UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2022
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. 000-54370
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
| Delaware | | 27-1903816 |
| (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
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to section 12(g) of the Act:
Limited Partner Interests
(Title of class)
General Partner Interests
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes ☐ No ☒
Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act from their obligations under those Sections.
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 ☒ 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company, “and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | | Smaller reporting company | ☒ |
| | | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant period pursuant to §240.10D(b). ☐
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
No market currently exists for the limited and general partner interests of the Registrant. Based on original purchase price the aggregate market value of limited and general partner interests owned by non-affiliates of the Registrant is $73,000,000.
The following documents are incorporated by reference into the indicated parts of this Annual Report on Form 10-K: Part of the information called for by Part IV of the Annual Report on Form 10-K is incorporated by reference from the Registrant’s Form 10.
PART I
Mewbourne Energy Partners 10-A, L.P. (the “Registrant” or the “Partnership”) is a limited partnership organized under the laws of the State of Delaware on February 9, 2010 (date of inception). Mewbourne Development Corporation (“MD”), a Delaware Corporation, has been appointed as the Registrant’s managing general partner. MD has no significant equity interest in the Registrant.
Limited and general partner interests in the Registrant were offered at $5,000 each to accredited investors in a private placement pursuant to Section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder, for a total of $73,000,000 sold. During 2012 all general partner equity interests were converted to limited partner equity interests
The Partnership participates in oil and natural gas activities through a Drilling Program Agreement (the “Program”). The Partnership and MD are parties to the Program Agreement. The Registrant engages primarily in oil and natural gas development and production and is not involved in any other industry segment. The Program is governed by a Drilling Program Agreement between the Registrant, MD and Mewbourne Oil Company (“MOC”), the Program manager and a wholly owned subsidiary of Mewbourne Holdings, Inc., which is also the parent of MD. MD does not make any capital contributions directly to the Registrant; rather, MD makes its capital contributions directly to the Program. See the financial statements in Item 8 of this report for a summary of the Registrant’s revenue, income and identifiable assets.
The sale of crude oil and natural gas produced by the Registrant will be affected by a number of factors that are beyond the Registrant’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 Registrant.
The market for crude oil is such that the Registrant anticipates it will be able to sell all the crude oil it can produce. Natural gas will be sold to natural gas marketers and end users on the spot market. The spot market reflects immediate sales of natural gas without long-term contractual commitments. The future market condition for natural gas cannot be predicted with any certainty, and the Registrant may experience delays in marketing natural gas production and fluctuations in natural gas prices.
Many aspects of the Registrant’s activities are highly competitive including, but not limited to, the acquisition of suitable drilling prospects and the procurement of drilling and related oil field equipment, and are subject to governmental regulation, both at Federal and state levels. The Registrant’s ability to compete depends on its financial resources and on the managing general partner’s staff and facilities, none of which are significant in comparison with those of the oil and natural gas exploration, development, and production industry as a whole. Federal and state regulation of oil and natural gas operations generally includes operational activity, drilling and spacing of wells on producing acreage, the imposition of maximum allowable production rates, the taxation of income and other items, and the protection of the environment.
The Registrant does not have any employees of its own. MD is responsible for all management functions. MOC, a wholly owned subsidiary of Mewbourne Holdings, Inc., which is also the parent of the Registrant’s managing general partner, has been appointed Program Manager and is responsible for activities in accordance with a Drilling Program Agreement entered into by the Registrant, MD and MOC. On March 31, 2023, MOC employed 636 persons, many of whom dedicated a part of their time to the conduct of the Registrant’s business during the period for which this report is filed.
The production of oil and natural gas is not considered subject to seasonal factors although the price received by the Registrant for natural gas sales will generally tend to increase during the winter months. Order backlog is not pertinent to the Registrant’s business.
Industry Operating Environment
The oil and natural gas industry is affected by many factors that the Partnership generally cannot control, including the prices of oil and natural gas. Global macroeconomic factors contributing to uncertainty within the industry include real or perceived geopolitical risks in oil-producing regions of the world, particularly the Middle East; forecasted levels of global economic growth combined with forecasted global supply; supply levels of oil and natural gas due to exploration and development activities in the United States; global health concerns; environmental and climate change regulation; actions taken by the Organization of Petroleum Exporting Countries (“OPEC”); the Russia/Ukraine conflict; and the strength of the U.S. dollar in international currency markets. Weather also has a significant impact on demand for natural gas since it is a primary heating source in the United States.
Not required for smaller reporting companies.
| ITEM 1B. | Unresolved Staff Comments |
None.
Property Interests
The Registrant’s properties consist primarily of interests in properties on which oil and natural gas wells are located. Such property interests are often subject to landowner royalties, overriding royalties and other oil and natural gas leasehold interests.
Fractional working interests in developmental oil and natural gas prospects, located primarily in the Anadarko Basin of Western Oklahoma, the Texas Panhandle, and the Permian Basin of New Mexico and West Texas, were acquired by the Registrant, resulting in the Registrant’s participation in the drilling of oil and natural gas wells. As of December 31, 2022, the Registrant owned working interests in 122 producing wells. The Registrant had no drilling activity for the years ended December 31, 2022 and 2021. Additional capital costs incurred, if any, were due to maintenance of current wells.
