# MITCHELL ENERGY ADVISORS, LLC X-17A-5 (2020-02-27) — Broker-dealer annual report - Company: MITCHELL ENERGY ADVISORS, LLC - Form: X-17A-5 - Filed: 2020-02-27 - Period: 2019-12-31 - Accession: 0001321919-20-000001 - CIK: 1321919 - File #: 8-66878 - Material weakness: No - Auditor: Turner, Stone & Company, L.L.P. - Auditor location: Dallas, TX - Contact: Mike Mitchell - Phone: 469-916-7484 - Signed by: Mike Mitchell (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1321919/000132191920000001/2019auditmitchell.pdf --- {0}------------------------------------------------ **UNITEDSTATES SECURITIESANDEXCHANGECOMMISSION Washington,D.C. 20549** # **ANNUAL AUDITED REPORT FORM X-17A-5 PART III** OMB APPROVAL OMB Number: Expires: Estimated average burden hours per response 12.00 3235-0123 August 31, 2020 # SEC RLE NUMBER s-66878 **FACING PAGE** **Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder** | 01/01/2019
12/31/2019
REPORT FOR THE PERIOD BEGINNING
AND
ENDING | | | | |-------------------------------------------------------------------------------|------------------------------------------------------------|-----------------------|---------------------------------------------------| | | MM/DD/YY | | MM/DD/YY | | A. | REGISTRANT
IDENTIFICATION | | | | LLC.
Advisors,
OF BROKER-DEALER:
Mitchell
Energy
NAME | | | OFFICIAL USE ONLY | | OF BUSINESS:
not use P.O.
(Do
ADDRESS OF PRINCIPAL PLACE
Box No.) | | | FIRM I.D.
NO. | | 7515
Greenville
Avenue,
STE | 905 | | | | | (No. and Street ) | | | | Dallas | TX | | 75231 | | (City) | (State) | | (Zip Code) | | NAME
AND
Mike Mitchell | TELEPHONE NUMBER OF PERSON TO CONTACT IN | REGARD TO THIS REPORT | 469-916-7484
(Area Code -
Telephone Number) | | B. | ACCOUNTANT | IDENTIFICATION | | | | | | | | INDEPENDENT PUBLIC
Turner,
Stone
Company,
& | ACCOUNTANT whose opinion
is contained in this
L.L.P. | Report* | | | | (Name -if
individual, state last, first, middle name ) | | | | Dr.,
12700
Park
Central
STE | Dallas
1400 | TX | 75251 | | ( Address) | (City) | (State) | (Zip Code) | | ONE:
CHECK | | | | | /
Certified Public Accountant | | | | | Public Accountant | | | | | Accountant not resident in | of
United States
or any | its possessions. | | | | OFFICIAL
USE
FOR | ONLY | | | | | | | | | | | | *'Claims for exemption from the requirement that the annual report he covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(e)(2)* **Potential persons who are to respond to the collection of information contained in this form are not required to respond** SEC 1410 **unlesstheform displays a currently valid OMB control number.** (06-02) {1}------------------------------------------------ #### **OATH OR AFFIRMATION** Mike Mitchell , swear (or affirm ) that, to the best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of Mitchell Energy Advisors, LLC **I ,** , as *,* are true and correct. I further swear (or affirm ) that neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of a customer, except as follows: 0f December 31 , 20 19 *SwA''\*,* **ANGELA ANN GREEN f£W®Notarv Pub, i0, Sta,e of Texas Comm, Expires 08-22-2023 - \m/ Notary ID 128714104** Chief Financial Officer Title *JA* Notary Public This report \*\* contains (check all applicable boxes): 0 (a) Facing Page. 0 ( b) Statement of Financial Condition. 0 (c) Statement of Income (Loss). 0 (d ) Statement of Changes in Financial Condition. 0 (e ) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. D (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. 0 (g) Computation of Net Capital. 0 ( h ) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. 0 (i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. 0 (j) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 15c3- 1 and the Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. ( k ) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of consolidation. 0 ( I ) An Oath or Affirmation. D (m) A copy of the SIPC Supplemental Report. D ( n ) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. *\*\* For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3).* {2}------------------------------------------------ **Mitchell Energy Advisors, LLC** **Financial Statements** **and** **Report of Independent Registered Public Accounting Firm** **For the Year Ended December 31, 2019** {3}------------------------------------------------ ## **TABLE OF CONTENTS** | REPORT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM
1 | |----------------------------------------------------------------------------------| | STATEMENT
OF
FINANCIAL
CONDITION
3 | | MEMBER'S
STATEMENT
OF
OPERATIONS
AND
CAPITAL
4 | | STATEMENT
OF
CASH
FLOWS
5 | | 6-9
NOTES
TO
FINANCIAL
STATEMENTS | | SCHEDULE
10
I | | 1 1
REPORT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM | | EXEMPTION
REPORT
