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. 33-3353B
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 12 pages.
Exhibit index on page 11.
<PAGE>
PARKER & PARSLEY 86-B, 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-B, 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 $254,292 at June 30
and $271,474 at December 31 $ 254,669 $ 294,971
Accounts receivable - oil and gas sales 189,132 269,921
----------- -----------
Total current assets 443,801 564,892
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 12,261,948 12,282,023
Accumulated depletion (8,460,308) (8,298,577)
----------- -----------
Net oil and gas properties 3,801,640 3,983,446
----------- -----------
$ 4,245,441 $ 4,548,338
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 41,990 $ 91,772
Partners' capital:
Managing general partner 40,758 43,289
Limited partners (17,208 interests) 4,162,693 4,413,277
----------- -----------
4,203,451 4,456,566
----------- -----------
$ 4,245,441 $ 4,548,338
=========== ===========
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-B, 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 $ 329,527 $ 407,378 $ 726,372 $ 803,178
Interest 4,381 2,975 8,251 5,385
Salvage income from equipment
disposals - 5,972 - 12,859
Gain on sale of assets - 62,724 - 67,056
Litigation proceeds - 565,756 - 565,756
-------- --------- -------- ---------
333,908 1,044,805 734,623 1,454,234
-------- --------- -------- ---------
Costs and expenses:
Oil and gas production 151,422 194,705 311,885 394,964
General and administrative 9,886 12,221 21,791 24,095
Depletion 81,613 79,117 161,731 171,169
Abandoned property - 6,854 - 8,340
-------- --------- -------- ---------
242,921 292,897 495,407 598,568
-------- --------- -------- ---------
Net income $ 90,987 $ 751,908 $ 239,216 $ 855,666
======== ========= ======== =========
Allocation of net income:
Managing general partner $ 910 $ 7,519 $ 2,392 $ 8,557
======== ========= ======== =========
Limited partners $ 90,077 $ 744,389 $ 236,824 $ 847,109
======== ========= ======== =========
Net income per limited
partnership interest $ 5.23 $ 43.26 $ 13.76 $ 49.23
======== ========= ======== =========
Distributions per limited
partnership interest $ 11.50 $ 43.80 $ 28.32 $ 53.84
======== ========= ======== =========
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-B, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- ---------- ----------
Balance at January 1, 1997 $ 43,289 $4,413,277 $4,456,566
Distributions (4,923) (487,408) (492,331)
Net income 2,392 236,824 239,216
-------- --------- ---------
Balance at June 30, 1997 $ 40,758 $4,162,693 $4,203,451
======== ========= =========
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
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PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
-----------------------
1997 1996
---------- ----------
Cash flows from operating activities:
Net income $ 239,216 $ 855,666
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 161,731 171,169
Salvage income from equipment disposals - (12,859)
Gain on sale of assets - (67,056)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 80,789 (26,038)
Increase (decrease) in accounts payable (49,782) 52,487
--------- ---------
Net cash provided by operating activities 431,954 973,369
--------- ---------
Cash flows from investing activities:
Disposals of oil and gas properties 20,075 12,078
Proceeds from salvage income on equipment disposals - 12,859
Proceeds from sale of assets - 217,857
--------- ---------
Net cash provided by investing activities 20,075 242,794
--------- ---------
Cash flows from financing activities:
Cash distributions to partners (492,331) (935,897)
--------- ---------
Net increase (decrease) in cash and cash equivalents (40,302) 280,266
Cash and cash equivalents at beginning of period 294,971 151,763
--------- ---------
Cash and cash equivalents at end of period $ 254,669 $ 432,029
========= =========
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-B, 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-B, 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 10% to $726,372 from $803,178
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 16% decrease in mcf of gas
produced and sold and an 11% decrease in barrels of oil produced and sold,
offset by a 12% 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, 24,727 barrels of oil were sold compared to 27,909
for the same period in 1996, a decrease of 3,182 barrels. Of the decrease, 1,792
barrels, or 6%, was attributable to the sale of eight oil and gas wells during
1996. The remaining decrease of 5%, or 1,390 barrels, was due to the decline
characteristics of the Partnership's oil and gas properties. For the six months
ended June 30, 1997, 87,446 mcf of gas were sold compared to 104,133 for the
7
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same period in 1996, a decrease of 16,687 mcf. Of the decrease, 7,168 mcf, or
7%, was attributable to the sale of eight oil and gas wells during 1996. The
remaining decrease of 9,519 mcf, or 9%, was due 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 increased slightly from $20.27 for
the six months ended June 30, 1996 to $20.33 for the same period in 1997, while
the average price received per mcf of gas increased from $2.28 for the six
months ended June 30, 1996 to $2.56 for the same period 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 $12,859 was received during the six months ended June 30, 1996
from the disposal of oil and gas equipment on one fully depleted well.
