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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/14/23 Mewbourne Energy Partners 10-A LP 10-Q 9/30/23 33:1.3M Qes, LLC/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 224K
2: EX-31.1 Certification of CEO Pursuant to Section 302 HTML 16K
3: EX-31.2 Certification of CFO Pursuant to Section 302 HTML 16K
4: EX-32.1 Certification of CEO Pursuant to Section 906 HTML 13K
5: EX-32.2 Certification of CFO Pursuant to Section 906 HTML 13K
11: R1 Cover HTML 56K
12: R2 Condensed Balance Sheets (Unaudited) HTML 75K
13: R3 Condensed Statements of Operations (Unaudited) HTML 57K
14: R4 Condensed Statements of Changes in Partners' HTML 30K
Capital (Unaudited)
15: R5 Condensed Statements of Cash Flows (Unaudited) HTML 72K
16: R6 Description of Business HTML 16K
17: R7 Summary of Significant Accounting Policies HTML 20K
18: R8 Asset Retirement Obligations HTML 21K
19: R9 Oil and Natural Gas Sales HTML 20K
20: R10 Related Party Transactions HTML 32K
21: R11 Risks and Uncertainties HTML 17K
22: R12 Summary of Significant Accounting Policies HTML 20K
(Policies)
23: R13 Asset Retirement Obligations (Tables) HTML 19K
24: R14 Related Party Transactions (Tables) HTML 24K
25: R15 Summary of Significant Accounting Policies HTML 15K
(Details Narrative)
26: R16 A reconciliation of the Partnership?s liability HTML 22K
for well plugging and abandonment costs as of and
for the nine months ended September 30, 2023 and
the year ended December 31, 2022 is as follows
(Details)
27: R17 The Partnership participates in oil and natural HTML 36K
gas activities through the Program. The
Partnership and MD are the parties to the Program,
and the costs and revenues are allocated between
them as follows (Details)
28: R18 Related Party Transactions (Details Narrative) HTML 24K
31: XML IDEA XML File -- Filing Summary XML 49K
29: XML XBRL Instance -- mep10-10q_093023_htm XML 194K
30: EXCEL IDEA Workbook of Financial Report Info XLSX 39K
7: EX-101.CAL XBRL Calculations -- mep-20230930_cal XML 66K
8: EX-101.DEF XBRL Definitions -- mep-20230930_def XML 74K
9: EX-101.LAB XBRL Labels -- mep-20230930_lab XML 303K
10: EX-101.PRE XBRL Presentations -- mep-20230930_pre XML 203K
6: EX-101.SCH XBRL Schema -- mep-20230930 XSD 50K
32: JSON XBRL Instance as JSON Data -- MetaLinks 129± 191K
33: ZIP XBRL Zipped Folder -- 0001999371-23-000168-xbrl Zip 76K
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
| i ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i September 30, 2023
OR
| i ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. i 000-54370
i MEWBOURNE ENERGY PARTNERS 10-A, L.P.
| i Delaware | i 27-1903816 | |
| (State or jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| i 3901 South Broadway, i Tyler, i Texas | i 75701 |
| (Address of principal executive offices) | (Zip code) |
Registrant’s Telephone Number, including area code: i (903) i 561-2900
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
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. i 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). i 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 | ☐ | |
| i Non-accelerated filer ☒ | Smaller reporting company | i ☒ | |
| Emerging growth company | i ☐ |
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 if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ i No ☒
2
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
Part I - Financial Information
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash | $ | i 237,494 | $ | i 134,804 | ||||
| Accounts receivable, affiliate | i 806,100 | i 705,494 | ||||||
| Prepaid state taxes | i 17,385 | i 8,154 | ||||||
| Total current assets | i 1,060,979 | i 848,452 | ||||||
| Oil and gas properties at cost, full-cost method | i 69,555,311 | i 69,584,926 | ||||||
| Less accumulated depreciation, depletion, amortization and cost ceiling write-downs | ( i 67,080,394 | ) | ( i 66,933,389 | ) | ||||
| Assets, Noncurrent | i 2,474,917 | i 2,651,537 | ||||||
| Total assets | $ | i 3,535,896 | $ | i 3,499,989 | ||||
| LIABILITIES AND PARTNERS' CAPITAL | ||||||||
| Accounts payable, affiliate | $ | i 241,312 | $ | i 171,177 | ||||
| Total current liabilities | i 241,312 | i 171,177 | ||||||
| Asset retirement obligation | i 1,015,076 | i 992,432 | ||||||
| Total liabilities | i 1,256,388 | i 1,163,609 | ||||||
| Partners' capital | i 2,279,508 | i 2,336,380 | ||||||
| Total liabilities and partners' capital | $ | i 3,535,896 | $ | i 3,499,989 | ||||
The accompanying notes are an integral part of the financial statements.
