UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
or
[ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 333-85994
MEWBOURNE ENERGY PARTNERS 02-A, L.P.
Delaware 71-0871949
- ----------------------------- ----------------------
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3901 South Broadway, Tyler, Texas 75701
- ------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code:(903) 561-2900
Not Applicable
--------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 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. [X] Yes [ ] No
1
MEWBOURNE ENERGY PARTNERS 02-A, L. P.
INDEX
Part I - Financial Information Page No.
--------
Item 1. Financial Statements
Balance Sheets - 3
March 31, 2003 (Unaudited) and December 31, 2002
Statements of Income (Unaudited) - 4
For the three months ended March 31, 2003 and
the period from February 27, 2002 (date of inception)
through March 31, 2002
Statements of Cash Flows (Unaudited) - 5
For the three months ended March 31, 2003 and
the period from February 27, 2002 (date of inception)
through March 31, 2002
Statement of Changes In Partners' Capital (Unaudited) - 6
For the three months ended March 31, 2003
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 4. Disclosure Controls and Procedures 11
Part II-Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
2
MEWBOURNE ENERGY PARTNERS 02-A, L. P.
Part I - Financial Information
Item 1. Financial Statements
BALANCE SHEETS
March 31, 2003 and December 31, 2002
March 31, December 31,
2003 2002
------------ ------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 2,146,906 $ 4,052,370
Accounts receivable, affiliate 1,194,182 230,038
------------ ------------
Total current assets 3,341,088 4,282,408
------------ ------------
Prepaid well cost 2,652,510 5,860,680
Oil and gas properties at cost,
full cost method 11,584,437 6,160,308
Less accumulated depreciation,
depletion and amortization (776,100) (349,432)
------------ ------------
10,808,337 5,810,876
------------ ------------
Total assets $ 16,801,935 $ 15,953,964
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable, affiliate $ 96,143 $ 17,609
------------ ------------
Asset retirement obligation plugging liability 279,753 0
------------ ------------
Partners' capital
General partners 14,964,539 14,518,424
Limited partners 1,461,500 1,417,931
------------ ------------
Total partners' capital 16,426,039 15,936,355
------------ ------------
Total liabilities and partners' capital $ 16,801,935 $ 15,953,964
============ ============
The accompanying notes are an integral
part of the financial statements.
3
MEWBOURNE ENERGY PARTNERS 02-A, L. P.
STATEMENTS OF INCOME
For the three months ended March 31, 2003 and
the period from February 27, 2002 (date of inception)
through March 31, 2002
(Unaudited)
2003 2002
---------- ----------
Revenues and other income:
Oil and gas sales $1,484,656 $ 0
Interest income 6,392 0
---------- ----------
Total revenues and other income 1,491,048 0
---------- ----------
Expenses:
Lease operating expense 39,255 0
Production taxes 119,683 0
Administrative and general expense 12,340 0
Depreciation, depletion and amortization 429,912 0
Asset retirement obligation accretion 2,941 0
---------- ----------
Net income before cumulative effect of
accounting change 886,917 0
---------- ----------
Cumulative effect of accounting change 2,767 0
---------- ----------
Net income $ 889,684 $ 0
========== ==========
Allocation of net income:
General partners $ 810,525 $ 0
---------- ----------
Limited partners $ 79,159 $ 0
---------- ----------
Basic and diluted net income per general
partner interest (14,642 interests outstanding) $ 50.43 $ 0
---------- ----------
Basic and diluted net income per limited
partner interest (1,430 interests outstanding) $ 4.93 $ 0
---------- ----------
The accompanying notes are an integral
part of the financial statements.
4
MEWBOURNE ENERGY PARTNERS 02-A, L. P.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2003 and
the period from February 27, 2002 (date of inception)
through March 31, 2002
(Unaudited)
2003 2002
----------- -----------
Cash flows from operating activities:
Net income $ 889,684 $ 0
Adjustment to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting change (2,767) 0
Depreciation, depletion and amortization 429,912 0
Asset retirement obligation accretion 2,941 0
Changes in operating assets and liabilities:
Accounts receivables, affiliate (964,144) 0
Accounts payable, affiliate 78,534 0
----------- -----------
Net cash provided by operating activities 434,160 0
----------- -----------
Cash flows from investing activities:
Purchase of oil and gas properties (5,147,794) 0
Prepaid well costs 3,208,170 0
----------- -----------
Net cash used in investing activities (1,939,624) 0
----------- -----------
Cash flows from financing activities:
Capital contributions from partners 0 100
Cash distributions to partners (400,000) 0
----------- -----------
Net cash provided by (used in) financing activities (400,000) 100
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,905,464) 100
Cash and cash equivalents, beginning of period 4,052,370 0
----------- -----------
Cash and cash equivalents, end of period $ 2,146,906 $ 100
=========== ===========
The accompanying notes are an integral
part of the financial statements.
