10-K 1 mep09-10k_123113.htm ANNUAL REPORT
 
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the year ended December 31, 2013
       
Or
TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from ______________________ to ___________________________

  

Commission File No. 000-53959

 

MEWBOURNE ENERGY PARTNERS 09-A, L.P.

 

Delaware 26-4280211
(State or jurisdiction of incorporation or organization)   (I.R.S. Employer Identification Number)
     
     
3901 South Broadway, Tyler, Texas 75701
(Address of principal executive offices) (Zip code)  

 

Registrant’s Telephone Number, including area code:       (903) 561-2900

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Securities registered pursuant to section 12(g) of the Act:

 

Limited Partner Interests


(Title of class)

 

General Partner Interests


(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

 

Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer    Accelerated filer
Non-accelerated filer      ☐  (Do not check if a smaller reporting company) Smaller reporting company

 

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

No market currently exists for the limited and general partner interests of the Registrant. Based on original purchase price the aggregate market value of limited and general partner interests owned by non-affiliates of the Registrant is $66,210,000.

 

The following documents are incorporated by reference into the indicated parts of this Annual Report on Form 10-K: Part of the information called for by Part IV of the Annual Report on Form 10-K is incorporated by reference from the Registrant’s Form 10.


 
 
MEWBOURNE ENERGY PARTNERS 09-A, L.P.
       
INDEX
 
Part I
  Item 1. Business
  Item 1A. Risk Factors
  Item 1B. Unresolved Staff Comments
  Item 2. Properties
  Item 3. Legal Proceedings
  Item 4. Mine Safety Disclosure
 
Part II
  Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
  Item 6. Selected Financial Data
  Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
  Item 7A. Quantitive and Qualitative Disclosures about Market Risk
  Item 8. Financial Statements and Supplementary Data
  Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  Item 9A. Controls and Procedures
 
Part III
  Item 10. Directors and Executive Officers of the Registrant
  Item 11. Executive Compensation
  Item 12. Security Ownership of Certain Beneficial Owners and Management
  Item 13. Certain Relationships and Related Transactions
  Item 14. Principal Accountant Fees and Services
 
Part IV
  Item 15. Exhibits, Financial Statements, Financial Statement Schedules and Reports on Form 8K
 
SIGNATURES
INDEX TO EXHIBITS
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906
Report of Forrest A. Garb & Associates, Inc.
2
 
 

PART I

 

ITEM 1. Business

 

Mewbourne Energy Partners 09-A, L.P. (the “Registrant” or the “Partnership”) is a limited partnership organized under the laws of the State of Delaware on February 26, 2009 (date of inception). Mewbourne Development Corporation (“MD”), a Delaware Corporation, has been appointed as the Registrant’s managing general partner. MD has no significant equity interest in the Registrant.

 

Limited and general partner interests in the Registrant were offered at $5,000 each to accredited investors in a private placement pursuant to Section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder, with a maximum offering amount of $73,000,000 (14,600 interests). On August 28, 2009, the offering of limited and general partnership interests in the Registrant was closed, with interests aggregating $66,210,000 originally being sold to accredited investors of which $62,140,000 were sold to accredited investors as general partner interests and $4,070,000 were sold to accredited investors as limited partner interests. During 2011 all general partner equity interests were converted to limited partner equity interests.

The Registrant engages primarily in oil and gas development and production and is not involved in any other industry segment. The Program is governed by a Drilling Program Agreement between the Registrant, MD and Mewbourne Oil Company (“MOC”), the program manager and a wholly owned subsidiary of Mewbourne Holdings, Inc., which is also the parent of MD. MD does not make any capital contributions directly to the Registrant; rather, MD makes its capital contributions directly to the Program. See the financial statements in Item 8 of this report for a summary of the Registrant’s revenue, income and identifiable assets.

 

The sale of crude oil and natural gas produced by the Registrant will be affected by a number of factors that are beyond the Registrant’s control. These factors include the price of crude oil and natural gas, the fluctuating supply of and demand for these products, competitive fuels, refining, transportation, extensive federal and state regulations governing the production and sale of crude oil and natural gas, and other competitive conditions. It is impossible to predict with any certainty the future effect of these factors on the Registrant.

 

The market for crude oil is such that the Registrant anticipates it will be able to sell all the crude oil it can produce. Natural gas will be sold to local distribution companies, gas marketers and end users on the spot market. The spot market reflects immediate sales of natural gas without long-term contractual commitments. The future market condition for natural gas cannot be predicted with any certainty, and the Registrant may experience delays in marketing natural gas production and fluctuations in natural gas prices.

 

Many aspects of the Registrant’s activities are highly competitive including, but not limited to, the acquisition of suitable drilling prospects and the procurement of drilling and related oil field equipment, and are subject to governmental regulation, both at Federal and state levels. The Registrant’s ability to compete depends on its financial resources and on the managing general partner’s staff and facilities, none of which are significant in comparison with those of the oil and gas exploration, development and production industry as a whole. Federal and state regulation of oil and gas operations generally includes drilling and spacing of wells on producing acreage, the imposition of maximum allowable production rates, the taxation of income and other items, and the protection of the environment.

 

The Registrant does not have any employees of its own. MD is responsible for all management functions. Mewbourne Oil Company (“MOC”), a wholly owned subsidiary of Mewbourne Holdings, Inc., which is also the parent of the Registrant’s managing general partner, has been appointed Program Manager and is responsible for activities in accordance with a Drilling Program Agreement entered into by the Registrant, MD and MOC. At March 31, 2014, MOC employed 356 persons, many of whom dedicated a part of their time to the conduct of the Registrant’s business during the period for which this report is filed.

 

The production of oil and gas is not considered subject to seasonal factors although the price received by the Registrant for natural gas sales will generally tend to increase during the winter months. Order backlog is not pertinent to the Registrant’s business.

3
 
 
ITEM 1A. Risk Factors

 

Oil and natural gas prices are volatile. A decline in prices could adversely affect the Registrant’s financial position, financial results, and cash flows.

