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 June 30, 1997
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. 33-3353A
PARKER & PARSLEY 86-A, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2124884
(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.
Exhibit index on page 11.
<PAGE>
PARKER & PARSLEY 86-A, LTD.
TABLE OF CONTENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of June 30, 1997 and
December 31, 1996 ....................................... 3
Statements of Operations for the three and six
months ended June 30, 1997 and 1996......................... 4
Statement of Partners' Capital for the six months
ended June 30, 1997......................................... 5
Statements of Cash Flows for the six months
ended June 30, 1997 and 1996................................ 6
Notes to Financial Statements................................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.............................. 11
27. Financial Data Schedule
Signatures.................................................... 12
2
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PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including
interest bearing deposits of $137,654
at June 30 and $231,863 at December 31 $ 138,007 $ 232,139
Accounts receivable - oil and gas sales 58,675 121,894
----------- -----------
Total current assets 196,682 354,033
----------- -----------
Oil and gas properties - at cost, based on
the successful efforts accounting method 7,088,676 7,084,599
Accumulated depletion (5,717,239) (5,634,266)
----------- -----------
Net oil and gas properties 1,371,437 1,450,333
----------- -----------
$ 1,568,119 $ 1,804,366
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 18,794 $ 76,557
Partners' capital:
Managing general partner 14,188 15,972
Limited partners (10,131 interests) 1,535,137 1,711,837
----------- -----------
1,549,325 1,727,809
----------- -----------
$ 1,568,119 $ 1,804,366
=========== ===========
The financial information included as of June 30, 1997 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 86-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
Revenues:
Oil and gas $ 131,627 $ 194,835 $ 304,025 $ 410,878
Interest 2,335 1,521 4,751 2,638
Salvage income from equipment
disposal - - - 14,605
Gain on sale of assets - 163,096 - 163,096
Litigation settlement - 290,690 - 290,690
-------- -------- -------- --------
133,962 650,142 308,776 881,907
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 105,017 119,086 209,968 235,961
General and administrative 3,949 5,845 9,121 12,326
Depletion 40,361 36,094 82,973 80,273
-------- -------- -------- --------
149,327 161,025 302,062 328,560
-------- -------- -------- --------
Net income (loss) $ (15,365) $ 489,117 $ 6,714 $ 553,347
======== ======== ======== ========
Allocation of net income (loss):
Managing general partner $ (154) $ 4,891 $ 67 $ 5,533
======== ======== ======== ========
Limited partners $ (15,211) $ 484,226 $ 6,647 $ 547,814
======== ======== ======== ========
Net income (loss) per limited
partnership interest $ (1.50) $ 47.79 $ .66 $ 54.07
======== ======== ======== ========
Distributions per limited
partnership interest $ 6.42 $ 37.70 $ 18.10 $ 45.21
======== ======== ======== ========
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
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PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- ---------- ----------
Balance at January 1, 1997 $ 15,972 $1,711,837 $1,727,809
Distributions (1,851) (183,347) (185,198)
Net income 67 6,647 6,714
------- --------- ---------
Balance at June 30, 1997 $ 14,188 $1,535,137 $1,549,325
======== ========= =========
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 86-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
------------------------
1997 1996
---------- ----------
Cash flows from operating activities:
Net income $ 6,714 $ 553,347
Adjustments to reconcile net income to
net cash provided by operating activities:
Depletion 82,973 80,273
Salvage income from equipment disposals - (14,605)
Gain on sale of assets - (163,096)
Changes in assets and liabilities:
Decrease in accounts receivable 63,219 33,590
Increase (decrease) in accounts payable (58,577) 42,595
--------- ---------
Net cash provided by operating activities 94,329 532,104
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (3,263) (3,989)
Proceeds from salvage income on equipment disposals - 14,605
Proceeds from sale of assets - 397,225
--------- ---------
Net cash provided by (used in) investing
activities (3,263) 407,841
--------- --------
Cash flows from financing activities:
Cash distributions to partners (185,198) (462,657)
--------- ---------
Net increase (decrease) in cash and cash equivalents (94,132) 477,288
Cash and cash equivalents at beginning of period 232,139 66,625
--------- ---------
Cash and cash equivalents at end of period $ 138,007 $ 543,913
========= =========
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.
