PARKER & PARSLEY 82 II LTD, 10-K405, 1998-03-30

PARKER & PARSLEY 82 II LTD
10-K405, 1998-03-30
DRILLING OIL & GAS WELLS

Previous: FIRST CHARTER CORP /NC/, S-8 POS, 1998-03-30

Next: KEYSTONE FINANCIAL INC, 10-K, 1998-03-30

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

/ x / Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (Fee Required)

For the fiscal year ended December 31, 1997

or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (No Fee Required)

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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited partnership interests ($2,000 per unit)

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 / /

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

No market currently exists for the limited partnership interests of the
Registrant. Based on original purchase price the aggregate market value of
limited partnership interests owned by non-affiliates of the Registrant is
$11,830,000.

As of March 9, 1998, the number of outstanding limited
partnership interests was 6,126. The following documents
are incorporated by reference into the indicated parts
of this Annual Report on Form 10-K: None

<PAGE>

Parts I and II of this Report contain 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. See "Item 1. Business" for a
description of various factors that could materially affect the ability of the
Partnership to achieve the anticipated results described in the forward looking
statements.
PART I

ITEM 1. Business

Parker & Parsley 82-II, Ltd. (the "Partnership") is a limited partnership
organized in 1982 under the laws of the State of Texas. On August 8, 1997,
Pioneer Natural Resources USA, Inc. ("Pioneer USA") became the managing general
partner of the Partnership, joining the existing general partner, P&P Employees
82-II, Ltd. ("EMPL"), a Texas limited partnership whose general partner is
Pioneer USA, and 6,126 limited partnership interests as of March 9, 1998. Prior
to August 8, 1997, the Partnership's managing general partner and the general
partner of EMPL was Parker & Parsley Development L.P. ("PPDLP"), a wholly-owned
subsidiary of Parker & Parsley Petroleum Company ("Parker & Parsley"). On August
7, 1997, Parker & Parsley and Mesa Inc. ("Mesa") received shareholder approval
to merge and create Pioneer Natural Resources Company ("Pioneer"). On August 8,
1997, PPDLP was merged with and into Pioneer USA, a wholly-owned subsidiary of
Pioneer, resulting in Pioneer USA becoming the managing general partner of the
Partnership and the general partner of EMPL as PPDLP's successor by merger. For
a more complete description of the Parker & Parsley and Mesa merger, see
Pioneer's Registration Statement on Form S-4 as filed with the Securities and
Exchange Commission.

A Registration Statement, as amended, filed pursuant to the Securities Act of
1933, registering limited partnership interests aggregating $33,000,000 in a
series of Texas limited partnerships formed under the Parker & Parsley 82
Drilling Program, was declared effective by the Securities and Exchange
Commission on February 4, 1982. On September 30, 1982, the offering of limited
partnership interests in the Partnership, the second partnership formed under
such registration statement, was closed, with interests aggregating $12,252,000
being sold to 798 subscribers.

The Partnership engages primarily in oil and gas exploration, development and
production and is not involved in any industry segment other than oil and gas.
See "Item 6. Selected Financial Data" and "Item 8. Financial Statements and
Supplementary Data" of this report for a summary of the Partnership's revenue,
income and identifiable assets.

The principal markets during 1997 for the oil produced by the Partnership were
refineries and oil transmission companies that have facilities near the
Partnership's oil producing properties. The principal markets for the
Partnership's gas were companies that have pipelines located near the
Partnership's gas producing properties. Of the Partnership's total oil and gas
revenues for 1997, approximately 66% and 17% were attributable to sales made to
Genesis Crude Oil, L.P. and Western Gas Resources, Inc., respectively.

<PAGE>

The Partnership's revenues, profitability, cash flow and future rate of growth
are highly dependent on the prevailing prices of oil and gas, which are affected
by numerous factors beyond the Partnership's control. Oil and gas prices
historically have been very volatile. A substantial or extended decline in the
prices of oil or gas could have a material adverse effect on the Partnership's
revenues, profitability and cash flow and could, under certain circumstances,
result in a reduction in the carrying value of the Partnership's oil and gas
properties.

Because of the demand for oil and gas, the Partnership does not believe that the
termination of the sales of its products to any one customer would have a
material adverse impact on its operations. The loss of a particular customer for
gas may have an effect if that particular customer has the only gas pipeline
located in the areas of the Partnership's gas producing properties. The
Partnership believes, however, that the effect would be temporary, until
alternative arrangements could be made.

Federal and state regulation of oil and gas operations generally includes the
fixing of maximum prices for regulated categories of natural gas, the imposition
of maximum allowable production rates, the taxation of income and other items,
and the protection of the environment. Although the Partnership believes that
its business operations do not impair environmental quality and that its costs
of complying with any applicable environmental regulations are not currently
significant, the Partnership cannot predict what, if any, effect these
environmental regulations may have on its current or future operations.

The Partnership does not have any employees of its own. Pioneer USA employs
1,133 persons, many of whom dedicated a part of their time to the conduct of the
Partnership's business during the period for which this report is filed. Pioneer
USA supplies all management functions.

Numerous uncertainties exist in estimating quantities of proved reserves and
future net revenues therefrom. The estimates of proved reserves and related
future net revenues set forth in this report are based on various assumptions,
which may ultimately prove to be inaccurate. Therefore, such estimates should
not be construed as estimates of the current market value of the Partnership's
proved reserves.

No material part of the Partnership's business is seasonal and the Partnership
conducts no foreign operations.

ITEM 2. Properties

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

Fractional working interests in developmental and exploratory oil and gas
prospects located in Texas and New Mexico were acquired by the Partnership,
resulting in the Partnership's participation in the drilling of 52 oil and gas

<PAGE>

wells. At December 31, 1997, the Partnership had 16 producing oil and gas wells;
two wells have been plugged and abandoned, one in a previous period and one well
in 1996 and five wells were completed as dry holes. Twenty-nine wells have been
sold; one in 1994, 22 in 1995 and six in 1997. The Partnership received
interests in two additional oil and gas wells in 1993 due to the Partnership's
back-in after payout provisions.

For information relating to the Partnership's estimated proved oil and gas
reserves at December 31, 1997, 1996 and 1995, and changes in such quantities for
the years then ended, see Note 7 of Notes to Financial Statements included in
"Item 8. Financial Statements and Supplementary Data" below. Such reserves have
been estimated by the engineering staff of Pioneer USA with a review by an
independent petroleum consultant.

ITEM 3. Legal Proceedings

The Partnership is a party to various legal proceedings incidental to its
business involving claims in oil and gas leases or interests, other claims for
damages in amounts not in excess of 10% of its current assets and other matters,
none of which Pioneer believes to be material.

