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, 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 10 pages.
-There are no exhibits-
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PARKER & PARSLEY 86-B, LTD.
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of March 31, 1997 and
December 31, 1996......................................... 3
Statements of Operations for the three months
ended March 31, 1997 and 1996............................. 4
Statement of Partners' Capital for the three months
ended March 31, 1997...................................... 5
Statements of Cash Flows for the three months
ended March 31, 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............................ 9
27. Financial Data Schedule
Signatures.................................................. 10
2
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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,
1997 1996
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including
interest bearing deposits of $304,276
at March 31 and $271,474 at December 31 $ 304,903 $ 294,971
Accounts receivable - oil and gas sales 203,988 269,921
---------- ----------
Total current assets 508,891 564,892
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 12,261,948 12,282,023
Accumulated depletion (8,378,695) (8,298,577)
---------- ----------
Net oil and gas properties 3,883,253 3,983,446
---------- ----------
$ 4,392,144 $ 4,548,338
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 79,750 $ 91,772
Partners' capital:
Managing general partner 41,847 43,289
Limited partners (17,208 interests) 4,270,547 4,413,277
---------- ----------
4,312,394 4,456,566
---------- ----------
$ 4,392,144 $ 4,548,338
========== ==========
The financial information included as of March 31, 1997 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
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PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
-------------------------
1997 1996
---------- ----------
Revenues:
Oil and gas $ 396,845 $ 395,800
Interest 3,870 2,410
Salvage income from equipment disposals - 6,887
Gain on sale of assets - 4,332
--------- ---------
400,715 409,429
--------- ---------
Costs and expenses:
Oil and gas production 160,463 200,259
General and administrative 11,905 11,874
Depletion 80,118 92,052
Abandoned property - 1,486
--------- ---------
252,486 305,671
--------- ---------
Net income $ 148,229 $ 103,758
========= =========
Allocation of net income:
Managing general partner $ 1,482 $ 1,038
========= =========
Limited partners $ 146,747 $ 102,720
========= =========
Net income per limited partnership interest $ 8.53 $ 5.97
========= =========
Distributions per limited partnership interest $ 16.82 $ 10.04
========= =========
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 (2,924) (289,477) (292,401)
Net income 1,482 146,747 148,229
-------- ---------- ----------
Balance at March 31, 1997 $ 41,847 $ 4,270,547 $ 4,312,394
======== ========== ==========
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)
Three months ended
March 31,
-------------------------
1997 1996
---------- ----------
Cash flows from operating activities:
Net income $ 148,229 $ 103,758
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion 80,118 92,052
Salvage income from equipment disposals - (6,887)
Gain on sale of assets - (4,332)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 65,933 (17,063)
Increase (decrease) in accounts payable (8,631) 18,878
--------- ---------
Net cash provided by operating activities 285,649 186,406
--------- ---------
Cash flows from investing activities:
Proceeds from salvage income on equipment disposals - 6,887
Proceeds from sale of assets - 4,332
Disposals of oil and gas properties 16,684 6,752
--------- ---------
Net cash provided by investing activities 16,684 17,971
--------- ---------
Cash flows from financing activities:
Cash distributions to partners (292,401) (174,521)
--------- ---------
Net increase in cash and cash equivalents 9,932 29,856
Cash and cash equivalents at beginning of period 294,971 151,763
--------- ---------
Cash and cash equivalents at end of period $ 304,903 $ 181,619
========= =========
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
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PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
Note 1. Organization and nature of operations
Parker & Parsley 86-B, Ltd. (the "Partnership") is a limited partnership
organized in 1986 under the laws of the State of Texas.
The Partnership engages primarily in oil and gas development and production in
Texas and is not involved in any industry segment other than oil and gas.
Note 2. Basis of presentation
In the opinion of management, the unaudited financial statements as of March 31,
1997 of the Partnership include all adjustments and accruals consisting only of
normal recurring accrual adjustments which are necessary for a fair presentation
of the results for the interim period. However, these interim results are not
necessarily indicative of results for a full year.
