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EXCEL - IDEA: XBRL DOCUMENT - MEWBOURNE ENERGY PARTNERS 04-A LPFinancial_Report.xls
EX-32.2 - CERTIFICATION OF CFO PURSUANT TO SECTION 906 OF SARBANES-OXLEY ACT OF 2002. - MEWBOURNE ENERGY PARTNERS 04-A LPex-32_2.htm
EX-31.1 - CERTIFICATION OF CEO PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002. - MEWBOURNE ENERGY PARTNERS 04-A LPex-31_1.htm
EX-32.1 - CERTIFICATION OF CEO PURSUANT TO SECTION 906 OF SARBANES-OXLEY ACT OF 2002. - MEWBOURNE ENERGY PARTNERS 04-A LPex-32_1.htm
EX-31.2 - CERTIFICATION OF CFO PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002. - MEWBOURNE ENERGY PARTNERS 04-A LPex-31_2.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2012
OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from___________________ to ___________________

 
Commission File No. 333-113340

MEWBOURNE ENERGY PARTNERS 04-A, L.P.
 
Delaware
 
20-0718858
  (State or jurisdiction of incorporation or organization)  
(I.R.S. Employer Identification Number) 
     
3901 South Broadway, Tyler, Texas
  75701
(Address of principal executive offices)
  (Zip code)
     
 
Registrant’s Telephone Number, including area code:
(903) 561-2900
 
 
 
 Not Applicable
 (Former name, former address and former fiscal year, if changed since last report)
  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
 
 
Large accelerated filer
¨
 
Accelerated filer
¨
           
 
Non-accelerated filer
¨
 
Smaller reporting company
x
 
Do not check if smaller reporting company
     

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 
 

 
 
MEWBOURNE ENERGY PARTNERS 04-A, L.P.
 
         
INDEX
         
Part 1  -  Financial Information
Page No.
         
 
Item 1.  Financial Statements
 
         
     
     
September 30, 2012  (Unaudited) and December 31, 2011
3
         
     
     
For the three months ended September 30, 2012 and 2011
 
     
  and the nine months months ended September 30, 2012 and 2011
4
         
     
     
For the nine months ended September 30, 2012 and 2011
5
         
     
     
For the nine months ended September 30, 2012
6
         
   
7
         
 
9
         
 
12
         
 
12
         
Part II  -  Other Information
 
         
 
13
         
 
13
 

 
2

 
 
MEWBOURNE ENERGY PARTNERS 04-A, L.P.
           
Part I - Financial Information
     
           
Item 1.  Financial Statements
     
 
   
September 30, 2012
   
December 31, 2011
 
   
(Unaudited)
       
ASSETS
           
             
Cash
  $ 54,130     $ 16,958  
Accounts receivable, affiliate
    272,922       305,598  
Prepaid state taxes
    5,068       10,039  
 Total current assets
    332,120       332,595  
                 
Oil and gas properties at cost, full-cost method
    30,455,904       30,430,171  
Less accumulated depreciation, depletion,
               
amortization and impairment
    (25,157,677 )     (24,902,854 )
      5,298,227       5,527,317  
                 
Total assets
  $ 5,630,347     $ 5,859,912  
                 
                 
LIABILITIES AND PARTNERS' CAPITAL
               
                 
Accounts payable, affiliate
  $ 61,781     $ 67,366  
Total current liabilities
    61,781       67,366  
                 
Asset retirement obligation
    474,975       460,791  
                 
Partners' capital
    5,093,591       5,331,755  
                 
Total liabilities and partners' capital
  $ 5,630,347     $ 5,859,912  
 

The accompanying notes are an integral part of the financial statements.
 
 
3

 
MEWBOURNE ENERGY PARTNERS 04-A, L.P.
                   
(Unaudited)
 
   
For the
   
For the
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Revenues and other income:
                       
Oil sales
  $ 99,157     $ 105,168     $ 306,118     $ 267,377  
Gas sales
    282,438       475,540       792,802       1,451,301  
Interest income
                      4,467  
Total revenues and other income
    381,595       580,708       1,098,920       1,723,145  
                                 
Expenses:
                               
Lease operating expense
    106,327       115,386       360,175       372,628  
Production taxes
    28,491       43,561       79,383       127,538  
Administrative and general expense
    20,472       29,673       68,536       90,386  
Depreciation, depletion, and amortization
    88,245       84,629       254,823       246,082  
Asset retirement obligation accretion
    4,728       4,608       14,184       13,824  
Total expenses
    248,263       277,857       777,101       850,458  
                                 
Net income
  $ 133,332     $ 302,851     $ 321,819     $ 872,687  
                                 
Basic and diluted net income per
                               
partner interest
                               
(30,000 interests outstanding)
  $ 4.44     $ 10.10     $ 10.73     $ 29.09  
 

The accompanying notes are an integral part of the financial statements.
 