 

Revenues, operating results, and profitability depend primarily upon the prices received for oil and natural gas sales. Prices also affect the amount of cash flow available for distribution. In addition, cost ceiling write-downs may be necessary in the future if prices fall significantly.

 

Historically, the markets for oil and natural gas have been volatile and they are likely to continue to be volatile. Wide fluctuations in oil and natural gas prices may result from relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty and other factors that are beyond the Registrant’s control, including:

 

·worldwide and domestic supplies of oil and natural gas;
·weather conditions;
·the level of consumer demand;
·the price and availability of alternative fuels;
·the proximity, accessibility and capacity of natural gas pipelines and other transportation facilities;
·regional imbalances in supply and demand;
·the price and level of foreign imports;
·domestic and foreign governmental regulations and taxes;
·the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;
·political instability or armed conflict in oil-producing regions; and
·overall domestic and global economic conditions.

 

These factors and the volatility of the energy markets make it extremely difficult to predict future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices would not only reduce revenue, but could reduce the amount of oil and natural gas that can be produced economically and, as a result, could have a material adverse effect on the Registrant’s financial condition, results of operations and reserves. For the year ended December 31, 2013, a 10% change in the price received for oil and gas production would have had an approximate $976,000 impact on revenue.

 

The actual quantities and present value of proved reserves may prove to be lower than estimated.

 

This report contains estimates of proved reserves. These estimates are based upon various assumptions, including assumptions required by the SEC relating to oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The process of estimating oil and natural gas reserves is complex. The process involves significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. Therefore, these estimates are inherently imprecise.

 

Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves most likely will vary from these estimates. Such variations may be significant and could materially affect the estimated quantities and present value of proved reserves. In addition, the Registrant may adjust estimates of proved reserves to reflect production history, results of exploration and development drilling, prevailing oil and natural gas prices and other factors, many of which are beyond the Registrant’s control. The Registrant’s properties may also be susceptible to hydrocarbon drainage from production by operators on adjacent properties.

4
 
 

Future price declines may result in a write-down of asset carrying values.

 

The Registrant utilizes the full-cost method of accounting for costs related to oil and natural gas properties. Under this method, all such costs (for both productive and nonproductive properties) are capitalized and amortized on an aggregate basis over the estimated lives of the properties using the unit-of-production method. However, these capitalized costs are subject to a ceiling test which limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved oil and natural gas reserves discounted at 10% plus the lower of cost or market value of unproved properties. The full-cost ceiling is evaluated at the end of each quarter using the oil and gas pricing guidelines established by the Securities and Exchange Commission. A significant decline in oil and natural gas prices from current levels, or other factors, without other mitigating circumstances, could cause a future write-down of capitalized costs and a non-cash charge against future earnings.

 

The Registrant’s ceiling test calculations resulted in cost ceiling write-downs totaling $2,172,398 and $10,210,093 during the years ended December 31, 2013 and 2012, respectively.

 

Oil and natural gas drilling and producing operations can be hazardous and may expose the Registrant to environmental liabilities.

 

Oil and natural gas operations are subject to many risks, including well blowouts, cratering and explosions, pipe failure, fires, formations with abnormal pressures, uncontrollable flows of oil, natural gas, brine or well fluids, and other environmental hazards and risks. If any of these risks occurs, the Registrant could sustain substantial losses as a result of:

 

·injury or loss of life;
·severe damage to or destruction of property, natural resources and equipment;
·pollution or other environmental damage;
·clean-up responsibilities;
·regulatory investigations and administrative, civil and criminal penalties; and
·injunctions resulting in limitation or suspension of operations.

 

There is inherent risk of incurring significant environmental costs and liabilities in exploration and production operations due to generation, handling, and disposal of materials, including wastes and petroleum hydrocarbons. The Registrant may incur joint and several, strict liability under applicable U.S. federal and state environmental laws in connection with releases of petroleum hydrocarbons and wastes on, under or from leased or owned properties, some of which have been used for oil and natural gas exploration and production activities for a number of years, often by third parties not under the Registrant’s control. While the Registrant maintains insurance against some, but not all, of the risks described above, the Registrant’s insurance may not be adequate to cover casualty losses or liabilities. Also, in the future the Registrant may not be able to obtain insurance at premium levels that justify its purchase.

5
 
 

In addition, in response to studies suggesting that emissions of certain gases may be contributing to warming of the earth’s atmosphere, many states are beginning to consider initiatives to track and record these gases, generally referred to as “greenhouse gases,” with several states having already adopted regulatory initiatives aimed at reducing emissions of greenhouse gases. Methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of natural gas, are included among the types of gases targeted by greenhouse gas initiatives and laws. This movement is in its infancy but regulatory initiatives or legislation placing restrictions on emissions of methane or carbon dioxide that may be imposed in various states of the United States could adversely affect operations of oil and gas wells and the demand for oil and gas products.

 

ITEM 1B. Unresolved Staff Comments

 

None.

 

ITEM 2. Properties

 

Property Interests

 

The Registrant’s properties consist primarily of interests in properties on which oil and gas wells are located. Such property interests are often subject to landowner royalties, overriding royalties and other oil and gas leasehold interests.

 

Fractional working interests in developmental oil and gas prospects, located primarily in the Anadarko Basin of Western Oklahoma, the Texas Panhandle, and the Permian Basin of New Mexico and West Texas, were acquired by the Registrant, resulting in the Registrant’s participation in the drilling of oil and gas wells. At December 31, 2013, the Registrant owned working interests in 109 producing wells. The Registrant had no drilling activity for the years ended December 31, 2013 and 2012.

 

Third Party Review of Reserves Estimate

 

The reserves estimate shown herein has been independently evaluated by Forrest A. Garb & Associates, Inc. Their reserves estimate is filed with this report as Exhibit 99.1. The qualifications of William Donald Harris III, P.E., the technical person primarily responsible for overseeing his firm’s preparation of the Partnership’s reserve estimates are set forth below.