ITEM 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth
quarter of 1997.

<PAGE>

PART II

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

At March 9, 1998, the Partnership had 6,126 outstanding limited partnership
interests held of record by 777 subscribers. There is no established public
trading market for the limited partnership interests. Under the limited
partnership agreement, Pioneer USA has made certain commitments to purchase
partnership interests at a computed value.

Revenues which, in the sole judgement of the general partners, are not required
to meet the Partnership's obligations are distributed to the partners at least
quarterly in accordance with the limited partnership agreement. During the years
ended December 31, 1997 and 1996, distributions of $263,417 and $302,515,
respectively, were made to the limited partners.

ITEM 6. Selected Financial Data

The following table sets forth selected financial data for the years ended
December 31:
<TABLE>
1997 1996 1995 1994 1993
---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating results:
Oil and gas sales $ 598,339 $ 732,599 $ 672,115 $ 864,129 $1,021,156
========= ========= ======== ========= =========
Litigation settlement, net $ - $ 45,027 $ - $ - $ 439,075
========= ========= ======== ========= =========
Impairment of oil and
gas properties $ 310,732 $ - $ 264,994 $ - $ -
========= ========= ======== ========= =========
Net income (loss) $ (93,386) $ 322,918 $ 138,715 $ (110,953) $ 228,574
========= ========= ======== ========= =========
Allocation of net income (loss):
General partner $ 30,221 $ 98,377 $ 120,537 $ 18,763 $ 110,128
========= ========= ======== ========= =========
Limited partners $ (123,607) $ 224,541 $ 18,178 $ (129,716) $ 118,446
========= ========= ======== ========= =========
Limited partners' net
income (loss) per limited
partnership interest $ (20.18) $ 36.65 $ 2.97 $ (21.17) $ 19.33
========= ========= ======== ========= =========
Limited partners' cash
distributions per limited
partnership interest $ 43.00 $ 49.38(a) $ 69.87 $ 24.33 $ 105.71(a)
========= ========= ========= ========= =========
At year end:
Total assets $1,456,326 $1,893,741 $1,996,995 $2,446,061 $2,750,001
========= ========= ========= ========= =========
</TABLE>
- ---------------
(a) Including litigation settlement per limited partnership interest of $6.02
in 1996 and $58.91 in 1993.
5

<PAGE>

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

Results of operations

1997 compared to 1996

The Partnership's 1997 oil and gas revenues decreased 18% to $598,339 from
$732,599 in 1996. The decrease in revenues resulted from declines in production
and lower average prices received. In 1997, 21,685 barrels of oil, 3,333 barrels
of natural gas liquids ("NGLs") and 57,516 mcf of gas were sold, or 34,604
barrel of oil equivalents ("BOEs"). In 1996, 24,283 barrels of oil and 77,814
mcf of gas were sold, or 37,252 BOEs.

Consistent with the managing general partner, the Partnership has historically
accounted for processed natural gas production as wellhead production on a wet
gas basis. As a result of the merger with Mesa, the managing general partner has
adopted Mesa's accounting policy and now accounts for processed natural gas
production in two components: natural gas liquids and dry residue gas. As a
result of the change in the managing general partner's policy, the Partnership
now accounts for processed natural gas production as processed natural gas
liquids and dry residue gas. Consequently, separate product volumes will not be
comparable for periods prior to September 30, 1997.

The declines in production volumes were primarily attributable to the decline
characteristics of the Partnership's oil and gas properties. Because of these
characteristics, management expects a certain amount of decline in production to
continue in the future until the Partnership's economically recoverable reserves
are fully depleted.

The average price received per barrel of oil decreased $2.41, or 11%, from
$21.92 in 1996 to $19.51 in 1997. The average price received per barrel of NGLs
during 1997 was $11.02. The average price received per mcf of gas decreased 6%
from $2.57 in 1996 to $2.41 in 1997. 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 Partnership may
therefore sell its future oil and gas production at average prices lower or
higher than that received in 1997.

A gain on disposition of assets of $88,515 was recognized during 1997 of which
$86,987 was due to the sale of six oil and gas wells and an overriding royalty
interest in one well and $1,528 was received from the sale of equipment on one
well plugged and abandoned during 1997. A loss on disposition of assets of
$18,634 was recognized during 1996. This loss was comprised of a $27,155 loss on
abandoned property, offset by a gain of $8,521 from the sale of equipment on one
fully depleted property. Expenses to plug and abandon these wells totaled $691
and $579 during 1997 and 1996, respectively.

<PAGE>

On April 29, 1996, Southmark Corporation, Pioneer USA and the Partnership
entered into a final $7.4 million settlement agreement with Jack N. Price
resolving all outstanding litigation between the parties. As a result, all of
the pending lawsuits and judgments have been dismissed, the supersedeas bond
released, and the Reserve released as collateral. On June 28, 1996, a final
distribution was made to the working interest owners of $45,027 which included
$36,851, or $6.02 per limited partnership interest, to the Partnership and its
partners.

Total costs and expenses increased in 1997 to $789,298 as compared to $445,751
in 1996, an increase of $343,547, or 77%. The increase was primarily due to the
impairment of oil and gas properties and increases in depletion, production
costs and abandoned property costs, offset by a decrease in general and
administrative expenses ("G&A").

Production costs were $323,544 in 1997 and $308,885 in 1996, resulting in an
increase of $14,659, or 5%. The increase was primarily due to additional well
maintenance costs, offset by declines in production taxes.

G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A
decreased, in aggregate, 12%, from $25,834 in 1996 to $22,634 in 1997. The
Partnership paid the managing general partner $17,950 in 1997 and $21,978 in
1996 for G&A incurred on behalf of the Partnership. G&A is allocated, in part,
to the Partnership by the managing general partner. Such allocated expenses are
determined by the general partners based upon its judgement of the level of
activity of the Partnership relative to the general partner's activities and
other entities it manages. The method of allocation has varied in certain years
and may do so again depending on the activities of the managed entities.

The Partnership adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("SFAS 121") effective as of October 1, 1995 (see Notes 2 and 3
of Notes to Financial Statements included in "Item 8. Financial Statements and
Supplementary Data"). As a result of the review and evaluation of its long-lived
assets for impairment, the Partnership recognized a non-cash charge of $310,732
related to its oil and gas properties during the fourth quarter of 1997.

Depletion was $131,697 in 1997 compared to $110,453 in 1996, an increase of
$21,244, or 19%. This increase was primarily attributable to a decrease in oil
reserves during 1997 as a result of lower commodity prices, offset by a decline
in oil production of 2,598 during 1997 compared to 1996.

