Mewbourne Energy Partners 02-a 10-Q 2008 Q2 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 June 30, 2008

OR

¨ 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. 333-85994

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, 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	¨  (Do not check if a smaller reporting company)	Smaller reporting company	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 1 - Financial Information
	Item 1. Financial Statements
		Condensed Balance Sheets - June 30, 2008 (Unaudited) and December 31, 2007	3
		Condensed Statements of Operations (Unaudited) - For the three months ended June  30, 2008 and 2007 and the six months ended June 30, 2008 and 2007	4
		Condensed Statements of Cash Flows (Unaudited) - For the six months ended June 30, 2008 and 2007	5
		Condensed Statement of Changes In Partners’ Capital (Unaudited) - For the six months ended June 30, 2008	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

JUNE 30, 2008 AND DECEMBER 31, 2007

	June 30, 2008			December 31, 2007
	(Unaudited)
ASSETS
Cash	$	37,729		$	318
Accounts receivable, affiliate		631,574			448,231
Total current assets		669,303			448,549
Oil and gas properties at cost, full-cost method		17,255,675			17,255,670
Less accumulated depreciation, depletion, amortization and impairment		(11,701,688	)		(11,515,336	)
		5,553,987			5,740,334
Total assets	$	6,223,290		$	6,188,883
LIABILITIES AND PARTNERS’ CAPITAL
Accounts payable, affiliate	$	135,783		$	221,897
Total current liabilities		135,783			221,897
Asset retirement obligation		461,326			450,304
Partners’ capital		5,626,181			5,516,682
Total liabilities and partners’ capital	$	6,223,290		$	6,188,883

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 June 30, 2008 and 2007 and

the six months ended June 30, 2008 and 2007

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2008		2007		2008		2007
Revenues and other income
Oil and gas sales	$	956,148	$	738,248	$	1,722,744	$	1,410,892
Interest income		173		315		325		809
Total revenues and other income		956,321		738,563		1,723,069		1,411,701
Expenses
Lease operating expense		139,679		102,600		251,046		230,148
Production taxes		76,678		59,000		139,014		112,550
Administrative and general expense		56,158		52,285		81,576		89,081
Depreciation, depletion, and amortization		89,063		113,384		186,352		214,277
Asset retirement obligation accretion		4,709		4,582		9,418		9,164
Total expenses		366,287		331,851		667,406		655,220
Net income	$	590,034	$	406,712	$	1,055,663	$	756,481
Basic and diluted net income per limited partner interest (16,072 interests outstanding)	$	36.71	$	25.31	$	65.68	$	47.07

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 six months ended June 30, 2008 and 2007

(Unaudited)

	Six Months Ended June 30,
	2008			2007
Cash flows from operating activities:
Net income	$	1,055,663		$	756,481
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization		186,352			214,277
Asset retirement obligation accretion		9,418			9,164
Changes in operating assets and liabilities:
Accounts receivable, affiliate		(183,343	)		51,868
Accounts payable, affiliate		(86,114	)		103,954
Net cash provided by operating activities		981,976			1,135,744
Cash flows from investing activities:
Proceeds from sale of oil and gas properties		3,179			—
Purchase and development of oil and gas properties		(1,580	)		(8,576	)
Net cash provided by (used in) investing activities		1,599			(8,576	)
Cash flows from financing activites:
Cash distributions to partners		(946,164	)		(1,129,483	)
Net cash used in financing activities		(946,164	)		(1,129,483	)
Net increase (decrease) in cash		37,411			(2,315	)
Cash, beginning of period		318			3,099
Cash, end of period	$	37,729		$	784
Supplemental Cash Flow Information:
Non-cash changes to oil & gas properties related to asset retirement obligation liabilities	$	1,604

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 six months ended June 30, 2008

(Unaudited)

	Partners’ Capital
Balance at December 31, 2007	$	5,516,682
Cash distributions		(946,164	)
Net income		1,055,663
Balance at June 30, 2008	$	5,626,181

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 2007, 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.

We adopted the provisions of Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” on January 1, 2008. SFAS No. 157 defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. SFAS No. 157 does not expand or require any new fair value measures. However, the application of this statement may change current practice. In February 2008, the FASB decided that an entity need not apply this standard to non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis until 2009. Accordingly, our adoption of this standard in 2008 was limited to financial assets and liabilities. The adoption of SFAS No. 157 did not impact our financial position, results of operations, or cash flows. We are still in the process of evaluating this standard with respect to its effect on non-financial assets and liabilities and therefore have not yet determined the impact that it will have on our financial statements upon full adoption in 2009. Non-financial assets and liabilities for which we have not applied the provisions of SFAS No. 157 include those measured at fair value in impairment testing.