5
MEWBOURNE ENERGY PARTNERS 02-A, L. P.
STATEMENT OF CHANGES IN PARTNERS'
CAPITAL For the three months ended
March 31, 2003
(Unaudited)
General Limited
Partners Partners Total
------------ ------------ ------------
Balance at December 31, 2002 $ 14,518,424 $ 1,417,931 $ 15,936,355
Cash distributions (364,410) (35,590) (400,000)
Net income 810,525 79,159 889,684
------------ ------------ ------------
Balance at March 31, 2003 $ 14,964,539 $ 1,461,500 $ 16,426,039
============ ============ ============
The accompanying notes are an integral
part of the financial statements.
6
MEWBOURNE ENERGY PARTNERS 02-A, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
Reference is hereby made to the Partnership's Annual Report on Form 10-K for
2002, which contains a summary of significant accounting policies followed by
the partnership in the preparation of its financial statements. These policies
are also followed in preparing the quarterly report included herein.
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments of a normal recurring nature necessary to present fairly
our financial position, results of operations, cash flows and partners' capital
for the three months ended March 31, 2003. The results of operations for the
three months ended March 31, 2002 are not necessarily indicative of the final
results expected for the full year.
2. Accounting for Oil and Gas Producing Activities
Mewbourne Energy Partners 02-A, L.P., (the "Partnership"), a Delaware limited
partnership formed on February 27, 2002, is engaged primarily in oil and gas
development and production in Texas, Oklahoma, and New Mexico. The offering of
limited and general partnership interests began June 26, 2002 as a part of an
offering registered under the name Mewbourne Energy Partners 02-03 Drilling
Programs and concluded October 10, 2002, with total investor contributions of
$16,072,000. Since the partnership was not funded until October 10, 2002, no
business was conducted by the Partnership during the period February 27, 2002
(date of inception) to March 31, 2002, therefore, there are no items of income
or expense for that reporting period.
The Partnership follows the full-cost method of accounting for its oil and gas
activities. Under the full-cost method, all productive and nonproductive costs
incurred in the acquisition, exploration and development of oil and gas
properties are capitalized. Depreciation, depletion and amortization of oil and
gas properties subject to amortization is computed on the units-of-production
method based on the proved reserves underlying the oil and gas properties. At
March 31, 2003, approximately $0.3 million of capitalized costs were excluded
from amortization, while at December 31, 2002, approximately $1.3 million of
capitalized costs were excluded from amortization. Gains and losses on the sale
or other disposition of properties are not recognized unless such adjustments
would significantly alter the relationship between capitalized costs and the
proved oil and gas reserves. Capitalized costs are subject to a periodic ceiling
test that limits such costs to the aggregate of the present value of future net
cash flows of proved reserves and the lower of cost or fair value of unproved
properties.
3. Comprehensive Income
Total comprehensive income (loss) equals net income (loss) during each of the
periods presented herein.
7
4. Asset Retirement Obligations
On January 1, 2003, the Partnership adopted Statement of Financial Accounting
Standard No. 143 ("FAS 143"), "Accounting for Asset Retirement Obligations."
This statement changes financial accounting and reporting obligations associated
with the retirement and disposal of long-lived assets, including the
Partnership's oil and gas properties, and the associated asset retirement 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 of 4.25%. 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.
Upon adoption of FAS 143 on January 1, 2003, the Partnership recorded a
discounted liability of $93,304, increased the net full cost pool by $96,071 and
recognized a one-time cumulative effect adjustment of $(2,767). The increase in
the net full cost pool included $9,918 for the reversal of accumulated
depreciation related to the inclusion of estimated salvage value of equipment on
the Partnership's oil and gas properties. Prior to the adoption of FAS 143, the
Partnership assumed salvage value approximated plugging and abandonment costs
and as a result was not included in the full cost pool.
