UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/ x / Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
/ / 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. 2-75530B
PARKER & PARSLEY 82-II, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-1867115
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 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 / x / No / /
Page 1 of 12 pages.
-There are no exhibits-
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PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
March 31, December 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $177,971 at March 31
and $198,783 at December 31 $ 178,471 $ 199,420
Accounts receivable - oil and gas sales 79,366 57,508
----------- -----------
Total current assets 257,837 256,928
Oil and gas properties - at cost, based on the
successful efforts accounting method 9,175,391 9,175,329
Accumulated depletion (7,464,315) (7,435,262)
----------- -----------
Net oil and gas properties 1,711,076 1,740,067
----------- -----------
$ 1,968,913 $ 1,996,995
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 20,834 $ 46,198
Partners' capital:
Limited partners (6,126 interests) 1,730,267 1,736,603
General partners 217,812 214,194
----------- -----------
1,948,079 1,950,797
----------- -----------
$ 1,968,913 $ 1,996,995
=========== ===========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1996 1995
----------- -----------
Revenues:
Oil and gas sales $ 168,190 $ 236,820
Interest income 2,058 958
Gain on sale of assets - 458,496
---------- ----------
Total revenues 170,248 696,274
Costs and expenses:
Production costs 81,385 159,386
General and administrative expenses 5,271 7,761
Depletion 29,053 105,511
---------- ----------
Total costs and expenses 115,709 272,658
---------- ----------
Net income $ 54,539 $ 423,616
========== ==========
Allocation of net income:
General partners $ 17,993 $ 52,956
========== ==========
Limited partners $ 36,546 $ 370,660
========== ==========
Net income per limited partnership interest $ 5.97 $ 60.51
========== ==========
Distributions per limited partnership
interest $ 7.00 $ 6.87
========== ==========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
General Limited
partners partners Total
----------- ----------- -----------
Balance at January 1, 1995 $ 262,241 $ 2,146,426 $ 2,408,667
Distributions (14,029) (42,088) (56,117)
Net income 52,956 370,660 423,616
---------- ---------- ----------
Balance at March 31, 1995 $ 301,168 $ 2,474,998 $ 2,776,166
========== ========== ==========
Balance at January 1, 1996 $ 214,194 $ 1,736,603 $ 1,950,797
Distributions (14,375) (42,882) (57,257)
Net income 17,993 36,546 54,539
---------- ---------- ----------
Balance at March 31, 1996 $ 217,812 $ 1,730,267 $ 1,948,079
========== ========== ==========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1996 1995
---------- ----------
Cash flows from operating activities:
Net income $ 54,539 $ 423,616
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 29,053 105,511
Gain on sale of assets - (458,496)
Changes in assets and liabilities:
Increase in accounts receivable (21,858) (16,773)
Increase (decrease) in accounts payable (25,364) 4,836
--------- ---------
Net cash provided by operating activities 36,370 58,694
Cash flows from investing activities:
Additions to oil and gas properties (62) -
Cash flows from financing activities:
Cash distributions to partners (57,257) (56,117)
--------- ---------
Net increase (decrease) in cash and cash
equivalents (20,949) 2,577
Cash and cash equivalents at beginning of period 199,420 55,371
--------- ---------
Cash and cash equivalents at end of period $ 178,471 $ 57,948
========= =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
Note 1.
Parker & Parsley 82-II, Ltd. (the "Registrant") is a limited partnership
organized in 1982 under the laws of the State of Texas.
The Registrant engages primarily in oil and gas exploration, development and
production in Texas and New Mexico and is not involved in any industry segment
other than oil and gas.
Note 2.
In the opinion of management, the unaudited financial statements as of March 31,
1996 of the Registrant include all adjustments and accruals consisting only of
normal recurring accrual adjustments which are necessary for a fair presentation
of the results for the interim period. However, these interim results are not
necessarily indicative of results for a full year.
