ote

Partners' Equity

Units represent limited partnership interests in Everflow. The Units are transferable subject only to the approval of any transfer by EML and to the laws governing the transfer of securities. The Units are not listed for trading on any securities exchange nor are they quoted in the automated quotation system of a registered securities association. However, Unitholders

may

have an opportunity to require Everflow to repurchase their Units pursuant to the Repurchase Right.

The partnership agreement provides that Everflow will repurchase for cash up to

10%

of the then outstanding Units, to the extent Unitholders offer Units to Everflow for repurchase pursuant to the Repurchase Right. The Repurchase Right entitles any Unitholder, between

May

and

June

of each year, to notify Everflow that the Unitholder elects to exercise the Repurchase Right and have Everflow acquire certain or all Units. The price to be paid for any such Units is calculated based upon the audited financial statements of the Company as of

December

of the year prior to the year in which the Repurchase Right is to be effective and independently prepared reserve reports. The price per Unit equals

66%

of the adjusted book value of the Company allocable to the Units, divided by the number of Units outstanding at the beginning of the year in which the applicable Repurchase Right is to be effective less all interim cash distributions received by a Unitholder. The adjusted book value is calculated by adding partners' equity, the standardized measure of discounted future net cash flows and the tax effect included in the standardized measure and subtracting from that sum the carrying value of oil and gas properties (net of undeveloped lease costs). If more than

10%

of the then outstanding Units are

tendered

during any period during which the Repurchase Right is to be effective, the investors' Units

tendered

shall be prorated for purposes of calculating the actual number of Units to be acquired during any such period. The Company has determined that the price associated with the

2017

Repurchase Right, based upon the

December

31,

2016

calculation, is negative, and as such the Company will not be offering to repurchase Units in

2017.

The Company did not make a distribution in

January

2017.

The Company has an Option Repurchase Plan (the "Option Plan") which permits the grant of options to repurchase certain Units to select officers and employees (the "Option Plan Participants"). The purpose of the Option Plan is to assist the Company in attracting and retaining officers and other key employees and to enable those individuals to acquire or increase their ownership interest in the Company in order to encourage them to promote the growth and profitability of the Company. The Option Plan is designed to align directly the financial interests of the Option Plan Participants with the financial interests of the Unitholders. The Company did not grant any options in

2016.

June

2015,

the Company granted options to officers and an employee. All options granted were exercised on the same date. Compensation expense associated with these grants was not material to the financial statements.

The Company did not repurchase any Units pursuant to the Repurchase Right during

2016.

Units repurchased pursuant to the Repurchase Right and Units issued through the exercise of options pursuant to the Option Plan (collectively the “Units Activity”) for the

two

years ended

December

31,

2015,

are as follows:

	Per Unit
	Calculated										Units
	Price for		Less								Outstanding
	Repurchase		Interim		Net		Units		Units		Following
Year	Right		Distributions		Price Paid		Repurchased		Issued		Units Activity

2014	$	7.010	$	0.500	$	6.51		11,964		5,982		5,601,003

2015	$	4.935	$	0.375	$	4.56		26,774		13,387		5,587,616

All Units repurchased pursuant to the Repurchase Right were retired except for those Units issued through the exercise of options pursuant to the Option Plan. There were no instruments outstanding at

December

31,

2016

2015

that would potentially dilute net income per Unit.