Third Party Review of Reserves Estimate
The reserves estimate shown herein has been independently evaluated by Legacy Petroleum Engineering. Their reserves estimate is filed with this report as Exhibit 99.1. The qualifications of Stacy M. Light, P.E., the technical person primarily responsible for overseeing her firm’s preparation of the Partnership’s reserve estimates are set forth below.
| ● | Over 25 years of practical experience in petroleum engineering |
| ● | Registered professional engineer in the state of Texas |
| ● | Bachelor of Science Degree in Petroleum Engineering |
Internal Controls Over Reserves Estimate
MD, the Registrant’s managing general partner, maintains internal controls such as the following to ensure the reliability of reserves estimation:
| ● | No employee’s compensation is tied to the amount of reserves booked. |
| ● | Comprehensive Securities and Exchange Commission (“SEC”) compliant internal policies are followed to determine and report proved reserves. |
| ● | Reserves estimate is made by experienced reservoir engineers or under their direct supervision. |
| ● | The reservoir engineers review all the Partnership’s reported proved reserves at the close of each quarter. |
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 4. | Mine Safety Disclosure |
Not Applicable
PART II
| ITEM 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
On March 31, 2023, the Registrant had 14,600 outstanding limited partnership interests held of record by 1,901 subscribers. There is no established public or organized trading market for the partner interests.
Cash received from sales of oil and natural gas 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, 2022 and 2021 were $4,742,360 and $2,825,800, respectively. Since inception, the Partnership has made distributions of $79,501,673, inclusive of state tax payments for the benefit of investor partners.
| ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
General
The Registrant was formed to engage primarily in the business of drilling development wells, to produce and market crude oil and natural gas produced from such properties, to distribute any net proceeds from operations to the general and limited partners and to the extent necessary, acquire leases which contain drilling prospects. The economic life of the Registrant depends on the period over which the Registrant’s oil and natural gas reserves are economically recoverable.
Current Price Environment
Oil and natural gas prices are determined by many factors outside of the Partnership’s control. Historically, world-wide oil and natural gas prices and markets have been subject to significant change and may continue to be in the future. Global macroeconomic factors contributing to uncertainty within the industry include real or perceived geopolitical risks in oil-producing regions of the world, particularly the Middle East; forecasted levels of global economic growth combined with forecasted global supply; supply levels of oil and natural gas due to exploration and development activities in the United States; environmental and climate change regulation; actions taken by OPEC; and the strength of the U.S. dollar in international currency markets.
Additionally, the ongoing conflict and the continuation of, or any increase in the severity of, the conflict between Russia and Ukraine has led and may continue to lead to an increase in the volatility of global oil and natural gas prices.
However, continuing political and social attention to the issue of global climate change has resulted in both existing and pending national, regional, and local legislation and regulatory measures to limit or reduce emissions of so-called greenhouse gases, such as mandates for renewable energy.
The trend in oil and natural gas regulation has been to increase regulatory restrictions and limitations on such activities. Any changes in, or more stringent enforcement of, these laws and regulations may result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management or completion activities or waste handling, storage, transport, remediation, or disposal emission or discharge requirements which could have an adverse effect on the Partnership.
Results of Operations
Year ended December 31, 2022 compared to the year ended December 31, 2021:
| | | Year Ended December 31, |
| | | 2022 | | 2021 |
| Oil sales | | $ | 4,354,225 | | | $ | 3,375,790 | |
| Barrels produced | | | 46,016 | | | | 50,685 | |
| Average price/bbl | | $ | 94.62 | | | $ | 66.60 | |
| | | | | | | | | |
| Natural gas sales | | $ | 2,048,388 | | | $ | 1,680,047 | |
| Mcf produced | | | 275,020 | | | | 281,221 | |
| Average price/mcf | | $ | 7.45 | | | $ | 5.97 | |
Oil and natural gas revenues. Oil and natural gas sales increased by $1,346,776 a 26.6% increase, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Of this increase, $1,420,235 and $414,527 were due to increases in the average prices of oil and natural gas sold, respectively. The average price rose to $94.62 from $66.60 per barrel (bbl) of oil and to $7.45 from $5.97 per thousand cubic feet (mcf) of natural gas for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Partially offsetting these increases were decreases of $441,800 and $46,186 due to decreases in the volumes of oil and natural gas sold, respectively, by 4,669 bbls of oil and 6,201 mcf natural gas for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Lease operations. Lease operating expense during the year ended December 31, 2022 increased to $1,098,152 from $835,448 for the year ended December 31, 2021 due to more well repairs and workovers.
Production taxes. Production taxes during the year ended December 31, 2022 increased to $504,542 from $388,508 for the year ended December 31, 2021. This was due to higher overall oil and natural gas revenue for the year ended December 31, 2022.
Administrative and general expense. Administrative and general expense for the year ended December 31, 2022 rose to $298,767 from $255,570 for the year ended December 31, 2021. This was due to higher total administrative expenses allocable to the Partnership .
Depreciation, depletion and amortization. Depreciation, depletion, and amortization for the year ended December 31, 2022 decreased to $203,067 from $224,650 for the year ended December 31, 2021. This was due to a lower net full cost pool resulting from prior period depreciation, depletion and amortization deductions and cost ceiling write-downs.