 

  • Over 25 years of practical experience in petroleum engineering
  • Registered professional engineer in the state of Texas
  • Bachelor of Science Degree in Petroleum Engineering
  • Master of Business Administration
6
 
 

Internal Controls Over Reserves Estimate

MD, the Registrant’s managing general partner, maintains internal controls such as the following to ensure the reliability of reserves estimation:

 

  • No employee’s compensation is tied to the amount of reserves booked.
  • Comprehensive SEC-compliant internal policies are followed to determine and report proved reserves.
  • Reserves estimate is made by experienced reservoir engineers or under their direct supervision.
  • The reservoir engineers review all the Partnership’s reported proved reserves at the close of each quarter.

 

ITEM 3. 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.

 

ITEM 4. Mine Safety Disclosure

 

Not Applicable

 

PART II

 

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters

 

At March 31, 2014, the Registrant had 13,242 outstanding limited partnership interests held of record by 1,754 subscribers. There is no established public or organized trading market for the partner interests.

 

Revenues 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 of $7,431,486, and $11,224,889 were made to partners during the years ended December 31, 2013 and 2012, respectively.

 

ITEM 6. Selected Financial Data

 

Not required under Regulation S-K, Item 301 for smaller reporting companies.

 

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

General

 

The Registrant was organized as a Delaware limited partnership on February 26, 2009. The offering of limited and general partnership interests began May 1, 2009 as a part of an offering registered under the name Mewbourne Energy Partners 09 Drilling Program. The offering of limited and general partner interests in the Registrant concluded August 28, 2009, with total investor partner contributions of $66,210,000.

 

The Registrant was formed to engage primarily in the business of drilling development wells, to produce and market crude oil and natural gas produced from such properties, to distribute any net proceeds from operations to the general and limited partners and to the extent necessary, acquire leases which contain drilling prospects. The economic life of the Registrant depends on the period over which the Registrant’s oil and gas reserves are economically recoverable.

7
 
 

Results of Operations

 

The following is a comparative discussion of the results of operations for the periods indicated. It should be read in conjunction with the financial statements and the related notes to the financial statements, which begin on page 20.

 

Year ended December 31, 2013 compared to the year ended December 31, 2012:

 

   Year Ended December 31,  
    2013     201 
Oil sales  $6,320,349   $9,165,331 
Barrels produced   68,404    116,478 
Average price/bbl  $92.40   $78.69 
           
Gas sales  $3,438,621   $3,833,876 
Mcf produced   671,289    861,466 
Average price/mcf  $5.12   $4.45 

 

Oil and gas revenues. As shown in the above table, total oil and gas sales fell by $3,240,237, a 24.9% decrease, for the year ended December 31, 2013 as compared to year ended December 31, 2012.

 

Of this decrease, $4,441,911 and $974,166 were due to decreases in the volumes of oil and gas sold, respectively. Volumes fell by 48,074 barrels (bbls) and 190,177 thousand cubic feet (mcf) for the year ended December 31, 2013 as compared to the year ended December 31, 2012.

 

These decreases were partially offset by increases of $1,596,929 and $578,911 due to increases in the average prices of oil and gas sold, respectively. The average prices rose to $92.40 from $78.69 per bbl and to $5.12 from $4.45 per mcf for the year ended December 31, 2013 as compared to the year ended December 31, 2012.

 

Lease operations. Lease operating expense during the year ended December 31, 2013 increased to $1,667,301 from $1,600,295 for the year ended December 31, 2012 due to more well repairs and workovers.

 

Production taxes. Production taxes during the year ended December 31, 2013 fell to $405,911 from $628,193 during the year ended December 31, 2012 due to lower overall oil and gas revenue.

 

Administrative and general expenses. Administrative and general expenses decreased to $403,228 for the year ended December 31, 2013 from $450,382 for the year ended December 31, 2012 due to decreased administrative expenses allocable to the Partnership.

 

Depreciation, depletion and amortization. Depreciation, depletion and amortization fell to $2,721,183 for the year ended December 31, 2013 from $4,417,226 for the year ended December 31, 2012 due to lower oil and gas production.

 

Cost ceiling write-down. There were cost ceiling write-downs of $1,286,337 at June 30, 2013 and $886,061 at December 31, 2013, totaling $2,172,398 for the year ended December 31, 2013. There were cost ceiling write-downs of $5,435,445 at September 30, 2012 and $4,774,648 at December 31, 2012, totaling $10,210,093 for the year ended December 31, 2012. These were due to lower average oil and gas prices for the twelve months preceding the write-downs.

8
 
 

Liquidity and Capital Resources

 

Cash decreased by $44,612 during the year ended December 31, 2013. Cash flows from operating activities were utilized primarily for cash distributions to partners. All wells for which funds have been committed have been drilled. Any incidental future capital expenditures incurred will be paid with current available cash and revenues generated through oil and gas sales. Revenues 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.

 

Critical 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 at 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 gas reserves and future abandonment costs. Changes in oil and 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 gas properties.

 

All financing activities of the Registrant are reported in the financial statements. The Registrant does not engage in any off-balance sheet financing arrangements. Additionally, the Registrant has no contractual obligations but has a financial obligation to plug and abandon non-producing properties as discussed below.

 

Full Cost Method of Accounting

 

The Registrant follows the full-cost method of accounting for its oil and gas activities. Under the full-cost method, all productive and non-productive 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. Oil and gas properties are subject to a quarterly 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. The present value of future net cash flows has been prepared by using the oil and gas pricing guidelines established by the Securities and Exchange Commission, projected development and production costs and a 10 percent annual discount rate.

 

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. Depreciation expense associated with estimated plugging and abandonment costs is recognized in accordance with the full cost methodology.

9
 
 

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 for the year ended December 31, 2013 and December 31, 2012 is as follows:

 

    2013    2012 
Balance, beginning of period  $1,033,851   $995,271 
Liabilities incurred   7,790    2,806 
Liabilities reduced due to plugging and abandonments   (18,994)   (3,952)
Accretion expense   41,499    39,726 
Balance, end of period  $1,064,146   $1,033,851 

 

Organization and Related Party Transactions

 

The Partnership was organized on February 26, 2009 in accordance with the laws of the state of Delaware. MD, a Delaware Corporation, has been appointed as the Registrant’s managing general partner. MD has no significant equity interest in the Registrant. MOC is operator of oil and gas properties owned by the Partnership. Mewbourne Holdings, Inc. is the parent of both MD and MOC. Substantially all transactions are with MD and MOC.