6
<PAGE>
PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
Note 1. Basis of presentation
In the opinion of management, the unaudited financial statements of Parker &
Parsley 86-A, Ltd. (the "Partnership") as of June 30, 1997 and for the three and
six months ended June 30, 1997 and 1996 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. These interim results
are not necessarily indicative of results for a full year.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
should be read in conjunction with the financial statements and the notes
thereto contained in the Partnership's Report on Form 10-K for the year ended
December 31, 1996, as filed with the Securities and Exchange Commission, a copy
of which is available upon request by writing to Rich Dealy, Controller, 303
West Wall, Suite 101, Midland, Texas 79701.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
Results of Operations
Six months ended June 30, 1997 compared with six months ended
June 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 26% to $304,025 from $410,878
for the six months ended June 30, 1997 as compared to the six months ended June
30, 1996. The decrease in revenues resulted from a 32% decline in mcf of gas
produced and sold and a 27% decline in barrels of oil produced and sold, offset
by a 10% increase in the average price received per mcf of gas and a slight
increase in the average price received per barrel of oil. For the six months
ended June 30, 1997, 10,223 barrels of oil were sold compared to 14,007 for the
same period in 1996, a decrease of 3,784 barrels. Of the decrease, 2,407
barrels, or 17%, was attributable to the sale of four oil and gas wells during
1996. The additional decrease of 10%, or 1,377 barrels, was due to the decline
characteristics of the Partnership's oil and gas properties. For the six months
ended June 30, 1997, 40,467 mcf of gas were sold compared to 59,422 for the same
period in 1996, a decrease of 18,955 mcf. Of the decrease, 10,573 mcf, or 18%,
was attributable to the sale of four oil and gas wells during 1996. The
additional decrease of 8,382 mcf, or 14%, was due to the decline characteristics
7
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of the Partnership's oil and gas properties. 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 increased slightly from $20.35 for
the six months ended June 30, 1996 to $20.48 for the same period in 1997, while
the average price received per mcf of gas increased from $2.12 during the six
months ended June 30, 1996 to $2.34 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 during the six months ended June 30, 1997.
Salvage income of $14,605 was received during the six months ended June 30, 1996
from the disposal of equipment on one fully depleted well.
A gain of $163,096 from the sale of four oil and gas wells to Costilla Energy,
L.L.C. was recognized during the six months ended June 30, 1996.
On April 29, 1996, Southmark Corporation, the managing general partner 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 $290,690, which included
$287,784, or $28.41 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $302,062 for the six months ended June 30,
1997 as compared to $328,560 for the same period in 1996, a decrease of $26,498,
or 8%. This decrease was due to a decline in production costs and general and
administrative expenses ("G&A") , offset by an increase in depletion.
Production costs were $209,968 for the six months ended June 30, 1997 and
$235,961 for the same period in 1996 resulting in a $25,993 decrease, or 11%.
This decrease was primarily the result of a reduction in well repair and
maintenance costs, offset by an increase in workover expense incurred in an
effort to stimulate well production.
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, 26% from $12,326 for the six months ended June 30, 1996
to $9,121 for the same period in 1997. The Partnership agreement limits G&A to
3% of gross oil and gas revenues.
Depletion was $82,973 for the six months ended June 30, 1997 compared to $80,273
for the same period in 1996. This represented an increase in depletion of
$2,700, or 3%. This increase is the result of a decline in oil reserves during
1997 as a result of lower commodity prices.
8
<PAGE>
Three months ended June 30, 1997 compared with three months ended
June 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 32% to $131,627 from $194,835
for the three months ended June 30, 1997 as compared to the three months ended
June 30, 1996. The decrease in revenues resulted from a 25% decline in barrels
of oil produced and sold, a 16% decline in mcf of gas produced and sold, a 15%
decrease in the average price received per barrel of oil and an 8% decrease in
the average price received per mcf of gas. For the three months ended June 30,
1997, 4,680 barrels of oil were sold compared to 6,279 for the same period in
1996, a decrease of 1,599 barrels. Of the decrease, 574 barrels, or 9%, was
attributable to the sale of four oil and gas wells in 1996. The additional
decrease of 16%, or 1,025 barrels, was due to the decline characteristics of the
Partnership's oil and gas properties. For the three months ended June 30, 1997,
21,506 mcf of gas were sold compared to 25,517 for the same period in 1996, a
decrease of 4,011 mcf. Of the decrease, 2,620 mcf, or 10%, was attributable to
the sale of four oil and gas wells in 1996. The additional decrease of 1,391
mcf, or 6%, was due to the decline characteristics of the Partnership's oil and
gas properties.
