Note

Organization and Summary of Significant Accounting Policies

Organization and Principles of Consolidation – Everflow Eastern Partners, L.P. ("Everflow") is a Delaware limited partnership which was organized in

September 1990

to engage in the business of oil and gas acquisition, exploration, development and production. Everflow was formed to consolidate the business and crude oil and natural gas properties of Everflow Eastern, Inc. ("EEI") and subsidiaries and the crude oil and natural gas properties owned by certain limited partnership and working interest programs managed or sponsored by EEI ("EEI Programs" or the "Programs").

Everflow Management Limited, LLC ("EML"), an Ohio limited liability company, is the general partner of Everflow and, as such, is authorized to perform all acts necessary or desirable to carry out the purposes and conduct of the business of Everflow. The members of EML are Everflow Management Corporation ("EMC");

two

individuals who are officers and directors of EEI and employees of Everflow;

one

individual who is the Chairman of the Board of EEI;

one

individual who is an employee of Everflow; and

one

private limited liability company. EMC is an Ohio corporation formed in

September 1990

and is the managing member of EML. EML holds

assets other than its general partner's interest in Everflow, nor does it have any liabilities. In addition, EML has

separate operations or role apart from its role as Everflow's general partner.

The consolidated financial statements include the accounts of Everflow, its wholly-owned subsidiaries, including EEI, and interests with joint venture partners (collectively, the "Company"), which are accounted for under the proportional consolidation method. All significant accounts and transactions between the consolidated entities have been eliminated.

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("generally accepted accounting principles" or "GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates impacting the Company's financial statements include revenue and expense accruals and oil and gas reserve quantities. In the oil and gas industry, and especially as related to the Company's natural gas sales, the processing of actual transactions generally occurs

days after the month of delivery of its product. Consequently, accounts receivable from production and crude oil and natural gas sales are recorded using estimated production volumes and market or contract prices. Differences between estimated and actual amounts are recorded in subsequent period's financial results. As is typical in the oil and gas industry, a significant portion of the Company's accounts receivable from production and crude oil and natural gas sales consists of unbilled receivables. Oil and gas reserve quantities are utilized in the calculation of depreciation, depletion and amortization and the impairment of crude oil and natural gas properties and also impact the timing and costs associated with asset retirement obligations. The Company's estimates, especially those related to oil and gas reserves, could change in the near term and could significantly impact the Company's results of operations and financial position.

Fair Value of Financial Instruments – The fair values of cash and equivalents, accounts and notes receivable, accounts payable and other short-term obligations approximate their carrying values because of the short maturity of these financial instruments. The carrying values of the Company's long-term obligations approximate their fair value because they are considered to be at current market rates. In accordance with generally accepted accounting principles, rates available to the Company at the balance sheet dates are used to estimate the fair value of existing obligations.

Cash and Equivalents – The Company considers all highly liquid debt instruments purchased with an original maturity of

three

months or less to be cash equivalents. The Company maintains, at various financial institutions, cash and equivalents which

may

exceed federally insured amounts and which

may,

at times, significantly exceed balance sheet amounts due to float. Cash and equivalents include

$2,135,632

and

$1,513,924

of operational advances at

December 31, 2018

and

2017,

respectively, which are funds collected and held on behalf of joint venture partners for their anticipated share of future plugging and abandonment costs. Operational advances held on behalf of joint venture partners include those held on behalf of employees, including officers and directors (see Note

Investments – The Company’s investments are classified as available-for-sale securities and consist of shares held in a mutual fund that invests primarily in investment grade, U.S. dollar denominated short-term fixed and floating rate debt securities. The mutual fund seeks current income while seeking to maintain a low volatility of principal.

The Financial Accounting Standards Board established a framework for measuring fair value and expands disclosures about fair value measurements by establishing a fair value hierarchy that prioritizes the inputs and defines valuation techniques used to measure fair value. The hierarchy gives highest priority to Level I inputs and lowest priority to Level III inputs. The

three

levels of the fair value hierarchy are described below:

Level I – Quoted prices are available in active markets for identical financial instruments as of the reporting date.

Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

Level III – Pricing inputs are unobservable for the financial instrument and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation.

The Company’s investments are carried at fair market value based on quoted prices available in active markets and are therefore classified as Level

Property and Equipment – The Company uses the successful efforts method of accounting for oil and gas exploration and production activities. Under successful efforts, costs to acquire mineral interests in oil and gas properties, to drill and equip development wells and related asset retirement costs are capitalized. Costs of development wells (on properties the Company has

further interest in) that do

not

find proved reserves and geological and geophysical costs are expensed. The Company has

not

participated in exploratory drilling and owns

interest in unproved properties.