1996 compared to 1995

The Partnership's 1996 oil and gas revenues increased 9% to $732,599 from
$672,115 in 1995. The increase in revenues resulted from higher average prices
received per barrel of oil and mcf of gas, offset by declines in barrels of oil
produced and sold and mcf of gas produced and sold. In 1996, 24,283 barrels of
oil were sold compared to 30,804 in 1995, a decrease of 6,521 barrels, or 21%.
In 1996, 77,814 mcf of gas were sold compared to 86,622 in 1995, a decrease of
8,808 mcf, or 10%. The production decreases were primarily due to the decline
characteristics of the Partnership's oil and gas properties.

<PAGE>

The average price received per barrel of oil increased $5.08, or 30%, from
$16.84 in 1995 to $21.92 in 1996, while the average price received per mcf of
gas increased 45% from $1.77 in 1995 to $2.57 in 1996.

A loss on disposition of assets of $18,634 was recognized during 1996. This loss
was comprised of a $27,155 loss on abandoned property, offset by a gain of
$8,521 from the sale of equipment on one fully depleted property. Expenses to
plug and abandon this well totaled $579.

A gain on disposition of assets was recognized during 1995 of $450,599 from the
sale of 22 oil and gas wells.

Total costs and expenses decreased in 1996 to $445,751 as compared to $995,548
in 1995, a decrease of $549,797, or 55%. The decrease was primarily due to the
reduction in impairment of oil and gas properties and declines in production
costs and depletion.

Production costs were $308,885 in 1996 and $423,845 in 1995, resulting in a
decrease of $114,960, or 27%. The decrease was primarily due to reductions in
well repair and maintenance costs.

During this period, G&A increased, in aggregate, 8%, from $23,907 in 1995 to
$25,834 in 1996. The Partnership paid the general partners $21,978 in 1996 and
$20,163 in 1995 for G&A incurred on behalf of the Partnership.

The Partnership adopted SFAS 121 effective as of October 1, 1995 (see Notes 2
and 3 of Notes to Financial Statements included in "Item 8. Financial Statements
and Supplementary Data"). As a result of the review and evaluation of its
long-lived assets for impairment, the Partnership recognized a non-cash charge
of $264,994 related to its oil and gas properties during the fourth quarter of
1995.

Depletion was $110,453 in 1996 compared to $282,802 in 1995, a decrease of
$172,349, or 61%. This decrease was primarily attributable to the following
factors: (i) a reduction in the Partnership's net depletable basis from charges
taken in accordance with SFAS 121, (ii) a reduction in oil production of 6,521
barrels for 1996 compared to 1995, and (iii) an increase in oil reserves during
1996 as a result of higher commodity prices.

Impact of inflation and changing prices on sales and net income

Inflation impacts the fixed overhead rate charges of the lease operating
expenses for the Partnership. During 1995, the annual change in the index of

<PAGE>

average weekly earnings of crude petroleum and gas production workers issued by
the U.S. Department of Labor, Bureau of Labor Statistics increased by 4.4%. The
1996 annual change in average weekly earnings increased by 4.1%. The 1997 index
(effective April 1, 1997) increased 2%. The impact of inflation for other lease
operating expenses is small due to the current economic condition of the oil
industry.

The oil and gas industry experienced volatility during the past decade because
of the fluctuation of the supply of most fossil fuels relative to the demand for
such products and other uncertainties in the world energy markets causing
significant fluctuations in oil and gas prices. During 1997, the price per
barrel for oil production similar to the Partnership's ranged from approximately
$16.00 to $23.00. During most of 1997 and 1996, the Partnership benefitted from
higher oil prices as compared to previous years. However, during the fourth
quarter of 1997, oil prices began a downward trend that has continued into March
1998. On March 19, 1998, the market price for West Texas intermediate crude was
$12.00 per barrel. A continuation of the oil price environment experienced
during the first quarter of 1998 will have an adverse effect on the
Partnership's revenues and operating cash flow and could result in additional
decreases in the carrying value of the Partnership's oil and gas properties.

Prices for natural gas are subject to ordinary seasonal fluctuations, and this
volatility of natural gas prices may result in production being curtailed and,
in some cases, wells being completely shut-in.

Liquidity and capital resources

Net Cash Provided by Operating Activities

Net cash provided by operating activities decreased $53,154 during the year
ended December 31, 1997 from the year ended December 31, 1996. This decrease was
due to proceeds received in 1996 from the litigation settlement as discussed
above and a decline in oil and gas sales receipts, offset by a decrease in
production costs paid.

Net Cash Provided by Investing Activities

The Partnership's principal investing activities during 1997 and 1996 included
expenditures related to equipment replacement on several oil and gas properties.

Proceeds from disposition of assets of $156,446 were received during 1997 of
which $152,407 derived from the sale of nine oil and gas wells and an overriding
royalty interest in one well, $2,511 was received from equipment disposals on
one of the sold wells and $1,528 was received from equipment sold on one fully
depleted well abandoned during 1997. During 1996, proceeds of $10,509 were
received of which $8,521 resulted from the sale of equipment on one abandoned
well and $1,988 was received from the salvage of equipment on one well abandoned
during 1996.

<PAGE>

Net Cash Used in Financing Activities

Cash was sufficient in 1997 for distributions to the partners of $343,206 of
which $79,789 was distributed to the general partners and $263,417 to the
limited partners. In 1996, cash was sufficient for distributions to the partners
of $397,520 of which $95,005 was distributed to the general partners and
$302,515 to the limited partners.

It is expected that future net cash provided by operations will be sufficient
for any capital expenditures and any distributions. As the production from the
properties declines, distributions are also expected to decrease.

Information systems for the year 2000

The general partner will be required to modify its information systems in order
to accurately process Partnership data referencing the year 2000. Because of the
importance of occurrence dates in the oil and gas industry, the consequences of
not pursuing these modifications could be very significant to the Partnership's
ability to manage and report operating activities. Currently, the general
partner plans to contract with third parties to perform the software programming
changes necessary to correct any existing deficiencies. Such programming changes
are anticipated to be completed and tested by March 1, 1999. The managing
general partner will allocate a portion of the costs of the year 2000
programming charges to the Partnership when they are incurred, along with
recurring general and administrative expenses as defined pursuant to the
partnership agreement. Although the costs are not estimable at this time, they
should not be significant to the Partnership.

