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 September 30, 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
MEWBOURNE ENERGY PARTNERS 02-A, L. P.
INDEX
<Table>
<Caption>
Page No.
Part I - Financial Information
Item 1. Financial Statements
Balance Sheets - 3
September 30, 2003 (Unaudited) and December 31, 2002
Statements of Income (Unaudited) - 4
For the three months ended September 30, 2003 and 2002
and the nine months ended September 30, 2003 and the
period from February 27, 2002 (date of inception)
through September 30, 2003
Statements of Cash Flows (Unaudited) - 5
For the nine months ended September 30, 2003 and
the period from February 27, 2002 (date of inception)
through September 30, 2003
Statement of Changes In Partners' Capital (Unaudited) - 6
For the nine months ended September 30, 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
</Table>
2
MEWBOURNE ENERGY PARTNERS 02-A, L. P.
Part I - Financial Information
Item 1. Financial Statements
BALANCE SHEETS
September 30, 2003 and December 31, 2002
<Table>
<Caption>
September 30, December 31,
2003 2002
-------------- --------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 359,621 $ 4,052,370
Accounts receivable, affiliate 1,118,953 230,038
-------------- --------------
Total current assets 1,478,574 4,282,408
-------------- --------------
Prepaid well cost 0 5,860,680
Oil and gas properties at cost,
full cost method 16,422,888 6,160,308
Less accumulated depreciation,
depletion and amortization (2,064,357) (349,432)
-------------- --------------
14,358,531 5,810,876
-------------- --------------
Total assets $ 15,837,105 $ 15,953,964
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable, affiliate $ 98,642 $ 17,609
-------------- --------------
Asset retirement obligation 364,742 0
-------------- --------------
Partners' capital
General partners 14,029,764 14,543,213
Limited partners 1,343,957 1,393,142
-------------- --------------
Total partners' capital 15,373,721 15,936,355
-------------- --------------
Total liabilities and partners' capital $ 15,837,105 $ 15,953,964
============== ==============
</Table>
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 September 30, 2003 and 2002, and
the nine months ended September 30, 2003 and the period from
February 27, 2002 (date of inception) through September 30, 2002
(Unaudited)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Revenues and other income:
Oil and gas sales $ 1,804,278 $ 0 $ 5,049,283 $ 0
Interest income 1,398 0 13,832 0
------------ ------------ ------------ ------------
Total revenues and other income 1,805,676 0 5,063,115 0
------------ ------------ ------------ ------------
Expenses:
Lease operating expense 122,566 0 274,741 0
Production taxes 151,700 0 413,274 0
Administrative and general expense 64,896 0 131,393 0
Depreciation, depletion and amortization 600,762 0 1,709,481 0
Cost ceiling write-down 8,687 0 8,687 0
Asset retirement obligation accretion 4,097 0 10,940 0
------------ ------------ ------------ ------------
Net income before cumulative effect of
accounting change 852,968 0 2,514,599 0
------------ ------------ ------------ ------------
Cumulative effect of accounting change 0 0 2,767 0
------------ ------------ ------------ ------------
Net income $ 852,968 $ 0 $ 2,517,366 $ 0
============ ============ ============ ============
Allocation of net income:
General partners $ 778,402 $ 0 $ 2,297,300 $ 0
------------ ------------ ------------ ------------
Limited partners $ 74,566 $ 0 $ 220,066 $ 0
------------ ------------ ------------ ------------
Basic and diluted net income per
limited and general partner interest
(16,072 interests outstanding) $ 53.07 $ 0.00 $ 156.63 $ 0.00
------------ ------------ ------------ ------------
</Table>
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 nine months ended September 30, 2003 and
the period from February 27, 2002 (date of inception)
through September 30, 2002
(Unaudited)
<Table>
<Caption>
2003 2002
------------ ------------
Cash flows from operating activities:
Net income $ 2,517,366 $ 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 1,709,481 0
Cost ceiling write-down 8,687
Asset retirement obligation accretion 10,940 0
Changes in operating assets and liabilities:
Accounts receivables, affiliate (888,915) 0
Accounts payable, affiliate 81,033 0
------------ ------------
Net cash provided by operating activities 3,435,825 0
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (4,048,574) 0
------------ ------------
Net cash used in investing activities (4,048,574) 0
------------ ------------
Cash flows from financing activities:
Capital contributions from partners 0 100
Cash distributions to partners (3,080,000) 0
------------ ------------
Net cash provided by (used in) financing activities (3,080,000) 100
------------ ------------
Net increase (decrease) in cash and cash equivalents (3,692,749) 100
Cash and cash equivalents, beginning of period 4,052,370 0
------------ ------------
Cash and cash equivalents, end of period $ 359,621 $ 100
============ ============
</Table>
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 nine months ended September 30, 2003
(Unaudited)
<Table>
<Caption>
General Limited
Partners Partners Total
------------ ------------ ------------
Balance at December 31, 2002 $ 14,543,213 $ 1,393,142 $ 15,936,355
Cash distributions (2,810,749) (269,251) (3,080,000)
Net income 2,297,300 220,066 2,517,366
------------ ------------ ------------
Balance at September 30, 2003 $ 14,029,764 $ 1,343,957 $ 15,373,721
============ ============ ============
</Table>
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 periods presented. The results of operations for the interim periods 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 September 30, 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
September 30, 2003, substantially all capitalized costs were subject to
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. 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.