A reconciliation of the Partnership's liability for well plugging and
abandonment costs for the three months ended March 31, 2003, is as follows:
Balance upon adoption at January 1, 2003 $ 93,304
Liabilities incurred 183,508
Accretion expense 2,941
--------
Balance at March 31, 2003 $279,753
========
5. Recently Issued Accounting Standards
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146 (FAS 146), Accounting for Costs
Associated with Exit or Disposal Activities. This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and was effective for the Partnership beginning January 1, 2003. The adoption of
FAS 146 did not have a material impact on the Partnership.
8
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Mewbourne Energy Partners 02-A, L.P. (the "Partnership")was formed February 27,
2002. The offering of limited and general partnership interests began on June
26, 2002 and concluded on October 10, 2002, with investor partner contributions
of $16,072,000.
The Partnership has acquired interests in oil and gas prospects for the purpose
of development drilling. At March 31, 2003, 29 wells had been drilled and were
productive and 5 wells were drilled and abandoned.
Operations will be conducted with available funds and revenues generated from
oil and gas activities. No bank borrowing is anticipated. The Partnership had
net working capital of $3,244,945 at March 31, 2003.
During the three months ended March 31, 2003, the Partnership made cash
distributions to the investor partners in the amount of $400,000. The
Partnership expects that cash distributions will continue during 2003 as
additional oil and gas revenues are received.
The sale of crude oil and natural gas produced by the Partnership will be
affected by a number of factors which are beyond the Partnership's control.
These factors include the price of crude oil and natural gas, the fluctuating
supply of and demand for these products, competitive fuels, refining,
transportation, extensive federal and state regulations governing the production
and sale of crude oil and natural gas, and other competitive conditions. It is
impossible to predict with any certainty the future effect of these factors on
the Partnership.
Results of Operations
Revenues and other income during the period from January 1, 2003 to March 31,
2003 totaled $1,491,048, and consisted of oil and gas sales of $1,484,656 and
interest income of $6,392. Production volumes during the period ended March 31,
2003 were approximately 669 bbls of oil and 254,927 mcf of gas at corresponding
average realized prices of $31.96 per bbl of oil and $5.95 per mcf of gas.
Expenses totaling $604,131, consisting primarily of lease operating expenses in
the amount of $39,255, production taxes in the amount of $119,683, and
depreciation, depletion, and amortization in the amount of $429,912 resulted in
net income for the period of $889,684 prior to the cumulative effect of
accounting change. The Partnership's oil and gas production should increase
during the remainder of 2003 as additional wells are completed and oil and gas
production is sold. Ten additional wells are expected to be drilled by December
2003 which should complete the Partnership's drilling activities. Interest
income should decrease in 2003 as the available cash is utilized for drilling
and equipping of such wells. The Partnership expects that drilling and
completion costs will decrease during 2003 and that production costs, operating
expenses and depletion provisions will increase.
The Partnership's operations did not commence until the fourth quarter of 2002.
No corresponding activities, therefore, occurred during the period from February
27, 2002 (date of inception) through March 31, 2002.
9
Asset Retirement Obligation
In accordance with FAS 143, the Partnership has recognized an estimated
liability for future oil and gas well plugging and abandonment costs (see Note
4). The estimated liability is based on historical experience and estimated well
lives. The liability is discounted using the credit-adjusted risk-free rate of
4.25%. 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.
Upon adoption of FAS 143 on January 1, 2003, the Partnership recorded a
discounted liability of $93,304, increased the net full cost pool by $96,071 and
recognized a one-time cumulative effect adjustment of $(2,767). The increase in
the net full cost pool included $9,918 for the reversal of accumulated
depreciation related to the inclusion of estimated salvage value of equipment on
the Partnership's oil and gas properties. Prior to the adoption of FAS 143, the
Partnership assumed salvage value approximated plugging and abandonment costs
and as a result was not included in the full cost pool.