<PAGE>

ITEM 8. Financial Statements and Supplementary Data

Index to Financial Statements

Page

Financial Statements of Parker & Parsley 82-II, Ltd:
Independent Auditors' Report........................................ 12
Balance Sheets as of December 31, 1997 and 1996..................... 13
Statements of Operations for the Years Ended December 31,
1997, 1996 and 1995............................................... 14
Statements of Partners' Capital for the Years Ended
December 31, 1997, 1996 and 1995.................................. 15
Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995............................................... 16
Notes to Financial Statements....................................... 17

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Partners
Parker & Parsley 82-II, Ltd.
(A Texas Limited Partnership):

We have audited the financial statements of Parker & Parsley 82-II, Ltd. as
listed in the accompanying index. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Parker & Parsley 82-II, Ltd. as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.

As discussed in Notes 2 and 3 to the financial statements, the Partnership
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in 1995.

KPMG Peat Marwick LLP

Midland, Texas
March 20, 1998

<PAGE>

PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)

BALANCE SHEETS
December 31

1997 1996
----------- -----------
ASSETS

Current assets:
Cash and cash equivalents, including
interest bearing deposits of $150,579
in 1997 and $178,658 in 1996 $ 151,079 $ 179,158
Accounts receivable - oil and gas sales 60,072 114,039
Accounts receivable - other 152,402 -
---------- ----------
Total current assets 363,553 293,197
---------- ----------
Oil and gas properties - at cost, based on
the successful efforts accounting method 8,420,466 9,058,497
Accumulated depletion (7,327,693) (7,457,953)
---------- ----------
Net oil and gas properties 1,092,773 1,600,544
---------- ----------
$ 1,456,326 $ 1,893,741
========== ==========
LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
Accounts payable - affiliate $ 16,723 $ 17,546

Partners' capital:
General partners 167,998 217,566
Limited partners (6,126 interests) 1,271,605 1,658,629
---------- ----------
1,439,603 1,876,195
---------- ----------
$ 1,456,326 $ 1,893,741
========== ==========

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

<PAGE>

PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)

STATEMENTS OF OPERATIONS
For the years ended December 31

1997 1996 1995
--------- -------- ----------
Revenues:
Oil and gas $ 598,339 $732,599 $ 672,115
Interest 9,058 9,677 11,549
Gain (loss) on disposition of assets 88,515 (18,634) 450,599
Litigation settlement - 45,027 -
-------- ------- ---------
695,912 768,669 1,134,263
-------- ------- ---------
Costs and expenses:
Oil and gas production 323,544 308,885 423,845
General and administrative 22,634 25,834 23,907
Impairment of oil and gas properties 310,732 - 264,994
Depletion 131,697 110,453 282,802
Abandoned property 691 579 -
-------- ------- ---------
789,298 445,751 995,548
-------- ------- ---------
Net income (loss) $ (93,386) $322,918 $ 138,715
======== ======= =========
Allocation of net income (loss):
General partners $ 30,221 $ 98,377 $ 120,537
======== ======= =========
Limited partners $(123,607) $224,541 $ 18,178
======== ======= =========
Net income (loss) per limited
partnership interest $ (20.18) $ 36.65 $ 2.97
======== ======= =========

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

<PAGE>

PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)

STATEMENTS OF PARTNERS' CAPITAL

General Limited
partners partners Total
---------- ---------- ----------
Partners' capital at January 1, 1995 $ 262,241 $2,146,426 $2,408,667

Distributions (168,584) (428,001) (596,585)

Net income 120,537 18,178 138,715
--------- --------- ---------
Partners' capital at December 31, 1995 214,194 1,736,603 1,950,797

Distributions (95,005) (302,515) (397,520)

Net income 98,377 224,541 322,918
--------- --------- ---------
Partners' capital at December 31, 1996 217,566 1,658,629 1,876,195

Distributions (79,789) (263,417) (343,206)

Net income (loss) 30,221 (123,607) (93,386)
--------- --------- ---------
Partners' capital at December 31, 1997 $ 167,998 $1,271,605 $1,439,603
========= ========= =========

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

<PAGE>

PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)

STATEMENTS OF CASH FLOWS
For the years ended December 31

1997 1996 1995
---------- --------- ---------
Cash flows from operating activities:
Net income (loss) $ (93,386) $ 322,918 $ 138,715
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Impairment of oil and gas properties 310,732 - 264,994
Depletion 131,697 110,453 282,802
(Gain) loss on disposition of assets (88,515) 18,634 (450,599)
Changes in assets and liabilities:
Accounts receivable 53,967 (56,531) 21,966
Accounts payable (823) (28,648) 8,801
--------- -------- --------
Net cash provided by operating
activities 313,672 366,826 266,679
--------- -------- --------
Cash flows from investing activities:
Additions to oil and gas properties (154,985) (77) (1,238)
Proceeds from asset dispositions 156,440 10,509 475,193
--------- -------- --------
Net cash provided by investing
activities 1,455 10,432 473,955
--------- -------- --------
Cash flows from financing activities:
Cash distributions to partners (343,206) (397,520) (596,585)
--------- -------- --------
Net increase (decrease) in cash and cash
equivalents (28,079) (20,262) 144,049
Cash and cash equivalents at beginning
of year 179,158 199,420 55,371
--------- -------- --------
Cash and cash equivalents at end of year $ 151,079 $ 179,158 $ 199,420
========= ======== ========

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

<PAGE>

PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)

NOTES TO FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995

Note 1. Organization and nature of operations

Parker & Parsley 82-II, Ltd. (the "Partnership") is a limited partnership
organized in 1982 under the laws of the State of Texas. On August 8, 1997,
Pioneer Natural Resources USA, Inc. ("Pioneer USA") became the managing general
partner of the Partnership, joining the existing general partner, P&P Employees
82-II, Ltd. ("EMPL"), a Texas limited partnership whose general partner is
Pioneer USA, and 6,126 limited partnership interests as of March 9, 1998. Prior
to August 8, 1997, the Partnership's managing general partner and the general
partner of EMPL was Parker & Parsley Development L.P. ("PPDLP"), a wholly-owned
subsidiary of Parker & Parsley Petroleum Company ("Parker & Parsley"). On August
7, 1997, Parker & Parsley and Mesa Inc. received shareholder approval to merge
and create Pioneer Natural Resources Company ("Pioneer"). On August 8, 1997,
PPDLP was merged with and into Pioneer USA, a wholly-owned subsidiary of
Pioneer, resulting in Pioneer USA becoming the managing general partner of the
Partnership and the general partner of EMPL as PPDLP's successor by merger.

The Partnership 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. Summary of significant accounting policies

A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:

The Partnership accounts for long-lived assets to be disposed of at the
lower of their carrying amount or fair value less costs to sell once management
has committed to a plan to dispose of the assets.

