SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 3, 1997 (January 2, 1996)
PARKER & PARSLEY PETROLEUM COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 1-10695 74-2570602
(State or other jurisdiction of Commission (I.R.S. Employer
incorporation or organization) File Number Identification Number)
303 West Wall, Suite 101, Midland, Texas 79701
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code : (915) 683-4768
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Page 1 of 10 pages.
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ITEM 5. Other Events
Divestiture of Australasian Assets
On March 28, 1996, Parker & Parsley Petroleum Company (the "Company")
completed the sale of certain wholly-owned Australian subsidiaries to Santos
Ltd., and on June 20, 1996, the Company completed the sale of another
wholly-owned subsidiary, Bridge Oil Timor Sea, Inc., to Phillips Petroleum
International Investment Company. During the year ended December 31, 1996, the
Company received aggregate consideration of $237.5 million for these combined
sales which consisted of $186.6 million of proceeds for the equity of such
entities, $21.8 million for reimbursement of certain intercompany cash advances,
and the assumption of such subsidiaries' net liabilities, exclusive of oil and
gas properties, of $29.1 million. The proceeds, after payment of certain costs
and expenses, were utilized to reduce the Company's outstanding bank
indebtedness and for general working capital purposes.
The assets sold to Santos Ltd. consisted primarily of properties located in
the Cooper Basin in Central Australia, the Surat Basin in Northeast Australia,
the Carnarvon Basin on the Northwest Shelf off the coast of Western Australia,
the Otway Basin off the coast of Southeast Australia and the Central Sumatra
Basin in Indonesia. At December 31, 1995, the Company's interests in these
properties contained 32.1 million BOE of proved reserves (consisting of 12.4
million Bbls of oil and 118.3 Bcf of gas), representing $133.8 million of SEC 10
value.
The wholly-owned subsidiary sold to Phillips Petroleum International
Investment Company, Bridge Oil Timor Sea, Inc., has a wholly owned subsidiary,
Bridge Oil Timor Sea Pty Ltd., which owns a 22.5% interest in the ZOCA 91-13
permit in the offshore Bonaparte Basin in the Zone of Cooperation between
Australia and Indonesia.
Divestiture of Domestic Assets
The Company regularly reviews its property base for the purpose of
identifying nonstrategic assets, the disposition of which would create
organizational and operational efficiencies. While the Company generally does
not dispose of assets solely for the purpose of reducing debt, such dispositions
can have the result of furthering the Company's objective of financial
flexibility through decreased debt levels. During the year ended December 31,
1996, the Company received proceeds of $58.4 million from the sale of such
properties and related assets. At December 31, 1995, the domestic properties
which the Company has sold contained proved reserves of 5.1 million barrels of
oil and 59.8 Bcf of gas and had an aggregate SEC 10 value of $65.4 million. The
proceeds from such divestitures were initially used to reduce outstanding
indebtedness and subsequently to provide funding for a portion of the Company's
1996 capital expenditures, including purchases of oil and gas properties in the
Company's core areas.
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ITEM 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information:
Pro forma financial information for the Company is included in this
Report on the pages indicated below. This information has been
provided to give effect to (i) the sale of certain wholly-owned
Australian subsidiaries to Santos Ltd. in March 1996, (ii) the sale
of Bridge Oil Timor Sea, Inc. to Phillips Petroleum International
Investment Company in June 1996 and (iii) the aggregate effect of the
sales of certain nonstrategic domestic oil and gas properties, gas
plants, contract rights and related assets sold during the period
from January 2, 1996 to December 31, 1996.
Page
----
Preliminary Statement 4
Unaudited Pro Forma Combined Statement of Operations
for the year ended December 31, 1996 5
Notes to Unaudited Pro Forma Combined Statement of
Operations 6
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Unaudited Pro Forma Combined Statement of Operations of the Company
The Unaudited Pro Forma Combined Statement of Operations of the Company
has been prepared to give effect to (i) the sale of certain wholly-owned
Australian subsidiaries to Santos Ltd. in March 1996, (ii) the sale of Bridge
Oil Timor Sea, Inc. to Phillips Petroleum International Investment Company in
June 1996 (items (i) and (ii) collectively the "Australasian Assets") and (iii)
the aggregate effect of the sales of certain nonstrategic domestic oil and gas
properties, gas plants, contract rights and related assets sold during the
period from January 2, 1996 to December 31, 1996 (collectively the "1996 Assets
Sold"). The Unaudited Pro Forma Combined Statement of Operations of the Company
is not necessarily indicative of the financial results for the period presented
had the sale of the Australasian Assets and the 1996 Assets Sold taken place on
January 1, 1996. In addition, future results may vary significantly from the
results reflected in the accompanying Unaudited Pro Forma Combined Statement of
Operations because of normal production declines, changes in product prices and
future acquisitions and divestitures, among other factors. This information
should be read in conjunction with the Consolidated Financial Statements of the
Company (and the related notes) included in the Annual Report on Form 10-K for
the year ended December 31, 1996.