 
4

 

 
MEWBOURNE ENERGY PARTNERS 04-A, L.P.
               
(Unaudited)
 
   
For the
 
   
Nine Months Ended
 
   
September 30,
 
   
2012
   
2011
 
Cash flows from operating activities:
           
Net income
  $ 321,819     $ 872,687  
Adjustments to reconcile net income to net cash
               
  provided by operating activities:
               
Depreciation, depletion, and amortization
    254,823       246,082  
Asset retirement obligation accretion
    14,184       13,824  
Changes in operating assets and liabilities:
               
Accounts receivable, affiliate
    32,676       21,646  
Prepaid state taxes
    4,971       (8,245 )
Accounts payable, affiliate
    (5,585 )     (9,980 )
Net cash provided by operating activities
    622,888       1,136,014  
                 
Cash flows from investing activities:
               
Purchase and development of oil and gas properties
    (25,733 )     (5,554 )
Net cash used in investing activities
    (25,733 )     (5,554 )
                 
Cash flows from financing activities:
               
Cash distributions to partners
    (559,983 )     (1,090,344 )
Net cash used in financing activities
    (559,983 )     (1,090,344 )
                 
Net increase in cash
    37,172       40,116  
Cash, beginning of period
    16,958       421  
                 
Cash, end of period
  $ 54,130     $ 40,537  
                 
Supplemental Cash Flow Information:
               
Non-cash changes to net oil & gas properties related to
               
asset retirement obligation liabilities
  $     $ (2,201 )
                 

The accompanying notes are an integral part of the financial statements.
 
 
5

 
 
MEWBOURNE ENERGY PARTNERS 04-A, L.P.
     
For the nine months ended September 30, 2012
(Unaudited)
 
   
Partners' Capital
 
       
Balance at December 31, 2011
  $ 5,331,755  
         
Cash distributions
    (559,983 )
         
Net income
    321,819  
         
Balance at September 30, 2012
  $ 5,093,591  

The accompanying notes are an integral part of the financial statements.
 
 
6

 

MEWBOURNE ENERGY PARTNERS 04-A, L.P.
(Unaudited)

1.           Description of Business

Mewbourne Energy Partners 04-A, L.P. (the “Registrant” or the “Partnership”), a Delaware limited partnership, is engaged primarily in oil and gas development and production in Texas, Oklahoma, and New Mexico, and was organized on January 27, 2004.  The offering of limited and general partnership interests began June 10, 2004 as a part of an offering registered under the name Mewbourne Energy Partners 04-05 Drilling Program, (the “Program”), and concluded August 20, 2004, with total investor contributions of $30,000,000 originally being sold to 1,118 subscribers of which $27,235,000 were sold to 1,022 subscribers as general partner interests and $2,765,000 were sold to 96 subscribers as limited partner interests. During 2006, all general partner equity interests were converted to limited partner equity interests.  In accordance with the laws of the State of Delaware, Mewbourne Development Corporation (“MD”), a Delaware Corporation, has been appointed as the Partnership’s managing general partner. MD has no significant equity interest in the Partnership.

2.           Summary of Significant Accounting Policies

Reference is hereby made to the Registrant’s Annual Report on Form 10-K for 2011, which contains a summary of significant accounting policies followed by the Partnership in the preparation of its financial statements.  These policies are also followed in preparing the quarterly report included herein.

In the opinion of management, the accompanying unaudited financial statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position, results of operations, cash flows and partners’ capital for the periods presented.  The results of operations for the interim periods are not necessarily indicative of the final results expected for the full year.