Liquidity and Capital Resources
Cash increased by $18,283 during the year ended December 31, 2022. Cash received from sales of oil and natural gas were utilized primarily for cash distributions to partners. All wells for which funds have been committed have been drilled; the Partnership has no planned drilling activity in the future. Any incidental future capital expenditures incurred will be paid with current available cash and revenues generated through oil and natural gas sales. Cash received from sales of oil and natural gas 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. Management believes they have sufficient liquidity for the next 12 months and beyond.
Additionally, the ongoing conflict and the continuation of, or any increase in the severity of, the conflict between Russia and Ukraine has led and may continue to lead to an increase in the volatility of global oil and natural gas prices.
However, continuing political and social attention to the issue of global climate change has resulted in both existing and pending national, regional, and local legislation and regulatory measures to limit or reduce emissions of so-called greenhouse gases, such as mandates for renewable energy.
The trend in oil and natural gas regulation has been to increase regulatory restrictions and limitations on such activities. Any changes in, or more stringent enforcement of, these laws and regulations may result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management or completion activities or waste handling, storage, transport, remediation, or disposal emission or discharge requirements which could have an adverse effect on the Partnership.
Future capital requirements and operations will be conducted with available funds generated from oil and natural gas activities. No bank borrowing is anticipated. The Partnership had net working capital of $677,275 as of December 31, 2022.
Critical Accounting Policies And Estimates
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 on 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.
Proved reserves are the estimated quantities of natural gas and condensate that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Material revisions (upward and downward) to existing reserve estimates may occur from time to time. The accuracy of these estimates is dependent on the quality pf available data and on engineering and geological interpretation and judgement. These inputs and assumptions all require a high degree of subjectivity and could have a material impact on the overall estimate of proved oil and natural gas reserve volumes and associated future cash flows and the related measurement of DD&A expense or the full-cost ceiling test impairment calculation. We believe our estimates and assumptions are reasonable; however, such estimates and assumptions are subject to a number of risks and uncertainties that may cause actual results to differ materially from such estimates.
All financing activities of the Registrant are reported in the financial statements. The Registrant does not engage in any off-balance sheet financing arrangements. Additionally, the Registrant has no contractual obligations but has a financial obligation to plug and abandon non-producing properties as discussed below.
Full Cost Method of Accounting
The Partnership follows the full-cost method of accounting for its oil and natural gas activities. Under the full-cost method, all productive and non-productive costs incurred in the acquisition, exploration and development of oil and natural gas properties are capitalized. Depreciation, depletion and amortization of oil and natural gas properties subject to amortization is computed on the units-of-production method based on the proved reserves underlying the oil and natural gas properties. On December 31, 2022 and 2021, 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 natural 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 natural gas prices, adjusted by a pricing differential associated with the particular property 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, 2022 and 2021.
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. Depletion 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 as of and for the years ended December 31, 2022 and December 31, 2021 is as follows:
| | | 2022 | | 2021 |
| Balance, beginning of period | | $ | 958,662 | | | $ | 909,538 | |
| Liabilities incurred | | | 7,590 | | | | 10,826 | |
| Liabilities reduced due to settlements and plugging and abandonments | | | (14,536 | ) | | | (626 | ) |
| Accretion expense | | | 40,716 | | | | 38,924 | |
| Balance, end of period | | $ | 992,432 | | | $ | 958,662 | |
Organization and Related Party Transactions
The Partnership was organized on February 9, 2010 in accordance with the laws of the state of Delaware. MD, a Delaware Corporation, has been appointed as the Registrant’s managing general partner. MD has no significant equity interest in the Registrant. MOC is operator of oil and natural 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 for which the costs were incurred. The Partnership will be allocated its portion of these costs based upon its ownership in each well incurring the costs. These costs are referred to as operator charges and are standard and customary in the oil and natural gas industry. Operator charges include recovery of natural 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. Amounts paid to MOC for operator charges totaled $517,910 and $426,566 for the years ended December 31, 2022 and 2021, respectively. Operator charges are billed in accordance with the Program and Partnership Agreements.
In accordance with the Partnership agreement, 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 0.25% of the capital contributions of limited and general partners. Administrative expenses can only be paid out of funds available for distributions. Under this arrangement, $241,847 and $176,954 were allocated to the Partnership during the years ended December 31, 2022 and 2021, respectively.
The Partnership participates in oil and natural 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(1) |
| Revenues: | | | | | | | | |
| Proceeds from disposition of depreciable and depletable properties | | | 75 | % | | | 25 | % |
| All other revenues | | | 75 | % | | | 25 | % |
| Costs and expenses: | | | | | | | | |
| Organization and offering costs (1) | | | 0 | % | | | 100 | % |
| Lease acquisition costs (1) | | | 0 | % | | | 100 | % |
| Tangible and intangible drilling costs (1) | | | 100 | % | | | 0 | % |
| Reporting and legal expenses | | | 100 | % | | | 0 | % |
| Operating costs, general and administrative expenses (except for reporting and legal expenses) and all other costs | | | 75 | % | | | 25 | % |
| (1) | As noted above, pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which should approximate 15% of total capital costs. To the extent that organization and offering costs and lease acquisition costs are less than 15% of total capital costs, MD is responsible for tangible drilling costs until its share of the Program’s total capital costs reaches approximately 15%. The Partnership’s financial statements reflect its respective proportionate interest in the Program. |
| ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Not required under Regulation S-K, Item 305 for smaller reporting companies.