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PARKER & PARSLEY PETROLEUM COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 1996
(in thousands, except share and per share data)
<TABLE>
1996
The Australasian Assets Pro Forma Pro Forma
Company Assets Sold Entries Combined
----------- ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas $ 396,931 $ (10,591) $ (11,780) $ 374,560
Natural gas processing 23,814 - (630) 23,184
Interest and other 17,458 (130) - 17,328
Gain on disposition of
assets, net 97,140 (83,260) (13,880) -
---------- --------- -------- ----------
535,343 (93,981) (26,290) 415,072
---------- --------- -------- ----------
Cost and expenses:
Oil and gas production 110,334 (3,300) (5,489) 101,545
Natural gas processing 12,528 - (579) 11,949
Depletion, depreciation and
amortization 112,134 (4,217) (3,288) 104,629
Exploration and abandonments 23,030 (1,435) (1,408) 20,187
General and administrative 28,363 (1,732) - 26,631
Interest 46,155 (1,100) - (4,335)(a) 40,720
Other 2,451 - - 2,451
---------- --------- -------- ----------
334,995 (11,784) (10,764) 308,112
---------- --------- -------- ----------
Income from continuing operations
before income taxes 200,348 (82,197) (15,526) 106,960
Income tax provision (60,100) - - 22,700 (b) (37,400)
---------- --------- -------- ----------
Income from continuing operations $ 140,248 $ (82,197) $ (15,526) $ 69,560
========== ========= ======== ==========
Income from continuing operations
per share:
Primary $ 3.92 $ 2.16
========== ==========
Fully diluted $ 3.47 $ 1.81
========== ==========
Weighted average shares outstanding 35,733,991 35,733,991
========== ==========
</TABLE>
See accompanying notes to unaudited pro forma combined statement of operations.
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PARKER & PARSLEY PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
December 31, 1996
Note 1. Basis of Presentation
The accompanying Unaudited Pro Forma Combined Statement of Operations of
Parker & Parsley Petroleum Company ("the Company") is presented to reflect (i)
the sale of certain wholly-owned Australian subsidiaries to Santos Ltd. in March
1996, (ii) the sale of Bridge Oil Timor Sea, Inc. to Phillips Petroleum
International Investment Company in June 1996 (items (i) and (ii) collectively
the "Australasian Assets") and (iii) the aggregate effect of the sales of
certain nonstrategic domestic oil and gas properties, gas plants, contract
rights and related assets sold during the year ended December 31, 1996
(collectively the "1996 Assets Sold"). The Unaudited Pro Forma Combined
Statement of Operations is presented as if the sale of the Australasian Assets
and the 1996 Assets Sold occurred on January 1, 1996.
The Company - Represents the consolidated statement of operations of
Parker & Parsley Petroleum Company for the year ended December 31, 1996.
Australasian Assets - Reflects the results of operations (before
income taxes) for the year ended December 31, 1996 from the oil and gas
properties and related assets prior to their sale in 1996.
1996 Assets Sold - Reflects the results of operations (before income
taxes) for the year ended December 31, 1996 from the oil and gas
properties, gas plants, contract rights and related assets prior to their
sale in 1996.
Note 2. Pro Forma Entries
(a) To adjust interest expense resulting from the application of that
portion of the sales proceeds necessary to retire the Company's
outstanding bank indebtedness. The proceeds applied to retire the
Company's outstanding bank indebtedness of $225 million resulted in a
reduction in interest expense of $4.3 million. The reduction in
interest expense was calculated utilizing the Company's weighted
average rate on its bank indebtedness of 6.22% for the period during
1996 which the Company had outstanding bank indebtedness.
(b) To adjust income tax expense for each tax jurisdiction.