Oil and gas properties - The Partnership utilizes the successful efforts
method of accounting for its oil and gas properties and equipment. Under this
method, all costs associated with productive wells and nonproductive development
wells are capitalized while nonproductive exploration costs are expensed.
Capitalized costs relating to proved properties are depleted using the
unit-of-production method on a property-by-property basis based on proved oil
(dominant mineral) reserves as determined by the engineering staff of Pioneer
USA, the Partnership's managing general partner, and reviewed by independent
petroleum consultants. The carrying amounts of properties sold or otherwise
disposed of and the related allowances for depletion are eliminated from the
accounts and any gain or loss is included in operations.

Impairment of long-lived assets - In accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of

<PAGE>

Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), the
Partnership reviews its long-lived assets to be held and used on an individual
property basis, including oil and gas properties accounted for under the
successful efforts method of accounting, whenever events or circumstances
indicate that the carrying value of those assets may not be recoverable. An
impairment loss is indicated if the sum of the expected future cash flows is
less than the carrying amount of the assets. In this circumstance, the
Partnership recognizes an impairment loss for the amount by which the carrying
amount of the asset exceeds the fair value of the asset.

Use of estimates in the preparation of financial statements - Preparation
of the accompanying financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reporting amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Net income (loss) per limited partnership interest - The net income
(loss) per limited partnership interest is calculated by using the number of
outstanding limited partnership interests.

Income taxes - A Federal income tax provision has not been included in
the financial statements as the income of the Partnership is included in the
individual Federal income tax returns of the respective partners.

Statements of cash flows - For purposes of reporting cash flows, cash and
cash equivalents include depository accounts held by banks.

General and administrative expenses - General and administrative expenses
are allocated in part to the Partnership by the managing general partner or its
affiliates. Such allocated expenses are determined by the managing general
partner based upon its judgement of the level of activity of the Partnership
relative to the managing general partner's activities and other entities it
manages. The method of allocation has varied in certain years and may do so
again depending on the activities of the managed entities.

Reclassifications - Certain reclassifications have been made to the 1996
and 1995 financial statements to conform to the 1997 financial statement
presentation.

Environmental - The Partnership is subject to extensive federal, state
and local environmental laws and regulations. These laws, which are constantly
changing, regulate the discharge of materials into the environment and may
require the Partnership to remove or mitigate the environmental effects of the
disposal or release of petroleum or chemical substances at various sites.
Environmental expenditures are expensed or capitalized depending on their future
economic benefit. Expenditures that relate to an existing condition caused by
past operations and that have no future economic benefits are expensed.
Liabilities for expenditures of a noncapital nature are recorded when
environmental assessment and/or remediation is probable, and the costs can be

<PAGE>

reasonably estimated. Such liabilities are generally undiscounted unless the
timing of cash payments for the liability or component are fixed or reliably
determinable.

Note 3. Impairment of long-lived assets

The Partnership adopted SFAS 121 effective October 1, 1995. In order to
determine whether an impairment has occurred, the Partnership estimates the
expected future cash flows of its oil and gas properties and compares such
future cash flows to the carrying amount of the oil and gas properties to
determine if the carrying amount is recoverable. For those oil and gas
properties for which the carrying amount exceeded the estimated future cash
flows, an impairment was determined to exist; therefore, the Partnership
adjusted the carrying amount of those oil and gas properties to their fair value
as determined by discounting their expected future cash flows at a discount rate
commensurate with the risks involved in the industry. As a result of the review
and evaluation of its long-lived assets for impairment, the Partnership
recognized non-cash charges of $310,732 and $264,994 related to its oil and gas
properties during the fourth quarters of 1997 and 1995, respectively.

Note 4. Income taxes

The financial statement basis of the Partnership's net assets and
liabilities was $102,775 less than the tax basis at December 31, 1997.

The following is a reconciliation of net income (loss) per statements of
operations with the net income per Federal income tax returns for the years
ended December 31:
1997 1996 1995
-------- -------- --------
Net income (loss) per statements of
operations $(93,386) $322,918 $138,715
Depletion and depreciation provisions
for tax reporting purposes under
amounts for financial reporting purposes 129,114 98,829 263,931
Impairment of oil and gas properties for
financial reporting purposes 310,732 - 264,994
Other, net 58,698 29,945 (20,631)
------- ------- -------
Net income per Federal
income tax returns $405,158 $451,692 $647,009
======= ======= =======

Note 5. Oil and gas producing activities

The following is a summary of the costs incurred, whether capitalized or
expensed, related to the Partnership's oil and gas producing activities for the
years ended December 31:
1997 1996 1995
-------- -------- --------
Development costs $ (4,803) $ 9,856 $ 1,241
======= ======= =======
19

<PAGE>

Capitalized oil and gas properties consist of the following:
1997 1996
----------- -----------
Proved properties:
Property acquisition costs $ 415,980 $ 519,337
Completed wells and equipment 8,004,486 8,539,160
---------- ----------
8,420,466 9,058,497
Accumulated depletion (7,327,693) (7,457,953)
---------- ----------
Net capitalized costs $ 1,092,773 $ 1,600,544
========== ==========

During 1997, the Partnership recognized a non-cash charge against oil and
gas properties of $310,732 associated with SFAS 121. See Note 3.

Note 6. Related party transactions

Pursuant to the limited partnership agreement, the Partnership had the
following related party transactions with the managing general partner or its
affiliates during the years ended December 31:
1997 1996 1995
-------- -------- --------
Payment of lease operating and supervision
charges in accordance with standard
industry operating agreements $133,860 $122,545 $156,161

Reimbursement of general and
administrative expenses $ 17,950 $ 21,978 $ 20,163

Purchase of oil and gas properties and
related equipment at predecessor cost $ 2,195 $ - $ 1,241

Receipt of proceeds for the salvage value
of retired oil and gas equipment $ - $ 9,004 $ -

Pioneer USA, P&P Employees 82-II, Ltd. ("EMPL") and the Partnership are
parties to the Partnership agreement. EMPL is a limited partnership in which
Pioneer USA owns 83% and the remaining portion is owned by former affiliates.
Pioneer USA owned 211 limited partner interests at January 1, 1998.

