<PAGE> 1
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, 1995, 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. 33-3353B
PARKER & PARSLEY 86-B, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2140235
(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 13 pages.
There are no exhibits.
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PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
March 31, December 31,
1995 1994
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including
interest bearing deposits of
$159,568 at March 31 and $141,462
at December 31 $ 162,277 $ 141,681
Accounts receivable - oil and gas sales 178,479 184,109
---------- ----------
Total current assets 340,756 325,790
Oil and gas properties - at cost, based
on the successful efforts accounting
method 14,162,102 14,129,225
Accumulated depletion (9,098,504) (8,958,142)
---------- ----------
Net oil and gas properties 5,063,598 5,171,083
---------- ----------
$ 5,404,354 $ 5,496,873
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 137,291 $ 90,443
Partners' capital:
Limited partners (17,208 interests) 5,215,669 5,353,642
Managing general partner 51,394 52,788
---------- ----------
5,267,063 5,406,430
---------- ----------
$ 5,404,354 $ 5,496,873
========== ==========
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 statements.
2
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PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Revenues:
Oil and gas sales $ 389,765 $ 361,333
Interest income 2,425 466
--------- ---------
Total revenues 392,190 361,799
Costs and expenses:
Production costs 196,653 198,943
General and administrative expenses 11,693 10,840
Depletion 140,362 224,525
Abandoned property costs 3,328 -
--------- ---------
Total costs and expenses 352,036 434,308
--------- ---------
Net income (loss) $ 40,154 $ (72,509)
========= =========
Allocation of net income (loss):
Managing general partner $ 401 $ (725)
========= =========
Limited partners $ 39,753 $ (71,784)
========= =========
Net income (loss) per limited
partnership interest $ 2.31 $ (4.17)
========= =========
Distributions per limited partnership
interest $ 10.33 $ 8.54
========= =========
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 statements.
3
<PAGE> 4
PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 1994 $ 59,287 $ 5,996,978 $ 6,056,265
Distributions (1,485) (146,999) (148,484)
Net loss (725) (71,784) (72,509)
---------- ---------- ----------
Balance at March 31, 1994 $ 57,077 $ 5,778,195 $ 5,835,272
========== ========== ==========
Balance at January 1, 1995 $ 52,788 $ 5,353,642 $ 5,406,430
Distributions (1,795) (177,726) (179,521)
Net income 401 39,753 40,154
---------- ---------- ----------
Balance at March 31, 1995 $ 51,394 $ 5,215,669 $ 5,267,063
========== ========== ==========
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 statements.
4
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PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Cash flows from operating activities:
Net income (loss) $ 40,154 $ (72,509)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depletion 140,362 224,525
Changes in assets and liabilities:
Decrease in accounts receivable 5,630 4,709
Increase in accounts payable 22,130 2,129
--------- ---------
Net cash provided by operating
activities 208,276 158,854
Cash flows from investing activities:
Additions to oil and gas properties (8,159) (2,341)
Cash flows from financing activities:
Cash distributions to partners (179,521) (148,484)
Net increase in cash and cash equivalents 20,596 8,029
Cash and cash equivalents at beginning
of period 141,681 104,318
--------- ---------
Cash and cash equivalents at end of period $ 162,277 $ 112,347
========= =========
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 statements.
5
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PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
(Unaudited)
NOTE 1.
In the opinion of management, the unaudited financial statements as of
March 31, 1995 of Parker & Parsley 86-B, Ltd. (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, the results of operations for the
three months ended March 31, 1995 are not necessarily indicative of the
results for the full year ending December 31, 1995.
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, 1994, 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 2.
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 the managing general
partner, Parker & Parsley Development L.P. ("PPDLP") (see Item 2). The
May 25, 1993 settlement agreement called for a payment of $115 million
in cash by the defendants. 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. A distribution of $91,000,000 was made to the
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working interest owners, including the Registrant, on July 30, 1993.
The limited partners received their distribution of $5,500,648, or
$319.66 per limited partnership interest, in September 1993.
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 is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Registrant was formed October 29, 1986. The managing general
partner of the Registrant at December 31, 1994 was Parker & Parsley
Development Company ("PPDC"). On January 1, 1995, PPDLP, a Texas
limited partnership, became the sole managing general partner of the
Registrant, by acquiring the rights and assuming the obligations of
PPDC. PPDC was merged into PPDLP on January 1, 1995. 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 Program and Registrant
affairs. The limited partners contributed $17,208,000 representing
17,208 interests ($1,000 per interest) sold to a total of 1,466 limited
partners.
Since its formation, the Registrant invested $14,330,413 in various
prospects that were drilled in Texas. At March 31, 1995, the Registrant
had 55 producing oil and gas wells. On August 1, 1990, the Registrant
sold its interest in one well. The Registrant received one additional
producing oil and gas well in 1993 due to the Registrant's back-in after
payout.