3.           Accounting for Oil and Gas Producing Activities

The Partnership follows the full-cost method of accounting for its oil and gas activities.  Under the full-cost method, all productive and non-productive costs incurred in the acquisition, exploration and development of oil and gas properties are capitalized.  Depreciation, depletion and amortization of oil and gas properties subject to amortization is computed on the units-of-production method based on the proved reserves underlying the oil and gas properties.  At September 30, 2012 and 2011, all capitalized costs were subject to amortization. Proceeds from the sale or other disposition of properties are credited to the full cost pool.  Gains and losses on the sale or other disposition of properties are not recognized unless such adjustments would significantly alter the relationship between capitalized costs and the proved oil and gas reserves.  Capitalized costs are subject to a quarterly ceiling test that limits such costs to the aggregate of the present value of future net cash flows of proved reserves and the lower of cost or fair value of unproved properties. There were no cost ceiling write-downs for the nine months ended September 30, 2012 or 2011.


 
7

 

4.           Asset Retirement Obligations

The Partnership has recognized an estimated liability for future plugging and abandonment costs. A liability for the estimated fair value of the future plugging and abandonment costs is recorded with a corresponding increase in the full cost pool at the time a new well is drilled.  Depreciation expense associated with estimated plugging and abandonment costs is recognized in accordance with the full cost methodology.

The Partnership estimates a liability for plugging and abandonment costs based on historical experience and estimated well life.  The liability is discounted using the credit-adjusted risk-free rate.  Revisions to the liability could occur due to changes in well plugging and abandonment costs or well useful lives, or if federal or state regulators enact new well restoration requirements.  The Partnership recognizes accretion expense in connection with the discounted liability over the remaining life of the well.

A reconciliation of the Partnership’s liability for well plugging and abandonment costs for the nine months ended September 30, 2012 and the year ended December 31, 2011 is as follows:

   
September 30,
   
December 31,
 
   
2012
   
2011
 
Balance, beginning of period
  $ 460,791     $ 441,068  
Liabilities incurred
          3,600  
Liabilities reduced due to revisions
          (2,201 )
Accretion expense
    14,184       18,324  
Balance, end of period
  $ 474,975     $ 460,791  
 
5.           Related Party Transactions

In accordance with the laws of the State of Delaware, Mewbourne Development Corporation (“MD”), a Delaware Corporation, has been appointed as the Partnership’s managing general partner. MD has no significant equity interest in the Partnership. Mewbourne Oil Company (“MOC”) is operator of oil and gas properties owned by the Partnership.  Mewbourne Holdings, Inc. is the parent of both MD and MOC.  Substantially all transactions are with MD and MOC.

In the ordinary course of business, MOC will incur certain costs that will be passed on to owners of the well for which the costs were incurred.  The Partnership will receive their portion of these costs based upon their ownership in each well incurring the costs.  These costs are referred to as operator charges and are standard and customary in the oil and gas industry.  Operator charges include recovery of gas marketing costs, fixed rate overhead, supervision, pumping, and equipment furnished by the operator, some of which will be included in the full cost pool pursuant to Rule 4-10(c)(2) of Regulation S-X. Services and operator charges are billed in accordance with the program and partnership agreements.

In accordance with the Partnership agreement, during any particular calendar year the total amount of administrative expenses allocated to the Partnership by MOC shall not exceed the greater of (a) 3.5% of the Partnership’s gross revenue from the sale of oil and natural gas production during each year (calculated without any deduction for operating costs or other costs and expenses) or (b) the sum of $50,000 plus .25% of the capital contributions of limited and general partners.

 
8

 

The Partnership participates in oil and gas activities through the Program. The Partnership and MD are the parties to the Program, and the costs and revenues are allocated between them as follows:
 
   
Partnership
   
MD
 
Revenues:
           
Proceeds from disposition of depreciable and depletable properties
    70 %     30 %
All other revenues
    70 %     30 %
Costs and expenses:
               
Organization and offering costs (1)
    0 %     100 %
Lease acquisition costs (1)
    0 %     100 %
Tangible and intangible drilling costs (1)
    100 %     0 %
Operating costs, reporting and legal expenses, general and
               
administrative expenses and all other costs
    70 %     30 %
 
(1)  
Pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which should approximate 20% of total capital costs. To the extent that organization and offering costs and lease acquisition costs are less than 20% of total capital costs, MD is responsible for tangible drilling costs until its share of the Program’s total capital costs reaches approximately 20%. The Partnership’s financial statements reflect its respective proportionate interest in the Program.
 

