UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

☐

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. 333-113340

MEWBOURNE ENERGY PARTNERS 04-A, L.P.

Delaware		20-0718858
(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

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 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 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, a smaller reporting company, or an emerging growth 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 ☒
	Emerging growth company ☐

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 ☐ No ☒

MEWBOURNE ENERGY PARTNERS 04-A, L.P.

INDEX


Part 1 - Financial Information				Page No.

	Item 1. Financial Statements

		Condensed Balance Sheets -
			June 30, 2017 (Unaudited) and December 31, 2016	3

		Condensed Statements of Operations (Unaudited) -
			For the three months ended June 30, 2017 and 2016
			and the six months ended June 30, 2017 and 2016	4

		Condensed Statement of Changes In Partners' Capital (Unaudited) -
			For the six months ended June 30, 2017	5

		Condensed Statements of Cash Flows (Unaudited) -
			For the six months ended June 30, 2017 and 2016	6

		Notes to Condensed Financial Statements		7

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			9

	Item 3. Quantitative and Qualitative Disclosures about Market Risk			12

	Item 4. Disclosure Controls and Procedures			12

Part II - Other Information

	Item 1. Legal Proceedings			13

	Item 6. Exhibits and Reports on Form 8-K			13

MEWBOURNE ENERGY PARTNERS 04-A, L.P.

Part I - Financial Information

Item 1. Financial Statements
CONDENSED BALANCE SHEETS

	June 30, 2017			December 31, 2016
	(Unaudited)
ASSETS

Cash	$	3,292		$	12,266
Accounts receivable, affiliate		229,970			149,300
Prepaid state taxes		2,818			1,711
Total current assets		236,080			163,277

Oil and gas properties at cost, full-cost method		30,507,851			30,507,068
Less accumulated depreciation, depletion, amortization
and cost ceiling write-downs		(28,852,875	)		(28,801,226	)
		1,654,976			1,705,842

Total assets	$	1,891,056		$	1,869,119


LIABILITIES AND PARTNERS' CAPITAL

Accounts payable, affiliate	$	48,112		$	37,188
Total current liabilities		48,112			37,188

Asset retirement obligation		582,062			572,433

Partners' capital		1,260,882			1,259,498

Total liabilities and partners' capital	$	1,891,056		$	1,869,119

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

MEWBOURNE ENERGY PARTNERS 04-A, L.P.

CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

	For the					For the
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2017		2016			2017		2016
Revenues:
Oil sales	$	90,087	$	18,129		$	128,227	$	34,130
Gas sales		222,845		104,876			375,984		187,446
Total revenues		312,932		123,005			504,211		221,576

Expenses:
Lease operating expense		88,333		83,101			155,954		191,045
Production taxes		23,321		7,888			36,888		14,111
Administrative and general expense		21,378		22,847			39,479		36,253
Depreciation, depletion, and amortization		26,269		40,318			47,962		70,081
Cost ceiling write-down		—		260,932			—		288,144
Asset retirement obligation accretion		6,441		6,044			12,969		12,090
Total expenses		165,742		421,130			293,252		611,724
Net income (loss)	$	147,190	$	(298,125	)	$	210,959	$	(390,148	)

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

MEWBOURNE ENERGY PARTNERS 04-A, L.P.

CONDENSED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
For the six months ended June 30, 2017
(Unaudited)

	Partners’ Capital

Balance at December 31, 2016	$	1,259,498

Cash distributions		(209,575	)

Net income		210,959

Balance at June 30, 2017	$	1,260,882

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

MEWBOURNE ENERGY PARTNERS 04-A, L.P.

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended
	June 30,
	2017			2016
Cash flows from operating activities:
Net income (loss)	$	210,959		$	(390,148	)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion, and amortization		47,962			70,081
Cost ceiling write-down		—			288,144
Asset retirement obligation accretion		12,969			12,090
Changes in operating assets and liabilities:
Accounts receivable, affiliate		(80,670	)		(925	)
Prepaid state taxes		(1,107	)		(2,907	)
Accounts payable, affiliate		10,924			23,676
Net cash provided by operating activities		201,037			11

Cash flows from investing activities:
Proceeds from sale of oil and gas properties		17			—
Purchase and development of oil and gas properties		(453	)		(1,763	)
Net cash used in investing activities		(436	)		(1,763	)

Cash flows from financing activities:
Cash distributions to partners		(209,575	)		(17,788	)
Net cash used in financing activities		(209,575	)		(17,788	)

Net decrease in cash		(8,974	)		(19,540	)
Cash, beginning of period		12,266			21,164
Cash, end of period	$	3,292		$	1,624

Supplemental Cash Flow Information:
Change to net oil & gas properties related to asset retirement
obligation liabilities	$	(3,340	)	$	—

