Mewbourne Energy Partners 02-a 10-Q 2007 Q3 Quarterly report

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, 2007

Or

¨ TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File No. 333-85994

MEWBOURNE ENERGY PARTNERS 02-A, L.P.

Delaware	75-0871949
(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    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  x

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

Mewbourne Energy Partners 02-A, L.P.

INDEX

		Page No.
Part I – Financial Information
Item 1.	Financial Statements
	Condensed Balance Sheets - September 30, 2007 (Unaudited) and December 31, 2006	3
	Condensed Statements of Operations (Unaudited) - For the three months ended September 30, 2007 and 2006 and the nine months ended September 30, 2007 and 2006	4
	Condensed Statements of Cash Flows (Unaudited) - For the nine months ended September 30, 2007 and 2006	5
	Condensed Statement of Changes In Partners’ Capital (Unaudited) - For the nine months ended September 30, 2007	6
	Notes to Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	13
Item 4.	Disclosure Controls and Procedures	13
Part II – Other Information
Item 1.	Legal Proceedings	14
Item 6.	Exhibits and Reports on Form 8-K	14

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Mewbourne Energy Partners 02-A, L.P.

Part I –Financial Information

Item 1. Financial Statements

CONDENSED BALANCE SHEETS

September 30, 2007 and December 31, 2006

	September 30, 2007			December 31, 2006
	(Unaudited)
ASSETS
Cash	$	4,090		$	3,099
Accounts receivable, affiliate		379,587			540,425
Total current assets		383,677			543,524
Oil and gas properties at cost, full cost method		17,178,956			17,171,360
Less accumulated depreciation, depletion, amortization and impairment		(11,414,213	)		(11,096,086	)
		5,764,743			6,075,274
Total assets	$	6,148,420		$	6,618,798
LIABILITIES AND PARTNERS’ CAPITAL
Accounts payable, affiliate	$	200,810		$	148,457
Asset retirement obligation		445,813			432,070
Partners’ capital		5,501,797			6,038,271
Total liabilities and partners’ capital	$	6,148,420		$	6,618,798

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

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Mewbourne Energy Partners 02-A, L.P.

CONDENSED STATEMENTS OF OPERATIONS

For the three months ended September 30, 2007 and 2006 and

the nine months ended September 30, 2007 and 2006

(Unaudited)

	Three Months Ended September 30,					Nine months Ended September 30,
	2007		2006			2007		2006
Revenues and other income:
Oil and gas sales	$	570,589	$	826,843		$	1,981,481	$	2,676,005
Interest income		314		518			1,123		1,984
Total revenues and other income		570,903		827,361			1,982,604		2,677,989
Expenses:
Lease operating expense		109,549		158,357			339,697		380,795
Production taxes		44,702		67,251			157,252		211,490
Administrative and general expense		30,483		39,300			119,564		155,626
Depreciation, depletion, and amortization		103,850		231,654			318,127		740,749
Cost ceiling write-down		—		3,605,887			—		4,895,512
Asset retirement obligation accretion		4,579		4,395			13,743		13,186
Total expenses		293,163		4,106,844			948,383		6,397,358
Net income (loss)	$	277,740	$	(3,279,483	)	$	1,034,221	$	(3,719,369	)
Basic and diluted net income (loss) per limited partner interest (16,072 interests outstanding)	$	17.28	$	(204.05	)	$	64.35	$	(231.42	)

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

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Mewbourne Energy Partners 02-A, L.P.

CONDENSED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2007 and 2006

(Unaudited)

	2007			2006
Cash flows from operating activities:
Net income (loss)	$	1,034,221			(3,719,369	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion, and amortization		318,127			740,749
Cost ceiling write-down		—			4,895,512
Asset retirement obligation accretion		13,743			13,186
Changes in operating assets and liabilities:
Accounts receivable, affiliate		160,838			360,053
Accounts payable, affiliate		52,353			96,396
Net cash provided by operating activities		1,579,282			2,386,527
Cash flows from investing activities:
Purchase and development of oil and gas properties		(7,596	)		(112,296	)
Net cash used in investing activities		(7,596	)		(112,296	)
Cash flows from financing activities:
Cash distributions to partners		(1,570,695	)		(2,272,364	)
Net cash used in financing activities		(1,570,695	)		(2,272,364	)
Net increase in cash		991			1,867
Cash, beginning of period		3,099			913
Cash, end of period	$	4,090		$	2,780

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

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Mewbourne Energy Partners 02-A, L.P.

