| 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 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 no 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 2,825,800 79,501,673 |
