| Summary of Significant Accounting Policies | 2. Summary of Significant
Accounting Policies The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates inherent in the Registrant’s financial
statements include the estimate of oil and gas reserves and future abandonment costs. Changes in oil and gas prices and the changes
in production estimates could have a significant effect on reserve estimates. The reserve estimates directly impact the computation
of depreciation, depletion, and amortization, asset retirement obligation, and the ceiling test for the Registrant’s oil
and gas properties. Full Cost Method of Accounting 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 December 31, 2019 and 2018, 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 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 estimated future net cash flows
of proved reserves, computed using the 12-month unweighted average of first-day-of the-month oil and gas prices, discounted at
10%, and the lower of cost or fair value of unproved properties. If unamortized costs capitalized exceed the ceiling, the excess
is charged to expense in the period the excess occurs. There were no cost ceiling write-downs during the years ended December 31,
2019 and 2018. Subsequent to December 31, 2019 the price of both oil and
gas has continued to fluctuate. Oil prices decreased to $25.78 per barrel on March 19, 2020, down from $61.14 on December 31, 2019,
and gas prices decreased to $1.62 per million Btu, down from $2.09 on December 31, 2019. These decreases are primarily a result
of oil demand concerns due to the economic impacts of the COVID-19 virus and anticipated increases in supply from Russia and OPEC,
particularly Saudi Arabia. Oil and natural gas prices are expected to continue to fluctuate during the first part of the year 2020
and potentially beyond. Declines in oil and natural gas prices affect the Partnership’s revenues and partner distributions
and could reduce the amount of oil and natural gas that the Partnership can produce economically. The Partnership has no planned
drilling activity. If oil or natural gas prices remain depressed or continue to decline, the Partnership could be required to record
oil and gas property write-downs; however, the excess in the value of reserves over the full cost pool book value at December 31,
2019 reduces the likelihood of this occurring. In the third quarter of 2019, the Partnership received $1,447,711 in sales proceeds from the sale of its interests in oil and gas wells to Summit West Resources L.P. Under the full cost method of accounting cash proceeds from sales of oil and gas properties are generally treated as a recovery of cost with no gain or loss recognized unless material to reserves or to the rate of depletion. These sales proceeds were recorded as an adjustment to the full cost pool and no gain or loss was recognized. The plugging and abandonment accretion expense for these wells which had been recorded in prior years, $15,681, also was recorded as an adjustment to the full cost pool under this method of accounting. Recent
Accounting Developments In February 2016, the FASB issued ASU 2016-02, “Leases.”
ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for those leases currently classified as
operating leases and makes certain changes to the way lease expenses are accounted for. This update is effective for smaller reporting
companies for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December
15, 2020. This update should be applied using a modified retrospective approach, and early adoption is permitted. In January 2018,
the FASB issued ASU 2018-01, which permits an entity to elect an optional transition practical expedient to not evaluate land easements
that exist or expire before the Partnership’s adoption of Topic 842 and that were not previously accounted for as leases
under Topic 840. The Partnership will elect the optional transition practical expedient upon adoption with an adjustment to the
opening balance of retained earnings in the period of adoption. Comparative periods presented will not be adjusted for the new
standard. The Partnership is currently evaluating the new guidance to determine the impact it will have on its financial statements. Cash The Partnership maintains all its cash in one financial institution.