 

In the ordinary course of business, MOC will incur certain costs that will be passed on to well owners of the well for which the costs were incurred. The Partnership will receive their portion of these costs based upon their ownership in each well incurring the costs. These costs are referred to as operator charges and are standard and customary in the oil and gas industry. Operator charges include recovery of gas marketing costs, fixed rate overhead, supervision, pumping, and equipment furnished by the operator, some of which will be included in the full cost pool pursuant to Rule 4-10(c)(2) of Regulation S-X. Amounts accrued for and paid to MOC for operator charges totaled $456,194 and $425,314 for the years ended December 31, 2013 and 2012, respectively. Operator charges are billed in accordance with the Program and Partnership Agreements.

 

In consideration for services rendered by MD in managing the business of the Partnership, the Partnership during each of the initial three years of the Partnership pays to MD a management fee in the amount equal to 7/10’s of 1% of the subscriptions by the investor partners to the Partnership. Management fees can only be paid out of funds available for distributions. Under this arrangement, management fees of $496,575 were allocated to the Partnership for the year ended December 31, 2012. No management fees were allocated to the Partnership for the year ended December 31, 2013. The Partnership includes the management fee as part of the full cost pool pursuant to Rule 4-10(c)(2) of Regulation S-X.

10
 
 

In accordance with the Partnership agreement, during any particular calendar year, the total amount of administrative expenses allocated to the Partnership by MOC shall not exceed the greater of (a) 3.5% of the Partnership’s gross revenue from the sale of oil and natural gas production during each year (calculated without any deduction for operating costs or other costs and expenses) or (b) the sum of $50,000 plus .25% of the capital contributions of limited and general partners. Administrative expenses can only be paid out of funds available for distributions. Under this arrangement, $346,197 and $392,961 were allocated to the Partnership during the years ended December 31, 2013 and 2012, respectively.

 

The Partnership participates in oil and gas activities through a Drilling Program Agreement (the “Program”). The Partnership and MD are parties to the Program Agreement. The costs and revenues of the Program are allocated to MD and the Partnership as follows:

 

      Partnership   MD
Revenues:      
  Proceeds from disposition of depreciable and depletable properties 75%   25%
  All other revenues 75%   25%
Costs and expenses:      
  Organization and offering costs (1) 0%   100%
  Lease acquisition costs (1) 0%   100%
  Tangible and intangible drilling costs (1) 100%   0%
  Operating costs, reporting and legal expenses, general and      
    administrative expenses and all other costs 75%   25%

 

(1)As noted above, pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which should approximate 15% of total capital costs. To the extent that organization and offering costs and lease acquisition costs are less than 15% of total capital costs, MD is responsible for tangible drilling costs until its share of the Program’s total capital costs reaches approximately 15%. The Partnership’s financial statements reflect its respective proportionate interest in the Program.

 

 

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

 

Not required under Regulation S-K, Item 305 for smaller reporting companies.

 

 

ITEM 8. Financial Statements and Supplementary Data

 

The required financial statements of the Registrant are contained in a separate section of this report following the signature attestation. See “Item 15. Exhibits, Financial Statements, Financial Statement Schedules and Reports on Form 8-K”.

11
 
 
ITEM 9. Changes in and Disagreements with Accountants in Accounting and Financial Disclosure

 

None.

 

ITEM 9A. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report, MD’s management conducted an evaluation, under the supervision and with the participation of MD’s principal executive officer and principal financial officer, of the Registrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, MD's principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Registrant’s disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Registrant to disclose material information otherwise required to be set forth in the Registrant’s periodic reports.

 

(b) MD Management’s Annual Report on Internal Control Over Financial Reporting

 

MD’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of MD’s management, including MD’s principal executive officer and principal financial officer, MD conducted an evaluation of the effectiveness of the Partnership’s internal control over financial reporting based on the framework in “Internal Control — Integrated Framework” (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on MD’s evaluation under the framework in “Internal Control — Integrated Framework”, MD’s management concluded that internal control over financial reporting was effective as of December 31, 2013. This annual report does not include an attestation report of the Registrant’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Registrant’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Registrant to provide only management’s report in this annual report. There have been no changes in MD’s internal controls for the quarter ended December 31, 2013 or in other factors which have materially affected, or are reasonably likely to materially affect the internal controls over financial reporting.

12
 
 

PART III

 

ITEM 10. Directors and Executive Officers of the Registrant

 

The Registrant does not have any officers or directors. Under the Registrant’s Partnership Agreement, the Registrant’s managing partner, MD, is granted the exclusive right and full authority to manage, control and administer the Registrant’s business. MD is a wholly owned subsidiary of Mewbourne Holdings, Inc.

 

Set forth below are the names, ages and positions of the directors and executive officers of MD, the Registrant’s managing general partner. Directors of MD are elected to serve until the next annual meeting of stockholders or until their successors are elected and qualified.

 

  Age as of         
  December 31,        
Name 2013 Position
           
Curtis W. Mewbourne 78 Chief Executive Officer    
           
J. Roe Buckley 51 Chairman of the Board and Chief Financial Officer
           
Kenneth S. Waits 53 President and Chief Operating Officer  
           
Alan Clark 61 Treasurer and Controller    
           
Dorothy M. Cuenod 53 Assistant Secretary and Director  
           
Ruth M. Buckley 52 Assistant Secretary and Director  
           
Julie M. Greene 50 Assistant Secretary and Director  

 

Curtis W. Mewbourne, age 78, formed Mewbourne Holdings, Inc. in 1965 and serves as Chief Executive Officer of Mewbourne Holdings, Inc., MD and MOC. He has operated as an independent oil and gas producer for the past 48 years. Mr. Mewbourne received a Bachelor of Science Degree in Petroleum Engineering from the University of Oklahoma in 1957. Mr. Mewbourne is the father of Dorothy M. Cuenod, Ruth M. Buckley, and Julie M. Greene and the father-in-law of J. Roe Buckley.