Liquidity and Capital Resources

Mewbourne Energy Partners 04-A, L.P. was formed January 27, 2004.  The offering of limited and general partnership interests began June 10, 2004 and concluded August 20, 2004, with total investor contributions of $30,000,000. During 2006, all general partner equity interests were converted to limited partner equity interests.

Future capital requirements and operations will be conducted with available funds generated from oil and gas activities.  No bank borrowing is anticipated.  The Partnership had net working capital of $270,339 at September 30, 2012.

During the nine months ended September 30, 2012, the Partnership made cash distributions to the investor partners in the amount of $559,983 as compared to $1,090,344 for the nine months ended September 30, 2011.  The Partnership expects that cash distributions will continue during 2012 as additional oil and gas revenues are sufficient to produce cash flows from operations.

The sale of crude oil and natural gas produced by the Partnership will be affected by a number of factors that are beyond the Partnership’s control.  These factors include the price of crude oil and natural gas, the fluctuating supply of and demand for these products, competitive fuels, refining, transportation, extensive federal and state regulations governing the production and sale of crude oil and natural gas, and other competitive conditions.  It is impossible to predict with any certainty the future effect of these factors on the Partnership.

 
9

 

Results of Operations

For the three months ended September 30, 2012 as compared to the three months ended September 30, 2011:

   
Three Months Ended September 30,
 
   
2012
   
2011
 
Oil sales
  $ 99,157     $ 105,168  
Barrels produced
    1,127       1,236  
Average price/bbl
  $ 87.98     $ 85.09  
                 
Gas sales
  $ 282,438     $ 475,540  
Mcf produced
    100,982       108,071  
Average price/mcf
  $ 2.80     $ 4.40  
 
Oil and gas revenues.  As shown in the above table, total oil and gas sales decreased by $199,113, a 34.3% decline, for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011.

Of this decrease, $173,275 was from a decline in the average price of gas sold. The average price fell to $2.80 from $4.40 per thousand cubic feet (mcf) for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011.

Also contributing to the decrease in revenue were $9,590 and $19,827 due to decreases in the volumes of oil and gas sold, respectively. The volumes sold decreased by 109 barrels (bbls) and 7,089 mcf for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011. The decreases in volumes were primarily due to normal declines in production, which in some wells were substantial.

These decreases were slightly offset by $3,579 from an increase in the average price of oil sold. The average price rose to $87.98 from $85.09 per bbl for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011.

Lease operations.  Lease operating expense during the three month period ended September 30, 2012 decreased to $106,327 from $115,386 for the three month period ended September 30, 2011 due to fewer well repairs and workovers.

Production taxes.  Production taxes during the three month period ended September 30, 2012 decreased to $28,491 from $43,561 for the three month period ended September 30, 2011 due to lower overall oil and gas revenue.

Administrative and general expense.  Administrative and general expense decreased to $20,472 for the three month period ended September 30, 2012 from $29,673 for the three month period ended September 30, 2011 due to decreased administrative expenses allocable to the Partnership and lower general expense for reporting and legal costs.

Depreciation, depletion and amortization.  Depreciation, depletion and amortization for the three month period ended September 30, 2012 increased to $88,245 from $84,629 for the three month period ended September 30, 2011 due to an increase in the depreciation, depletion and amortization rate in 2012. This rate increase resulted from a decline in the reserves in 2012 due to lower prices.

 
10

 

Results of Operations

For the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011:

   
Nine Months Ended September 30,
 
   
2012
   
2011
 
Oil sales
  $ 306,118     $ 267,377  
Barrels produced
    3,387       2,941  
Average price/bbl
  $ 90.38     $ 90.91  
                 
Gas sales
  $ 792,802     $ 1,451,301  
Mcf produced
    303,483       330,703  
Average price/mcf
  $ 2.61     $ 4.39  
 
Oil and gas revenues.  As shown in the above table, total oil and gas sales decreased by $619,758, a 36.1% decline, for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011.

Of this decline, $1,569 and $587,391 were due to decreases in the average prices of oil and gas sold, respectively. The average price fell to $90.38 from $90.91 per barrel (bbl) and to $2.61 from $4.39 per thousand cubic feet (mcf) for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011.

Also contributing to the decline in sales was $71,108 due to a decrease in the volume of gas sold by 27,220 mcf. The decrease in volume sold was primarily due to normal declines in production.