| ITEM 8. | Financial Statements and Supplementary Data |
The required financial statements of the Registrant are contained in a separate section of this report following the signature attestation. See “Item 15. Exhibit and Financial Statement Schedules”.
| ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
| ITEM 9A. | Controls and Procedures |
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, MD’s management conducted an evaluation, under the supervision and with the participation of MD’s principal executive officer and principal financial officer, of the Registrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, MD's principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Registrant’s disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Registrant to disclose material information otherwise required to be set forth in the Registrant’s periodic reports.
((b) Annual Report on Internal Control Over Financial Reporting
MD’s management, as managing general partner of the Partnership, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of MD’s management, including MD’s principal executive officer and principal financial officer, MD conducted an evaluation of the effectiveness of the Partnership’s internal control over financial reporting based on the framework in “Internal Control — Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on MD’s evaluation under the framework in “Internal Control — Integrated Framework”, MD’s management concluded that internal control over financial reporting was effective as of December 31, 2022. This annual report does not include an attestation report of the Registrant’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Registrant’s independent registered public accounting firm pursuant to rules of the SEC that permit the Registrant to provide only management’s report in this annual report. There have been no changes in MD’s internal controls for the quarter ended December 31, 2022 or in other factors which have materially affected or are reasonably likely to materially affect the internal controls over financial reporting.
| ITEM 9B. | Other Information |
Not applicable
| ITEM 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
Not applicable
PART III
| ITEM 10. | Directors, Executive Officers and Corporate Governance |
The Registrant does not have any officers or directors. Under the Registrant’s Partnership Agreement, the Registrant’s managing partner, MD, is granted the exclusive right and full authority to manage, control and administer the Registrant’s business. MD is a wholly owned subsidiary of Mewbourne Holdings, Inc.
Set forth below are the names, ages and positions of the directors and executive officers of MD, the Registrant’s managing general partner. Directors of MD are elected to serve until the next annual meeting of stockholders or until their successors are elected and qualified.
| Name | | Age as of
December 31, 2022 | | Position |
| J. Roe Buckley | | 60 | | Chairman of the Board and Chief Financial Officer |
| | | | | |
| Kenneth S. Waits | | 62 | | Chief Executive Officer |
| | | | | |
| Dorothy M. Cuenod | | 62 | | Assistant Secretary and Director |
| | | | | |
| Ruth M. Buckley | | 61 | | Assistant Secretary and Director |
| | | | | |
| Julie M. Greene | | 59 | | Assistant Secretary and Director |
| | | | | |
| Donald R. Russell | | 48 | | Treasurer and Controller |
J. Roe Buckley, age 60, joined Mewbourne Holdings, Inc. in July 1990 and serves as Chairman of the Board and Chief Financial Officer of Mewbourne Holdings, Inc., MD and MOC. Mr. Buckley was employed by Mbank Dallas from 1985 to 1990 where he served as a commercial loan officer. He received a Bachelor of Arts in Economics from Sewanee in 1984. Mr. Buckley is married to Ruth M. Buckley. He is also the brother-in-law of Dorothy M. Cuenod and Julie M. Greene.
Kenneth S. Waits, age 62, Chief Executive Officer of Mewbourne Holdings, Inc., MD and MOC, has been with MOC since February 1984. He joined MOC following his graduation from the University of Oklahoma where he received a Bachelor of Science in Petroleum Engineering in December 1983. He currently manages all MOC’s exploration efforts. He has also served as Exploration Manager for Western Oklahoma. Previously at MOC, he held positions in Operations and in Reservoir/Evaluations.
Dorothy M. Cuenod, age 62, received a Bachelor of Arts degree in Art History from The University of Texas and a Master of Business Administration Degree from Southern Methodist University. Since 1984 she has served as a Director and Assistant Secretary of both MD and MOC. Ms. Cuenod is the sister of Ruth M. Buckley and Julie M. Greene. She is also the sister-in-law of J. Roe Buckley.
Ruth M. Buckley, age 61, received a Bachelor of Science Degree in both Engineering and Geology from Vanderbilt University. Since 1987 she has served as a Director and Assistant Secretary of both MD and MOC. Ms. Buckley is the sister of Dorothy M. Cuenod and Julie M. Greene. She is also the wife of J. Roe Buckley.
Julie M. Greene, age 59, received a Bachelor of Arts degree in Business Administration from The University of Oklahoma. Since 1988 she has served as a Director and Assistant Secretary of both MD and MOC. Prior to that time, she was employed by Rauscher, Pierce, Refsnes, Inc. Ms. Greene is the sister of Dorothy M. Cuenod and Ruth M. Buckley. She is also the sister-in-law of J. Roe Buckley.
Donald R. Russell, age 48, has been with MOC since 1997 and serves as Treasurer and Controller of both MD and MOC. He received a Bachelor of Business Administration degree in Accounting from Texas A&M University at Texarkana in 1997.