 

J. Roe Buckley, age 51, joined Mewbourne Holdings, Inc. in July, 1990 and serves as Chairman of the Board and Chief Financial Officer of Mewbourne Holdings, Inc., MD and MOC. Mr. Buckley was employed by Mbank Dallas from 1985 to 1990 where he served as a commercial loan officer. He received a Bachelor of Arts in Economics from Sewanee in 1984. Mr. Buckley is the son-in-law of Curtis W. Mewbourne and is married to Ruth M. Buckley. He is also the brother-in-law of Dorothy M. Cuenod and Julie M. Greene.

13
 
 

Kenneth S. Waits, age 53, President and Chief Operating Officer of Mewbourne Holdings, Inc., MD and MOC, has been with MOC since February 1984. He joined the company following his graduation from the University of Oklahoma where he received a Bachelor of Science in Petroleum Engineering in December, 1983. He currently manages all of MOC’s exploration efforts. He has also served as Exploration Manager for Western Oklahoma. Previously at MOC, he held positions in Operations and in Reservoir/Evaluations.

 

Alan Clark, age 61, joined MOC in 1979 and serves as Treasurer and Controller of both MD and MOC. Prior to joining MOC, Mr. Clark was employed by Texas Oil and Gas Corporation as Assistant Supervisor of joint interest accounting from 1976 to 1979. Mr. Clark has served in several accounting/finance positions with MOC prior to his current assignment. Mr. Clark received a Bachelor of Business Administration from the University of Texas at Arlington.

 

Dorothy M. Cuenod, age 53 received a Bachelor of Arts degree in Art History from The University of Texas and a Masters of Business Administration Degree from Southern Methodist University. Since 1984 she has served as a Director and Assistant Secretary of both MD and MOC. Ms. Cuenod is the daughter of Curtis W. Mewbourne and is the sister of Ruth M. Buckley and Julie M. Greene. She is also the sister-in-law of J. Roe Buckley.

 

Ruth M. Buckley, age 52, received a Bachelor of Science Degree in both Engineering and Geology from Vanderbilt University. Since 1987 she has served as a Director and Assistant Secretary of both MD and MOC. Ms. Buckley is the daughter of Curtis W. Mewbourne and is the sister of Dorothy M. Cuenod and Julie M. Greene. She is also the wife of J. Roe Buckley.

 

Julie M. Greene, age 50, received a Bachelor of Arts degree in Business Administration from The University of Oklahoma. Since 1988 she has served as a Director and Assistant Secretary of both MD and MOC. Prior to that time she was employed by Rauscher, Pierce, Refsnes, Inc. Ms. Greene is the daughter of Curtis W. Mewbourne and is the sister of Dorothy M. Cuenod and Ruth M. Buckley. She is also the sister-in-law of J. Roe Buckley.

 

The organizational structure of the Partnership does not provide for an audit committee and therefore the Partnership does not have an audit committee or financial expert serving in such capacity.

 

 

ITEM 11. Executive Compensation

 

The Registrant does not have any officers or directors. Management of the Registrant is vested in the managing general partner. None of the officers or directors of MD or MOC will receive remuneration directly from the Registrant, but will continue to be compensated by their present employers. The Registrant will reimburse MD and MOC and affiliates thereof for certain costs of overhead falling within the definition of Administrative Costs, including without limitation, salaries of the officers and employees of MD and MOC; provided that no portion of the salaries of the directors or of the executive officer of MOC or MD may be reimbursed as Administrative Costs.

14
 
 
ITEM 12. Security Ownership of Certain Beneficial Owners and Management

 

(a) Beneficial owners of more than five percent at March 31, 2014

 

Class of    Name and Address of   Amount and Nature of    Percent of Limited
Ownership   Beneficial Owner   Beneficial Owner   Partnership Interests
None   None   N/A   N/A

 

(b) Security ownership of management

 

The Registrant does not have any officers or directors. The managing general partner of the Registrant, MD, has the exclusive right to manage and administer the Registrant’s business. Under the Registrant’s Partnership Agreement, limited and general partners holding a majority of the outstanding limited and general partnership interests have the right to take certain actions, including the removal of the managing general partner. The Registrant is not aware of any current arrangement or activity that may lead to such removal.

 

 

ITEM 13. Certain Relationships and Related Transactions

 

Transactions with MD and its affiliates

 

Pursuant to the Registrant’s Partnership Agreement, the Registrant had the following related party transactions with MD and its affiliates for the years ended December 31, 2013 and 2012:

 

 

2013   2012 
Administrative and general expense, management       
fees (if applicable) and payment of well charges      
and supervision charges in accordance with      
standard industry operating agreements  $802,391   $1,314,850 

 

The Registrant participates in oil and gas activities through a drilling Program created by the Program. Pursuant to the Program, MD pays approximately 15% of the Program’s capital expenditures and approximately 25% of its operating and general and administrative expenses. The Registrant pays the remainder of the costs and expenses of the Program. In return, MD is allocated approximately 25% of the Program’s revenues.

 

 

ITEM 14. Principal Accountant Fees and Services

 

The Partnership has retained BDO USA, LLP as their independent registered public accounting firm to perform auditing services. BDO USA, LLP’s fees for the years ended December 31, 2013 and 2012 are set forth below:

 

2013   2012 
Audit Fees  $27,500   $26,825 
15
 
 

PART IV

 

ITEM 15. Exhibits, Financial Statements, Financial Statement Schedules and Reports on Form 8-K

 

(a) 1. Financial statements
         
    The following are filed as part of this annual report:
         
      Report of Independent Registered Accounting Firm
         
      Balance sheets as of December 31, 2013 and 2012
         
      Statements of operations for the years ended December 31, 2013 and 2012
         
      Statements of changes in partners’ capital for the years ended December 31, 2013 and 2012
         
      Statements of cash flows for the years ended December 31, 2013 and 2012
         
      Notes to financial statements
         
  2.                 Financial statement schedules
         
    Not required for smaller reporting companies
         
  3.                   Exhibits
         
    The exhibits listed on the accompanying index are filed or incorporated by reference as part of this annual report.
         
