
    
    CIG$13.05 ceilingAtlantic Rim
    
    
    212,000
    
    
    
    1,000
    
    
    
    08/07-07/09
    
    
    $
    6.15
    
    
    CIGPinedale Anticline
    
    
    181,000
    
    
    
    1,000
    
    
    
    07/07-06/09
    
    
    $
    6.41
    
    
    CIGCompany Total
    
    
    1,661,000
 
 (1)
    
    CIG refers to the Colorado Interstate Gas price as quoted on the first day of each month.  F- 14




---



##### 



RemainingContractual
    
    Daily
    
    
    
    
    
    
    
    
    
    PriceType of Contract
    
    Volume
    
    Production
    
    Term
    
    Price
    
    Index (1)Costless Collar
    
    
    270,000
    
    
    
    3,000
    
    
    
    11/08-3/09
    
    
    $6.50 floor/$13.50 ceiling
    
    CIGOption
    
    
    450,000
    
    
    
    5,000
    
    
    
    11/08-3/09
    
    
    $10.50 floor
    
    NYMEXFixed Price Swap
    
    
    450,000
    
    
    
    5,000
    
    
    
    11/08-3/09
    
    
    $2.27 CIG basis hedge
    
    NYMEXFixed Price Swap
    
    
    2,920,000
    
    
    
    8,000
    
    
    
    1/09-12/09
    
    
    $
    7.34
    
    
    CIGFixed Price Swap
    
    
    2,920,000
    
    
    
    8,000
    
    
    
    1/11-12/11
    
    
    $
    7.07
    
    
    CIGTotal
    
    
    7,010,000
 
 (1)
    
    NYMEX refers to quoted prices on the New York Mercantile Exchange. CIG refers to the
Colorado Interstate Gas price as quoted on the first day of each month.  Commodity Risk Management
 Capital Lease Commitments
 Operating Lease Commitments
   LeaseYear ending December 31,
    
    Commitments2009
    
    $
    7532010
    
    
    7532011
    
    
    753Total minimum lease payments
    
    $
    2,259Less: Executory costs
    
    
    600Less: Amounts representing interest
    
    
    59Present value of minimum lease payments
    
    $
    1,600
 F- 15




---



##### 



Operating Lease Commitments
  LeaseYear ending December 31,
    
    Commitments2009
    
    $
    1,5662010
    
    
    1,5682011
    
    
    1,5702012
    
    
    1,5662013 and thereafter
    
    
    1,160Total
    
    $
    7,430
  Litigation and Contingencies
   Commodity Risk Management
 Risk policy and control
    F- 16




---



##### 



Commitments and Contingencies
 Normal purchases and normal sales
 Accounting for Derivative Instruments and Hedging Activities,
 Cash flow hedges
  Other derivative instruments
   For the years ended December 31,2008
    
    2007
    
    2006Realized gain (loss) on derivatives designated as cash flow hedges(1)
    
    $
    (88
    )
    
    $
    304
    
    
    $
    Realized gain on economic hedges (2)
    
    $
    2,698
    
    
    $
    
    
    
    $
    Unrealized gain on economic hedges (2)
    
    $
    2,631
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Included in the oil and gas sales on the Consolidated Statement of Operations(2)
    
    Included in the price risk management line on the Consolidated Statement of Operations 6. Fair Value of Financial Instruments
  F- 17




---



##### 




    
    Level 1  Quoted prices (unadjusted) for identical assets or liabilities in active
markets.
    
    Level 2  Quoted prices for similar assets or liabilities in active markets; quoted
prices for identical or similar
assets or liabilities in markets that are not active; and model-derived valuations
whose inputs or significant value drivers are observable.
    