Capitalized costs of proved properties, after considering estimated dismantlement and abandonment costs and estimated salvage values, are amortized by the unit-of-production method based upon estimated proved developed reserves. Depletion, depreciation and amortization on proved properties amounted to

$595,163

and

$889,794

during

2018

and

2017,

respectively.

On sale or retirement of a unit of a proved property (which generally constitutes the amortization base), the cost and related accumulated depreciation, depletion, amortization and write down are eliminated from the property accounts, and the resultant gain or loss is recognized.

Generally accepted accounting principles require that long-lived assets (including oil and gas properties) and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. The Company, at least annually, reviews its proved crude oil and natural gas properties (on a field by field basis) for impairment by comparing the carrying value of its properties to the properties' undiscounted estimated future net cash flows. Estimates of future crude oil and natural gas prices, operating costs, and production are utilized in determining undiscounted future net cash flows. The estimated future production of oil and gas reserves is based upon the Company's independent reserve engineer's estimate of proved reserves which includes assumptions regarding field decline rates and future prices and costs. For properties where the carrying value exceeds undiscounted future net cash flows, the Company recognizes as impairment the difference between the carrying value and fair market value of the properties. The Company determines fair market value, using the income approach, as the properties’ discounted estimated future net cash flows. The key assumptions above are

not

observable in the market and, therefore, the fair value of the oil and gas properties is classified as Level III. The Company did

not

write down any crude oil and natural gas properties during

2018

2017.

Additions to proved properties in

2017

include changes to accrued expenses related to the drilling of oil and gas properties (see Note

), and asset retirement obligations (see Note

1.G

Pipeline and support equipment and other corporate property and equipment are recorded at cost and depreciated principally on the straight-line method over their estimated useful lives (pipeline and support equipment -

years, other corporate equipment -

years, building and improvements -

years). Depreciation on pipeline and support equipment amounted to

$42,479

and

$50,349

for the years ended

December 31, 2018

and

2017,

respectively. Depreciation on other corporate property and equipment, included in general and administrative expense, amounted to

$77,757

and

$86,029

for the years ended

December 31, 2018

and

2017,

respectively.

Maintenance and repairs of property and equipment are expensed as incurred. Major renewals and improvements are capitalized, and the assets replaced are retired.

Asset Retirement Obligations – Generally accepted accounting principles require the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. For the Company, these obligations include dismantlement, plugging and abandonment of crude oil and natural gas wells and associated pipelines and equipment. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The liability is accreted to its then present value each period, and the capitalized cost is depleted over the estimated useful life of the related asset.

The estimated liability is based on historical experience in dismantling, plugging and abandoning wells, estimated remaining lives of those wells based on reserves estimates, estimates of the external cost to dismantle, plug and abandon the wells in the future and federal and state regulatory requirements. The liability is discounted using an assumed credit-adjusted risk-free interest rate. Revisions to the liability will likely occur due to: changes in estimates of dismantlement, plugging and abandonment costs, changes in estimated remaining lives of the wells, changes in federal or state regulations regarding plugging and abandonment requirements, and other factors.

Gain on disposal of property and equipment includes approximately

$650,200

and

$54,900

associated with non-cash settlements of asset retirement obligations during

2018

and

2017,

respectively.

The schedule below is a reconciliation of the Company's liability for the years ended

December 31:

	2018			2017

Beginning of period	$	17,366,270		$	17,124,630
Liabilities incurred		-			877
Liabilities settled		(676,425	)		(114,364	)
Accretion expense		313,641			355,127

End of period	$	17,003,486		$	17,366,270

Revenue Recognition – As further described in Note

1.K.,

the Company adopted ASU

2014

January 1, 2018.

Revenues from contracts with customers are recognized when performance obligations are satisfied in accordance with contractual terms.

For the sale of crude oil and natural gas from operated properties, the Company generally considers each unit (BBL or MCF) to be a separate performance obligation. The transaction price

may

consist of fixed and variable consideration, in which the variable amount is determinable each production period and is recognized as revenue upon pickup/delivery of the crude oil or natural gas, which is the point in time that the customer obtains control of the crude oil or natural gas and the Company's performance obligation is satisfied.