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PARKER & PARSLEY PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
December 31, 1996
Note 3. Income Taxes
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). In accordance with SFAS 109, the Company prepares separate
tax calculations for each tax jurisdiction in which the Company is subject to
income taxes.
The Company's income tax provision for the year ended December 31, 1996 of
$60.1 million included a provision of $16 million associated with the
disposition of the Australasian Assets. The income tax provision associated with
the disposition of the Australasian Assets includes $6.4 million related to the
write-off of certain net operating loss carryforwards which, with the sale of
the income producing assets in the Australian tax jurisdiction, will not be
utilized in the future.
Note 4. Income from Continuing Operations per Share
Primary income from continuing operations per share is computed based on
the weighted average number of shares of common stock and common stock
equivalents outstanding during the period. The computation of fully diluted
income from continuing operations per share for the year ended December 31, 1996
assumes conversion of the Company's 6-1/4% Cumulative Guaranteed Monthly Income
Convertible Preferred Shares which increased the weighted average number of
shares outstanding to 42.6 million.
Note 5. Oil and Gas Reserve Data
The following unaudited pro forma supplemental information regarding the
oil and gas activities of the Company is presented pursuant to the disclosure
requirements promulgated by the Securities and Exchange Commission and Statement
of Financial Accounting Standards No. 69, "Disclosures About Oil and Gas
Producing Activities". The pro forma combined reserve information is presented
as if the sale of the Australasian Assets and 1996 Assets Sold had occurred on
January 1, 1996. Information for oil is presented in barrels (Bbls) and for gas
in thousands of cubic feet (Mcf).
The Company emphasizes that reserve estimates are inherently imprecise and
subject to revision and that estimates of new discoveries are more imprecise
than those of producing oil and gas properties. Accordingly, the estimates are
expected to change as future information becomes available; such changes could
be significant.
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PARKER & PARSLEY PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
December 31, 1996
Quantities of oil and gas reserves
Set forth below is a pro forma summary of the changes in the net
quantities of oil and natural gas reserves for the year ended December 31, 1996.
Oil Gas
(Bbls) (Mcf)
------- -------
(in thousands)
Balance, January 1, 1996 129,760 718,800
Revisions of previous estimates 42,614 151,095
Purchase of minerals-in-place 300 11,494
New discoveries and extensions 1,919 18,715
Production (10,652) (70,728)
Sales of minerals-in-place - -
------- -------
Balance, December 31, 1996 163,941 829,376
======= =======
Standardized measure of discounted future net cash flows
The standardized measure of discounted future net cash flow is computed by
applying year-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of oil and gas reserves less estimated future expenditures (based on
year-end costs) to be incurred in developing and producing the proved reserves,
discounted using a rate of 10% per year to reflect the estimated timing of the
future cash flows. Future income taxes are calculated by comparing discounted
future cash flows to the tax basis of oil and gas properties plus available
carryforwards and credits and applying the current tax rate to the difference.
December 31, 1996
-----------------
(in thousands)
Oil and gas producing activities:
Future cash inflows $ 7,308,921
Future production costs (2,333,373)
Future development costs (200,866)
----------
Future net cash flows before taxes 4,774,682
10% annual discount factor (2,429,313)
----------
Discounted future cash flows before taxes 2,345,369
Discounted future income taxes (537,804)
----------
Standardized measure of discounted future
net cash flows $ 1,807,565
==========
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PARKER & PARSLEY PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
December 31, 1996
Changes relating to the standardized measure of discounted future net cash flows
The principal sources of the change in the pro forma combined standardized
measure of discounted future net cash flows for the year ended December 31, 1996
are as follows (in thousands):
Oil and gas sales, net of production costs $ (273,015)
Net changes in prices and production costs 846,638
Extensions and discoveries 53,314
Sales of minerals-in-place -
Purchases of minerals-in-place 20,606
Revisions of estimated future development costs (73,587)
Revisions of previous quantity estimates 579,380
Accretion of discount 116,636
Changes in production rates, timing and other (90,966)
----------
Change in present value of future net revenues 1,179,006
Net change in present value of future income taxes (415,866)
----------
763,140
Balance, beginning of year 1,044,425
----------
Balance, end of year $ 1,807,565
==========
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PARKER & PARSLEY PETROLEUM COMPANY
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PARKER & PARSLEY PETROLEUM COMPANY
Date: April 3, 1997 By: /s/ Steven L. Beal
-----------------------
Steven L. Beal, Senior Vice President
and Chief Financial Officer
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