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

MEWBOURNE ENERGY PARTNERS 04-A, L.P.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business

Mewbourne Energy Partners 04-A, L.P. (the “Registrant” or the “Partnership”), a Delaware limited partnership, is engaged primarily in oil and gas development and production in Texas, Oklahoma, and New Mexico, and was organized on January 27, 2004. The offering of limited and general partnership interests began June 10, 2004 as a part of an offering registered under the name Mewbourne Energy Partners 04-05 Drilling Program, (the “Program”), and concluded August 20, 2004, with total investor contributions of $30,000,000 originally being sold to 1,118 subscribers of which $27,235,000 were sold to 1,022 subscribers as general partner interests and $2,765,000 were sold to 96 subscribers as limited partner interests. During 2006, 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.

2. Summary of Significant Accounting Policies

Reference is hereby made to the Registrant’s Annual Report on Form 10-K for 2016, which contains a summary of significant accounting policies followed by the Partnership in the preparation of its financial statements. These policies are also followed in preparing the quarterly report included herein.

In the opinion of management, the accompanying unaudited financial statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position, results of operations, cash flows and partners’ capital for the periods presented. The results of operations for the interim periods are not necessarily indicative of the final results expected for the full year. In preparing these financial statements, the Partnership has evaluated subsequent events for potential recognition and disclosure through the date the financial statements were issued.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, concerning revenue recognition. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein. In April 2015, the FASB proposed to delay the effective date one year, beginning in fiscal year 2018 and such proposal was subsequently adopted by the FASB in August 2015. The Partnership is currently determining the impacts of the new revenue recognition standard on its contracts. The Partnership’s approach include evaluating its key revenue contracts representative of its revenue and comparing historical accounting policies and practices to the new standard. The Partnership’s revenue contracts are primarily normal purchase/normal sale contracts with index pricing that settle monthly and as such, the Partnership does not expect that the new revenue recognition standard will have a material impact on its financial statements upon adoption. The new revenue recognition standard will require new disclosure related to revenue. The Partnership intends to apply the new standard utilizing a modified retrospective basis that could result in a cumulative effect adjustment as of January 1, 2018.

3. Accounting for Oil and Gas Producing Activities

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 June 30, 2017 and 2016, 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 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, discounted at 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 cost ceiling write-downs totaling $288,144 for the six months ended June 30, 2016. There were no cost ceiling write-downs for the six months ended June 30, 2017.

4. 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. 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 six months ended June 30, 2017 and the year ended December 31, 2016 is as follows:

	2017			2016
Balance, beginning of period	$	572,433		$	545,723
Liabilities incurred		2,757			7,204
Liabilities reduced due to settlements		(6,097	)		(4,730	)
Accretion expense		12,969			24,236
Balance, end of period	$	582,062		$	572,433

5. Related Party Transactions

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. 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.

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 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. Services and operator charges are billed in accordance with the program and partnership agreements.

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.

The Partnership participates in oil and 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:

			Partnership	MD (1)
Revenues:
	Proceeds from disposition of depreciable and depletable properties		70%	30%
	All other revenues		70%	30%
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	70%	30%

________________

(1)

As noted above, pursuant to the Program, MD must contribute 100% of organization and offering costs and lease acquisition costs which should approximate 20% of total capital costs. To the extent that organization and offering costs and lease acquisition costs are less than 20% of total capital costs, MD is responsible for tangible drilling costs until its share of the Program’s total capital costs reaches approximately 20%. The Partnership’s financial statements reflect its respective proportionate interest in the Program.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources

Mewbourne Energy Partners 04-A, L.P. was formed January 27, 2004. The offering of limited and general partnership interests began June 10, 2004 and concluded August 20, 2004, with total investor contributions of $30,000,000. During 2006, all general partner equity interests were converted to limited partner equity interests.

Future capital requirements and operations will be conducted with available funds generated from oil and gas activities. No bank borrowing is anticipated. The Partnership had net working capital of $187,968 at June 30, 2017.

During the six months ended June 30, 2017, the Partnership made cash distributions to the investor partners (including state tax payments for the benefit of investor partners) in the amount of $209,575 as compared to $17,788 for the six months ended June 30, 2016. Since inception, the Partnership has made distributions of $41,108,377, 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. It is impossible to predict with any certainty the future effect of these factors on the Partnership.

Results of Operations

For the three months ended June 30, 2017 as compared to the three months ended June 30, 2016:

	Three Months Ended June 30,
	2017		2016
Oil sales	$	90,087	$	18,129
Barrels produced		2,110		458
Average price/bbl	$	42.70	$	39.58

Gas sales	$	222,845	$	104,876
Mcf produced		84,485		71,091
Average price/mcf	$	2.64	$	1.48

Oil and gas revenues. As shown in the above table, total oil and gas sales increased by $189,927, a 154.4% rise, for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016.