3
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues: | ||||||||||||||||
| Oil sales | $ | i 472,982 | $ | i 1,341,549 | $ | i 3,264,217 | $ | i 3,532,171 | ||||||||
| Natural gas sales | i 121,492 | i 714,640 | i 757,633 | i 1,739,914 | ||||||||||||
| Total revenues | i 594,474 | i 2,056,189 | i 4,021,850 | i 5,272,085 | ||||||||||||
| Expenses: | ||||||||||||||||
| Lease operating expense | i 300,124 | i 318,394 | i 1,005,008 | i 808,211 | ||||||||||||
| Production taxes | i 41,717 | i 164,157 | i 323,971 | i 417,969 | ||||||||||||
| Administrative and general expense | i 81,839 | i 81,412 | i 258,784 | i 254,458 | ||||||||||||
| Depreciation, depletion, and amortization | i 28,089 | i 58,699 | i 159,987 | i 163,338 | ||||||||||||
| Asset retirement obligation accretion | i 10,503 | i 10,196 | i 31,495 | i 30,804 | ||||||||||||
| Total expenses | i 462,272 | i 632,858 | i 1,779,245 | i 1,674,780 | ||||||||||||
| Net income | $ | i 132,202 | $ | i 1,423,331 | $ | i 2,242,605 | $ | i 3,597,305 | ||||||||
The accompanying notes are an integral part of the financial statements.
4
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
| For the | For the | |||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Beginning balance | $ | i 3,047,306 | $ | i 2,654,318 | $ | i 2,336,380 | $ | i 2,821,371 | ||||||||
| Cash distributions | ( i 900,000 | ) | ( i 1,300,000 | ) | ( i 2,299,477 | ) | ( i 3,641,027 | ) | ||||||||
| Net income | i 132,202 | i 1,423,331 | i 2,242,605 | i 3,597,305 | ||||||||||||
| Ending balance | $ | i 2,279,508 | $ | i 2,777,649 | $ | i 2,279,508 | $ | i 2,777,649 | ||||||||
The accompanying notes are an integral part of the financial statements.
5
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | i 2,242,605 | $ | i 3,597,305 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation, depletion, and amortization | i 159,987 | i 163,338 | ||||||
| Asset retirement obligation accretion | i 31,495 | i 30,804 | ||||||
| Plugging and abandonment cost paid from asset retirement obligation | ( i 18,328 | ) | ( i 18,806 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, affiliate | ( i 100,606 | ) | ( i 172,952 | ) | ||||
| Prepaid state taxes | ( i 9,231 | ) | ( i 5,769 | ) | ||||
| Accounts payable, affiliate | i 69,571 | i 69,907 | ||||||
| Net cash provided by operating activities | i 2,375,493 | i 3,663,827 | ||||||
| Cash flows from investing activities: | ||||||||
| Operator credit received for oil and gas properties | i 48,839 | — | ||||||
| Development of oil and gas properties | ( i 22,165 | ) | ( i 20,517 | ) | ||||
| Net cash provided by (used in) investing activities | i 26,674 | ( i 20,517 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Cash distributions to partners | ( i 2,299,477 | ) | ( i 3,641,027 | ) | ||||
| Net cash used in financing activities | ( i 2,299,477 | ) | ( i 3,641,027 | ) | ||||
| Net increase in cash | i 102,690 | i 2,283 | ||||||
| Cash, beginning of period | i 134,804 | i 116,521 | ||||||
| Cash, end of period | $ | i 237,494 | $ | i 118,804 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Change to net oil & gas properties related to asset retirement obligation liabilities | $ | i 9,477 | $ | i 16,261 | ||||
| Changes to oil and gas properties included in accounts payable, affiliate | $ | i 564 | $ | — | ||||
The accompanying notes are an integral part of the financial statements.