12 | {4}------------------------------------------------ *Your Vision Our Focus* ![](_page_4_Picture_1.jpeg) ## Report of Independent Registered Public Accounting Firm To the Member of Mitchell Energy Advisors, LLC ### Opinion on the Financial Statements We have audited the accompanying statement of financial condition of Mitchell Energy Advisors, LLC (the "Company") as of December 31, 2019 and the related statements of operations and member's capital and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. ### Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Turner, Stone & Company, L.L.P. Accountants and Consultants 12700 Park Central Drive, Suite 1400 Dallas,Texas 75251 Telephone:972-239-1660/Facsimile:972-239-1665 Toll Free:877-853-4195 Web site: turnerstone.com ![](_page_4_Picture_12.jpeg) {5}------------------------------------------------ ### Opinion on Supplemental Information Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.The supplementary information contained in the Supplemental Schedule required by Rule 17a-5 under the Securities Exchange Act of 1934 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with Rule 17a-5 under the Securities Exchange Act of 1934. In our opinion, the Supplemental Schedule is fairly stated, in all material respects, in relation to the financial statements as a whole. **U/Vf^TL** Certified Public Accountants We have served as the Company's auditor since 2005. February 27, 2020 {6}------------------------------------------------ ## **MITCHELL ENERGY ADVISORS, LLC STATEMENT OF FINANCIAL CONDITION DECEMBER 3L 2019** #### Assets Current assets: | Cash | \$
28,837 | |-------------------------------------------------------------|---------------| | current
assets
Total | 28,837 | | Furniture,
cost:
at
and
equipment,
fixtures | | | Furniture
and
fixtures | 133,908 | | Equipment | 72,464 | | of
Use
Asset
Right | 124,212 | | Less
accumulated
depreciation | (206,372) | | furniture,
equipment,
Total
and
fixtures
net | 124,212 | | assets
Total | \$
153,049 | | Capital
Member's
and
Liabilities | | | Current
liabilities: | | | Accounts
payable | \$
4,064 | | Lease
liability | 76,309 | | current
Total
liabilities | 80,373 | | liabilities:
term
Long | | | Lease
liability | 51,781 | | term
Total
long
liabilities | 51,781 | | Total
Liabilities | 132,154 | | and
2)
Commitments
contingencies
(Note | | | Member's
capital | 20,895 | | member's
Total
and
capital
liabilities | \$
153,049 | The accompanying notes are an integral part of the financial statements. {7}------------------------------------------------ ## **MITCHELL ENERGY ADVISORS, LLC STATEMENT OF OPERATIONS AND MEMBER'S CAPITAL FOR THE YEAR ENDED DECEMBER 3L 2019** | Revenues | | |-----------------------------------------------------------------------|---------------| | fees
Advisors | \$
645,000 | | | 645,000 | | | | | Costs
expenses:
and | | | Travel
and
entertainment | 226,978 | | and
Salaries
benefits | 357,244 | | General
and
administrative | 55,268 | | fees
Legal
and
professional | 33,087 | | Rent
expense | 76,968 | | Property
expense
tax | 903 | | Total
costs
and
expenses | 750,448 | | Net
operating
loss | ( 105,448) | | Other
(expense):
income | | | sale
of
partnership
interest
Gain
on
the
limited | 29,158 | | Total
other
income | 29,158 | | Net
loss | (76,290) | | capital,
Member's
of
year
beginning | 64,245 | | Contributions
from
member | 32,940 | | Member's
capital,
year
end
of | \$
20,895 | The accompanying notes are an integral part of the financial statements. {8}------------------------------------------------ ## **MITCHELL ENERGY ADVISORS, LLC STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2019** #### OPERATING ACTIVITIES | Net
loss | \$
(76,290) | |-----------------------------------------------------------------------|----------------| | Adjustments
to
reconcile
net
loss | | | operations:
cash
used
to
net
in | | | sale
of
partnership
interest
Gain
on
the
limited | (29,158) | | lease
Amortization
of
liability | 3,878 | | Assets
Changes
Operating
and
Liabilities
in | | | Accounts
payable | 4,064 | | Deferred
rent | (3,302) | | cash
Net
provided
Operating
by
Activities | (100,808) | | INVESTING
ACTIVITIES | | | of
Advances
to
Parent
Repayment | 50,424 | | interest
LP
in Gultex
III | 30,158 | | cash
Net
provided
Investing
Activities
by | 80,582 | | ACTIVITIES
FINANCING | | | from
member
Contribution | 32,940 | | Net
cash
provided
by
Financing
Activities | 32,940 | | cash
Net
increase | 12,714 | | at
Cash
year
beginning
of | 16,123 | | Cash
at
end
of
year | \$
28,837 | | | | ## NON-CASH INVESTING AND FINANCING Recognition of Right of Use Asset 124,212 The accompanying notes are an integral part of the financial statements. {9}------------------------------------------------ ## **1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:** #### Business and operations Mitchell Energy Advisors, LLC (the Company) is a limited liability company organized in the State of Texas, on March 5, 2003 and is a wholly-owned subsidiary of Mitchell Energy Partners, LLC (the Parent). The Company is a broker-dealer registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). The Company is engaged in the private placement of debt and equity securities, principally in the oil and gas industry, as well as providing advisory services for mergers and acquisitions and corporate finance. #### Management estimates The preparation of financial statements in confonnity with U.S. 