Mewbourne Energy Partners 07-A 10-Q 2010 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 endedSeptember 30, 2010

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. 000-53190

MEWBOURNE ENERGY PARTNERS 07-A, L.P.

Delaware	20-8481823
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ]    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 07-A, L.P.

INDEX

Part 1  -  Financial Information	Page No.
Item 1. Financial Statements
Condensed Balance Sheets - September 30, 2010 (Unaudited) and December 31, 2009	3
Condensed Statements of Operations (Unaudited) - For the three months ended September  30, 2010 and 2009   and the nine months ended September 30, 2010 and 2009	4
Condensed Statements of Cash Flows (Unaudited) - For the nine months ended September 30, 2010 and 2009	5
Condensed Statement of Changes In Partners’ Capital (Unaudited) - For the nine months ended September  30, 2010	6
Notes to Condensed Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3. Quantitative and Qualitative Disclosures about Market Risk	12
Item 4. Disclosure Controls and Procedures	12
Part II  -  Other Information
Item 1. Legal Proceedings	13
Item 6. Exhibits and Reports on Form 8-K	13

2

MEWBOURNE ENERGY PARTNERS 07-A, L.P.

Part I - Financial Information

Item 1. Financial Statements

CONDENSED BALANCE SHEETS

September 30, 2010 and December 31, 2009

	September 30, 2010		December 31, 2009
	(Unaudited)
ASSETS
Cash	$	23,106	$	282,559
Accounts receivable, affiliate		1,498,372		2,170,941
Prepaid state taxes		5,000		-
Total current assets		1,526,478		2,453,500
Oil and gas properties at cost, full-cost method		65,927,491		65,414,636
Less accumulated depreciation, depletion, amortization and impairment		(45,700,930)		(44,152,582)
		20,226,561		21,262,054
Total assets	$	21,753,039	$	23,715,554
LIABILITIES AND PARTNERS’ CAPITAL
Accounts payable, affiliate	$	362,307	$	291,270
Total current liabilities		362,307		291,270
Asset retirement obligation		397,675		374,238
Partners’ capital		20,993,057		23,050,046
Total liabilities and partners’ capital	$	21,753,039	$	23,715,554

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

3

MEWBOURNE ENERGY PARTNERS 07-A, L.P.

CONDENSED STATEMENTS OF OPERATIONS

For the three months ended September 30, 2010 and 2009 and

the nine months ended September 30, 2010 and 2009

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Revenues and other income:
Oil sales	$	654,427	$	999,279	$	2,278,917	$	2,632,610
Gas sales		1,563,668		1,818,524		6,035,562		7,354,550
Interest income		-		128		310		1,327
Total revenues and other income		2,218,095		2,817,931		8,314,789		9,988,487
Expenses:
Lease operating expense		252,733		283,846		874,656		897,606
Production taxes		132,616		143,975		418,170		565,361
Administrative and general expense		113,163		18,265		376,387		473,841
Depreciation, depletion, and amortization		461,665		758,139		1,548,348		3,177,490
Cost ceiling write-down		-		-		-		13,601,516
Asset retirement obligation accretion		6,484		6,043		19,432		18,055
Total expenses		966,661		1,210,268		3,236,993		18,733,869
Net income (loss)	$	1,251,434	$	1,607,663	$	5,077,796	$	(8,745,382)
Basic and diluted net income (loss) per partner interest (14,000 interests outstanding)	$	89.39	$	114.83	$	362.70	$	(624.67)

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

4

MEWBOURNE ENERGY PARTNERS 07-A, L.P.

CONDENSED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2010 and 2009

(Unaudited)

	Nine Months Ended September 30,
	2010		2009
Cash flows from operating activities:
Net income (loss)	$	5,077,796	$	(8,745,382)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion, and amortization		1,548,348		3,177,490
Cost ceiling write-down		-		13,601,516
Asset retirement obligation accretion		19,432		18,055
Changes in operating assets and liabilities:
Accounts receivable, affiliate		672,569		2,302,936
Prepaid state taxes		(5,000)		960
Accounts payable, affiliate		71,037		200,472
Net cash provided by operating activities		7,384,182		10,556,047
Cash flows from investing activities:
Purchase and development of oil and gas properties		(508,850)		(921,201)
Net cash used in investing activities		(508,850)		(921,201)
Cash flows from financing activities:
Cash distributions to partners		(7,134,785)		(12,400,000)
Net cash used in financing activities		(7,134,785)		(12,400,000)
Net decrease in cash and cash equivalents		(259,453)		(2,765,154)
Cash and cash equivalents, beginning of period		282,559		3,952,913
Cash, end of period	$	23,106	$	1,187,759
Supplemental Cash Flow Information:
Non-cash changes to oil & gas properties related to asset retirement obligation liabilities	$	4,005	$	(2,007)

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

5

MEWBOURNE ENERGY PARTNERS 07-A, L.P.