For the six months ended June 30, 1996, the Partnership recognized a gain on
sale of assets of $67,056. Of this amount, $62,724 was from the sale of six oil
and gas wells and four saltwater disposal wells to Costilla Energy, L.L.C. An
additional unrelated sale of four fully depleted oil and gas wells resulted in
proceeds received of $4,332.
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 $565,756, which included
$547,002, or $31.79 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $495,407 for the six months ended June 30,
1997 as compared to $598,568 for the same period in 1996, a decrease of
$103,161, or 17%. This decrease was due to declines in production costs,
depletion, abandoned property costs and general and administrative expenses
("G&A").
Production costs were $311,885 for the six months ended June 30, 1997 and
$394,964 for the same period in 1996 resulting in a $83,079 decrease, or 21%. Of
the decrease, $33,834, or 9%, was attributable to the sale of eight oil and gas
wells and four saltwater disposal wells during 1996. The remaining decrease of
$49,245, or 12%, was due to a decline in well repair and maintenance costs.
8
<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, 10%, from $24,095 for the six months ended June 30,
1996 to $21,791 for the same period in 1997. The Partnership agreement limits
G&A to 3% of gross oil and gas revenues.
Depletion was $161,731 for the six months ended June 30, 1997 compared to
$171,169 for the same period in 1996. This represented a decrease in depletion
of $9,438, or 6%, primarily attributable to the sale of properties during 1996
and a decline in oil production of 1,390 barrels on the remaining active
properties for the six months ended June 30, 1997 from the same period in 1996.
Abandoned property costs of $8,340 were incurred on one well during the six
months ended June 30, 1996.
Three months ended June 30, 1997 compared with three months ended
June 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 19% to $329,527 from $407,378
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 14% decrease in the
average price received per barrel of oil, a 12% decrease in the average price
received per mcf of gas, a 9% decrease in mcf of gas produced and sold, and a 6%
decrease in barrels of oil produced and sold. For the three months ended June
30, 1997, 12,263 barrels of oil were sold compared to 13,083 for the same period
in 1996, a decrease of 820 barrels. Of the decrease, 390 barrels, or 3%, was
attributable to the sale of eight oil and gas wells. The additional decrease of
3%, or 430 barrels, was due to the decline characteristics of the Partnership's
oil and gas properties. For the three months ended June 30, 1997, 46,843 mcf of
gas were sold compared to 51,266 for the same period in 1996, a decrease of
4,423 mcf. Of the decrease, 1,712 mcf, or 4%, was attributable to the sale of
eight oil and gas wells. The additional decrease of 2,711 mcf, or 5%, was due to
the decline characteristics of the Partnership's oil and gas properties.
The average price received per barrel of oil decreased $2.96 from $21.71 for the
three months ended June 30, 1996 to $18.75 for the same period in 1997, while
the average price received per mcf of gas decreased from $2.41 during the three
months ended June 30, 1996 to $2.13 in 1997.