The organizational structure of the Partnership does not provide for an audit committee and therefore the Partnership does not have an audit committee or financial expert serving in such capacity.
| ITEM 11. | Executive Compensation |
The Registrant does not have any officers or directors. Management of the Registrant is vested in the managing general partner. None of the officers or directors of MD or MOC will receive remuneration directly from the Registrant but will continue to be compensated by their present employers. The Registrant will reimburse MD and MOC and affiliates thereof for certain costs of overhead falling within the definition of Administrative Costs, including without limitation, salaries of the officers and employees of MD and MOC; provided that no portion of the salaries of the directors or of the executive officer of MOC or MD may be reimbursed as Administrative Costs.
| ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
(a) Beneficial owners of more than five percent on March 31, 2023
Class of
Ownership | | Name and Address of
Beneficial Owner | | Amount and Nature of
Beneficial Owner | | Percent of Limited
Partnership Interests |
Limited Partnership
Interest | | Mewbourne Development Corp
3901 S. Broadway Tyler, TX 75701 | | 888 Limited Partnership
Interests | | 6.08% |
Of the number of interests in column 3, none are interests with respect to which such listed beneficial owner has the right to acquire beneficial ownership as specified in Rule 13d-3(d)(1) under the Exchange Act.
(b) Security ownership of management
The Registrant does not have any officers or directors. The managing general partner of the Registrant, MD, has the exclusive right to manage and administer the Registrant’s business. Under the Registrant’s Partnership Agreement, limited and general partners holding a majority of the outstanding limited and general partnership interests have the right to take certain actions, including the removal of the managing general partner. The Registrant is not aware of any current arrangement or activity that may lead to such removal.
| ITEM 13. | Certain Relationships and Related Transactions and Director Independence |
Transactions with MD and its affiliates
Pursuant to the Registrant’s Partnership Agreement, the Registrant had the following related party transactions with MD and its affiliates for the years ended December 31, 2022 and 2021:
| | | 2022 | | 2021 |
Administrative and general expense and payment of well charges and supervision charges in
accordance with standard industry operating agreements | | $ | 759,757 | | | $ | 603,520 | |
The Registrant participates in oil and natural gas activities through a drilling Program created by the Program. Pursuant to the Program, MD pays approximately 15% of the Program’s capital expenditures and approximately 25% of its operating and general and administrative expenses. The Registrant pays the remainder of the costs and expenses of the Program. In return, MD is allocated approximately 25% of the Program’s revenues.
| ITEM 14. | Principal Accountant Fees and Services |
The Partnership has retained BDO USA, LLP as its independent registered public accounting firm to perform auditing services. BDO USA, LLP’s fees for the years ended December 31, 2022 and 2021 are set forth below:
| | | 2022 | | 2021 |
| Audit Fees | | $ | 60,449 | | | $ | 54,177 | |
PART IV
| ITEM 15. | Exhibit and Financial Statement Schedules |
The following are filed as part of this annual report:
Report of Independent Registered Public Accounting Firm
(BDO USA, LLP; Dallas, Texas, PCAOB ID #243)
Balance sheets as of December 31, 2022 and 2021
Statements of operations for the years ended December 31, 2022 and 2021
Statements of changes in partners’ capital for the years ended December 31, 2022 and 2021
Statements of cash flows for the years ended December 31, 2022 and 2021
Notes to financial statements
| 2. | Financial statement schedules |
Not required for smaller reporting companies
The exhibits listed on the accompanying index are filed or incorporated by reference as part of this annual report.
| ITEM 16. | Form 10-K Summary |
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
| | Mewbourne Energy Partners 10-A, L.P. |
| | | |
| | By: | Mewbourne Development Corporation |
| | | Managing General Partner |
| | | |
| | By: | /s/ Kenneth S. Waits |
| | | Kenneth S. Waits |
| | | Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
| /s/ Kenneth S. Waits | | Chief Executive Officer | | March 31, 2023 |
| Kenneth S. Waits | | | | |
| | | | | |
| /s/ J. Roe Buckley | | Chairman of the Board | | March 31, 2023 |
| J. Roe Buckley | | Chief Financial Officer | | |
| | | | | |
| /s/ Dorothy M. Cuenod | | Director | | March 31, 2023 |
| Dorothy M. Cuenod | | | | |
| | | | | |
| /s/ Ruth M. Buckley | | Director | | March 31, 2023 |
| Ruth M. Buckley | | | | |
| | | | | |
| /s/ Julie M. Greene | | Director | | March 31, 2023 |
| Julie M. Greene | | | | |
Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act
No annual report or proxy material has been sent to the Registrant’s security holders.