(b)                   Reports on Form 8-K
    None    
16
 
 

 

SIGNATURES

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

  Mewbourne Energy Partners 09-A, L.P.
       
  By: Mewbourne Development Corporation
    Managing General Partner
       
       
       
  By: /s/ Curtis W. Mewbourne
    Curtis W. Mewbourne
    Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

 

/s/ Curtis W. Mewbourne   Chief Executive Officer   March 31, 2014
Curtis W. Mewbourne        
         
/s/ J. Roe Buckley   Chairman of the Board   March 31, 2014
J. Roe Buckley   Chief Financial Officer  
         
/s/ Kenneth S. Waits   President   March 31, 2014
Kenneth S. Waits   Chief Operating Officer  
         
/s/ Alan Clark   Treasurer and Controller         March 31, 2014
Alan Clark        
         
/s/ Dorothy M. Cuenod   Director   March 31, 2014
Dorothy M. Cuenod        
         
/s/ Ruth M. Buckley   Director   March 31, 2014
Ruth M. Buckley        
         
/s/ Julie M. Greene   Director   March 31, 2014
Julie M. Greene        

 

Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act

 

No annual report or proxy material has been sent to the Registrant’s security holders.

17
 
 

MEWBOURNE ENERGY PARTNERS 09-A, L.P.

 

FINANCIAL STATEMENTS

 

WITH REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

 

As of and for the years ended December 31, 2013 and 2012

18
 
 

Report of Independent Registered Public Accounting Firm

 

To the Partners of Mewbourne Energy Partners 09-A, L.P. and to the Board of Directors of Mewbourne Development Corporation

Tyler, Texas

 

We have audited the accompanying balance sheets of Mewbourne Energy Partners 09-A, L.P. (Partnership) as of December 31, 2013 and 2012 and the related statements of operations, changes in partners’ capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership at December 31, 2013 and 2012, and the results of its operations and its cash flows for the year ended in conformity with accounting principles generally accepted in the United States of America.

 /s/BDO USA, LLP

Dallas, Texas

March 31, 2014

 

19
 
 

MEWBOURNE ENERGY PARTNERS 09-A, L.P.
       
BALANCE SHEETS
       
   December 31, 2013   December 31, 2012 
       
ASSETS          
           
Cash  $1,873   $46,485 
Accounts receivable, affiliate   1,478,835    1,569,211 
Prepaid state taxes   7,500    7,500 
 Total current assets   1,488,208    1,623,196 
           
Oil and gas properties at cost, full-cost method   63,736,487    63,695,926 
Less accumulated depreciation, depletion,          
and amortization   (33,396,019)   (28,515,047)
    30,340,468    35,180,879 
           
Total assets  $31,828,676   $36,804,075 
           
           
LIABILITIES AND PARTNERS' CAPITAL          
           
Accounts payable, affiliate  $257,383   $179,041 
Total current liabilities   257,383    179,041 
           
Asset retirement obligation   1,064,146    1,033,851 
           
Partners' capital   30,507,147    35,591,183 
           
Total liabilities and partners' capital  $31,828,676   $36,804,075 

 

The accompanying notes are an integral part of the financial statements.

20
 
 

MEWBOURNE ENERGY PARTNERS 09-A, L.P.
 
STATEMENTS OF OPERATIONS
 
       
       
   For the Years Ended
   December 31,
   2013   2012 
Revenues and other income:          
Oil sales  $6,320,349   $9,165,331 
Gas sales   3,438,621    3,833,876 
Interest income   —      420 
Total revenues and other income   9,758,970    12,999,627 
           
Expenses:          
Lease operating expense   1,667,301    1,600,295 
Production taxes   405,911    628,193 
Administrative and general expense   403,228    450,382 
Depreciation, depletion, and amortization   2,721,183    4,417,226 
Cost ceiling write-down   2,172,398    10,210,093 
Asset retirement obligation accretion   41,499    39,726 
Total expenses   7,411,520    17,345,915 
           
Net income (loss)  $2,347,450   $(4,346,288)
           
Basic and diluted net income (loss) per          
partner interest (13,242 interests outstanding)  $177.27   $(328.22)

 

The accompanying notes are an integral part of the financial statements.

21
 
 

MEWBOURNE ENERGY PARTNERS 09-A, L.P.
    
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the years ended December 31, 2013 and 2012
    
    
    Partners' 
    Capital 
      
Balance at December 31, 2011  $51,162,360 
      
Cash distributions   (11,224,889)
Net loss   (4,346,288)
      
Balance at December 31, 2012   35,591,183 
      
Cash distributions   (7,431,486)
Net income   2,347,450 
      
Balance at December 31, 2013  $30,507,147 
      
Distribution amount per partnership unit for the year ended December 31, 2012  $847.67 
      
Distribution amount per partnership unit for the year ended December 31, 2013  $

561.21

 

 

The accompanying notes are an integral part of the financial statements.

22
 
 

MEWBOURNE ENERGY PARTNERS 09-A, L.P.
STATEMENTS OF CASH FLOWS
 
   For the Years Ended
   December 31,
   2013   2012 
Cash flows from operating activities:          
Net income (loss)  $2,347,450   $(4,346,288)
Adjustments to reconcile net income (loss) to net cash          
  provided by operating activities:          
Depreciation, depletion, and amortization   2,721,183    4,417,226 
Cost ceiling write-down   2,172,398    10,210,093 
Asset retirement obligation accretion   41,499    39,726 
Plugging and abandonment cost paid from asset retirement obligation   (13,176)   —   
Changes in operating assets and liabilities:          
Accounts receivable, affiliate   90,376    1,511,964 
Prepaid state taxes   —      71,651 
Accounts payable, affiliate   78,342    (193,609)
Net cash provided by operating activities   7,438,072    11,710,763 
           
Cash flows from investing activities:          
Purchase and development of oil and gas properties   (51,198)   (550,425)
Net cash used in investing activities   (51,198)   (550,425)
           
Cash flows from financing activities:          
Cash distributions to partners   (7,431,486)   (11,224,889)
Net cash used in financing activities   (7,431,486)   (11,224,889)
           
Net decrease in cash   (44,612)   (64,551)
Cash, beginning of period   46,485    111,036 
           
Cash, end of period  $1,873   $46,485 
           
Supplemental Cash Flow Information:          
Non-cash changes to net oil & gas properties related to          
asset retirement obligation liabilities  $1,972   $(1,146)

 

The accompanying notes are an integral part of the financial statements.