The financial statements should be read in conjunction with the financial
statements and the notes thereto contained in the Registrant's Report on Form
10-K for the year ended December 31, 1995, as filed with the Securities and
Exchange Commission, a copy of which is available upon request by writing to
Steven L. Beal, Senior Vice President, 303 West Wall, Suite 101, Midland, Texas
79701.
Note 3.
On May 25, 1993, a final settlement agreement was negotiated, drafted and
finally executed, ending litigation which had begun on September 5, 1989, when
the Registrant filed suit along with other parties against Dresser Industries,
Inc.; Titan Services, Inc.; BJ-Titan Services Company; BJ-Hughes Holding
Company; Hughes Tool Company; Baker Hughes Production Tools, Inc.; and Baker
Hughes Incorporated alleging that the defendants had intentionally failed to
provide the materials and services ordered and paid for by the Registrant and
other parties in connection with the fracturing and acidizing of 523 wells, and
then fraudulently concealed the shorting practice from Parker & Parsley
Development L.P. ("PPDLP"). The May 25, 1993 settlement agreement called for a
payment of $115 million in cash by the defendants, and Southmark, the
Registrant, and the other plaintiffs indemnified the defendants against the
claims of Jack N. Price. The managing general partner received the funds,
deducted incurred legal expenses, accrued interest, determined the general
partner's portion of the funds and calculated any inter-partnership allocations.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G. "Zeke"
Lancaster in the Federal Court lawsuit, filed suit in State Court in Beaumont
against all of the plaintiff partnerships, including the Registrant and others,
6
<PAGE>
alleging his entitlement to 12% of the settlement proceeds. Price's lawsuit
claim for approximately $13.8 million is predicated on a purported contract
entered into with Southmark Corporation in August 1988 in which he allegedly
binds the Registrant and the other defendants, as well as Southmark. Although
PPDLP believes the lawsuit was without merit and has vigorously defended it,
PPDLP has held in reserve approximately 12.5% of the total settlement (the
"Reserve") pending final resolution of the litigation.
A distribution of $91,000,000 was made to the working interest owners, including
the Registrant, on July 30, 1993. The limited partners received their
distribution of $360,857, or $58.91 per limited partnership interest, in
September 1993. The allocation of the lawsuit settlement amount was based on the
original verdict entered on October 26, 1990. The allocation to the working
interest owners in each well (including the Registrant) was based on a ratio of
the relative amount of damages due to overcharges for services and materials
("Materials") and damages for loss of past and future production ("Production"),
each as determined in that initial judgment. Within the Registrant, damages for
Materials were allocated between the partners based on their original sharing
percentages for costs of acquiring and/or drilling of wells. Similarly, damages
related to Production were allocated to the partners in the Registrant based on
their respective share of revenues from the subject wells.
As a condition of the purchase by Parker & Parsley Petroleum Company of Parker &
Parsley Development Company ("PPDC"), which was merged into PPDLP on January 1,
1995, from its former parent in May 1989, PPDC's interest in the lawsuit and
subsequent settlement was retained by the former parent. Consequently, all of
PPDC's share of the settlement related to its separately held interests in the
wells and its partnership interests in the sponsored partnerships (except that
portion allocable to interests acquired by PPDC after May 1989) was paid to the
former parent.
On September 20, 1995, the Beaumont trial judge entered a summary judgment
against Southmark for the $13,790,000 contingent fee sought by Price, together
with prejudgment interest, and also awarded Price an additional $5,498,525 in
attorneys' fees. On January 22, 1996, the trial judge entered an interlocutory
summary judgment against Dresser Industries and Baker Hughes for an amount yet
to be determined. Pursuant to their indemnity obligations, the Registrant,
Southmark, PPDLP and other original plaintiffs have vigorously protected the
rights of both Dresser and Baker Hughes. Southmark has vigorously pursued its
appeal of the judgment, and has posted a supersedeas bond using the Reserve as
collateral. On April 29, 1996, all of the parties, including the Registrant and
Southmark, entered into a $7.4 million settlement with Price which fully and
finally resolves all of the litigation and disputes between the parties,
including the Registrant's indemnity obligations to Dresser and Baker Hughes.