Of this increase, $1,425 and $82,640 were due to inclines in the average prices of oil and gas sold, respectively. The average price rose to $42.70 from $39.58 per barrel (bbl) and to $2.64 from $1.48 per thousand cubic feet (mcf) for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016.

Additionally contributing to this increase were increases of $70,533 and $35,329 from inclines in the volumes of oil and gas sold by 1,652 bbls and 13,394 mcf.

Lease operations. Lease operating expense during the three month period ended June 30, 2017 increased to $88,333 from $83,101 for the three month period ended June 30, 2016 due to more well repairs and workovers and higher pumping expenses and overhead.

Production taxes. Production taxes during the three month period ended June 30, 2017 increased to $23,321 from $7,888 for the three month period ended June 30, 2016. This was due to higher overall oil and gas revenue for the three month period ended June 30, 2017.

Administrative and general expense. Administrative and general expense for the three month period ended June 30, 2017 fell to $21,378 from $22,847 for the three month period ended June 30, 2016 due to lower reporting and legal costs.

Depreciation, depletion and amortization. Depreciation, depletion and amortization for the three months ended June 30, 2017 decreased to $26,269 from $40,318 for the three months ended June 30, 2016 due to the prior period cost ceiling write-downs that reduced the balance of the full cost pool subject to amortization. This decrease was partially offset by the incline in production.

Cost ceiling write-down. There was a cost ceiling write-down of $260,932 for the three months ended June 30, 2016. This was due to lower average oil and gas prices for the twelve months preceding the write-down. There was no cost ceiling write-down for the three months ended June 30, 2017.

Results of Operations

For the six months ended June 30, 2017 as compared to the six months ended June 30, 2016:

	Six Months Ended June 30,
	2017		2016
Oil sales	$	128,227	$	34,130
Barrels produced		2,897		1,024
Average price/bbl	$	44.26	$	33.33

Gas sales	$	375,984	$	187,446
Mcf produced		144,437		124,585
Average price/mcf	$	2.60	$	1.50

Oil and gas revenues. As shown in the above table, total oil and gas sales increased by $282,635, a 127.6% rise, for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016.

Of this increase, $11,194 and $136,861 were due to inclines in the average prices of oil and gas sold, respectively. The average price rose to $44.26 from $33.33 per barrel (bbl) and to $2.60 from $1.50 per thousand cubic feet (mcf) for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016.

Additionally contributing to this increase were increases of $82,903 and $51,677 from inclines in the volumes of oil and gas sold by 1,873 bbls and 19,852 mcf.

Lease operations. Lease operating expense during the six month period ended June 30, 2017 decreased to $155,954 from $191,045 for the six month period ended June 30, 2016 due to fewer well repairs and workovers and lower pumping expenses and overhead.

Production taxes. Production taxes during the six month period ended June 30, 2017 increased to $36,888 from $14,111 for the six month period ended June 30, 2016. This was due to higher overall oil and gas revenue for the six month period ended June 30, 2017.

Administrative and general expense. Administrative and general expense for the six month period ended June 30, 2017 rose to $39,479 from $36,253 for the six month period ended June 30, 2016 due to increased administrative expenses allocable to the Partnership.

Depreciation, depletion and amortization. Depreciation, depletion and amortization for the six months ended June 30, 2017 decreased to $47,962 from $70,081 for the six months ended June 30, 2016 due to the prior period cost ceiling write-downs that reduced the balance of the full cost pool subject to amortization. This decrease was partially offset by the incline in production.

Cost ceiling write-down. There were cost ceiling write-downs totaling $288,144 for the six months ended June 30, 2016. These were due to lower average oil and gas prices for the twelve months preceding the write-downs. There were no cost ceiling write-downs for the six months ended June 30, 2017.

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 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 gas industry, and the level of commodity prices will have a significant impact on the Partnership’s results of operations. For the six months ended June 30, 2017, a 10% change in the price received for oil and gas production would have had an approximate $50,000 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. 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 concluded that its disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Partnership is required to disclose in the reports it files under the Securities Exchange Act of 1934 within the time periods specified in the SEC’s rules and forms. Since MD’s December 31, 2016 annual report on internal control over financial reporting, and for the quarter ended June 30, 2017, there have been no changes in MD’s internal controls or in other factors which have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

Part II – Other Information

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.

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 June 30, 2017 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.

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 04-A, L.P.

		By:	Mewbourne Development Corporation
			Managing General Partner

Date: August 14, 2017


		By:	/s/ Alan Clark
			Alan Clark, Treasurer and Controller

INDEX TO EXHIBITS

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 June 30, 2017 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.

MEWBOURNE ENERGY PARTNERS 04-A LP 10-Q