    Level 3  Unobservable inputs that reflect the Companys own assumptions
      Level 1
    
    Level 2
    
    Level 3
    
    TotalAssetsDerivative instruments
    
    $
    
    
    
    $
    19,319
    
    
    $
    
    
    
    $
    19,319Total assets at fair value
    
    $
    
    
    
    $
    19,319
    
    
    $
    
    
    
    $
    19,319LiabilitiesDerivative instruments
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Total liabilities at fair value
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 6. Series A Cumulative Preferred Stock
   F- 18




---



##### 



Redemption Date on or Before
    
    Redemption PriceJune 30, 2009
    
    $
    25.75June 30, 2010
    
    $
    25.50June 30, 2011
    
    $
    25.25June 30, 2012 or thereafter
    
    $
    25.00
   Compensation Plans
    Stock Options
  F- 19




---



##### 



For the year ended December 31,2008
    
    2007
    
    2006Weighted-average volatility
    
    
    40-41
    %
    
    
    42
    %
    
    
    40% - 44
    %Expected dividends
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Expected term (in years)
    
    
    4-5
    
    
    
    4.25
    
    
    
    2 - 4Risk-free rate
    
    
    2.42%-3
    %
    
    
    4.58
    %
    
    
    4.68% - 5.10
    %Expected forfeiture rate
    
    
    5%-7
    %
    
    
    7.00
    %
    
    
    5% - 10
    %
  Weighted-AverageRemainingWeighted-Average
    
    
    Contractual Term
    
    
    AggregateOptions:
    
    Shares
    
    
    Exercise Price
    
    
    (in years)
    
    
    Intrinsic ValueOutstanding at January 1, 2008
    
    
    263,500
    
    
    $
    17.71
    
    
    
    3.4Granted
    
    
    445,897
    
    
    $
    14.91Exercised
    
    
    (15,000
    )
    
    $
    18.52Cancelled/expired
    
    
    (67,500
    )
    
    $
    17.56Outstanding at December 31, 2008
    
    
    626,897
    
    
    $
    15.68
    
    
    
    5.1
    
    
    $
    2Exerciseable at December 31, 2008
    
    
    175,679
    
    
    $
    16.37
    
    
    
    3.5
    
    
    $
    
   Options
    
    
    
    
    
    Options ExercisableOutstandingWeighted Average
    
    Weighted
    
    
    
    
    
    WeightedNumber of
    
    Remaining
    
    Average
    
    Number of
    
    AverageRange of Exercise
    
    Options
    
    Contractual Life
    
    Exercise Price
    
    Options
    
    Exercise PricePrices per Share
    
    Outstanding
    
    (in years)
    
    per Share
    
    Exercisable
    
    per Share$6.78 - $7.26
    
    
    15,000
    
    
    
    5.3
    
    
    $
    6.94
    
    
    
    
    
    
    $
    $14.00 - $16.21
    
    
    445,897
    
    
    
    5.8
    
    
    $
    14.74
    
    
    
    112,179
    
    
    $
    14.71$17.86 - $19.55
    
    
    138,500
    
    
    
    3.2
    
    
    $
    18.52
    
    
    
    52,500
    
    
    $
    18.88$20.21 - $23.61
    
    
    27,500
    
    
    
    3.2
    
    
    $
    21.30
    
    
    
    11,000
    
    
    $
    21.30626,897
    
    
    
    5.1
    
    
    $
    15.68
    
    
    
    175,679
    
    
    $
    16.37
  Stock awards
  F-20




---



##### 



Weighted-Average GrantStock Awards:
    
    Shares
    
    Date Fair ValueOutstanding at January 1, 2008
    
    
    
    
    
    $
    Granted
    
    
    124,013
    
    
    $
    14.81Vested
    
    
    (29,251
    )
    
    $
    15.15Forfeitures
    
    
    
    
    
    $
    Nonvested at December 31, 2008
    
    
    94,762
    
    
    $
    14.70
  Supplemental Information on Oil and Gas Producing Activities
 Capitalized Costs Relating to Oil and Gas Producing Activities
  As of December 31,2008
    
    
    2007
    
    
    2006Developed properties
    
    $
    133,516
    
    
    $
    61,394
    
    
    $
    53,677Wells in progress
    
    
    18,518
    
    
    
    29,768
    
    
    
    13,839Undeveloped properties
    
    
    2,907
    
    
    