Pursuant to the settlement agreement, all of the pending lawsuits and judgments
will be dismissed, the supersedeas bond released, and the Reserve released as
collateral. It is expected that before the end of the third quarter, the
necessary dismissals and releases will be effected, the managing general partner
will conduct an accounting of income and expenses among the parties, and a final
distribution will be made to the working interest owners, including the
Registrant and its partners.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations(1)
The Registrant was formed September 30, 1982. The Registrant consisted of two
general partners at December 31, 1994, Parker & Parsley Development Company
("PPDC") and P&P Employees 82- II, Ltd. ("EMPL"), a Texas limited partnership
whose general partner was PPDC, and 856 limited partners. On January 1, 1995,
Parker & Parsley Development L.P. ("PPDLP"), a Texas limited partnership, became
the managing general partner of the Registrant and EMPL, by acquiring the rights
and assuming the obligations of PPDC. PPDC was merged into PPDLP on January 1,
1995. PPDLP's co-general partner is EMPL. PPDLP acquired PPDC's rights and
obligations as managing general partner of the Registrant in connection with the
merger of PPDC, P&P Producing, Inc. and Spraberry Development Corporation into
MidPar L.P., which survived the merger with a change of name to PPDLP. The sole
general partner of PPDLP is Parker & Parsley Petroleum USA, Inc. PPDLP has the
power and authority to manage, control and administer all Registrant affairs.
The limited partners contributed $12,252,000 representing 6,126 interests
($2,000 per interest).
Since its formation, the Registrant invested $13,085,654 in various prospects
that were drilled in Texas and New Mexico. One well was plugged and abandoned
and five wells were completed as dry holes in a previous period. Twenty-three
wells have been sold; one in 1994 and 22 in 1995. The Registrant received
interests in two additional oil and gas wells in 1993 due to the Registrant's
back-in after payout provisions. At March 31, 1996, the Registrant had 23
producing oil and gas wells.
Results of Operations
Revenues:
The Registrant's oil and gas revenues decreased to $168,190 from $236,820 for
the three months ended March 31, 1996 and 1995, respectively, a decrease of 29%.
The decrease in revenues resulted from a 47% decline in barrels of oil produced
and sold, offset by a slight increase in mcf of gas produced and sold and
increases in the average prices received per barrel of oil and mcf of gas. For
the three months ended March 31, 1996, 6,067 barrels of oil were sold compared
to 11,346 for the same period in 1995, a decrease of 5,279 barrels. Of the
decrease, 1,255 barrels, or 11%, was due to the decline characteristics of the
Registrant's oil and gas properties. The additional decrease of 4,024 barrels,
or 35%, was attributable to the sale of properties. For the three months ended
March 31, 1996, 23,309 mcf of gas were sold compared to 23,208 for the same
period in 1995, an increase of 101 mcf. Of the increase, 2,282 mcf, or 10%, was
due to increased production resulting from operational changes on several wells,
offset by a decrease of 2,181 mcf, or 9%, attributable to the sale of
properties. Management expects a certain amount of decline in production in the
future until the Registrant's economically recoverable reserves are fully
depleted.
The average price received per barrel of oil increased $2.48, or 15%, from
$16.59 for the three months ended March 31, 1995 to $19.07 for the same period
in 1996 while the average price received per mcf of gas increased from $2.09
8
<PAGE>
during the three months ended March 31, 1995 to $2.25 for the same period ended
March 31, 1996. The market price for oil and gas has been extremely volatile in
the past decade, and management expects a certain amount of volatility to
continue in the foreseeable future. The Registrant may therefore sell its future
oil and gas production at average prices lower or higher than that received
during the three months ended March 31, 1996.