A reconciliation of the Partnership's liability for well plugging and
abandonment costs for the three months ended March 31, 2003, is as follows:
Balance upon adoption at January 1, 2003 $ 93,304
Liabilities incurred 183,508
Accretion expense 2,941
--------
Balance at March 31, 2003 $279,753
========
Recently Issued Accounting Standards
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146 (FAS 146), Accounting for Costs
Associated with Exit or Disposal Activities. This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and was effective for the Partnership beginning January 1, 2003. The adoption of
FAS 146 did not have a material impact on the Partnership.
10
Item 4. Disclosure Controls and Procedures
Mewbourne Development Corporation ("MDC"), the Managing General Partner of the
Partnership, maintains a system of controls and procedures designed to provide
reasonable assurance as to the reliability of the financial statements and other
disclosures included in this report, as well as to safeguard assets from
unauthorized use or disposition. Within 90 days prior to the filing of this
report, MDC's Chief Executive Officer and Chief Financial Officer have evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures with the assistance and participation of other members of management.
Based upon that evaluation, MDC's Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective for
gathering, analyzing and disclosing the information the Partnership is required
to disclose in the reports it files under the Securities Exchange Act of 1934
within the time periods specified in the SEC's rules and forms. There have been
no significant changes in MDC's internal controls or in other factors which
could significantly affect internal controls subsequent to the date MDC carried
out its evaluation.
Part II - Other Information
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
MEWBOURNE ENERGY PARTNERS 02-A, L.P.
By: Mewbourne Development Corporation
Managing General Partner
Date: May 13, 2003 By: /s/ Alan Clark
---------------------------------
Alan Clark, Treasurer
12
CERTIFICATIONS
I, Curtis W. Mewbourne, Chief Executive Officer of Mewbourne Development
Corporation, Managing General Partner of Mewbourne Energy Partners 02-A, L.P.
(the "Registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mewbourne Energy
Partners, 02-A, L.P.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us
particularly during the period in which this quarterly report is
being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report
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financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003.
/s/ Curtis W. Mewbourne
------------------------------------------
Curtis W. Mewbourne
Chief Executive Officer
Mewbourne Development Corporation,
Managing General Partner of the Registrant
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CERTIFICATIONS
I, J. Roe Buckley, Chief Financial Officer of Mewbourne Development
Corporation, Managing General Partner of Mewbourne Energy Partners 02-A, L.P.
(the "Registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mewbourne Energy
Partners, 02-A, L.P.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us
particularly during the period in which this quarterly report is
being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report
-15-
financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003.
/s/ J. Roe Buckley
------------------------------------------
J. Roe Buckley
Chief Financial Officer
Mewbourne Development Corporation,
Managing General Partner of the Registrant
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CERTIFICATION OF
CURTIS W. MEWBOURNE/CHIEF EXECUTIVE OFFICER
OF MEWBOURNE DEVELOPMENT CORPORATION
PURSUANT TO 18 U.S.C.Section 1350
I, Curtis W. Mewbourne, Chief Executive Officer of Mewbourne Development
Corporation, Managing General Partner of Mewbourne Energy Partners 02-A, L.P.,
(the "Registrant"), hereby certify that the accompanying report on Form 10-Q,
for the quarterly period ended March 31, 2003 and filed with the Securities and
Exchange Commission on the date hereof pursuant to Section 13(a) of the
Securities Exchange Act of 1934 (the "Report") by the Registrant fully complies
with the requirements of that section.
I further certify that the information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Registrant.
/s/ Curtis W. Mewbourne
----------------------------------------
Name: Curtis W. Mewbourne
Date: May 13, 2003
-17-
CERTIFICATION OF
J. ROE BUCKLEY/CHIEF FINANCIAL OFFICER
OF MEWBOURNE DEVELOPMENT CORPORATION
PURSUANT TO 18 U.S.C.Section 1350
I, J. Roe Buckley, Chief Financial Officer of Mewbourne Development
Corporation, Managing General Partner of Mewbourne Energy Partners 02-A, L.P.,
(the "Registrant"), hereby certify that the accompanying report on Form 10-Q,
for the quarterly period ended March 31, 2003 and filed with the Securities and
Exchange Commission on the date hereof pursuant to Section 13(a) of the
Securities Exchange Act of 1934 (the "Report") by the Registrant fully complies
with the requirements of that section.
I further certify that the information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Registrant.
/s/ J. Roe Buckley
----------------------------------------
Name: J. Roe Buckley
Date: May 13, 2003
-18-