CONDENSED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

For the nine months ended September 30, 2007

(Unaudited)

	Partners Capital
Balance at December 31, 2006	$	6,038,271
Cash distributions		(1,570,695	)
Net income		1,034,221
Balance at September 30, 2007	$	5,501,797

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

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Mewbourne Energy Partners 02-A, L.P.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Accounting Policies

Reference is hereby made to the Registrant’s Annual Report on Form 10-K for 2006, 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.

2. Accounting for Oil and Gas Producing Activities

Mewbourne Energy Partners 02-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 February 27, 2002. The offering of limited and general partnership interests began June 26, 2002 as a part of an offering registered under the name Mewbourne Energy Partners 02-03 Drilling Program, (the “Program”), and concluded October 10, 2002, with total investor contributions of $16,072,000 originally being sold to 647 subscribers of which $14,667,000 were sold to 597 subscribers as general partner interests and $1,405,000 were sold to 50 subscribers as limited partner interests. During 2004, 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 equity interest in the Partnership.

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, 2007 and 2006 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 was no cost ceiling write-down for the nine month period ended September 30, 2007. There was a cost ceiling write-down of $4,895,512 for the nine month period ended September 30, 2006.

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3. Asset Retirement Obligations

The Partnership has recognized an estimated liability for future plugging and abandonment costs. The estimated liability is 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, 2007 and for the year ended December 31, 2006 is as follows:

	2007		2006
Balance, beginning of period	$	432,070	$	414,488
Accretion expense		13,743		17,582
Balance, end of period	$	445,813	$	432,070

4. 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 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. Services and operator charges are billed in accordance with the program and partnership agreements.

In general, 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.

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The Partnership participates in oil and gas activities through a Drilling Program Agreement (the “Program”). The Partnership and MD are parties to the Program. The costs and revenues of the Program are allocated to MD and the Partnership as follows:

	Partnership		MD
Revenues:
Proceeds from disposition of depreciable and depletable properties	60	%	40	%
All other revenues	60	%	40	%
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	60	%	40	%

(1) Pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which approximate 30% of total capital costs. To the extent that organization and offering costs and lease acquisition costs are less than 30% of total capital costs, MD is responsible for tangible drilling costs until its share of the Program’s total capital costs reaches approximately 30%.

The Partnership’s financial statements reflect its respective proportionate interest in the Program.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources

Mewbourne Energy Partners 02-A, L.P. was formed February 27, 2002. The offering of limited and general partnership interests began June 26, 2002 and concluded October 10, 2002, with total investor contributions of $16,072,000. During 2004, all general partner equity interests were converted to limited partner equity interests.

The Partnership has acquired interests in oil and gas prospects for the purpose of development drilling. The Partnership participated in the drilling of 44 wells. 39 wells were productive and 5 wells were abandoned.

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 $182,867 at September 30, 2007.

During the nine months ended September 30, 2007, the Partnership made cash distributions to the investor partners in the amount of $1,570,695 as compared to $2,272,364 for the nine months ended September 30, 2006. The Partnership expects that cash distributions will continue during 2007 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.

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Results of Operations

Three months ended September 30, 2007 as compared to the three months ended September 30, 2006.

Oil and gas revenues.

	Three Months Ended September 30,
	2007		2006
Oil and gas sales	$	570,589	$	826,843
Barrels produced		505		898
Mcf produced		99,118		132,198
Average price/bbl	$	74.34	$	67.78
Average price/mcf	$	5.38	$	5.79

As shown in the table above, total oil and gas sales decreased $256,254 (31.0%) for the three months ended September 30, 2007 as compared to the three months ended September 30, 2006. Of this decrease, $178,147 was related to a decrease in the volume of gas sold, to 99,118 mcf of gas for the three months ended September 30, 2007 from 132,198 mcf for the three months ended September 30, 2006. An additional decrease of $29,229 was due to the decrease in the volume of oil sold to 505 barrels of oil for the three months ended September 30, 2007 from 898 barrels of oil for the three months ended September 30, 2006. The decreases in volumes of oil and gas sold were due to normal declines in production, which in some wells was substantial. Also, gas sales decreased by $54,766 due to the decrease in the average price of gas to $5.38 per mcf for the three months ended September 30, 2007 from $5.79 per mcf for the three months ended September 30, 2006. This was partially offset by a $5,888 increase in oil sales due to the increase in the average price of oil to $74.34 per barrel for the three months ended September 30, 2007 from $67.78 per barrel for the three months ended September 30, 2006.