The financial statements should be read in conjunction with the financial
statements and the notes thereto contained in the 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
Steven L. Beal, Senior Vice President, 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
Revenues:
The Partnership's oil and gas revenues increased to $396,845 from $395,800 for
the three months ended March 31, 1997 and 1996, respectively. The increase in
revenues resulted from a 15% increase in the average price received per barrel
of oil and a 42% increase in the average price received per mcf of gas, offset
by a 16% decrease in barrels of oil produced and sold and a 23% decrease in mcf
of gas produced and sold. For the three months ended March 31, 1997, 12,464
barrels of oil were sold compared to 14,826 for the same period in 1996, a
decrease of 2,362 barrels. Of the decrease, 1,353 barrels, or 9%, was
attributable to the sale of eight oil and gas wells during 1996. The remaining
decrease of 7%, or 1,009 barrels, was due to the decline characteristics of the
Partnership's oil and gas properties. For the three months ended March 31, 1997,
40,603 mcf of gas were sold compared to 52,867 for the same period in 1996, a
decrease of 12,264 mcf. Of the decrease, 5,248 mcf, or 10%, was attributable to
7
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the sale of eight oil and gas wells during 1996. The remaining decrease of 7,016
mcf, or 13%, 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 $2.88 from $19.00 for the
three months ended March 31, 1996 to $21.88 for the same period in 1997, while
the average price received per mcf of gas increased from $2.16 for the three
months ended March 31, 1996 to $3.06 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 three months ended
March 31, 1997.
Salvage income of $6,887 was received during the three months ended March 31,
1996 from the disposal of equipment on one fully depleted well.
A gain was realized as a result of the receipt of $4,332 in proceeds from the
sale of four fully depleted properties during the three months ended March 31,
1996.
Costs and Expenses:
Total costs and expenses decreased to $252,486 for the three months ended March
31, 1997 as compared to $305,671 for the same period in 1996, a decrease of
$53,185, or 17%. This decrease was due to declines in production costs,
depletion and abandoned property costs, offset by an increase in general and
administrative expenses ("G&A").
Production costs were $160,463 for the three months ended March 31, 1997 and
$200,259 for the same period in 1996, resulting in a $39,796 decrease, or 20%.
Of the decrease, $14,808, or 7%, was attributable to the sale of eight oil and
gas wells and four saltwater disposal wells during 1996. The remaining decrease
of 12%, or $24,988, was due to a reduction 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
increased, in aggregate, from $11,874 for the three months ended March 31, 1996
to $11,905 for the same period in 1997. The Partnership agreement limits G&A to
3% of gross oil and gas revenues.
Depletion was $80,118 for the three months ended March 31, 1997 compared to
$92,052 for the same period in 1996. This represented a decrease in depletion of
$11,934, or 13%, primarily attributable to the the sale of properties during
1996 and a decline in oil production of 2,362 barrels for the three months ended
March 31, 1997 compared to the same period in 1996, offset by an upward revision
in oil and gas reserves.
Abandoned property costs of $1,486 were incurred on one well during the three
months ended March 31, 1996.
8
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Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $99,243 for the three months
ended March 31, 1997 from the same period in 1996. This increase was due to an
increase in oil and gas sales receipts and a decrease in expenditures for
production costs.
Net Cash Provided by Investing Activities
The Partnership's investing activities related to the disposal of oil and gas
equipment on active properties was $16,684 during the three months ended March
31, 1997 and $6,752 for the same period in 1996.
Proceeds of $6,887 were received during the three months ended March 31, 1996
from equipment credits received on one fully depleted well.
Four fully depleted properties were sold during the three months ended March 31,
1996, resulting in the receipt of $4,332 in proceeds from the sale.
Net Cash Used in Financing Activities
Cash was sufficient for the three months ended March 31, 1997 to cover
distributions to the partners of $292,401 of which $289,477 was distributed to
the limited partners and $2,924 to the managing general partner. For the same
period ended March 31, 1996, cash was sufficient for distributions to the
partners of $174,521 of which $172,776 was distributed to the limited partners
and $1,745 to the managing general partner.
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
9
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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 9, 1997 By: /s/ Steven L. Beal
-------------------------------------
Steven L. Beal, Senior Vice President
and Chief Financial Officer of PPUSA
10
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