The average price received per barrel of oil decreased $3.26 from $22.18 for the
three months ended June 30, 1996 to $18.92 for the same period in 1997, while
the average price received per mcf of gas decreased from $2.18 during the three
months ended June 30, 1996 to $2.00 in 1997.
A gain of $163,096 from the sale of four oil and gas wells to Costilla Energy,
L.L.C. was recognized during the three months ended June 30, 1996.
On April 29, 1996, Southmark Corporation, the managing general partner 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 $290,690, which included
$287,784, or $28.41 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $149,327 for the three months ended June
30, 1997 as compared to $161,025 for the same period in 1996, a decrease of
$11,698, or 7%. This decrease was due to declines in production costs and G&A,
offset by an increase in depletion.
Production costs were $105,017 for the three months ended June 30, 1997 and
$119,086 for the same period in 1996 resulting in a $14,069 decrease, or 12%.
This decrease was primarily the result of declines in workover costs and
production taxes.
9
<PAGE>
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, 32% from $5,845 for the three months ended June 30,
1996 to $3,949 for the same period in 1997.
Depletion was $40,361 for the three months ended June 30, 1997 compared to
$36,094 for the same period in 1996. This represented an increase in depletion
of $4,267, or 12%, primarily attributable to a downward revision in oil and gas
reserves during 1997 as a result of lower commodity prices.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $437,775 during the six
months ended June 30, 1997 from the same period ended June 30, 1996. This
decrease was primarily due to the receipt of proceeds in 1996 from the
litigation settlement, as discussed in Item 2, and a decline in oil and gas
sales receipts.
Net Cash Provided by (Used in) Investing Activities
The Partnership's principal investing activities for the six months ended June
30, 1997 and 1996 included expenditures related to equipment replacement on
various oil and gas properties.
The Partnership received proceeds during the six months ended June 30, 1996 of
$14,605 from the disposal of oil and gas equipment and $397,225 from the sale of
four oil and gas wells.
Net Cash Used in Financing Activities
Cash was sufficient for the six months ended June 30, 1997 to cover
distributions to the partners of $185,198 of which $1,851 was distributed to the
managing general partner and $183,347 to the limited partners. For the same
period ended June 30, 1996, cash was sufficient for distributions to the
partners of $462,657 of which $4,627 was distributed to the managing general
partner and $458,030 to the limited partners. Cash distributions to the partners
of $462,657 for the six months ended June 30, 1996 included $2,906 to the
managing general partner and $287,784 to the limited partners, resulting from
proceeds received in the litigation settlement, as discussed in Item 2.
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.
10
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K - none
11
<PAGE>
PARKER & PARSLEY 86-A, 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 86-A, LTD.
By: Parker & Parsley Development L.P.,
Managing General Partner
By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
Dated: August 7, 1997 By: /s/ Rich Dealy
---------------------------------
Rich Dealy, Controller of PPUSA
12
<PAGE>
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<ARTICLE> 5
<CIK> 0000789789
<NAME> 86A.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 138,007
<SECURITIES> 0
<RECEIVABLES> 58,675
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 196,682
<PP&E> 7,088,676
<DEPRECIATION> 5,717,239
<TOTAL-ASSETS> 1,568,119
<CURRENT-LIABILITIES> 18,794
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,549,325
<TOTAL-LIABILITY-AND-EQUITY> 1,568,119
<SALES> 304,025
<TOTAL-REVENUES> 308,776
<CGS> 0
<TOTAL-COSTS> 302,062
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<LOSS-PROVISION> 0
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<INCOME-PRETAX> 6,714
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,714
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<CHANGES> 0
<NET-INCOME> 6,714
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