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. #### Cash and cash flows For purposes of the statement of cash flows, cash includes demand deposits, time deposits, certificates of deposit and short-term liquid investments with original maturities of three months or less when purchased. The Company maintains deposits in a financial institution. At December 31, 2019, the Federal Deposit Insurance Corporation (FDIC) provided insurance coverage of up to \$250,000, per depositor, per institution. At December 31, 2019, the Company's cash was not in excess of federally insured limits. #### Accounts Receivable Receivables consist of uncollateralized customer obligations due under normal trade tenns. Payments on trade receivables are applied to the earliest unpaid invoices. Management reviews trade receivables periodically and reduces the carrying amount by a valuation allowance that reflects management's best estimate of the amount that may or may not be collectible. As of December 31, 2019, there was no allowance for doubtful accounts. #### Furniture, fixtures and equipment Furniture,fixtures and equipment are stated at cost less accumulated depreciation. Depreciation of furniture, fixtures and equipment being provided using the straight-line method for financial reporting purposes over estimated useful lives of five to seven years and using accelerated methods for tax reporting purposes. {10}------------------------------------------------ #### Revenue recognition On January 1, 2018 the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Revenue from contracts with customers includes fees from investment banking services. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's progress under the contract; and whether constraints on variable consideration should be applied due to uncertain future events. The Company earns fees and commissions in connection with the placement and advisory services it provides and recognizes revenue when the Company has completed its contractual obligations and collection is reasonably assured. #### Client concentrations For the year ended December 31, 2019, three clients represented 28%, 28%, and 23% of the Company's total revenues. #### Fair value of financial instruments In accordance with the reporting requirements of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 825, *Financial Instruments*, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2019, nor gains or losses reported in the statement of operations and member's capital that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held during the year ended December 31, 2019. #### Fair value measurements ASC Topic 820, *Fair Value Measurement*, defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the customer's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. {11}------------------------------------------------ Recent accounting pronouncements During the year ended December 31, 2019 and through February 27, 2020, there were several new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company's financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, which replaces the existing guidance in ASC 840, Leases. The new standard establishes a right-of-use model that requires a lessee to record a right-ofuse asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The company adopted the new standard on January 1 ,2019 using the modified retrospective method described within ASC 842. The adoption did not have a material effect on the Company's beginning retained earnings but di have a material impact on the way leases are recorded, presented and disclosed on the Company's financial statements. #### Subsequent events In preparing the financial statements, the Company has reviewed, as detennined necessary by the Company's management, events that have occurred after December 31, 2019, up until the issuance of the financial statements, which occurred on February 27, 2020. ### **2. COMMITMENTS AND CONTINGENCIES:** #### Operating lease The Company leases its office space under the terms of an operating lease, which expires on August 31, 2021. For the year ended December 31, 2019, rent expense totaled \$76,968 and included maintenance, and other costs as required by the Company's lease. | Year
ending | | |-----------------|---------------| | 31,
December | Amount | | 2020 | 76,309 | | 2021 | 51,781 | | Total | \$