    3,147
    
    
    
    3,313154,941
    
    
    
    94,309
    
    
    
    70,829Accumulated depletion
and amortization
    
    
    (33,905
    )
    
    
    (22,218
    )
    
    
    (19,442
    )Net capitalized costs
    
    $
    121,036
    
    
    $
    72,091
    
    
    $
    51,387
 Costs incurred in Oil and Gas Property Acquisitions, Exploration and Development Activities
  For the year ended December 31,2008
    
    
    2007
    
    
    2006Property acquisitions  unproved
    
    $
    30
    
    
    $
    316
    
    
    $
    100Exploration
    
    
    536
    
    
    
    3,600
    
    
    
    11,304Development
    
    
    64,462
    
    
    
    41,337
    
    
    
    10,046Total
    
    $
    65,028
    
    
    $
    45,253
    
    
    $
    21,450
 F-21




---



##### 



Results of Operations from Oil and Gas Producing Activities
  For the year ended December 31,2008
    
    
    2007
    
    
    2006Operating revenues (1)
    
    $
    41,847
    
    
    $
    16,044
    
    
    $
    18,228Costs and expenses:Production
    
    
    12,302
    
    
    
    7,629
    
    
    
    5,769Exploration
    
    
    911
    
    
    
    15,399
    
    
    
    530Depletion, amortization and impairment
    
    
    11,078
    
    
    
    6,691
    
    
    
    4,163Total costs and expenses
    
    
    24,291
    
    
    
    29,719
    
    
    
    10,462Income (loss) before income taxes
    
    $
    17,556
    
    
    $
    (13,675
    )
    
    $
    7,766
 
 (1)
    
    Our operating revenues are comprised of the oil and gas sales from the Consolidated
Statement of Operations, plus settlements on our economic hedges during the period. For
the years ended December 31, 2008, 2007 and 2006, the settlements on economic hedges
totaled $2,698, $0, and $0, respectively. Oil and Gas Reserves (Unaudited)
   For the year ended December 31,2008
    
    
    2007
    
    
    2006Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas(Bbl)
    
    
    (Mcf)
    
    
    (Bbl)
    
    
    (Mcf)
    
    
    (Bbl)
    
    
    (Mcf)Beginning of year
    
    
    412,812
    
    
    
    71,253,865
    
    
    
    360,165
    
    
    
    48,496,719
    
    
    
    328,752
    
    
    
    47,234,335Revisions of estimates
    
    
    (33,439
    )
    
    
    (4,637,562
    )
    
    
    (112,093
    )
    
    
    (18,449,972
    )
    
    
    41,546
    
    
    
    (5,976,392
    )Extensions and discoveries
    
    
    65,429
    
    
    
    26,244,840
    
    
    
    178,208
    
    
    
    44,135,456
    
    
    
    2,596
    
    
    
    10,379,429Sales of reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (24,613
    )
    
    
    (6,530,323
    )
    
    
    (13,468
    )
    
    
    (2,928,338
    )
    
    
    (12,729
    )
    
    
    (3,140,653
    )End of year
    
    
    420,189
    
    
    
    86,330,820
    
    
    
    412,812
    
    
    
    71,253,865
    
    
    
    360,165
    
    
    
    48,496,719Proved developed reserves
    
    
    295,698
    
    
    
    63,007,126
    
    
    
    253,478
    
    
    
    44,782,553
    
    
    
    254,346
    
    
    
    30,075,467Percentage of proved
developed reserves
    
    
    70
    %
    
    
    73
    %
    
    
    61
    %
    
    
    63
    %
    
    
    71
    %
    
    
    62
    %
 F-22




---



##### 



Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
(Unaudited)
      As of December 31,2008
    
    
    2007
    
    
    2006Future cash inflows
    
    $
    406,017
    
    
    $
    462,655
    
    
    $
    246,270Future production costs
    
    
    (118,299
    )
    
    
    (102,515
    )
    
    
    (65,650
    )Future development costs
    
    
    (18,275
    )
    