The costs and revenues of the Partnership are allocated as follows:

General Limited
partners partners
-------- --------
Revenues:
Proceeds from property dispositions prior
to cost recovery 10% 90%
All other Partnership revenues 25% 75%
Costs and expenses:
Lease acquisition costs, drilling and
completion costs 10% 90%
Operating costs, direct costs and general
and administrative expenses 25% 75%
20

<PAGE>

Note 7. Oil and gas information (unaudited)

The following table presents information relating to the Partnership's
estimated proved oil and gas reserves at December 31, 1997, 1996 and 1995 and
changes in such quantities during the years then ended. All of the Partnership's
reserves are proved and located within the United States. The Partnership's
reserves are based on an evaluation prepared by the engineering staff of Pioneer
USA and viewed by an independent petroleum consultant, using criteria
established by the Securities and Exchange Commission. Reserve value information
is available to limited partners pursuant to the Partnership agreement and,
therefore, is not presented.
Oil and NGLs Gas
(bbls) (mcf)
---------- ---------
Net proved reserves at January 1, 1995 329,552 1,339,559
Revisions 51,323 124,771
Production (30,804) (86,622)
---------- ---------
Net proved reserves at December 31, 1995 350,071 1,377,708
Revisions 25,559 (4,590)
Production (24,283) (77,814)
---------- ---------
Net proved reserves at December 31, 1996 351,347 1,295,304
Revisions 73,904 (696,504)
Sale of reserves (23,878) (28,436)
Production (25,018) (57,516)
---------- ---------
Net proved reserves at December 31, 1997 376,355 512,848
========== =========

The estimated present value of future net revenues of proved reserves,
calculated using December 31, 1997 prices of $17.19 per barrel of oil, $12.20
per barrel of NGLs and $2.20 per mcf of gas, discounted at 10% was approximately
$1,475,000 and undiscounted was $2,773,000 at December 31, 1997. Subsequent to
December 31, 1997, the prices of oil and gas have been declining, and on March
19, 1998, the average prices for the Partnership's oil and gas were
approximately $12.00 and $2.05, respectively.

The Partnership emphasizes that reserve estimates are inherently
imprecise and, accordingly, the estimates are expected to change as future
information becomes available.

Note 8. Major customers

The following table reflects the major customers of the Partnership's oil
and gas sales (a major customer is defined as a customer whose sales exceed 10%
of total sales) during the years ended December 31:
1997 1996 1995
-------- -------- --------
Genesis Crude Oil, L.P. 66% 67% 70%
Western Gas Resources, Inc. 17% 15% 11%

The above customers represent 76% of total accounts receivable at
December 31, 1997.
21

<PAGE>

Pioneer USA is party to a long-term agreement pursuant to which Pioneer
USA and affiliates are to sell to Basis Petroleum, Inc. (formerly Phibro Energy,
Inc.) substantially all crude oil (including condensate) which any of such
entities have the right to market from time to time. On November 25, 1996,
Pioneer USA consented to the assignment of the agreement to Genesis Crude Oil,
L.P. ("Genesis"), a limited partnership formed by Basis Petroleum, Inc. and
Howell Corporation. The price to be paid by Genesis for oil purchased under the
agreement ("Genesis Agreement") is to be competitive with prices paid by other
substantial purchasers in the same areas who are significant competitors of
Genesis. The price to be paid for oil purchased under the Genesis Agreement
includes a market-related bonus that may vary from month to month based upon
spot oil prices at various commodity trade points. The term of the Genesis
Agreement is through June 30, 1998, and it may continue thereafter subject to
termination rights afforded each party. Salomon, Inc., the parent company of
Basis Petroleum, Inc. and a subordinated limited partner in Genesis, secures the
payment obligations under the Genesis Agreement with a $25 million payment
guarantee. Accounts receivable-oil and gas sales included $29,466 due from
Genesis at December 31, 1997.

Note 9. Organization and operations

The Partnership was organized September 30, 1982 as a limited partnership
under the Texas Uniform Limited Partnership Act for the purpose of acquiring and
developing oil and gas properties. The following is a brief summary of the more
significant provisions of the limited partnership agreement:

General partners - The general partners of the Partnership are Pioneer
USA and EMPL. Pioneer USA, the managing general partner, has the power
and authority to manage, control and administer all Partnership affairs.

Limited partner liability - The maximum amount of liability of any
limited partner is the total contributions of such partner plus his share
of any undistributed profits.

Initial capital contributions - The limited partners entered into
subscription agreements for aggregate capital contributions of
$12,252,000. The general partners are required to contribute amounts
equal to 10% of Partnership expenditures for lease acquisition, drilling
and completion and 25% of direct, general and administrative and
operating expenses, and by agreement must maintain a calculated minimum
capital balance.

Note 10. Disposition of assets

During 1997, gain on disposition of assets of $88,515 primarily resulted
from the sale of six oil and gas wells and an overriding royalty interest in one
well. A loss on disposition of assets of $18,634 was recognized during 1996.
This loss was comprised of a $27,155 loss on abandoned property, offset by a
gain of $8,521 from proceeds received from the sale of equipment on one fully
depleted property. The loss of $450,599, recognized during 1995, was due to the
sale of 22 oil and gas wells.
22

<PAGE>

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

None
23

<PAGE>

PART III

ITEM 10. Directors and Executive Officers of the Partnership

The Partnership does not have any officers or directors. Under the limited
partnership agreement, the Partnership's managing general partner, Pioneer USA,
is granted the exclusive right and full authority to manage, control and
administer the Partnership's business. Pioneer USA is a wholly-owned subsidiary
of Pioneer, a publicly-traded corporation on the New York Stock Exchange.

Set forth below are the names, ages and positions of the directors and executive
officers of Pioneer USA. Directors of Pioneer USA are elected to serve until the
next annual meeting of stockholders or until their successors are elected and
qualified.

Age at
December 31,
Name 1997 Position
- -------------------- ------------ -------------------------------------
Scott D. Sheffield 45 President and Director

Timothy L. Dove 41 Executive Vice President and Director

Dennis E. Fagerstone 48 Executive Vice President and Director

Mark L. Withrow 50 Executive Vice President, General
Counsel and Director

M. Garrett Smith 36 Executive Vice President, Chief
Financial Officer and Director

Mel Fischer 63 Executive Vice President

Lon C. Kile 42 Executive Vice President

Rich Dealy 31 Vice President and Chief Accounting
Officer

Scott D. Sheffield. Mr. Sheffield is a distinguished graduate of The
University of Texas with a B.S. in Petroleum Engineering. Since August 1997, he
has served as President, Chief Executive Officer and a director of Pioneer and
President and a director of Pioneer USA. Mr. Sheffield was the President and a
director of Parker & Parsley from May 1990 until August 1997 and was the
Chairman of the Board and Chief Executive Officer of Parker & Parsley from
October 1990 until August 1997. He was the sole director of Parker & Parsley
from May 1990 until October 1990. Mr. Sheffield joined Parker & Parsley
Development Company ("PPDC"), a predecessor of Parker & Parsley, as a petroleum
engineer in 1979. He served as Vice President - Engineering of PPDC from
September 1981 until April 1985 when he was elected President and a director. In
March 1989, Mr. Sheffield was elected Chairman of the Board and Chief Executive
Officer of PPDC. Before joining PPDC, Mr. Sheffield was employed as a production
and reservoir engineer for Amoco Production Company.