CONDENSED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

For the nine months ended September 30, 2010

(Unaudited)

	Total
Balance at December 31, 2009	$	23,050,046
Cash distributions		(7,134,785)
Net income		5,077,796
Balance at September 30, 2010	$	20,993,057

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

6

MEWBOURNE ENERGY PARTNERS 07-A, L.P.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business

Mewbourne Energy Partners 07-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 March 1, 2007. The offering of limited and general partner interests began May 1, 2007 as a part of a private placement pursuant to Section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder, as a part of the Mewbourne Energy Partners 07 Drilling Program, (the “Program”), and concluded August 13, 2007 with total investor contributions of $70,000,000 originally being sold to accredited investors, of which $65,710,000 were sold to accredited investors as general partner interests and $4,290,000 were sold to accredited investors as limited partner interests. During 2009, all general partner equity interests were converted to limited partner equity interests and accordingly all partnership interests have been reflected in the accompanying financial statements 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 significant equity interest in the Partnership.

2. Summary of Significant Accounting Policies

Reference is hereby made to the Registrant’s Annual Report on Form 10-K for 2009, which contains a summary of significant accounting policies followed by the Partnership in the preparation of its financial statements. These policies are also followed in preparing the quarterly report included herein.

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

3. Accounting for Oil and Gas Producing Activities

The Partnership follows the full-cost method of accounting for its oil and gas activities. Under the full-cost method, all productive and non-productive costs incurred in the acquisition, exploration and development of oil and gas properties are capitalized. Depreciation, depletion and amortization of oil and gas properties subject to amortization is computed on the units-of-production method based on the proved reserves underlying the oil and gas properties. At September 30, 2010 and September 30, 2009, all capitalized costs were subject to amortization. Proceeds from the sale or other disposition of properties are credited to the full cost pool. Gains and losses on the sale or other disposition of properties are not recognized unless such adjustments would significantly alter the relationship between capitalized costs and the proved oil and gas reserves. Capitalized costs are subject to a quarterly ceiling test that limits such costs to the aggregate of the present value of future net cash flows of proved reserves and the lower of cost or fair value of unproved properties. There were no cost ceiling write-downs during the nine months ended September 30, 2010. There was a cost ceiling write-down of $13,601,516 at March 31, 2009 but none at June 30, 2009 nor at September 30, 2009.

7

4. 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 ownership interests, 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, 2010 and the year ended December 31, 2009 is as follows:

	September 30, 2010		December 31, 2009
Balance, beginning of period	$	374,238	$	352,147
Liabilities incurred		4,141		-
Liabilities reduced		(136)		(2,007)
Accretion expense		19,432		24,098
Balance, end of period	$	397,675	$	374,238

5. Related Party Transactions

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

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

In 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. The Partnership will include the management fee as part of the full cost pool pursuant to 4-10(c)(2) of Regulation S-X.

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.

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. 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:
Organization and offering costs (1)		0%		100%
Lease acquisition costs (1)		0%		100%
Tangible and intangible drilling costs (1)		100%		0%
Operating costs, reporting and legal expenses, general and administrative expenses and all other costs		70%		30%

(1) Pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which should approximate 20% of total capital costs. To the extent that organization and offering costs and lease acquisition costs are less than 20% of total capital costs, MD is responsible for tangible drilling costs until its share of the Program’s total capital costs reaches approximately 20%. The Partnership’s financial statements reflect its respective proportionate interest in the Program.

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

Liquidity and Capital Resources

Mewbourne Energy Partners 07-A, L.P. (“the Partnership”) was formed March 1, 2007. The offering of limited and general partnership interests began May 1, 2007 and concluded August 13, 2007, with total investor contributions of $70,000,000. During 2009, all general partner equity interests were converted to limited partner equity interests and accordingly all partnership interests have been reflected in the accompanying financial statements as limited partner interests.

The Registrant owns fractional working interests in developmental oil and gas prospects, which has resulted in participation in the drilling of oil and gas wells.

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 $1,164,171 at September 30, 2010.

During the nine months ended September 30, 2010, the Partnership made cash distributions to the investor partners in the amount of $7,134,785 as compared to $12,400,000 for the nine months ended September 30, 2009. The Partnership expects that cash distributions will continue during 2010 as additional oil and gas revenues are sufficient to produce cash flows from operations.