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As of and for the years ended December 31, 2022 and 2021
Report of Independent Registered Public Accounting Firm
Partners of Mewbourne Energy Partners 10-A, L.P. and the
Board of Directors of Mewbourne Development Corporation (MD)
Tyler, Texas
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Mewbourne Energy Partners 10-A, L.P. (the “Partnership”) as of December 31, 2022 and 2021, the related statements of operations, changes in partners’ capital, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Proved Oil and Natural Gas Reserves Estimation and Impact on Depreciation, Depletion, and Amortization (“DD&A”) Expense and Full-Cost Ceiling Test Impairment Calculation Related to Proved Oil and Natural Gas Properties
As described in Note 2 to the financial statements, proved oil and natural gas reserves volumes and associated future net cash flows directly impact the calculation of DD&A expense and the full-cost ceiling test impairment calculation. There are numerous uncertainties inherent in estimating proved oil and natural gas reserves volumes and associated future net cash flows including, among others, estimated future production volumes and timing of such production, pricing differentials, lease operating expenses, and amounts and timing of capital expenditures. The accuracy of these estimates is dependent on the quality of available data and on engineering and geological interpretation and judgment. The estimation of oil and natural gas reserve volumes and associated future net cash flows requires management’s use of internal petroleum engineers and independent petroleum engineers and geologists (referred to as “management’s specialists”).
We have identified the estimation and timing of future production volumes and lease operating expenses used to estimate oil and natural gas reserves as a critical audit matter. These inputs and assumptions require a high degree of subjectivity and could have a material impact on the overall estimate of proved oil and natural gas reserve volumes, the associated future cash flows and the related measurement of DD&A expense or the full-cost ceiling test impairment calculation. Auditing management’s judgment with respect to these inputs involved a high degree of auditor judgment in the design of our audit procedures and the evaluation of the audit evidence obtained.
The primary procedures we performed to address this critical audit matter included:
| ● | Evaluating the professional qualifications of management’s specialists and their relationship to the Partnership, making inquiries of management’s specialists regarding the process followed and judgments used to assist in estimating the Partnership’s proved oil and natural gas reserves, and reading the report prepared by the independent petroleum engineers and geologists. |
| ● | Comparing estimated production volumes and production decline analyses against results of actual production and actual production decline analyses to determine the appropriateness of management’s estimates. |
| ● | Evaluating the estimates of lease operating expenses used in the reserve estimates compared to historical lease operating expenses. |
| ● | Evaluating management’s estimates of oil and natural gas reserve volumes and lease operating expenses against evidence obtained in other areas of the audit for consistency and reasonableness. |
/s/ BDO USA, LLP
We have served as the Partnership's auditor since 2010.
Dallas, Texas
March 31, 2023
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
BALANCE SHEETS
| | | December 31, 2022 | | December 31, 2021 |
| ASSETS | | | | | | | | |
| | | | | | | | | |
| Cash | | $ | 134,804 | | | $ | 116,521 | |
| Accounts receivable, affiliate | | | 705,494 | | | | 1,061,099 | |
| Prepaid state taxes | | | 8,154 | | | | 1,000 | |
| Total current assets | | | 848,452 | | | | 1,178,620 | |
| | | | | | | | | |
| Oil and gas properties at cost, full-cost method | | | 69,584,926 | | | | 69,567,505 | |
| Less accumulated depreciation, depletion, amortization and cost ceiling write-downs | | | (66,933,389 | ) | | | (66,745,536 | ) |
| | | | 2,651,537 | | | | 2,821,969 | |
| | | | | | | | | |
| Total assets | | $ | 3,499,989 | | | $ | 4,000,589 | |
| | | | | | | | | |
| | | | | | | | | |
| LIABILITIES AND PARTNERS' CAPITAL | | | | | | | | |
| | | | | | | | | |
| Accounts payable, affiliate | | $ | 171,177 | | | $ | 220,556 | |
| Total current liabilities | | | 171,177 | | | | 220,556 | |
| | | | | | | | | |
| Asset retirement obligation | | | 992,432 | | | | 958,662 | |
| Total liabilities | | | 1,163,609 | | | | 1,179,218 | |
| | | | | | | | | |
| Partners' capital | | | 2,336,380 | | | | 2,821,371 | |
| | | | | | | | | |
| Total liabilities and partners' capital | | $ | 3,499,989 | | | $ | 4,000,589 | |
The accompanying notes are an integral part of the financial statements.
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
STATEMENTS OF OPERATIONS
| | | | | | | | |
| | | For the Years Ended |
| | | December 31, |
| | | 2022 | | 2021 |
| Revenues: | | | | |
| Oil sales | | $ | 4,354,225 | | | $ | 3,375,790 | |
| Natural gas sales | | | 2,048,388 | | | | 1,680,047 | |
| Total revenues | | | 6,402,613 | | | | 5,055,837 | |
| | | | | | | | | |
| Expenses: | | | | | | | | |
| Lease operating expense | | | 1,098,152 | | | | 835,448 | |
| Production taxes | | | 504,542 | | | | 388,508 | |
| Administrative and general expense | | | 298,767 | | | | 255,570 | |
| Depreciation, depletion, and amortization | | | 203,067 | | | | 224,650 | |
| Asset retirement obligation accretion | | | 40,716 | | | | 38,924 | |
| Total expenses | | | 2,145,244 | | | | 1,743,100 | |
| | | | | | | | | |
| Net income | | $ | 4,257,369 | | | $ | 3,312,737 | |
The accompanying notes are an integral part of the financial statements.
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the years ended December 31, 2022 and 2021
| | | Partners' |
| | | Capital |
| Balance at December 31, 2020 | | $ | 2,334,434 | |
| | | | | |
| Cash distributions | | | (2,825,800 | ) |
| Net income | | | 3,312,737 | |
| | | | | |
| Balance at December 31, 2021 | | | 2,821,371 | |
| | | | | |
| Cash distributions | | | (4,742,360 | ) |
| Net income | | | 4,257,369 | |
| | | | | |
| Balance at December 31, 2022 | | $ | 2,336,380 | |
The accompanying notes are an integral part of the financial statements.