A gain on sale of assets of $458,496 was recognized in 1995 resulting from
proceeds of $483,090 received from the sale of 22 wells, offset by the write-off
of remaining capitalized well costs of $24,594. There was no sale activity for
the same period in 1996.
Costs and Expenses:
Total costs and expenses decreased to $115,709 for the three months ended March
31, 1996 as compared to $272,658 for the same period in 1995, a decrease of
$156,949, or 58%. This decrease was due to declines in production costs, general
and administrative expenses ("G&A") and depletion.
Production costs were $81,385 for the three months ended March 31, 1996 and
$159,386 for the same period in 1995 resulting in a $78,001 decrease, or 49%.
The decrease was due to declines in well repair and maintenance costs, partially
attributable to the sale of properties.
G&A's components are independent accounting and engineering fees, computer
services, postage and managing general partner personnel costs. During this
period, G&A decreased 32% from $7,761 for the three months ended March 31, 1995
to $5,271 for the same period in 1996.
Depletion was $29,053 for the three months ended March 31, 1996 compared to
$105,511 for the same period in 1995. This represented a decrease in depletion
of $76,458, or 72%, attributable to the sale of 22 properties during 1995, the
adoption of the provisions of Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" effective for the fourth quarter of 1995 and the
reduction of net depletable basis resulting from the charge taken upon such
adoption. Depletion was computed property-by-property utilizing the
unit-of-production method based upon the dominant mineral produced, generally
oil. Oil production decreased 5,279 barrels for the three months ended March 31,
1996 from the same period in 1995, while oil reserves of barrels were revised
upward by 51,323 barrels, or 16%, resulting in a lower unit cost per barrel of
production.
On May 25, 1993, a final settlement agreement was negotiated, drafted and
finally executed, ending litigation which had begun on September 5, 1989, when
the Registrant filed suit along with other parties against Dresser Industries,
Inc.; Titan Services, Inc.; BJ-Titan Services Company; BJ-Hughes Holding
Company; Hughes Tool Company; Baker Hughes Production Tools, Inc.; and Baker
Hughes Incorporated alleging that the defendants had intentionally failed to
provide the materials and services ordered and paid for by the Registrant and
other parties in connection with the fracturing and acidizing of 523 wells, and
then fraudulently concealed the shorting practice from PPDLP. The May 25, 1993
settlement agreement called for a payment of $115 million in cash by the
9
<PAGE>
defendants, and Southmark, the Registrant, and the other plaintiffs indemnified
the defendants against the claims of Jack N. Price. The managing general partner
received the funds, deducted incurred legal expenses, accrued interest,
determined the general partner's portion of the funds and calculated any
inter-partnership allocations.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G. "Zeke"
Lancaster in the Federal Court lawsuit, filed suit in State Court in Beaumont
against all of the plaintiff partnerships, including the Registrant and others,
alleging his entitlement to 12% of the settlement proceeds. Price's lawsuit
claim for approximately $13.8 million is predicated on a purported contract
entered into with Southmark Corporation in August 1988 in which he allegedly
binds the Registrant and the other defendants, as well as Southmark. Although
PPDLP believes the lawsuit was without merit and has vigorously defended it,
PPDLP has held in reserve approximately 12.5% of the total settlement (the
"Reserve") pending final resolution of the litigation.
A distribution of $91,000,000 was made to the working interest owners, including
the Registrant, on July 30, 1993. The limited partners received their
distribution of $360,857, or $58.91 per limited partnership interest, in
September 1993. The allocation of the lawsuit settlement amount was based on the
original verdict entered on October 26, 1990. The allocation to the working
interest owners in each well (including the Registrant) was based on a ratio of
the relative amount of damages due to overcharges for services and materials
("Materials") and damages for loss of past and future production ("Production"),
each as determined in that initial judgment. Within the Registrant, damages for
Materials were allocated between the partners based on their original sharing
percentages for costs of acquiring and/or drilling of wells. Similarly, damages
related to Production were allocated to the partners in the Registrant based on
their respective share of revenues from the subject wells.