These decreases were partially offset by additional revenue of $40,310 from an increase in the volume of oil sold by 446 bbls. The increase in volume was primarily due to a farmout in a well which paid at the end of 2011. Now that this well has been paid out, the Partnership will have an increased interest in the production and revenue of the well in the future.

Lease operations.  Lease operating expense during the nine month period ended September 30, 2012 decreased to $360,175 from $372,628 for the nine month period ended September 30, 2011 due to fewer well repairs and workovers.

Production taxes.  Production taxes during the nine month period ended September 30, 2012 decreased to $79,383 from $127,538 for the nine month period ended September 30, 2011 due to lower overall oil and gas revenue.

Administrative and general expense.  Administrative and general expense decreased to $68,536 for the nine month period ended September 30, 2012 from $90,386 for the nine month period ended September 30, 2011 due to decreased administrative expenses allocable to the Partnership and lower general expense for reporting and legal costs.

Depreciation, depletion and amortization.  Depreciation, depletion and amortization for the nine month period ended September 30, 2012 increased to $254,823 from $246,082 for the nine month period ended September 30, 2011 due to an increase in the depreciation, depletion and amortization rate in 2012. This rate increase resulted from a decline in the reserves in 2012 due to lower prices.

 
11

 
 

1.    Interest Rate Risk
 
The Partnership Agreement allows borrowings from banks or other financial sources of up to 20% of the total capital contributions to the Partnership without investor approval. Should the Partnership elect to borrow monies for additional development activity on Partnership properties, it will be subject to the interest rate risk inherent in borrowing activities. Changes in interest rates could significantly affect the Partnership’s results of operations and the amount of net cash flow available for partner distributions. Also, to the extent that changes in interest rates affect general economic conditions, the Partnership will be affected by such changes.

2.    Commodity Price Risk
 
The Partnership does not expect to engage in commodity futures trading or hedging activities or enter into derivative financial instrument transactions for trading or other speculative purposes.  The Partnership currently expects to sell a significant amount of its production from successful oil and gas wells on a month-to-month basis at market prices. Accordingly, the Partnership is at risk for the volatility in commodity prices inherent in the oil and gas industry, and the level of commodity prices will have a significant impact on the Partnership’s results of operations. For the nine months ended September 30, 2012, a 10% change in the price received for oil and gas production would have had an approximate $110,000 impact on revenue.
 
3.    Exchange Rate Risk
 
The Partnership currently has no income from foreign sources or operations in foreign countries that would subject it to currency exchange rate risk. The Partnership does not currently expect to purchase any prospects located outside of either the United States or United States coastal waters in the Gulf of Mexico.


MD maintains a system of controls and procedures designed to provide reasonable assurance as to the reliability of the financial statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition.  MD’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of its disclosure controls and procedures with the assistance and participation of other members of management.  Based upon that evaluation, MD’s Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Partnership is required to disclose in the reports it files under the Securities Exchange Act of 1934 within the time periods specified in the SEC’s rules and forms. Since MD’s December 31, 2011 annual report on internal control over financial reporting, and for the quarter ended September 30, 2012, there have been no changes in MD’s internal controls or in other factors which have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

 
12

 

Part II –        Other Information


From time to time, the Registrant may be a party to certain legal actions and claims arising in the ordinary course of business. While the outcome of these events cannot be predicted with certainty, the Partnership does not expect these matters to have a material effect on its financial position or results of operations.


(a)           Exhibits filed herewith.

31.1           Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

31.2           Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

32.1           Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

32.2           Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

 
101
The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statements of Cash Flows, (iv) the Condensed Statement of Changes in Partners’ Capital and (v) related notes.

(b)           Reports on Form 8-K
None.

 
13

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.o.


   
Mewbourne Energy Partners 04-A, L.P.
     
   
By:
Mewbourne Development Corporation
   
 
Managing General Partner
   
 
 


Date: November 14, 2012  
By:
/s/Alan Clark
   
 
Alan Clark, Treasurer and Controller

 
14

 

INDEX TO EXHIBITS
 
 
EXHIBIT
NUMBER
DESCRIPTION
     
 
31.1
Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
     
 
31.2
     
 
32.1
     
 
32.2
     
 
101
The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statements of Cash Flows, (iv) the Condensed Statement of Changes in Partners’ Capital and (v) related notes.
     
 
15