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
STATEMENTS OF CASH FLOWS
| | | | | | | | |
| | | For the Years Ended |
| | | December 31, |
| | | 2022 | | 2021 |
| Cash flows from operating activities: | | | | | | | | |
| Net income | | $ | 4,257,369 | | | $ | 3,312,737 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation, depletion, and amortization | | | 203,067 | | | | 224,650 | |
| Asset retirement obligation accretion | | | 40,716 | | | | 38,924 | |
| Plugging and abandonment cost paid from asset retirement obligation | | | (18,806 | ) | | | — | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable, affiliate | | | 355,605 | | | | (752,441 | ) |
| Prepaid state taxes | | | (7,154 | ) | | | 925 | |
| Accounts payable, affiliate | | | (49,501 | ) | | | 106,616 | |
| Net cash provided by operating activities | | | 4,781,296 | | | | 2,931,411 | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Operator credit received for oil and gas properties | | | — | | | | 482 | |
| Development of oil and gas properties | | | (20,653 | ) | | | (4,536 | ) |
| Net cash used in investing activities | | | (20,653 | ) | | | (4,054 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Cash distributions to partners | | | (4,742,360 | ) | | | (2,825,800 | ) |
| Net cash used in financing activities | | | (4,742,360 | ) | | | (2,825,800 | ) |
| | | | | | | | | |
| Net increase in cash | | | 18,283 | | | | 101,557 | |
| Cash, beginning of period | | | 116,521 | | | | 14,964 | |
| | | | | | | | | |
| Cash, end of period | | $ | 134,804 | | | $ | 116,521 | |
| | | | | | | | | |
| Supplemental Cash Flow Information: | | | | | | | | |
| Change to net oil & gas properties related to asset retirement obligation liabilities | | $ | 11,860 | | | $ | 10,200 | |
| | | | | | | | | |
| Changes to oil and gas properties included in accounts payable, affiliate | | $ | 122 | | | $ | 44 | |
The accompanying notes are an integral part of the financial statements.
Mewbourne Energy Partners 10-A, L.P.
NOTES TO FINANCIAL STATEMENTS
| 1. | Description of Business |
Mewbourne Energy Partners 10-A, L.P., (the “Registrant” or the “Partnership”), a Delaware limited partnership engaged primarily in oil and natural gas development and production in Texas, Oklahoma, and New Mexico, was organized on February 9, 2010. The offering was part of a private placement pursuant to Section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder. During 2012 all general partner equity interests were converted to limited partner equity interests. The managing general partner has no significant equity interest in the Partnership.
The Partnership’s sole business is the development and production of oil and natural gas. A substantial portion of the Partnership’s natural gas production is being sold regionally in the spot market. Due to the highly competitive nature of the spot market, prices are subject to seasonal and regional pricing fluctuations. In addition, such spot market sales are generally short-term in nature and are dependent upon obtaining transportation services provided by pipelines. The prices received for the Partnership’s oil and natural gas are subject to influences such as global consumption and supply trends.
| 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 on 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 natural gas reserves and future abandonment costs. Changes in oil and natural 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 natural gas properties. There are numerous uncertainties inherent in estimating proved oil and natural gas reserves volumes and associated future net cash flows including, among others, estimated future production volumes and timing of such production, pricing differentials, lease operating expenses, and amounts and timing of capital expenditures. The accuracy of these estimates is dependent on the quality of available data and on engineering and geological interpretation and judgement. The estimation of oil and natural gas reserve volumes and associated future net cash flows requires management’s use of internal petroleum engineers and independent petroleum engineers and geologists.
Full Cost Method of Accounting
The Partnership follows the full-cost method of accounting for its oil and natural gas activities. Under the full-cost method, all productive and non-productive costs incurred in the acquisition, exploration and development of oil and natural gas properties are capitalized. Depreciation, depletion and amortization of oil and natural gas properties subject to amortization is computed on the units-of-production method based on the proved reserves underlying the oil and natural gas properties. As of December 31, 2022 and 2021, 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 natural 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 natural gas prices, adjusted by a pricing differential associated with the particular property, 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, 2022 and 2021.
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 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. Depletion 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 as of and for the years ended December 31, 2022 and 2021 is as follows:
| | | 2022 | | 2021 |
| Balance, beginning of period | | $ | 958,662 | | | $ | 909,538 | |
| Liabilities incurred | | | 7,590 | | | | 10,826 | |
| Liabilities reduced due to settlements and plugging and abandonments | | | (14,536 | ) | | | (626 | ) |
| Accretion expense | | | 40,716 | | | | 38,924 | |
| Balance, end of period | | $ | 992,432 | | | $ | 958,662 | |
Oil and Natural 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 natural gas applicable to the Partnership’s interest are recorded as revenue when the natural gas is metered and title transferred pursuant to the natural gas sales contracts covering the Partnership’s interest in natural gas reserves.