As a condition of the purchase by Parker & Parsley Petroleum Company of PPDC,
which was merged into PPDLP on January 1, 1995, from its former parent in May
1989, PPDC's interest in the lawsuit and subsequent settlement was retained by
the former parent. Consequently, all of PPDC's share of the settlement related
to its separately held interests in the wells and its partnership interests in
the sponsored partnerships (except that portion allocable to interests acquired
by PPDC after May 1989) was paid to the former parent.
On September 20, 1995, the Beaumont trial judge entered a summary judgment
against Southmark for the $13,790,000 contingent fee sought by Price, together
with prejudgment interest, and also awarded Price an additional $5,498,525 in
attorneys' fees. On January 22, 1996, the trial judge entered an interlocutory
summary judgment against Dresser Industries and Baker Hughes for an amount yet
to be determined. Pursuant to their indemnity obligations, the Registrant,
Southmark, PPDLP and other original plaintiffs have vigorously protected the
rights of both Dresser and Baker Hughes. Southmark has vigorously pursued its
appeal of the judgment, and has posted a supersedeas bond using the Reserve as
collateral. On April 29, 1996, all of the parties, including the Registrant and
Southmark, entered into a $7.4 million settlement with Price which fully and
finally resolves all of the litigation and disputes between the parties,
including the Registrant's indemnity obligations to Dresser and Baker Hughes.
10
<PAGE>
Pursuant to the settlement agreement, all of the pending lawsuits and judgments
will be dismissed, the supersedeas bond released, and the Reserve released as
collateral. It is expected that before the end of the third quarter, the
necessary dismissals and releases will be effected, the managing general partner
will conduct an accounting of income and expenses among the parties, and a final
distribution will be made to the working interest owners, including the
Registrant and its partners.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased to $36,370 during the three
months ended March 31, 1996, a $22,324 decrease from the same period ended March
31, 1995. The decrease was due to a decline in oil and gas sales receipts,
offset by declines in expenditures for production costs. The decline in oil and
gas sales receipts was due to a decrease in barrels of oil produced and sold.
The decrease in production cost expenditures was due to less well repair and
maintenance, partially attributable to the sale of properties.
Net Cash Used in Financing Activities
Cash was sufficient for the three months ended March 31, 1996 to cover
distributions to the partners of $57,257 of which $42,882 was distributed to the
limited partners and $14,375 to the general partners. For the same period ended
March 31, 1995, cash was sufficient for distributions to the partners of $56,117
of which $42,088 was distributed to the limited partners and $14,029 to the
general partners.
It is expected that future net cash provided by operating activities will be
sufficient for any capital expenditures and any distributions. As the production
from the properties declines, distributions are also expected to decrease.
- - ---------------
(1) "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward looking statements that involve
risks and uncertainties. Accordingly, no assurances can be given that
the actual events and results will not be materially different than the
anticipated results described in the forward looking statements.
Part II. Other Information
Item 1. Legal Proceedings
The Registrant is a party to material litigation which is described in Note 3 of
Notes to Financial Statements above.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
11
<PAGE>
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
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 thereunto duly authorized.
PARKER & PARSLEY 82-II, LTD.
By: Parker & Parsley Development L.P.,
Managing General Partner
By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
Dated: May 14, 1996 By: /s/ Steven L. Beal
---------------------------------------
Steven L. Beal, Senior Vice President
and Chief Financial Officer of PPUSA
12
<PAGE>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 178,471
<SECURITIES> 0
<RECEIVABLES> 79,366
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 257,837
<PP&E> 9,175,391
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0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 1,968,913
<SALES> 168,190
<TOTAL-REVENUES> 170,248
<CGS> 0
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