Mewbourne Energy Partners 04-a 10-Q 2005 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, 2005

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. 333-113340

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.  x  Yes    ¨  No

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  ¨  Yes    x  No

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

Mewbourne Energy Partners 04-A, L.P.

INDEX

		Page No.
Part I – Financial Information
Item 1.	Financial Statements
	Balance Sheets - September 30, 2005 (Unaudited) and December 31, 2004	3
	Statements of Operations (Unaudited) - For the three months ended September 30, 2005 and 2004, the nine months ended September 30, 2005 and the period from January 27, 2004 (date of inception) through September 30, 2004	4
	Statements of Cash Flows (Unaudited) - For the nine months ended September 30, 2005 and the period from January 27, 2004 (date of inception) through September 30, 2004	5
	Statement of Changes In Partners’ Capital (Unaudited) - For the nine months ended September 30, 2005	6
	Notes to Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 4.	Disclosure Controls and Procedures	12
Part II – Other Information
Item 1.	Legal Proceedings	12
Item 6.	Exhibits and Reports on Form 8-K	12

2

Mewbourne Energy Partners 04-A, L.P.

Part I – Financial Information

Item 1. Financial Statements

BALANCE SHEETS

September 30, 2005 and December 31, 2004

	September 30, 2005			December 31, 2004
	(Unaudited)
ASSETS
Cash and cash equivalents	$	1,095,546		$	10,630,997
Accounts receivable, affiliate		4,747,892			690,040
Accounts receivable, other		395			—
Total current assets		5,843,833			11,321,037
Prepaid well cost		—			7,937,853
Oil and gas properties at cost, full cost method		28,551,368			9,505,563
Less accumulated depreciation, depletion and amortization		(4,288,074	)		(252,014	)
		24,263,294			9,253,549
Total assets	$	30,107,127		$	28,512,439
LIABILITIES AND PARTNERS’ CAPITAL
Accounts payable, affiliate	$	1,641,361		$	501,212
Accounts payable, other		4,892			—
Total accounts payable		1,646,253			501,212
Asset retirement obligation plugging liability		373,820			112,534
Partners’ capital
General partners		25,498,364			25,327,364
Limited partners		2,588,690			2,571,329
Total partners’ capital		28,087,054			27,898,693
Total liabilities and partners’ capital	$	30,107,127		$	28,512,439

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

3

Mewbourne Energy Partners 04-A, L.P.

STATEMENTS OF OPERATIONS

For the three months ended September 30, 2005 and 2004,

the nine months ended September 30, 2005 and the period from

January 27, 2004 (date of inception) through September 30, 2004

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended and Period Ended September 30,
	2005		2004		2005		2004
Revenues and other income:
Oil and gas sales	$	5,969,746	$	—	$	12,388,841	$	—
Interest income		7,831		23,039		95,081		23,039
Total revenues and other income		5,977,577		23,039		12,483,922		23,039
Expenses:
Lease operating expense		135,314		82		281,325		82
Production taxes		549,022		—		1,107,465		—
Administrative and general expense		198,319		4,301		418,616		4,301
Depreciation, depletion, and amortization		1,667,810		—		4,036,060		—
Asset retirement obligation accretion		2,781		—		11,270		—
Net income	$	3,424,331	$	18,656	$	6,629,186	$	18,656
Allocation of net income:
General partners	$	3,108,722	$	16,921	$	6,018,196	$	16,921
Limited partners	$	315,609	$	1,735	$	610,990	$	1,735
Basic and diluted net income per limited and general partner interest (30,000 interests outstanding)	$	114.14	$	.62	$	220.97	$	.62

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

4

Mewbourne Energy Partners 04-A, L.P.

STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2005 and

the period from January 27, 2004 (date of inception)

through September 30, 2004

(Unaudited)

	2005			2004
Cash flows from operating activities:
Net income	$	6,629,186		$	18,656
Adjustment to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, depletion, and amortization		4,036,060			—
Asset retirement obligation accretion		11,270			—
Changes in operating assets and liabilities:
Accounts receivable		(4,058,247	)		(22,705	)
Accounts payable		1,145,041			—
Net cash provided by (used in) operating activities		7,763,310			(4,049	)
Cash flows from investing activities:
Purchase and development of oil and gas properties		(10,857,936	)		(1,612,288	)
Net cash used in investing activities		(10,857,936	)		(1,612,288	)
Cash flows from financing activities:
Capital contributions from partners		—			27,450,000
Cash distributions to partners		(6,440,825	)		—
Net cash provided by (used in) financing activities		(6,440,825	)		27,450,000
Net (decrease) and increase in cash and cash equivalents		(9,535,451	)		25,833,663
Cash and cash equivalents, beginning of period		10,630,997			—
Cash and cash equivalents, end of period	$	1,095,546		$	25,833,663

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

5

Mewbourne Energy Partners 04-A, L.P.

STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

For the nine months ended September 30, 2005

(Unaudited)

	General Partners			Limited Partners			Total
Balance at December 31, 2004	$	25,327,364		$	2,571,329		$	27,898,693
Cash distributions		(5,847,196	)		(593,629	)		(6,440,825	)
Net income		6,018,196			610,990			6,629,186
Balance at September 30, 2005	$	25,498,364		$	2,588,690		$	28,087,054

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

6

Mewbourne Energy Partners 04-A, L.P.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

1. Accounting Policies

Reference is hereby made to the Partnership’s Annual Report on Form 10-K for 2004, 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 04-A, L.P., (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 Programs, (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.