23
 
 

MEWBOURNE ENERGY PARTNERS 09-A, L.P.

 

NOTES TO FINANCIAL STATEMENTS

 

1. Description of Business

 

Mewbourne Energy Partners 09-A, L.P., (the “Registrant” or the “Partnership”), a Delaware limited partnership engaged primarily in oil and gas development and production in Texas, Oklahoma, and New Mexico, was organized on February 26, 2009. The offering of limited and general partner interests began May 1, 2009 as a part of a private placement pursuant to Section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder, and concluded August 28, 2009, with total investor contributions of $66,210,000 originally being sold to accredited investors of which $62,140,000 were sold to accredited investors as general partner interests and $4,070,000 were sold to accredited investors as limited partner interests. During 2011 all general partner equity interests were converted to limited partner equity interests. The managing general partner has no significant equity interest in the Partnership.

The Program’s sole business is the development and production of oil and gas. A substantial portion of the Program’s gas production is being sold regionally in the spot market. Due to the highly competitive nature of the spot market, prices are subject to seasonal and regional pricing fluctuations. In addition, such spot market sales are generally short-term in nature and are dependent upon obtaining transportation services provided by pipelines. The prices received for the Program’s oil and gas are subject to influences such as global consumption and supply trends.

 

2. Summary of Significant Accounting Policies

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at 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 gas reserves and future abandonment costs. Changes in oil and 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 gas properties.

 

Full Cost Accounting

 

The Partnership follows the full-cost method of accounting for its oil and gas activities. Under the full-cost method, all productive and non-productive 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 December 31, 2013 and 2012 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 gas reserves. Capitalized costs are subject to a quarterly 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. There were cost ceiling write-downs of $2,172,398 and $10,210,093 during the years ended December 31, 2013 and 2012, respectively.

24
 
 

 

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 Financial Accounting Standards Board (“FASB”) has issued guidance on determining the estimated fair value for financial instruments. This disclosure states that 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 and accounts payable 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. 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. 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 for the year ended December 31, 2013 and December 31, 2012 is as follows:

 

   2013  2012
    
Balance, beginning of period  $1,033,851   $995,271 
Liabilities incurred   7,790    2,806 
Liabilities reduced due to plugging and abandonments   (18,994)   (3,952)
Accretion expense   41,499    39,726 
Balance, end of period  $1,064,146   $1,033,851 
25
 
 

Oil and Gas Sales

 

The Program’s oil and condensate production is sold and revenue recognized at or near the Program’s wells under short-term purchase contracts at prevailing prices in accordance with arrangements which are customary in the oil industry. Sales of gas applicable to the Program’s interest are recorded as revenue when the gas is metered and title transferred pursuant to the gas sales contracts covering the Program’s interest in gas reserves. The Partnership uses the sales method to recognize oil and gas revenue whereby revenue is recognized for the amount of production taken regardless of the amount for which the Partnership is entitled based on its working interest ownership. As of December 31, 2013 and 2012, no material gas imbalances between the Partnership and other working interest owners existed.

 

Substantially all of the Partnership’s accounts receivable result from oil and natural gas sales 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 in 2013 or 2012. The Partnership cannot ensure that such losses will not be realized in the future.

 

Comprehensive Income

 

Comprehensive income is defined as a change in equity of a business enterprise during a period from transactions and other events and circumstances from non-partner sources and includes all changes in equity during a period except those resulting from investments by partners and distributions to partners. The Partnership has no items of comprehensive income, other than net income, in any period presented. Therefore, net income as presented in the statements of operations equals comprehensive income.

 

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’s financial reporting basis of its net assets exceeded the tax basis of its net assets by $28,197,123 and $32,239,059 at December 31, 2013 and 2012, respectively.

 

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, 2013 or 2012, the Partnership did not accrue for any interest or penalties.

 

3. Organization and Related Party Transactions:

 

The Partnership was organized on February 26, 2009 in accordance with the laws of the state of Delaware. MD, a Delaware Corporation, has been appointed as the Registrant’s managing general partner. MD has no significant equity interest in the Registrant. Mewbourne Oil Company (MOC) is operator of oil and 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.

26
 
 

In the ordinary course of business, MOC will incur certain costs that will be passed on to well owners of the well for which the costs were incurred. The Partnership will receive their portion of these costs based upon their ownership in each well incurring the costs. These costs are referred to as operator charges and are standard and customary in the oil and gas industry. Operator charges include recovery of gas marketing costs, fixed rate overhead, supervision, pumping, and equipment furnished by the operator, some of which will be included in the full cost pool pursuant to Rule 4-10(c)(2) of Regulation S-X. Amounts accrued for and paid to MOC for operator charges totaled $456,194 and $425,314 for the years ended December 31, 2013 and 2012, respectively. Operator charges are billed in accordance with the Program and Partnership Agreements.

 

In consideration for services rendered by MD in managing the business of the Partnership, the Partnership during each of the initial three years of the Partnership pays to MD a management fee in the amount equal to 7/10’s of 1% of the subscriptions by the investor partners to the Partnership. Management fees can only be paid out of funds available for distributions. Under this arrangement, management fees of $496,575 were allocated to the Partnership for the year ended December 31, 2012. No management fees were allocated to the Partnership for the year ended December 31, 2013. The Partnership includes the management fee as part of the full cost pool pursuant to Rule 4-10(c)(2) of Regulation S-X.