6
MEWBOURNE ENERGY PARTNERS 10-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
i
| 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. During 2012, all general partner equity interests were converted to limited partner equity interests. In accordance with the laws of the State of Delaware, Mewbourne Development Corporation (“MD”), a Delaware Corporation, has been appointed as the Partnership’s managing general partner. MD has no significant equity interest in the Partnership.
i
| 2. | Summary of Significant Accounting Policies |
Reference is hereby made to the financial statements within the Registrant’s Annual Report on Form 10-K for 2022, 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 these financial statements within 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. In preparing these financial statements, the Partnership has evaluated subsequent events for potential recognition and disclosure through the date the financial statements were issued.
i
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 September 30, 2023 and 2022, 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 i 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 i i no / cost ceiling write-downs during the nine months ended September 30, 2023 or 2022.
/i
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. The standard changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The new standard replaces the existing incurred loss impairment methodology with a methodology that requires consideration of a broader range of reasonable and supportable forward-looking information to estimate all expected credit losses. The updated guidance is effective for the Partnership for annual and quarterly reporting periods beginning after December 15, 2022. The adoption of this guidance did not have a material impact on the Partnership’s financial statements or disclosures.
/
7
| 3. | Asset Retirement Obligations |
The Partnership has recognized an estimated asset retirement obligation liability (“ARO”) 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. Accretion 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.
i
A reconciliation of the Partnership’s liability for well plugging and abandonment costs as of and for the nine months ended September 30, 2023 and the year ended December 31, 2022 is as follows:
/
/
i
| 4. | 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 nine months ended September 30, 2023 or 2022. The Partnership cannot ensure that such losses will not occur in the future.
The Partnership has only non-operated working 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.
8
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 the sales contract with the third-party customers and directs all activities from the wellhead to the delivery point that make the commodity available to the customer; there is no agreement between the Partnership and the customers. In the event a production delay occurs because of, for example, well-equipment failure, MOC is responsible for correcting the issues preventing fulfillment of its promises to deliver product to its customers.
Accounts Receivable, affiliate
Under the Partnership’s joint operating and marketing agreements, the Partnership is entitled to consideration as production occurs at the wellhead and the value of such consideration is an estimate. Final amounts are only determined upon sale by the operator to the ultimate third-party customer, and recorded in “Accounts receivable, affiliate” in its balance sheet.
i
| 5. | Related Party Transactions |
i In accordance with the laws of the State of Delaware, MD has been appointed as the Partnership’s managing general partner. MD has no significant equity interest in the Partnership. 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.
The Partnership participates in oil and natural gas activities through a Drilling Program Agreement (the “Program”). In the ordinary course of business, MOC will incur certain costs that will be passed on to owners of the well for which the costs were incurred. The Partnership will receive 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. Services and operator charges are billed in accordance with the Program and Partnership agreements.
i In accordance with the Partnership agreement, during any calendar year the total amount of administrative expenses allocated to the Partnership by MOC shall not exceed the greater of (a) i 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 $ i 50,000 plus i 0.25% of the capital contributions of limited and general partners. /
9
i
The Partnership participates in oil and natural gas activities through the Program. The Partnership and MD are the parties to the Program, and the costs and revenues are allocated between them as follows:
/
/
i
| 6. | Risks and Uncertainties |
Oil, natural gas, and natural gas liquids 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, Ukraine, and Israel 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.
10
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Liquidity and Capital Resources
Mewbourne Energy Partners 10-A, L.P. (“the Partnership”) was formed February 9, 2010, with total investor contributions of $73,000,000. During 2012, all general partner equity interests were converted to limited partner equity interests.
Oil, natural gas, and natural gas liquids 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, Ukraine, and Israel has led and may continue to lead to an increase in the volatility of global oil and natural gas prices.
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 $819,667 as of September 30, 2023.