<PAGE>

Timothy L. Dove. Mr. Dove became Executive Vice President - Business
Development of Pioneer and Pioneer USA in August 1997. He was also appointed a
director of Pioneer USA in August 1997. Mr. Dove joined Parker & Parsley in May
1994 as Vice President - International and was promoted to Senior Vice President
- - Business Development in October 1996, in which position he served until August
1997. Prior to joining Parker & Parsley, Mr. Dove was employed with Diamond
Shamrock Corp., and its successor, Maxus Energy Corp, in various capacities in
international exploration and production, marketing, refining and marketing and
planning and development. Mr. Dove earned a B.S. in Mechanical Engineering from
Massachusetts Institute of Technology in 1979 and received his M.B.A. in 1981
from the University of Chicago.

Dennis E. Fagerstone. Mr. Fagerstone, a graduate of the Colorado School of
Mines with a B.S. in Petroleum Engineering, became an Executive Vice President
of Pioneer and Pioneer USA in August 1997. He was also appointed a director of
Pioneer USA in August 1997. He served as Executive Vice President and Chief
Operating Officer of Mesa from March 1, 1997 until August 1997. From October
1996 to February 1997, Mr. Fagerstone served as Senior Vice President and Chief
Operating Officer of Mesa and from May 1991 to October 1996, he served as Vice
President - Exploration and Production of Mesa. From June 1988 to May 1991, Mr.
Fagerstone served as Vice President - Operations of Mesa.

Mark L. Withrow. Mr. Withrow, a graduate of Abilene Christian University
with a B. S. in Accounting and Texas Tech University with a Juris Doctorate
degree, became Executive Vice President, General Counsel and Secretary of
Pioneer and Pioneer USA in August 1997. He was also appointed a director of
Pioneer USA in August 1997. Mr. Withrow was Vice President - General Counsel of
Parker & Parsley from January 1991, when he joined Parker & Parsley, to January
1995, when he was appointed Senior Vice President - General Counsel. He was
Parker & Parsley's Secretary from August 1992 until August 1997. Prior to
joining Parker & Parsley, Mr. Withrow was the managing partner of the law firm
of Turpin, Smith, Dyer, Saxe & MacDonald, Midland, Texas.

M. Garrett Smith. Mr. Smith, a graduate of The University of Texas with a
B.S. in Electrical Engineering and Southern Methodist University with an M.B.A.,
was appointed Executive Vice President and Chief Financial Officer of Pioneer in
December 1997. He served as Senior Vice President - Finance of Pioneer from
August 1997 until December 1997. Mr. Smith was elected Senior Vice President -
Finance and a director of Pioneer USA in August 1997. He served as Vice
President - Corporate Acquisitions of Mesa from January 1997 until August 1997.
From October 1996 to December 1996, Mr. Smith served as Vice President - Finance
of Mesa and from 1994 to 1996 he served as Director of Financial Planning of
Mesa. Mr. Smith was employed by BTC Partners, Inc. (a former financial advisor
to Mesa) from 1989 to 1994.

Mel Fischer. Mr. Fischer, a graduate of the University of California at
Berkeley with a Masters degree in Geology, became Executive Vice President -
Worldwide Exploration of Pioneer and Pioneer USA in August 1997. He served as a
director of Parker & Parsley from November 1995 until August 1997 and was
Executive Vice President - Worldwide Exploration for Parker & Parsley from
February 1997 to August 1997. Mr. Fischer worked in the petroleum industry for
32 years, starting as a Petroleum Geologist with Texaco in 1962, and retiring as

<PAGE>

President, Occidental International Exploration and Production Company in March
1994. For the 10 years prior to becoming President of Occidental International,
he served as Executive Vice President, World Wide Exploration with Occidental
Oil and Gas Corporation. He is a registered geologist in the State of
California, a member of the American Association of Petroleum Geologists and an
emeritus member of the Board of Advisors for the Earth Sciences Research
Institute at the University of Utah.

Lon C. Kile. Mr. Kile, a graduate of Oklahoma State University with a
B.B.A. in Accounting, became Executive Vice President of Pioneer and Pioneer USA
in August 1997. Mr. Kile was Senior Vice President - Investor Relations from
October 1996 to August 1997. Previously, he served as Vice President and Manager
of the Mid-Continent Division, Vice President - Equity Finance & Analysis and
Vice President - Marketing & Program Administration. Prior to joining Parker &
Parsley in 1985, he was employed as Supervisor - Senior, Audit, in charge of
Parker & Parsley's audit, with Ernst & Young.

Rich Dealy. Mr. Dealy is a graduate of Eastern New Mexico University with a
B.B.A. in Accounting and Finance and is a Certified Public Accountant. He became
Vice President and Chief Accounting Officer of Pioneer and Pioneer USA in
February 1998. Mr. Dealy served as Controller of Pioneer USA from August 1997 to
February 1998. He served as Controller of Parker & Parsley from August 1995 to
August 1997. Mr. Dealy joined Parker & Parsley as an Accounting Manager in July,
1992. He was previously employed with KPMG Peat Marwick as an Audit Senior, in
charge of Parker & Parsley's audit.

ITEM 11. Executive Compensation

The Partnership does not have any directors or officers. Management of the
Partnership is vested in Pioneer USA, the managing general partner. Under the
Partnership agreement, Pioneer USA pays 8% of the Partnership's acquisition,
drilling and completion costs and 20% of its operating and general and
administrative expenses. In return, Pioneer USA is allocated 20% of the
Partnership's revenues. See Notes 6 and 9 of Notes to Financial Statements
included in "Item 8. Financial Statements and Supplementary Data" for
information regarding fees and reimbursements paid to the managing general
partner or its affiliates by the Partnership.

EMPL is a co-general partner of the Partnership. Under this arrangement, EMPL
pays 2% of the Partnership's acquisition, drilling and completion costs and 5%
of its operating and general and administrative expenses. In return, EMPL is
allocated 5% of the Partnership's revenues. EMPL does not receive any fees or
reimbursements from the Partnership.