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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 significant 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 June 30, 2008 and 2007, 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.

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 six months ended June 30, 2008 and the year ended December 31, 2007 is as follows:

	June 30, 2008		December 31, 2007
Balance, beginning of period	$	450,304	$	432,070
Liabilities incurred		1,604		—
Accretion expense		9,418		18,234
Balance, end of period	$	461,326	$	450,304

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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 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. 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.

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) As noted above, pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which should 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.

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 $533,520 at June 30, 2008.

During the six months ended June 30, 2008, the Partnership made cash distributions to the investor partners in the amount of $946,164 as compared to $1,129,483 for the six months ended June 30, 2007. The Partnership expects that cash distributions will continue during 2008 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 June 30, 2008 as compared to the three months ended June 30, 2007

Oil and gas revenues	Three Months Ended June 30,
	2008		2007
Oil and gas sales	$	956,148	$	738,248
Barrels produced		975		764
Mcf produced		99,364		106,501
Average price/bbl	$	116.07	$	60.53
Average price/mcf	$	8.48	$	6.50

As shown in the table above, total oil and gas sales increased $217,900 (29.5%) for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007.

Of this increase, $24,522 was related to an increase in the volume of oil sold. This was more than offset by a reduction in revenue of $60,540 from a decrease in the volume of gas sold. The volume of oil sold increased by 211 bbls and the volume of gas decreased by 7,137 mcfs for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007. This decrease in the volume sold was primarily due to normal declines in production.

The net decrease in revenue due to the changes in volume were more than offset by increases of $42,438 and $211,480, respectively, related to increases in the average prices of oil and gas sold. Average oil and gas prices increased to $116.07 per bbl and $8.48 per mcf for the three months ended June 30, 2008 from $60.53 per bbl and $6.50 per mcf for the three months ended June 30, 2007.

Production taxes. Production taxes during the three month period ended June 30, 2008 increased to $76,678 from $59,000 for the three month period ended June 30, 2007 due to increased revenue.

Lease operations. Lease operating expense during the three month period ended June 30, 2008 increased to $139,679 from $102,600 for the three month period ended June 30, 2007 due to well repairs and workovers.

Depreciation, depletion and amortization. Depreciation, depletion and amortization for the three month period ended June 30, 2008 decreased to $89,063 from $113,384 for the three month period ended June 30, 2007. The decrease was due to the decline in production volumes.

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Results of Operations

Six months ended June 30, 2008 as compared to the six months ended June 30, 2007

Oil and gas revenues	Six Months Ended June 30,
	2008		2007
Oil and gas sales	$	1,722,744	$	1,410,892
Barrels produced		1,318		1,343
Mcf produced		200,547		207,412
Average price/bbl	$	110.40	$	58.06
Average price/mcf	$	7.86	$	6.43

As shown in the table above, total oil and gas sales increased $311,852 (22.1%) for the six months ended June 30, 2008 as compared to the six months ended June 30, 2007.

Of this increase, $70,283 and $298,340, respectively, were related to increases in the average prices of oil and gas sold. Average oil and gas prices increased to $110.40 per bbl and $7.86 per mcf for the six months ended June 30, 2008, as compared to $58.06 per bbl and $6.43 per mcf for the six months ended June 30, 2007.

The above increases in oil and gas revenue due to higher prices were partially offset by reductions of $2,783 and $53,988, respectively, due to decreases in the volumes of oil and gas sold. The volumes sold decreased 25 bbls and 6,865 mcfs, respectively, as compared to the six months ended June 30, 2007. This decrease in volumes sold was primarily due to normal declines in production.

Production taxes. Production taxes during the six month period ended June 30, 2008 increased to $139,014 from $112,550 for the six month period ended June 30, 2007 due to increased revenue.

Lease operations. Lease operating expense during the six month period ended June 30, 2008 increased to $251,046 from $230,148 for the six month period ended June 30, 2007 due to well repairs and workovers.

Depreciation, depletion and amortization. Depreciation, depletion and amortization for the six month period ended June 30, 2008 decreased to $186,352 from $214,277 for the six month period ended June 30, 2007. The decrease was due to the decline in production volumes.

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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 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 six months ended June 30, 2008, a 10% change in the price received for natural gas production would have had an approximate $158,000 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.

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. Since MD’s December 31, 2007 annual report on internal control over financial reporting, and for the quarter ended June 30, 2008, 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.

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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: August 14, 2008
	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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