At various times throughout the year, the cash amount may be in excess of the amount insured by the Federal Deposit Insurance Corporation. Fair Value of Financial Instruments The FASB has issued guidance on determining the estimated fair value for financial instruments. This disclosure states that the fair value of financial instruments is determined at discrete points in time based on relevant market information. Such estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, accounts receivable, affiliate and accounts payable, affiliate approximates their carrying value due to their short-term nature. Asset Retirement Obligations The Partnership has recognized an estimated liability for
future plugging and abandonment costs. A liability for the estimated fair value of the future plugging and abandonment costs is
recorded with a corresponding increase in the full cost pool at the time a new well is drilled. Depreciation expense associated
with estimated plugging and abandonment costs is recognized in accordance with the full cost methodology. The Partnership estimates a liability for plugging and abandonment
costs 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 years ended December 31, 2019 and 2018 is as follows:
2019 2018
Balance, beginning of period $ 901,457 $ 863,754
Liabilities incurred 1,347 3,197
Liabilities reduced due to settlements, plugging and
abandonments, and sales (68,748 ) (2,290 )
Accretion expense 35,601 36,796
Balance, end of period $ 869,657 $ 901,457 Oil and Gas Sales The Partnership’s oil and condensate production is sold
and revenue recognized at or near the Partnership’s wells under short-term purchase contracts at prevailing prices in accordance
with arrangements which are customary in the oil industry. Sales of gas applicable to the Partnership’s interest are recorded
as revenue when the gas is metered and title transferred pursuant to the gas sales contracts covering the Partnership’s interest
in gas reserves. Substantially all the Partnership’s accounts receivable
result from oil and natural gas sales by MOC to third parties in the oil and natural gas industry. This concentration of customers
may impact the Partnership’s overall credit risk in that these entities may be similarly affected by changes in economic
and other conditions. Historically, the Partnership has not experienced significant credit losses on such receivables. No bad debt
expense was recorded for the years ended December 31, 2019 or 2018. The Partnership cannot ensure that such losses will not occur
in the future. The Partnership has only non-operated working interests in
oil and gas wells and receives monthly net revenue checks from the operator of these oil and gas wells. Each unit of oil and gas
is accounted for as a separate performance obligation. It recognizes revenue for oil and condensate when control transfers to the
purchaser at a contractually specified delivery point at or near the wellhead at market prices in accordance with the contractual
arrangement. Sales of gas applicable to the Partnership’s interest are recorded as revenue when the gas is metered and control
is transferred pursuant to the gas sales contracts covering the Partnership’s interest in gas reserves. Disaggregation of Revenue The Partnership has identified two material revenue streams
in its business: oil sales and natural gas sales. Revenue attributable to each of the Partnership’s identified revenue streams
is disaggregated in the Statements of Operations. Principal versus agent In the case of the non-operating agreements,
the operator is responsible for providing the goods due to its contractual obligations with the purchaser. Based on the joint
operating and marketing agreement arrangements between the Partnership and operator, the Partnership does not take title to the
product prior to the operator’s ultimate sale to a customer. The operator is responsible for fulfilling promises to provide
specified goods and remitting proceeds back to the Partnership for the Partnership’s proportionate share of the total product
sold. Mewbourne Oil Company (MOC), rather than the Partnership, is primarily responsible for fulfilling promises to provide specified
goods. MOC, as the operator, enters into the sales contract with the third-party customers and directs all activities from the
wellhead to the delivery point that make the commodity available to the customer; there is no agreement between the Partnership
and the customers. In the event a production delay occurs because of, for example, well-equipment failure, MOC is responsible
for correcting the issues preventing fulfillment of its promises to deliver product to its customers. Accounts Receivable, affiliate Under the Partnership’s joint operating and marketing
agreements, the Partnership is entitled to consideration as production occurs at the wellhead and the value of such consideration
is an estimate. Final amounts are only determined upon sale by the operator to the ultimate third-party customer, and recorded
in “Accounts receivable, affiliate” in its balance sheet. Income Taxes The Partnership is treated as a partnership for income tax
purposes and, as a result, income of the Partnership is reported on the tax returns of the partners and no recognition is given
to income taxes in the financial statements. The Partnership accounts for uncertainty in income taxes in
accordance with applicable accounting guidance and recognizes the effects of those positions only if they are more likely than
not of being sustained. As no liability had been recognized as of December 31, 2019 or 2018, the Partnership did not accrue for
any interest or penalties. Distributions Revenues which, in the sole judgment of the managing general
partner, are not required to meet the Registrant’s obligations will be distributed to the partners at least quarterly in
accordance with the Registrant’s Partnership Agreement. Distributions made to partners and state tax payments for the benefit
of investor partners during the years ended December 31, 2019 and 2018 were $2,747,426 and $1,765,249, respectively. Since inception,
the Partnership has made distributions of $71,359,803, inclusive of state tax payments. |