During the nine months ended September 30, 2023, the Partnership made cash distributions to the investor partners (including state tax payments for the benefit of investor partners) in the amount of $2,299,477 as compared to $3,641,027 for the nine months ended September 30, 2022. Since inception, the Partnership has made distributions of $81,801,150, inclusive of state tax payments.
The sale of crude oil and natural gas produced by the Partnership will be affected by a number of factors that 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.
11
Results of Operations
For the three months ended September 30, 2023 as compared to the three months ended September 30, 2022:
| Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Oil sales | $ | 472,982 | $ | 1,341,549 | ||||
| Barrels produced | 5,664 | 13,661 | ||||||
| Average price/bbl | $ | 83.51 | $ | 98.20 | ||||
| Natural gas sales | $ | 121,492 | $ | 714,640 | ||||
| Mcf produced | 51,504 | 76.370 | ||||||
| Average price/mcf | $ | 2.36 | $ | 9.36 | ||||
Oil and natural gas revenues. Oil and natural gas sales decreased by $1,461,715, a 71% decrease, for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022.
Of this decrease in revenue were decreases of $667,803 and $58,656 from decreases in the volumes of oil and natural gas sold, respectively. The volume of oil sold decreased by 7,997 barrels (bbls) and the volume of natural gas sold decreased by 24,866 thousand cubic feet (mcf) for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022.
Also contributing to the decrease in revenue was $200,764 and $534,492 from decreases in the average price of oil and natural gas sold, respectively. The average price decreased to $83.51 from $98.20 per bbl of oil and to $2.36 from $9.36 per mcf of natural gas for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022.
Lease operations. Lease operating expense during the three months ended September 30, 2023 decreased to $300,124 from $318,394 for the three months ended September 30, 2022 due to fewer well repairs, workovers, and overhead.
Production taxes. Production taxes decreased to $41,717 for the three months ended September 30, 2023 from $164,157 for the three months ended September 30, 2022. This was due to lower overall oil and natural gas revenue.
Administrative and general expense. Administrative and general expense for the three months ended September 30, 2023 rose to $81,839 from $81,412 for the three months ended September 30, 2022 due to increased accounting reporting and legal fees offsetting the decrease in revenue.
Depreciation, depletion, and amortization. Depreciation, depletion, and amortization for the three months ended September 30, 2023 decreased to $28,089 from $58,699 for the three months ended September 30, 2022 due to a decrease in production and to a lower net full cost pool resulting from prior period depreciation, depletion and amortization deductions.
12
Results of Operations
For the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022:
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Oil sales | $ | 3,264,217 | $ | 3,532,171 | ||||
| Barrels produced | 43,726 | 35,916 | ||||||
| Average price/bbl | $ | 74.59 | $ | 98.35 | ||||
| Natural gas sales | $ | 757,633 | $ | 1,739,914 | ||||
| Mcf produced | 246,069 | 210.779 | ||||||
| Average price/mcf | $ | 3.08 | $ | 8.25 | ||||
Oil and natural gas revenues. Oil and natural gas sales decreased by $1,250,235, a 24% decrease, for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.
Of this decrease, $853,189 and $1,090,937 were due to decreases in the average price of oil and natural gas sold, respectively. The average price fell to $74.59 from $98.35 per barrel (bbl) of oil and to $3.08 from $8.25 per thousand cubic feet (mcf) of natural gas for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.
Partially offsetting the decrease in revenue were increases of $585,235 and $108,656 from increases in the volumes of oil and natural gas sold, respectively. The volume of oil sold increased by 7,846 bbls and the volume of natural gas sold increased by 35,290 mcf for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.
Lease operations. Lease operating expense during the nine months ended September 30, 2023 increased to $1,005,008 from $808,211 for the nine months ended September 30, 2022 due to more well repairs, workovers, and overhead.
Production taxes. Production taxes decreased to $323,971 for the nine months ended September 30, 2023 from $417,969 for the nine months ended September 30, 2022. This was due to lower overall oil and natural gas revenue.
Administrative and general expense. Administrative and general expense for the nine months ended September 30, 2023 rose to $258,784 from $254,458 for the nine months ended September 30, 2022 due to increased accounting reporting and legal fees offsetting the decrease in revenue.