128,090 | In preparing the financial statements, the Company's management has reviewed its contractual obligations, as they relate to the Company's continued operations, and is not aware of any commitment, contingency or guarantee nor any claim to which the Company is subject to that could result in a material loss or future obligation to the Company. {12}------------------------------------------------ ## **3. INCOME TAXES:** The Company is organized as a limited liability company under the provisions of the Internal Revenue Code of 1986 as amended. Accordingly, the financial statements do not include a provision for federal income taxes because the Company does not incur federal income tax liabilities. Instead, its earnings and losses are included in the Member's income tax return and are taxed based on the Parent's income tax rate. Similarly, the financial statements do not include a provision for Texas franchise taxes because they are included in the Parent's Texas franchise tax return. #### **4. RELATED PARTY TRANSACTIONS:** During the year ended December 31, 2019, the Company advanced \$940 to its Parent and received repayments of \$51,364. #### **5. NET CAPITAL REQUIREMENTS:** The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-l ), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 (and the rule of the "applicable" exchange also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1). At December 31, 2019, the Company was in compliance with \$7,942 of aggregate indebtedness and net capital of \$20,895. #### **6. RULE 15c3-3 EXEMPTION:** The Company does not hold customer funds or securities and is, therefore, exempt under Rule 15c3- 3(k)(2)(i) from preparing the Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. {13}------------------------------------------------ ### **MITCHELL ENERGY ADVISORS, LLC SCHEDULE I DECEMBER 31 , 2019** | requirement,
of:
Net
capital
greater
the | | \$
5,000 | |-------------------------------------------------------------------------------|-----------|---------------| | 1/15%
of
aggregate
indebtedness | \$
529 | | | dollar
requirement
Minimum | 5,000 | | | Net
capital | | 20,895 | | Excess
net
capital | | \$
15,895 | | | | | | Aggregate
indebtedness | | 7,942 | | aggregate
to
Ratio
of
indebtedness
net
capital | | 38.01% | | 120%
of
required
net
capital | | 6,000 | | Net
in excess
120%
capital
of
of
required
net
capital | | \$
14,895 | | | | | | assets
Total | | \$
153,049 | | Less:
total
liabilities | | 132,154 | | Net
worth | | 20,895 | | and/or
charges
Deductions
from
to
net
worth | | | | assets
Total
non-allowable | \$ | | | Other
charges
deductions
or | | | | Excess
Bond
Deductible
Fidelity | | | | Total
deductions
from
net
worth | | | | Net
capital
before
haircuts
securities
on
positions | | 20,895 | | certificates
Haircuts
on
of
deposit
and | | | | paper
commercial | | | | Other
securities | | | | Other
positions | | | | Total
haircuts
of
securities | | | | Net
capital | | \$
20,895 | There are no material differences between the amounts presented above and the amounts reported on the Company's FOCUS report as of December 31, 2019. {14}------------------------------------------------ *Your Vision Our Focus* ![](_page_14_Picture_1.jpeg) ## Report of Independent Registered Public Accounting Firm To the Member of Mitchell Energy Advisors, LLC We have reviewed management's statements, included in the accompanying Exemption Report, in which (1) Mitchell Energy Advisors, LLC identified the following provisions of 17 C.F.R. §15c3-3(k) under which Mitchell Energy Advisors, LLC claimed an exemption from 17 C.F.R. §240.15c3-3, specifically 17 C.F.R. §240.15c3-3(k)(2)(i) (the exemption provisions) and (2) Mitchell Energy Advisors, LLC stated that Mitchell Energy Advisors, LLC met the identified exemption provisions throughout the most recent fiscal year, without exception. Mitchell Energy Advisors, LLC's management is responsible for compliance with the exemption provisions and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about Mitchell Energy Advisors, LLC's compliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management'sstatements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraph (k)(2)(i) of Rule 15c3-3 under the Securities Exchange Act of 1934. L,.U .p UA/tNeo. t Certified Public Accountants February 27, 2020 Turner, Stone & Company,L.L.P. Accountants and Consultants 12700 Park Central Drive, Suite 1400 Dallas,Texas 75251 Telephone:972-239-1660/Facsimile: 972-239-1665 Toll Free:877-853-4195 Web site: turnerstone.com ![](_page_14_Picture_11.jpeg) {15}------------------------------------------------ # **Mitchell Energy Advisors, LLC. 7515 Greenville Avenue, Suite 905 / Dallas, TX 75231 469-916-7484** ## **Mitchell Energy Advisors, LLC. Assertions** **Mitchell Energy Advisors, LLC.** (the "Company") is a registered broker-dealer subject to Rule 17a-5 promulgated by the Securities and Exchange Commission (17 C.F.R. §240.17a-5, "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R. § 240.17a-5(d)(1 ) and (4). To the best of its knowledge and belief, the Company states the following: - (1) The Company claimed an exemption from 17 C.F.R. § 240.15c3-3 under the following provisions of 17 C.F.R. § 240.15c3-3(k)(2)(i). - (2) The Company met the identified exemption provision in 17 C.F.R. § 240.15c3-3(k)(2)(i) throughout the most recent fiscal year without exception. #### **Mitchell Energy Advisors, LLC.** I, Mike Mitchell, swear (or affirm) that, to my best knowledge and belief, this Exemption Report is true and correct. Mike Mitchell, Chief Financial Officer January 4, 2020 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.