Mewbourne Energy Partners 04-a 10-Q 2007 Q1 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 March 31, 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. 333-113340

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    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 04-A, L.P.

INDEX

		Page No.
Part I    –    Financial Information		3
Item 1.	Financial Statements	3
	Condensed Balance Sheets - March 31, 2007 (Unaudited) and December 31, 2006	3
	Condensed Statements of Operations (Unaudited) - For the three months ended March 31, 2007 and 2006	4
	Condensed Statements of Cash Flows (Unaudited) - For the three months ended March 31, 2007 and 2006	5
	Condensed Statement of Changes In Partners’ Capital (Unaudited) - For the three months ended March 31, 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	12
Item 4.	Disclosure Controls and Procedures	12
Part II    –    Other Information		13
Item 1.	Legal Proceedings	13
Item 6.	Exhibits and Reports on Form 8-K	13

2

Mewbourne Energy Partners 04-A, L.P.

Part I – Financial Information

Item 1. Financial Statements

CONDENSED BALANCE SHEETS

March 31, 2007 and December 31, 2006

	March 31, 2007			December 31, 2006
	(Unaudited)
ASSETS
Cash and cash equivalents	$	49,317		$	5,361
Accounts receivable, affiliate		1,237,843			1,358,565
Total current assets		1,287,160			1,363,926
Oil and gas properties at cost, full cost method		29,549,022			29,506,193
Less accumulated depreciation, depletion, amortization and impairment		(16,808,407	)		(16,433,817	)
		12,740,615			13,072,376
Total assets	$	14,027,775		$	14,436,302
LIABILITIES AND PARTNERS’ CAPITAL
Accounts payable, affiliate	$	196,772		$	330,296
Asset retirement obligation plugging liability		394,830			391,163
Partners’ capital		13,436,173			13,714,843
Total liabilities and partners’ capital	$	14,027,775		$	14,436,302

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

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Mewbourne Energy Partners 04-A, L.P.

CONDENSED STATEMENTS OF OPERATIONS

For the three months ended March 31, 2007 and 2006

(Unaudited)

	Three Months Ended March 31,
	2007		2006
Revenues and other income:
Oil and gas sales	$	1,842,707	$	3,685,798
Interest income		1,485		6,456
Total revenues and other income		1,844,192		3,692,254
Expenses:
Lease operating expense		114,575		106,139
Production taxes		146,604		301,250
Administrative and general expense		57,607		256,183
Depreciation, depletion, and amortization		374,590		1,122,013
Asset retirement obligation accretion		3,667		3,406
Net income	$	1,147,149	$	1,903,263
Basic and diluted net income per limited partner interest (30,000 interests outstanding)	$	38.24	$	63.44

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

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Mewbourne Energy Partners 04-A, L.P.

CONDENSED STATEMENTS OF CASH FLOWS

For the three months ended March 31, 2007 and 2006

(Unaudited)

	2006			2006
Cash flows from operating activities:
Net income	$	1,147,149		$	1,903,263
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization		374,590			1,122,013
Asset retirement obligation accretion		3,667			3,406
Changes in operating assets and liabilities:
Accounts receivable, affiliate		120,722			2,051,145
Accounts receivable, other		—			(688	)
Accounts payable, affiliate		(133,524	)		6,133
Net cash provided by operating activities		1,512,604			5,085,272
Cash flows from investing activities:
Purchase and development of oil and gas properties		(42,829	)		(174,528	)
Net cash used in investing activities		(42,829	)		(174,528	)
Cash flows from financing activities:
Cash distributions to partners		(1,425,819	)		(5,059,998	)
Net cash used in financing activities		(1,425,819	)		(5,059,998	)
Net increase (decrease) in cash and cash equivalents		43,956			(149,254	)
Cash and cash equivalents, beginning of period		5,361			333,699
Cash and cash equivalents, end of period	$	49,317		$	184,445

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

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Mewbourne Energy Partners 04-A, L.P.

CONDENSED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

For the three months ended March 31, 2007

(Unaudited)

	Partners’ Capital
Balance at December 31, 2006	$	13,714,843
Cash distributions		(1,425,819	)
Net income		1,147,149
Balance at March 31, 2007	$	13,436,173

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

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Mewbourne Energy Partners 04-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 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. 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 March 31, 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.

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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 three months ended March 31, 2007 and for the year ended December 31, 2006 is as follows:

	2007		2006
Balance, beginning of period	$	391,163	$	377,536
Accretion expense		3,667		13,627
Balance, end of period	$	394,830	$	391,163

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 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 .7% of the subscriptions by the investor partners to the partnership. Effective January 1, 2006 the Partnership has elected to include the management fee as part of the full cost pool pursuant to Rule 4-10(c)(6)(iii) and (iv) of Regulation S-X. The Partnership analyzed prior periods and determined that this change would not have been material in prior statements.

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	70	%	30	%
All other revenues	70	%	30	%
Costs and expenses:
Sales commissions and due diligence fees (1)	100	%	0	%
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 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.

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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 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.

The Partnership has acquired interests in oil and gas prospects for the purpose of development drilling. The Partnership participated in the drilling of 79 wells. 74 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 $1,090,388 at March 31, 2007.

During the three months ended March 31, 2007, the Partnership made cash distributions to the investor partners in the amount of $1,425,819 as compared to $5,059,998 for the three months ended March 31, 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 March 31, 2007 as compared to the three months ended March 31, 2006.

Oil and gas revenues.

	Three Months Ended March 31,
	2007		2006
Oil and gas sales	$	1,842,707	$	3,685,798
Barrels produced		1,989		3,065
Mcf produced		257,729		486,767
Average price/bbl	$	55.78	$	60.54
Average price/mcf	$	6.72	$	7.19

As shown in the table above, total oil and gas sales decreased $1,843,091 (50.0%) for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006. Of this decrease, $74,608 and $1,768,483, respectively, were related to decreases in volumes of oil and gas sold. Volumes of oil and gas sold decreased 1,076 bbls of oil and 229,038 mcf of gas for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006. Average oil and gas prices decreased to $55.78 per bbl and $6.72 per mcf for the three months ended March 31, 2007 from $60.54 per bbl and $7.19 per mcf for the three months ended March 31, 2006. The decrease in volumes of oil sold was primarily due to a substantial decline in the production of two wells. The decrease in volumes of gas sold was primarily due to (i) normal declines in production and (ii) a substantial decline in the production of three wells. The wells with a substantial decline in production are not expected to return to previous levels of production

Interest income. Interest income was $1,485 during the three months ended March 31, 2007 as compared to $6,456 during the three month period ended March 31, 2006. The decrease is primarily due to the decrease in funds available for investment.

Lease operations and production taxes. Lease operating expense during the period ended March 31, 2007 totaled $114,575 as compared to $106,139 for the period ended March 31, 2006. Production taxes during the period ended March 31, 2007 totaled $146,604 as compared to $301,250 for the period ended March 31, 2006. 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 March 31, 2007 total $374,590 compared to $1,122,013 for the three month period ended March 31, 2006. The decrease is due to the decrease in production volumes.

Administrative and general expense. Administrative and general expense for the three month period ended March 31, 2007 totaled $57,607 compared to $256,183 for the period ended March 31, 2006. The overall decrease is due to decreased administrative charges caused by decreased oil and gas revenues. The decrease was also related to lower 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 three months ended March 31, 2007, a 10% change in the price received for natural gas production would have had an approximate $173,000 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 March 31, 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 04-A, L.P.
	By:	Mewbourne Development Corporation
		Managing General Partner
Date: May 15, 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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