The Partnership does not directly pay any salaries of the executive officers of
Pioneer USA, but does pay a portion of Pioneer USA's general and administrative
expenses of which these salaries are a part. See Note 6 of Notes to Financial
Statements included in "Item 8. Financial Statements and Supplementary Data".

<PAGE>

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

(a) Beneficial owners of more than five percent

The Partnership is not aware of any person who beneficially owns 5% or more of
the outstanding limited partnership interests of the Partnership. Pioneer USA
and EMPL respectively own 80% and 20% of the general partners' interests in the
Partnership. Pioneer USA owned 211 limited partner interests at January 1, 1998.

(b) Security ownership of management

The Partnership does not have any officers or directors. The managing general
partner of the Partnership, Pioneer USA, has the exclusive right and full
authority to manage, control and administer the Partnership's business. Under
the limited partnership agreement, limited partners holding a majority of the
outstanding limited partnership interests have the right to take certain
actions, including the removal of the managing general partner or any other
general partner. The Partnership is not aware of any current arrangement or
activity which may lead to such removal. The Partnership is not aware of any
officer or director of Pioneer USA who beneficially owns limited partnership
interests in the Partnership.

ITEM 13. Certain Relationships and Related Transactions

Transactions with the managing general partner or its affiliates

Pursuant to the limited partnership agreement, the Partnership had the following
related party transactions with the general partners or its affiliates during
the years ended December 31:
1997 1996 1995
-------- -------- --------
Payment of lease operating and
supervision charges in accordance
with standard industry operating
agreements $133,860 $122,545 $156,161
Reimbursement of general and
administrative expenses $ 17,950 $ 21,978 $ 20,163
Purchase of oil and gas properties and
related equipment at predecessor cost $ 2,195 $ - $ 1,241
Receipt of proceeds for the salvage value
of retired oil and gas equipment $ - $ 9,004 $ -

Under the limited partnership agreement, the general partners, Pioneer USA and
EMPL, together pay 10% of Partnership's acquisition, drilling and completion
costs and 25% of its operating and general and administrative expenses. In
return, they are allocated 25% of the Partnership's revenues. Twenty percent of
the general partner's share of costs and revenues is allocated to EMPL and the
remainder is allocated to Pioneer USA. Certain former affiliates of the managing
general partner are limited partners of EMPL. Also, see Notes 6 and 9 of Notes
to Financial Statements included in "Item 8. Financial Statements and
Supplementary Data", regarding the Partnership's participation with the managing
general partner in oil and gas activities of the Partnership.

<PAGE>

PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) 1. Financial statements

The following are filed as part of this annual report:

Independent Auditors' Report Balance sheets as of December
31, 1997 and 1996
Statements of operations for the years ended December 31,
1997, 1996 and 1995
Statements of partners' capital for the years ended December
31, 1997, 1996 and 1995
Statements of cash flows for the years ended December 31,
1997, 1996 and 1995
Notes to financial statements

2. Financial statement schedules

All financial statement schedules have been omitted since the
required information is in the financial statements or notes
thereto, or is not applicable nor required.

(b) Reports on Form 8-K

None.

The exhibits listed on the accompanying index to exhibits are filed or
incorporated by reference as part of this annual report.

<PAGE>

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.

Dated: March 27, 1998 By: Pioneer Natural Resources USA, Inc.
Managing General Partner

By: /s/ Scott D. Sheffield
----------------------------
Scott D. Sheffield, President

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

/s/ Scott D. Sheffield President and Director of March 27, 1998
- ------------------------ Pioneer USA
Scott D. Sheffield

/s/ Timothy L. Dove Executive Vice President and March 27, 1998
- ------------------------ Director of Pioneer USA
Timothy L. Dove

/s/ Dennis E. Fagerstone Executive Vice President and March 27, 1998
- ------------------------ Director of Pioneer USA
Dennis E. Fagerstone

/s/ Mark L. Withrow Executive Vice President, General March 27, 1998
- ------------------------ Counsel and Director of Pioneer USA
Mark L. Withrow

/s/ M. Garrett Smith Executive Vice President, Chief March 27, 1998
- ------------------------ Financial Officer and Director
M. Garrett Smith of Pioneer USA

/s/ Mel Fischer Executive Vice President of March 27, 1998
- ------------------------ Pioneer USA
Mel Fischer

/s/ Lon C. Kile Executive Vice President of March 27, 1998
- ------------------------ Pioneer USA
Lon C. Kile

/s/ Rich Dealy Vice President and Chief Accounting March 27, 1998
- ------------------------ Officer of Pioneer USA
Rich Dealy
29

<PAGE>

PARKER & PARSLEY 82-II, LTD.

INDEX TO EXHIBITS

The following documents are incorporated by reference in response to Item
14(c):

Exhibit No. Description Page
- ----------- ----------- ----
3.1 Agreement of Limited Partnership of -
Parker & Parsley 82-II, Ltd. incorporated
by reference to Exhibit 4(e) of Partnership's
Registration Statement on Form S-1
(Registration No. 2-75503B), as amended
on February 4, 1982, the effective date
thereof (hereinafter called, the Partnership's
Registration Statement)

3.2 Amended and Restated Certificate of -
Limited Partnership of Parker & Parsley
82-II, Ltd. incorporated by reference to
Exhibit 3.2 of the Partnership's Annual
Report on Form 10-K for the year ended
December 31, 1983

4.1 Form of Subscription Agreement and Power -
of Attorney incorporated by reference to
Exhibit 4(b) of the Partnership's Registration
Statement

4.2 Specimen Certificate of Limited Partnership -
Interest incorporated by reference to Exhibit
4(d) of the Partnership's Registration Statement

27.1* Financial Data Schedule -

99.1 Mutual Release and Indemnity Agreement -
dated May 25, 1993 incorporated by reference to
Exhibit 99.1 of the Partnership's Annual Report
on Form 10-K for the year ended December 31,
1993

* filed herewith
30

<PAGE>

<ARTICLE> 5
<CIK> 0000717374
<NAME> 82II.
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 151,079
<SECURITIES> 0
<RECEIVABLES> 212,474
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 363,553
<PP&E> 8,420,466
<DEPRECIATION> 7,327,693
<TOTAL-ASSETS> 1,456,326
<CURRENT-LIABILITIES> 16,723
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,439,603
<TOTAL-LIABILITY-AND-EQUITY> 1,456,326
<SALES> 598,339
<TOTAL-REVENUES> 695,912
<CGS> 0
<TOTAL-COSTS> 789,298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (93,386)
<INCOME-TAX> 0
<INCOME-CONTINUING> (93,386)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,386)
<EPS-PRIMARY> (20.18)
<EPS-DILUTED> 0

</TABLE>