Crude oil and natural gas sales derived from

third

party operated wells are recognized under similar terms as sales of crude oil and natural gas from operated properties and revenue is recognized at a point in time when the product is delivered, the purchaser obtains control and the Company's performance obligation is satisfied.

Crude oil and natural gas sales represent the Company's share of revenues, net of royalties and other revenue interests owned by other parties. When settling crude oil and natural gas on behalf of royalty owners or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis.

Based on the Company's judgment, the Company's performance obligations have been satisfied and an unconditional right to consideration exists at

December 31, 2018;

therefore, the Company recognized amounts due from contracts with customers as production accounts receivable within the Company’s consolidated balance sheet at

December 31, 2018.

The Company utilizes the sales method to account for gas production volume imbalances. Under this method, revenue is recognized only when gas is produced and sold on the Company’s behalf. The Company had

material gas imbalances at

December 31, 2018

and

2017.

The Company participates (and

may

act as drilling contractor) with unaffiliated joint venture partners and employees in the drilling, development and operation of jointly owned oil and gas properties. Each owner, including the Company, has an undivided interest in the jointly owned properties. Generally, the joint venture partners and employees participate on the same drilling/development cost basis as the Company and, therefore,

revenue, expense or income is recognized on the drilling and development of the properties. Well management and operating revenues are derived from a variety of both verbal and written operating agreements with joint venture partners, and are recognized monthly as services are provided and properties are managed and operated. Other revenues consist of miscellaneous revenues that are recognized at the time services are rendered, the Company has a contractual right to such revenue and collection is reasonably assured.

Income Taxes – Everflow is

not

a tax-paying entity and the net taxable income or loss, other than the taxable income or loss allocable to EEI, which is a C corporation owned by Everflow, is allocated directly to its respective partners. The non-taxable status of the Programs and Everflow is the primary reconciling item between taxes computed at the Federal statutory rate and the effective tax rate in the Statements of Operations. The Company is

not

able to determine the net difference between the tax bases and the reported amounts of Everflow's assets and liabilities due to separate elections that were made by owners of the working interests and limited partnership interests that comprised the Programs.

EEI accounts for income taxes under generally accepted accounting principles, which require income taxes be provided for all items (as they relate to EEI) in the consolidated statements of operations regardless of the period when such items are reported for income tax purposes. Therefore, deferred tax assets and liabilities are recognized for temporary differences between the financial reporting basis and tax basis of certain EEI assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The impact on deferred taxes of changes in tax rates and laws, if any, is reflected in the financial statements in the period of enactment. Items giving rise to deferred taxes consist primarily of temporary differences arising from differences in financial reporting and tax reporting methods for EEI's proved properties and percentage depletion credits.

The Company believes that it has appropriate support for any tax positions taken and, as such, does

not

have any uncertain tax positions that are material to the financial statements.

Allocation of Income and Per Unit Data – Under the terms of the limited partnership agreement, initially

99%

of revenues and costs were allocated to the Unitholders (the limited partners) and

of revenues and costs were allocated to the general partner. Such allocation has changed and

may

change in the future as Unitholders elect to exercise the Repurchase Right and select officers and employees elect to exercise options (See Note

Earnings per limited partner Unit have been computed based on the weighted average number of Units outstanding during each year presented. Average outstanding Units for earnings per Unit calculations amount to

5,568,486

and

5,587,616

2018

and

2017,

respectively.

New Accounting Standards – In

May 2014,

the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update

No.

2014

09,

“Revenue from Contracts with Customers (Topic

606

)” (“ASU

2014

09”

). ASU

2014

is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle based approach. The core principle of the standard is that revenue should be recognized when the transfer of promised goods or services is made in an amount that the entity expects to be entitled to in exchange for the transfer of goods and services. ASU

2014

also requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU

2014

09,

through issuance of ASU

2015

14,

is to be effective for financial statements issued for annual periods beginning after

December 31, 2017 (

including interim reporting periods within those periods). The Company adopted ASU

2014

using the modified retrospective method on

January 1, 2018.

There was

material impact to the Company's consolidated financial statements and, therefore, prior period amounts were

not

adjusted and

cumulative effect adjustment was recognized. However, ASU

2014

expanded disclosures regarding information of the Company's nature, amount and timing of revenue arising from contracts with customers.

The Company has reviewed all other recently issued accounting standards in order to determine their effects, if any, on the consolidated financial statements. Based on that review, the Company believes that

none

of these standards will have a significant effect on current or future earnings or results of operations.

Reclassifications – Certain prior period amounts have been reclassified to conform with the current period’s presentation.