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, 2005 all capitalized costs were subject to amortization, while at September 30, 2004, approximately $2.2 million of capitalized costs were excluded from 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.

7

3. Asset Retirement Obligations

In accordance with Financial Accounting Standards Board Statement No. 143, “Accounting for 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, 2005, is as follows:

Balance, beginning of period	$	112,534
Liabilities incurred		250,016
Accretion expense		11,270
Balance, end of period	$	373,820

4. Related Party Transactions

Mewbourne Development Corporation (MD) is managing general partner and 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 well owners of the well on 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 consideration for services rendered by MD in managing the business of the partnership, the partnership during each of the initial three years of the partnership will pay to MD a management fee in the amount equal to 1% of the subscriptions by the investor partners to the partnership.

In general, during any particular calendar year the total amount of administrative expenses allocated to the Partnership 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 a Drilling Program Agreement, the Program. The Partnership and MD are parties to the Program agreement. 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 and depletable properties	70	%	30	%
All other revenues	70	%	30	%
Costs and expenses:
Sales commissions and due diligence fees (1)	100	%	0	%
Organization and offering costs (2)	0	%	100	%
Lease acquisition costs (2)	0	%	100	%
Tangible and intangible drilling costs (2)	100	%	0	%
Operating costs, reporting and legal expenses, general and administrative expenses and all other costs	70	%	30	%

(1) The Partnership will pay sales commissions and due diligence fees of 8% and 0.5%, respectively, of the capital contributions initially made by investor partners in exchange for their respective interests.

(2) As noted above, pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which will approximate 20% of total capital costs. To the extent that organization and offering costs and lease acquisition costs are less that 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.

9

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

Liquidity and Capital Resources

Mewbourne Energy Partners 04-A, L.P. (the “Partnership”) 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.

The Partnership has acquired interests in oil and gas prospects for the purpose of development drilling. The Partnership participated in the drilling of 77 wells. 72 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 $4,197,580 at September 30, 2005.

During the nine months ended September 30, 2005, the Partnership made cash distributions to the investor partners in the amount of $6,440,825. The Partnership expects that cash distributions will continue during 2005 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.

10

Results of Operations

Revenues and other income during the three months ended September 30, 2005 totaled $5,977,577, and consisted of oil and gas sales of $5,969,746 and interest income of $7,831. Production volumes during the three months ended September 30, 2005 were approximately 5,055 bbls of oil and 693,795 mcf of gas at corresponding average realized prices of $60.37 per bbl of oil and $8.16 per mcf of gas. Expenses totaling $2,553,246, consisting primarily of lease operating expenses in the amount of $135,314, production taxes in the amount of $549,022, and depreciation, depletion, and amortization in the amount of $1,667,810 resulted in net income for the period of $3,424,331. The Partnership’s oil and gas production should increase during the remainder of 2005 as production from recently completed wells is sold. Interest income should decrease for the remainder of 2005 as available cash is utilized for drilling and equipping of wells. The Partnership expects that drilling and completion costs will decrease during the remainder of 2005 and that production costs, operating expenses and depletion provisions will increase.

Revenues and other income during the period from January 1, 2005 to September 30, 2005 totaled $12,483,922, and consisted of oil and gas sales of $12,388,841 and interest income of $95,081. Production volumes during the period ended September 30, 2005 were approximately 11,942 bbls of oil and 1,695,624 mcf of gas at corresponding average realized prices of $54.26 per bbl of oil and $6.92 per mcf of gas. Expenses totaling $5,854,736, consisting primarily of lease operating expenses in the amount of $281,325, production taxes in the amount of $1,107,465, and depreciation, depletion, and amortization in the amount of $4,036,060 resulted in net income for the period of $6,629,186. The Partnership’s oil and gas production should increase during the remainder of 2005 as production from recently completed wells is sold. Interest income should decrease for the remainder of 2005 as available cash is utilized for drilling and equipping of wells. The Partnership expects that drilling and completion costs will decrease during the remainder of 2005 and that production costs, operating expenses and depletion provisions will increase.

The Partnership’s operations did not commence until the third quarter of 2004. No corresponding activities, therefore, occurred during the period from January 27, 2004 (date of inception) through September 30, 2004.

11

Item 4. Disclosure Controls and Procedures

Mewbourne Development Corporation (“MDC”), the Managing General Partner of the Partnership, 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. Within 90 days prior to the filing of this report, MDC’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures with the assistance and participation of other members of management. Based upon that evaluation, MDC’s Chief Executive Officer and Chief Financial Officer concluded that our 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 significant changes in MDC’s internal controls or in other factors which could significantly affect internal controls subsequent to the date MDC carried out its evaluation.

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.

12

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 04-A, L.P.
	By:	Mewbourne Development Corporation
		Managing General Partner
Date: November 14, 2005
	By:	/s/    ALAN CLARK
		Alan Clark, Treasurer

13

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.

14