In accordance with the Partnership agreement, during any particular calendar year, the total amount of administrative expenses allocated to the Partnership by MOC shall not exceed the greater of (a) 3.5% of the Partnership’s gross revenue from the sale of oil and natural gas production during each year (calculated without any deduction for operating costs or other costs and expenses) or (b) the sum of $50,000 plus .25% of the capital contributions of limited and general partners. Administrative expenses can only be paid out of funds available for distributions. Under this arrangement, $346,197 and $392,961were allocated to the Partnership during the years ended December 31, 2013 and 2012, respectively.

 

The Partnership participates in oil and gas activities through a Drilling Program Agreement (the “Program”). The Partnership and MD are parties to the Program Agreement. The costs and revenues of the Program are allocated to MD and the Partnership as follows:

      Partnership   MD
Revenues:      
  Proceeds from disposition of depreciable and depletable properties 75%   25%
  All other revenues 75%   25%
Costs and expenses:      
  Organization and offering costs (1) 0%   100%
  Lease acquisition costs (1) 0%   100%
  Tangible and intangible drilling costs (1) 100%   0%
  Operating costs, reporting and legal expenses, general and      
     administrative expenses and all other costs 75%   25%

 

(1)As noted above, pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which should approximate 15% of total capital costs. To the extent that organization and offering costs and lease acquisition costs are less than 15% of total capital costs, MD is responsible for tangible drilling costs until its share of the Program’s total capital costs reaches approximately 15%. The Partnership’s financial statements reflect its respective proportionate interest in the Program.
27
 
 

4. Supplemental Oil and Gas Information (unaudited):

 

The tables presented below provide supplemental information about oil and natural gas exploration and production activities.

 

Costs Incurred and Capitalized Costs:

 

Costs incurred in oil and natural gas acquisition, exploration and development activities for the years ended December 31, 2013 and 2012 were:

  2013  2012
Development $51,198   $550,425 

 

Capitalized costs related to oil and natural gas acquisition, exploration and development activities for the years ended December 31, 2013 and 2012 were as follows:

 

  2013  2012
Cost of oil and natural gas properties at year-end:         
  Producing assets - Proved properties $62,814,495   $62,763,297 
  Asset retirement obligation  921,992    932,629 
        Total capitalized cost  63,736,487    63,695,926 
  Accumulated depreciation, depletion,         
    amortization and impairment  (33,396,019)   (28,515,047)
        Net capitalized costs $30,340,468   $35,180,879 

 

Estimated Net Quantities of Proved Oil and Gas Reserves:

 

Reserve estimates as well as certain information regarding future production and discounted cash flows were determined by the Partnership’s independent petroleum consultants, Forrest A. Garb & Associates Inc., in accordance with guidelines established by the Securities and Exchange Commission and the FASB’s accounting standard. The Partnership considers reserve estimates to be reasonable; however, due to inherent uncertainties and the limited nature of reservoir data, estimates of oil and gas reserves are imprecise and subject to change over time as additional information becomes available.

 

These reserve estimates have been prepared using projected costs and the average first-of-the-month natural gas and oil prices for the twelve months ended December 31, 2013 and the twelve months ended December 31, 2012.

28
 
 

There have been no favorable or adverse events that have caused a significant change in estimated proved reserves since December 31, 2013. The Partnership has no long-term supply agreements or contracts with governments or authorities in which it acts as producer nor does it have any interest in oil and gas operations accounted for by the equity method. All reserves are located onshore within the United States. All proved reserves are developed; therefore, the Partnership has no proved undeveloped properties for the year ended December 31, 2013 and 2012.

 

   Crude Oil and     
   Condensate   Natural Gas 
   (MBbl)   (MMcf)  
  Balance at December 31, 2011  (1)   1,132    10,815 
           
  Revisions to previous estimates   (125)   (1,955)
  Extensions, discoveries and other additions   24    38 
  Production   (116)   (861)
  Balance at December 31, 2012  (1)   915    8,037 
           
  Revisions to previous estimates   (162)   275
  Extensions, discoveries and other additions   10    19 
  Production   (68)   (671)
  Balance at December 31, 2013  (1)   695    7,660 
(1) All of these reserves are categorized as proved developed.          

 

Technologies Used in Reserves Estimation

 

Proved reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. The term “reasonable certainty” implies a high degree of confidence that the quantities of oil technologies that an entity can use to establish reserves. The SEC now allows use of techniques that have been proved effective by actual production from projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology that establishes reasonable certainty. Reliable technology is a grouping of one or more technologies (including computational methods) that have been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. To achieve reasonable certainty, our technical team employs technologies that have been demonstrated to yield results with consistency and repeatability. The technologies and economic data used in the estimation of our proved reserves may include, but are not limited to, empirical evidence through drilling results and well performance, well logs, geologic maps and available downhole and production data, seismic data, well test data and reservoir simulation modeling.

 

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MEWBOURNE ENERGY PARTNERS 09-A, L.P.

 

 

INDEX TO EXHIBITS

 

 

The following documents are incorporated by reference in response to Item 15(a)3.

 

EXHIBIT
NUMBER
DESCRIPTION
   
3.1 Form of Certificate of Limited Partnership (filed as Exhibit 3.1 to Form 10 and incorporated herein by reference)
   
3.2 Form of Certificate of Amendment of the Certificate of Limited Partnership (filed as Exhibit 3.2 to Form 10 and incorporated herein by reference)
   
4.1 Form of Agreement of Partnership (filed as Exhibit 2 to Form 10 and incorporated herein by reference)
   
10.2 Form of Drilling Program Agreement (filed as Exhibit 10.2 to Form 10 and incorporated herein by reference)
   
10.4 Form of Operating Agreement (filed as Exhibit 10.2 to Form 10 and incorporated herein by reference)
   
31.1 Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
   
31.2 Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
   
32.1 Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
   
32.2 Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
   
99.1 Report of Forrest A. Garb & Associates, Inc.
   
101 The following materials from the Partnership's Annual Report on Form 10-K for the year ended December 31, 2013 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, (iv) the Statement of Changes in Partners’ Capital and (v) related notes.

 

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