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

9

Results of Operations

For the three months ended September 30, 2010 as compared to the three months ended September 30, 2009:

	Three Months Ended September  30,
	2010		2009
Oil sales	$	654,427	$	999,279
Barrels produced		9,222		15,468
Average price/bbl	$	70.96	$	64.60
Gas sales	$	1,563,668	$	1,818,524
Mcf produced		333,974		501,437
Average price/mcf	$	4.68	$	3.63

Oil and gas revenues. As shown in the above table, total oil and gas sales decreased by $599,708, a 21.3% decrease, for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009.

Of this decrease, $443,239 and $784,063 were due to decreases in the volumes of oil and gas sold by 6,246 bbls and 167,463 mcf, respectively. The decrease in volumes sold was primarily due to normal declines in production, which in some wells was substantial.

Those decreases were partially offset by increases in revenue of $98,387 and $529,207 due to increases in the average prices of oil and gas, respectively. Average prices rose to $70.96 from $64.60 per bbl and to $4.68 from $3.63 per mcf for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009.

Lease operations. Lease operating expense during the three month period ended September 30, 2010 decreased to $252,733 from $283,846 due to fewer well repairs and workovers in the three month period ended September 30, 2010.

Production taxes. Production taxes during the three month period ended September 30, 2010 decreased to $132,616 from $143,975 for the three month period ended September 30, 2009 due to lower revenue.

Administrative and general expense. Administrative and general expense for the three month period ended September 30, 2010 increased to $113,163 from $18,265 for the three month period ended September 30, 2009. The overall increase was due to increased administrative expenses allocable to the Partnership for the three month period ended September 30, 2010 and higher general expenses for reporting costs.

Depreciation, depletion and amortization. Depreciation, depletion and amortization for the three month period ended September 30, 2010 decreased to $461,665 from $758,139 for the three month period ended September 30, 2009 due to the decreased production volumes for the three month period ended September 30, 2010.

10

Results of Operations

For the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009:

	Nine Months Ended September 30,
	2010		2009
Oil sales	$	2,278,917	$	2,632,610
Barrels produced		30,293		52,447
Average price/bbl	$	75.23	$	50.20
Gas sales	$	6,035,562	$	7,354,550
Mcf produced		1,125,404		1,724,983
Average price/mcf	$	5.36	$	4.26

Oil and gas revenues. As shown in the above table, total oil and gas sales fell by $1,672,681, a 16.7% decrease, for the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009.

Of this decrease, $1,666,627 and $3,215,553 were due to decreases in the volumes of oil and gas sold by 22,154 bbls and 599,579 mcf, respectively. These decreases were primarily due to normal declines in production, which in some wells was substantial.

Those decreases were offset by increases of $1,312,934 and $1,896,565 due to increases in average oil and gas prices, respectively. Average prices rose to $75.23 from $50.20 per bbl and to $5.36 from $4.26 per mcf for the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009.

Lease operations. Lease operating expense during the nine month period ended September 30, 2010 decreased to $874,656 from $897,606 due to fewer well repairs and workovers in the nine month period ended September 30, 2010.

Production taxes. Production taxes during the nine month period ended September 30, 2010 decreased to $418,170 from $565,361 for the nine month period ended September 30, 2009 due to lower revenue.

Administrative and general expense. Administrative and general expense for the nine month period ended September 30, 2010 decreased to $376,387 from $473,841 for the nine month period ended September 30, 2009 due to decreased administrative expenses allocable to the Partnership for the three month period ended September 30, 2010 and lower general expenses for reporting costs.

Depreciation, depletion and amortization. Depreciation, depletion and amortization for the nine month period ended September 30, 2010 decreased to $1,548,348 from $3,177,490 for the nine month period ended September 30, 2009 due to the decrease in production volumes and a lower amortizable base at September 30, 2010. The reduced amortizable base was due to the cost ceiling write-down at March 31, 2009.

Cost ceiling write-down. There were no cost ceiling write-downs during the nine months ended September 30, 2010. There was a cost ceiling write-down of $13,601,516 at March 31, 2009 but none at June 30, 2009 nor at September 30, 2009. The write-down was the result of lower oil and gas prices on that date.

11

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 nine months ended September 30, 2010, a 10% change in the price received for natural gas production would have had an approximate $604,000 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, 2009 annual report on internal control over financial reporting, and for the quarter ended September 30, 2010, there have been no changes in MD’s internal controls or in other factors which have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

12

Part II – Other Information

Item 1. Legal Proceedings

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

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.

13

SIGNATURES

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

Mewbourne Energy Partners 07-A, L.P.
By:	Mewbourne Development Corporation
	Managing General Partner

Date:               November 15, 2010

By:	/s/ Alan Clark
	Alan Clark, Treasurer and Controller

14

INDEX TO EXHIBITS

EXHIBIT NUMBER	DESCRIPTION
31.1	Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2	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.

15