Substantially all the Partnership’s accounts receivable result from oil and natural gas sales by Mewbourne Oil Company (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, 2022 or 2021. The Partnership cannot ensure that such losses will not occur in the future.
The Partnership has only non-operated working interests and royalty interests in oil and natural gas wells and receives monthly net revenue checks from the operator of these oil and natural gas wells. Each unit of oil and natural 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 natural gas applicable to the Partnership’s interest are recorded as revenue when the natural gas is metered and control is transferred pursuant to the natural gas sales contracts covering the Partnership’s interest in natural 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. 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 sheets.
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, 2022 or 2021, the Partnership did not accrue for any interest or penalties.
Distributions
Cash received from sales of oil and natural gas 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, 2022 and 2021 were $4,742,360 and $2,825,800, respectively. Since inception, the Partnership has made distributions of $79,501,673, inclusive of state tax payments for the benefit of investor partners.
| 3. | Organization and Related Party Transactions: |
The Partnership was organized on February 9, 2010 in accordance with the laws of the state of Delaware. MOC is operator of oil and natural 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 for which the costs were incurred. The Partnership will be allocated its portion of these costs based upon its ownership in each well incurring the costs. These costs are referred to as operator charges and are standard and customary in the oil and natural gas industry. Operator charges include recovery of natural 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. Amounts paid to MOC for operator charges totaled $517,910 and $426,566 for the years ended December 31, 2022 and 2021, respectively. Operator charges are billed in accordance with the Program and Partnership Agreements.
In accordance with the Partnership agreement, 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 0.25% of the capital contributions of limited and general partners. Administrative expenses can only be paid out of funds available for distributions. Under this arrangement, $241,847 and $176,954 were allocated to the Partnership during the years ended December 31, 2022 and 2021, respectively.
The Partnership participates in oil and natural 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(1) |
| Revenues: | | | | | | | | |
| Proceeds from disposition of depreciable and depletable properties | | | 75 | % | | | 25 | % |
| All other revenues | | | 75 | % | | | 25 | % |
| Costs and expenses: | | | | | | | | |
| Organization and offering costs (1) | | | 0 | % | | | 100 | % |
| Lease acquisition costs (1) | | | 0 | % | | | 100 | % |
| Tangible and intangible drilling costs (1) | | | 100 | % | | | 0 | % |
| Reporting and legal expenses | | | 100 | % | | | 0 | % |
| Operating costs, general and administrative expenses (except for reporting and legal expenses) and all other costs | | | 75 | % | | | 25 | % |
| (1) | As noted above, pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which should approximate 15% of total capital costs. To the extent that organization and offering costs and lease acquisition costs are less than 15% of total capital costs, MD is responsible for tangible drilling costs until its share of the Program’s total capital costs reaches approximately 15%. The Partnership’s financial statements reflect its respective proportionate interest in the Program. |
| 4. | Risks and Uncertainties: |
Oil and natural gas prices are determined by many factors outside of the Partnership’s control. Historically, world-wide oil and natural gas prices and markets have been subject to significant change and may continue to be in the future. Global macroeconomic factors contributing to uncertainty within the industry include real or perceived geopolitical risks in oil-producing regions of the world, particularly the Middle East; forecasted levels of global economic growth combined with forecasted global supply; supply levels of oil and natural gas due to exploration and development activities in the United States; environmental and climate change regulation; actions taken by OPEC; and the strength of the U.S. dollar in international currency markets.
Additionally, the ongoing conflict and the continuation of, or any increase in the severity of, the conflict between Russia and Ukraine has led and may continue to lead to an increase in the volatility of global oil and natural gas prices.
However, continuing political and social attention to the issue of global climate change has resulted in both existing and pending national, regional, and local legislation and regulatory measures to limit or reduce emissions of so-called greenhouse gases, such as mandates for renewable energy.
The trend in oil and natural gas regulation has been to increase regulatory restrictions and limitations on such activities. Any changes in, or more stringent enforcement of, these laws and regulations may result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management or completion activities or waste handling, storage, transport, remediation, or disposal emission or discharge requirements which could have an adverse effect on the Partnership.
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
INDEX TO EXHIBITS
The following documents are incorporated by reference in response to Item 15(a)3.
EXHIBIT
NUMBER | DESCRIPTION |
| | |
| 3.1 | Form of Certificate of Limited Partnership (filed as Exhibit 3.1 to Form 10 and incorporated herein by reference) |
| | |
| 3.2 | Form of Certificate of Amendment of the Certificate of Limited Partnership (filed as Exhibit 3.2 to Form 10 and incorporated herein by reference) |
| | |
| 4.1 | Form of Agreement of Partnership (filed as Exhibit 4.1 to Form 10 and incorporated herein by reference) |
| | |
| 10.1 | Form of Drilling Program Agreement (filed as Exhibit 10.1 to Form 10 and incorporated herein by reference) |
| | |
| 10.2 | Form of Operating Agreement (filed as Exhibit 10.2 to Form 10 and incorporated herein by reference) |
| | |
| 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 |
| | |
| 99.1 | Report of Legacy Petroleum Engineering |
| | |
| 101 | The following materials from the Partnership's Annual Report on Form 10-K for the year ended December 31, 2022 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, (iv) the Statement of Changes in Partners’ Capital and (v) related notes. |