    
    (23,651
    )
    
    
    (17,049
    )Future income taxes
    
    
    (58,313
    )
    
    
    (96,370
    )
    
    
    (42,578
    )Future net cash flows
    
    
    211,130
    
    
    
    240,119
    
    
    
    120,99310% annual discount
    
    
    (89,075
    )
    
    
    (109,820
    )
    
    
    (70,960
    )Standardized measure ofDiscounted future net cash flows
    
    $
    122,055
    
    
    $
    130,299
    
    
    $
    50,033
 F-23




---



##### 



2008
    
    
    2007
    
    
    2006Standard measure, as of January 1,
    
    $
    130,299
    
    
    $
    50,033
    
    
    $
    91,293Sales of oil and gas produced, net of
production costs
    
    
    (26,846
    )
    
    
    (8,416
    )
    
    
    (12,460
    )Extensions and discoveries
    
    
    49,511
    
    
    
    118,002
    
    
    
    14,724Net change in prices and production costs
related to future production
    
    
    (63,682
    )
    
    
    41,821
    
    
    
    (44,698
    )Development costs incurred during the year11,181
    
    
    
    9,924
    
    
    
    3,147Changes in estimated future development
costs
    
    
    (5,188
    )
    
    
    (24,107
    )
    
    
    (10,632
    )Sales of reserves in place
    
    
    
    
    
    
    
    
    
    
    Revisions of previous quantity estimates
    
    
    (9,119
    )
    
    
    (50,750
    )
    
    
    (7,749
    )Accretion of discount
    
    
    15,919
    
    
    
    6,764
    
    
    
    14,315Net change in income taxes
    
    
    18,576
    
    
    
    (18,064
    )
    
    
    13,299Changes in timing and other
    
    
    1,404
    
    
    
    5,092
    
    
    
    (11,206
    )Standardized measure, as of December 31,
    
    $
    122,055
    
    
    $
    130,299
    
    
    $
    50,033
 Quarterly Financial Data (Unaudited)
  Fourth
    

    Third
    
        Second
    
    FirstQuarter
    
    Quarter
    
    Quarter
    
    QuarterYear ended December 31, 2008Oil and gas sales
    
    $
    9,710
    
    
    $
    11,662
    
    
    $
    10,981
    
    
    $
    6,796Income from operations
    
    $
    3,287
    
    
    $
    4,464
    
    
    $
    5,189
    
    
    $
    3,009Net income
    
    $
    2,338
    
    
    $
    2,907
    
    
    $
    3,273
    
    
    $
    1,863Net income attributable to common stock
    
    $
    1,407
    
    
    $
    1,977
    
    
    $
    2,342
    
    
    $
    932Basic net income per common share
    
    $
    0.15
    
    
    $
    0.22
    
    
    $
    0.26
    
    
    $
    0.10Diluted net income per common share
    
    $
    0.15
    
    
    $
    0.22
    
    
    $
    0.26
    
    
    $
    0.10Year ended December 31, 2007Oil and gas sales
    
    $
    4,232
    
    
    $
    3,779
    
    
    $
    3,417
    
    
    $
    4,616Income (loss) from operations
    
    $
    (10,277
    )
    
    $
    (7,197
    )
    
    $
    (995
    )
    
    $
    560Net income (loss)
    
    $
    (6,539
    )
    
    $
    (4,792
    )
    
    $
    (507
    )
    
    $
    235Net income (loss) attributable to common stock
    
    $
    (7,470
    )
    
    $
    (5,671
    )
    
    $
    (507
    )
    
    $
    235Basic net income (loss) per common share
    
    $
    (0.82
    )
    
    $
    (0.62
    )
    
    $
    (0.06
    )
    
    $
    0.03Diluted net income (loss) per common share
    
    $
    (0.82
    )
    
    $
    (0.62
    )
    
    $
    (0.06
    )
    
    $
    0.03
 
 (1)
    
    Quarterly oil and gas sales have been reclassified to conform to presentation for the quarter
ended December 31, 2008. F-24