Depreciation, depletion, and amortization. Depreciation, depletion, and amortization for the nine months ended September 30, 2023 decreased to $159,987 from $163,338 for the nine months ended September 30, 2022 due to a decrease in third quarter DD&A rate.
13
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
1. Interest Rate Risk
The Partnership Agreement allows borrowings from banks or other financial sources of up to 20% of the total capital contributions to the Partnership without investor approval. Should the Partnership elect to borrow monies for additional development activity on Partnership properties, it will be subject to the interest rate risk inherent in borrowing activities. Changes in interest rates could significantly affect the Partnership’s results of operations and the amount of net cash flow available for partner distributions. Also, to the extent that changes in interest rates affect general economic conditions, the Partnership will be affected by such changes.
2. Commodity Price Risk
The Partnership does not expect to engage in commodity futures trading or hedging activities or enter into derivative financial instrument transactions for trading or other speculative purposes. The Partnership currently expects to sell a significant amount of its production from successful oil and natural gas wells on a month-to-month basis at market prices. Accordingly, the Partnership is at risk for the volatility in commodity prices inherent in the oil and natural gas industry, and the level of commodity prices will have a significant impact on the Partnership’s results of operations. For the nine months ended September 30, 2023, a 10% change in the price received for oil and natural gas production would have had an approximate $402,000 impact on revenue.
3. Exchange Rate Risk
The Partnership currently has no income from foreign sources or operations in foreign countries that would subject it to currency exchange rate risk. The Partnership does not currently expect to purchase any prospects located outside of either the United States or United States coastal waters in the Gulf of Mexico.
| Item 4. | Disclosure Controls and Procedures |
MD 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. The Company’s disclosure controls and procedures have been designed to ensure that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including MD’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow for accurate and timely decisions regarding required disclosure. No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases.
MD’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of its disclosure controls and procedures with the assistance and participation of other members of management. Based upon that evaluation, MD’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting as described below.
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Material Weakness in Internal Control over Financing Reporting Existing as of September 30, 2023
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Our management concluded that a material weakness in internal control over financial reporting existed as of September 30, 2023 as management did not maintain effective controls over the financial close process. Specifically, management did not maintain appropriate evidence to support the timely operation of certain financial statement close process review controls.
This material weakness did not result in any material misstatement of our financial statements for the prior periods presented, but it could lead to a material misstatement of account balances or disclosures that may not be timely prevented or detected in the future. Accordingly, management has concluded that this deficiency constitutes a material weakness.
Remediation Plan for the Material Weakness
To remediate the identified material weakness, we will enhance the design of our financial statement close review controls to support timely review. This includes enhanced monitoring of control activities over the financial reporting close process.
The process of designing and maintaining effective internal control over financial reporting is a continuous effort that requires management to anticipate and react to changes in our business, economic and regulatory environments and to expend significant resources. As we continue to evaluate our internal control over financial reporting, we may take additional actions to remediate the material weakness or modify the remediation actions described above.
While we continue to devote significant time and attention to these remediation efforts, the material weakness will not be considered remediated until management completes the actions described above and the controls operate for a sufficient period of time, and management has concluded, through testing, that these controls are effective.
Changes in Internal Control over Financial Reporting
Other than the material weakness described above and the ongoing remediation of such material weakness, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended September 30, 2023 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Item 1. | Legal Proceedings |
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.
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| 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. | |
| 101 | The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statement of Changes in Partners’ Capital, (iv) the Condensed Statements of Cash Flows, and (v) related notes. | |
| (b) | Reports on Form 8-K | |
| None. | ||
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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 10-A, L.P. | ||
| By: | Mewbourne Development Corporation | |
| Managing General Partner | ||
Date: November 14, 2023
| By: | /s/ J. Roe Buckley | |
| J. Roe Buckley | ||
| Chairman of the Board Executive Vice President Chief Financial Officer | ||
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| 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. |
| 101 | The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statement of Changes in Partners’ Capital, (iv) the Condensed Statements of Cash Flows, and (v) related notes. |
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| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| Filed on: | 11/14/23 | |||
| For Period end: | 9/30/23 | |||
| 12/31/22 | 10-K | |||
| 12/15/22 | ||||
| 9/30/22 | 10-Q | |||
| 2/9/10 | ||||
| List all Filings | ||||