Lease operations and production taxes. Lease operating expense during the period ended September 30, 2007 totaled $109,549 as compared to $158,357 for the period ended September 30, 2006. Production taxes during the period ended September 30, 2007 totaled $44,702 as compared to $67,251 for the period ended September 30, 2006. Lease operating expense decreased primarily due to workover expenses for one well for the period ended September 30, 2006 as compared to no workover expenses for the period ended September 30, 2007. The decrease in production taxes is due to the decrease in oil and gas revenues.

Depreciation, depletion and amortization. Depreciation, depletion and amortization for the three month period ended September 30, 2007 total $103,850 compared to $231,654 for the three month period ended September 30, 2006. The decrease is due to the decline in production volumes.

Cost ceiling write-down. There was no cost ceiling write-down for the three month period ended September 30, 2007. There was a cost ceiling write-down of $3,605,887 for the three month period ended September 30, 2006, which was caused by the lower gas price at September 30, 2006.

Administrative and general expense. Administrative and general expense for the three month period ended September 30, 2007 total $30,483 compared to $39,300 for the period ended September 30, 2006. The overall decrease is due to decreased administrative expenses allocable to the partnership and lower general expenses for reporting costs.

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Nine months ended September 30, 2007 as compared to the nine months ended September 30, 2006.

Oil and gas revenues

	Nine months Ended September 30,
	2007		2006
Oil and gas sales	$	1,981,481	$	2,676,005
Barrels produced		1,847		2,697
Mcf produced		306,529		416,081
Average price/bbl	$	62.51	$	65.64
Average price/mcf	$	6.09	$	6.01

As shown in the table above, total oil and gas sales decreased $694,524 (26.0%) for the nine months ended September 30, 2007 as compared to the nine months ended September 30, 2006. Of this decrease, $667,922 was related to a decrease in the volume of gas sold, to 306,529 mcf of gas for the nine months ended September 30, 2007 from 416,081 mcf for the nine months ended September 30, 2006. An additional decrease of $53,103 was due to the decrease in the volume of oil sold to 1,847 barrels of oil for the nine months ended September 30, 2007 from 2,697 barrels of oil for the nine months ended September 30, 2006. The decreases in volumes of oil and gas sold were due to normal declines in production, which in some wells was substantial. Also, gas sales increased by $34,938 due to the increase in the average price of gas to $6.09 per mcf for the nine months ended September 30, 2007 from $6.01 per mcf for the nine months ended September 30, 2006. Oil sales decreased by $8,437 due to the decrease in the average price of oil to $62.51 per barrel for the nine months ended September 30, 2007 from $65.64 per barrel for the nine months ended September 30, 2006.

Lease operations and production taxes. Lease operating expense during the period ended September 30, 2007 total $339,697 as compared to $380,795 for the period ended September 30, 2006. Production taxes during the period ended September 30, 2007 total $157,252 as compared to $211,490 for the period ended September 30, 2006. Lease operating expense decreased primarily due to workover expenses for one well and well service and repair expenses for two wells in the period ended September 30, 2006 as compared to workover expenses for one well and no well service and repair expenses for the period ended September 30, 2007. The decrease in production taxes is due to the decrease in oil and gas revenues.

Depreciation, depletion and amortization. Depreciation, depletion and amortization for the nine month period ended September 30, 2007 total $318,127, compared to $740,749 for the nine month period ended September 30, 2006. The decrease is due to the decline in production volumes.

Cost ceiling write-down. There was no cost ceiling write-down for the nine month period ended September 30, 2007. There was a cost ceiling write-down of $4,895,512 for the nine month period ended September 30, 2006, which was caused by lower gas prices at June 30, 2006 and September 30, 2006.

Administrative and general expense. Administrative and general expense for the nine month period ended September 30, 2007 total $119,564 compared to $155,626 for the period ended September 30, 2006. The overall decrease is due to decreased administrative expenses allocable to the partnership, which was partially offset by higher general expenses for reporting costs.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

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 vast majority 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, 2007, a 10% change in the price received for natural gas production would have had an approximate $187,000 impact on our 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.

Item 4. Disclosure Controls and Procedures

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. There have been no changes in MD’s internal controls for the quarter ended September 30, 2007 or in other factors which have materially affected, or are reasonably likely to materially affect the internal controls over financial reporting.

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Part II –Other Information

Item 1. Legal Proceedings

None.

Item 6. Exhibits and Reports on Form 8-K

(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.

(b) Reports on Form 8-K

None.

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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.

	Mewbourne Energy Partners 02-A, L.P.
	By:	Mewbourne Development Corporation
		Managing General Partner
Date: November 14, 2007
	By:	/s/ Alan Clark
		Alan Clark, Treasurer and Controller

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INDEX TO EXHIBITS

EXHIBIT NUMBER	DESCRIPTION
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.

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