Salvage income of $5,972 was received during the three months ended June 30,
1996 from the disposal of oil and gas equipment on one fully depleted well.
A gain of $62,724 from the sale of six oil and gas wells and four saltwater
disposal 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
9
<PAGE>
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 $565,756, which included
$547,002, or $31.79 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $242,921 for the three months ended June
30, 1997 as compared to $292,897 for the same period in 1996, a decrease of
$49,976, or 17%. This decrease was due to declines in production costs,
abandoned property costs and G&A, offset by an increase in depletion.
Production costs were $151,422 for the three months ended June 30, 1997 and
$194,705 for the same period in 1996 resulting in a $43,283 decrease, or 22%. Of
the decrease, $14,326, or 7%, was attributable to the sale of eight oil and gas
wells and four saltwater disposal wells during 1996. The remaining decrease of
$28,957, or 15%, was due to a decline in well repair and maintenance costs.
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, 19% from $12,221 for the three months ended June 30,
1996 to $9,886 for the same period in 1997.
Depletion was $81,613 for the three months ended June 30, 1997 compared to
$79,117 for the same period in 1996. This represented an increase in depletion
of $2,496, or 3%, primarily attributable to a reduction in oil and gas reserves
as a result of lower commodity prices.
Abandoned property costs of $6,854 were incurred during the three months ended
June 30, 1996.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $541,415 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 from the litigation
settlement during 1996 as discussed in Item 2, offset by a decline in production
costs paid and an increase in oil and gas sale receipts.
Net Cash Provided by Investing Activities
The Partnership's investing activities during the six months ended June 30, 1997
and 1996 were related to the disposal of oil and gas equipment on active
properties.
Proceeds from salvage income of $12,859 was received during the six months ended
June 30, 1996 from the sale of oil and gas equipment on one fully depleted well.
10
<PAGE>
Proceeds of $217,857 were received during the six months ended June 30, 1996
from the sale of ten 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 $492,331 of which $4,923 was distributed to the
managing general partner and $487,408 to the limited partners. For the same
period ended June 30, 1996, cash was sufficient for distributions to the
partners of $935,897 of which $9,359 was distributed to the managing general
partner and $926,538 to the limited partners. Cash distributions to the partners
of $935,897 for the six months ended June 30, 1996 included $5,525 to the
managing general partner and $547,002 to the limited partners resulting from
proceeds received in the litigation settlement as discussed in Item 2. At June
30, 1996, a receivable of $13,229 from the settlement was outstanding pending
revision of division orders after pay-out provisions on one well.
It is expected that future net cash provided by operating activities will be
sufficient for any capital expenditures and any distributions. As the production
from the properties declines, distributions are also expected to decrease.
- --------------
(1) "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward looking statements that involve
risks and uncertainties. Accordingly, no assurances can be given that the
actual events and results will not be materially different than the
anticipated results described in the forward looking statements.
Part II. Other Information
Item 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-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: August 11, 1997 By: /s/ Rich Dealy
-------------------------------
Rich Dealy, Controller of PPUSA
12
<PAGE>
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<ARTICLE> 5
<CIK> 0000789790
<NAME> 86B.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 254,669
<SECURITIES> 0
<RECEIVABLES> 189,132
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 443,801
<PP&E> 12,261,948
<DEPRECIATION> 8,460,308
<TOTAL-ASSETS> 4,245,441
<CURRENT-LIABILITIES> 41,990
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,203,451
<TOTAL-LIABILITY-AND-EQUITY> 4,245,441
<SALES> 726,372
<TOTAL-REVENUES> 734,623
<CGS> 0
<TOTAL-COSTS> 495,407
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 239,216
<INCOME-TAX> 0
<INCOME-CONTINUING> 239,216
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<EXTRAORDINARY> 0
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<NET-INCOME> 239,216
<EPS-PRIMARY> 13.76
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</TABLE>