7
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.
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 nine months ended September 30, 2003, is as follows:
<Table>
Balance upon adoption at January 1, 2003 $ 93,304
Liabilities incurred 260,498
Accretion expense 10,940
------------
Balance at September 30, 2003 $ 364,742
------------
</Table>
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 September 30, 2003, 38 wells had been drilled and
were productive and 5 wells were drilled and abandoned.
Additional drilling on the prospects and operations will be conducted with
available funds generated from oil and gas activities. No bank borrowing is
anticipated. The Partnership had net working capital of $1,379,932 at September
30, 2003.
During the nine months ended September 30, 2003, the Partnership made cash
distributions to the investor partners in the amount of $3,080,000. The
Partnership expects that cash distributions will continue during the remainder
of 2003 as additional oil and gas revenues are sufficient to produce cash flows
from operations.
The sale of crude oil and natural gas produced by the Partnership will be
affected by a number of factors 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 three months ended September 30, 2003
totaled $1,805,676, and consisted of oil and gas sales of $1,804,278 and
interest income of $1,398. Production volumes during the three month period
ended September 30, 2003 were approximately 3,479 bbls of oil and 380,622 mcf of
gas at corresponding average realized prices of $28.92 per bbl of oil and $4.48
per mcf of gas. Expenses totaling $ 952,708, consisting primarily of lease
operating expenses in the amount of $122,566, production taxes in the amount of
$151,700, depreciation, depletion, and amortization in the amount of $600,762,
and cost ceiling write-down in the amount of $8,687 resulted in net income for
the period of $852,968.
Revenues and other income during the nine months ended September 30, 2003
totaled $5,063,115, and consisted of oil and gas sales of $5,049,283 and
interest income of $13,832. Production volumes during the nine month period
ended September 30, 2003 were approximately 5,836 bbls of oil and 980,673 mcf of
gas at corresponding average realized prices of $28.89 per bbl of oil and $4.98
per mcf of gas. Expenses totaling $2,548,516, consisting primarily of lease
operating expenses in the amount of $274,741, production taxes in the amount of
$413,274, depreciation, depletion, and amortization in the amount of $1,709,481
and cost ceiling write-down in the amount of $ 8,687 resulted in net income for
the period of $2,514,599 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. One
additional well is expected to be drilled by December 2003 which should complete
the Partnership's drilling activities. Interest income should decrease during
the remainder of 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 the remainder of 2003 and that production costs,
operating expenses and depletion provisions will increase.
9
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 September 30, 2002.
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
3). The estimated liability is based on historical experience and estimated well
lives. 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.
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 nine months ended September 30, 2003, is as follows:
<Table>
Balance upon adoption at January 1, 2003 $ 93,304
Liabilities incurred 260,498
Accretion expense 10,940
------------
Balance at September 30, 2003 $ 364,742
------------
</Table>
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 filed herewith.
31.1 Certification of CEO Pursuant to Section 302 of
Sarbanes-Oxley Act of 2002.
31.2 Certification of CFO Pursuant to Section 302 of
Sarbanes-Oxley Act of 2002.
32.1 Certification of CEO Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002.
32.2 Certification of CFO Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K - none
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: November 13, 2003 By: /s/ Alan Clark
----------------------------------
Alan Clark, Treasurer
12
INDEX TO EXHIBITS
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
31.1 Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley
Act of 2002.
31.2 Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley
Act of 2002.
32.1 Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley
Act of 2002.
32.2 Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley
Act of 2002.
</Table>
13