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Results of Operations
Revenues:
The Registrant's oil and gas revenues increased to $389,765 from
$361,333 for the three months ended March 31, 1995 and 1994,
respectively, an increase of 8%. The increase in revenues resulted from
a 28% increase in the average price received per barrel of oil and a 15%
increase in the average price received per mcf of gas, offset by an 11%
decrease in barrels of oil produced and sold and a 17% decrease in mcf
of gas produced and sold. For the three months ended March 31, 1995,
16,279 barrels of oil were sold compared to 18,310 for the same period
in 1994, a decrease of 2,031 barrels. For the three months ended March
31, 1995, 54,433 mcf of gas were sold compared to 65,465 for the same
period in 1994, a decrease of 11,032 mcf. The decreases in production
volumes were primarily due to the decline characteristics of the
Registrant'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 Registrant's economically recoverable reserves
are fully depleted.
The average price received per barrel of oil increased $3.74 from $13.50
for the three months ended March 31, 1994 to $17.24 for the same period
in 1995 while the average price received per mcf of gas increased from
$1.74 for the three months ended March 31, 1994 to $2.00 for the same
period in 1995. 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,
1995.
Costs and Expenses:
Total costs and expenses decreased to $352,036 for the three months
ended March 31, 1995 as compared to $434,308 for the same period in
1994, a decrease of $82,272, or 19%. This decrease was due to declines
in production costs and depletion, offset by an increase in general and
administrative expenses ("G&A") and abandoned property costs.
Production costs were $196,653 for the three months ended March 31, 1995
and $198,943 for the same period in 1994, resulting in a $2,290
decrease. This decrease was primarily due to a decline in ad valorem
taxes, offset by an increase in well repair and maintenance costs
incurred in an effort to stimulate well production.
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G&A's components are independent accounting and engineering fees,
computer services, postage and managing general partner personnel costs.
During this period, G&A increased, in aggregate, 8% from $10,840 for the
three months ended March 31, 1994 to $11,693 for the same period in
1995. The Partnership agreement limits G&A to 3% of gross oil and gas
revenues.
Depletion was $140,362 for the three months ended March 31, 1995
compared to $224,525 for the same period in 1994. This represented a
decrease in depletion of $84,163, or 37%. Depletion was computed
property-by-property utilizing the unit-of-production method based upon
the dominant mineral produced, generally oil. Oil production decreased
2,031 barrels for the three months ended March 31, 1995 from the same
period in 1994, while oil reserves of barrels were revised downward by
34,688 barrels, or 4%.
Abandoned property costs of $3,328 were incurred on one well during the
three months ended March 31, 1995 compared to no plugging and
abandonment activity for the same period in 1994.
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 the managing general
partner. The May 25, 1993 settlement agreement called for a payment of
$115 million in cash by the defendants. 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. 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 $5,500,648,
or $319.66 per limited partnership interest, in September 1993.
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
9
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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 is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased to $208,276 for the
three months ended March 31, 1995, a 31% increase from the same period
ended March 31, 1994. This increase was due to an increase in oil and
gas sales, a decrease in production costs and a decline in G&A. The
increase in oil and gas sales was due to an increase in the average
price received per barrel of oil and mcf of gas. The decline in
production costs was due to less well repair, maintenance and workover
costs incurred in an effort to stimulate well production. The decline
in G&A was due to less allocated expenses by the managing general
partner.
Net Cash Used in Investing Activities
The Registrant's principal investing activities during the three months
ended March 31, 1995 was for repair and maintenance activity on various
oil and gas properties.
Net Cash Used in Financing Activities
Cash was sufficient for the three months ended March 31, 1995 to cover
distributions to the partners of $179,521 of which $177,726 was
distributed to the limited partners and $1,795 to the managing general
partner. For the same period ended March 31, 1994, cash was sufficient
for distributions to the partners of $148,484 of which $146,999 was
distributed to the limited partners and $1,485 to the managing general
partner.
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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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 the managing general
partner. The May 25, 1993 settlement agreement called for a payment of
$115 million in cash by the defendants. 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. 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 $5,500,648,
or $319.66 per limited partnership interest, in September 1993.
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 is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
11
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
12
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PARKER & PARSLEY 86-B, 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-B, LTD.
By: Parker & Parsley Development L.P.,
Managing General Partner
By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
Dated: May 12, 1995 By: /s/ Steven L. Beal
--------------------------------------
Steven L. Beal, Senior Vice
President - Finance and
Chief Financial Officer
of PPUSA
13
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<ARTICLE> 5
<CIK> 0000789790
<NAME> 86BL
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 162,277
<SECURITIES> 0
<RECEIVABLES> 178,479
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 340,756
<PP&E> 14,162,102
<DEPRECIATION> 9,098,504
<TOTAL-ASSETS> 5,404,354
<CURRENT-LIABILITIES> 137,291
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 5,267,063
<TOTAL-LIABILITY-AND-EQUITY> 5,404,354
<SALES> 389,765
<TOTAL-REVENUES> 392,190
<CGS> 0
<TOTAL-COSTS> 352,036
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 40,154
<INCOME-TAX> 0
<INCOME-CONTINUING> 40,154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,154
<EPS-PRIMARY> 2.31
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</TABLE>
