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 September 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.
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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 September 30, 1997 and
December 31, 1996 ................................... 3
Statements of Operations for the three and nine
months ended September 30, 1997 and 1996................ 4
Statement of Partners' Capital for the nine months
ended September 30, 1997................................ 5
Statements of Cash Flows for the nine months ended
September 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
September 30, December 31,
1997 1996
------------ -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $235,584 at September 30
and $271,474 at December 31 $ 235,962 $ 294,971
Accounts receivable - oil and gas sales 172,126 269,921
----------- ----------
Total current assets 408,088 564,892
----------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 12,265,139 12,282,023
Accumulated depletion (8,533,668) (8,298,577)
----------- ----------
Net oil and gas properties 3,731,471 3,983,446
----------- ----------
$ 4,139,559 $ 4,548,338
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 49,845 $ 91,772
Partners' capital:
Managing general partner 39,620 43,289
Limited partners (17,208 interests) 4,050,094 4,413,277
----------- ----------
4,089,714 4,456,566
----------- ----------
$ 4,139,559 $ 4,548,338
=========== ==========
The financial information included as of September 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 Nine months ended
September 30, September 30,
--------------------- -----------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
Revenues:
Oil and gas $ 287,228 $ 375,549 $1,013,600 $1,178,727
Interest 3,961 5,584 12,212 10,969
Litigation settlement - - - 565,756
Gain (loss) on disposition
of assets - (7,186) - 72,729
-------- -------- --------- ---------
291,189 373,947 1,025,812 1,828,181
-------- -------- --------- ---------
Costs and expenses:
Oil and gas production 152,855 183,227 464,740 578,191
General and administrative 8,617 11,267 30,408 35,362
Depletion 73,360 74,715 235,091 245,884
Abandoned property - - - 8,340
-------- -------- --------- ---------
234,832 269,209 730,239 867,777
-------- -------- --------- ---------
Net income $ 56,357 $ 104,738 $ 295,573 $ 960,404
======== ======== ========= =========
Allocation of net income:
Managing general partner $ 564 $ 1,047 $ 2,956 $ 9,604
======== ======== ========= =========
Limited partners $ 55,793 $ 103,691 $ 292,617 $ 950,800
======== ======== ========= =========
Net income per limited
partnership interest $ 3.24 $ 6.02 $ 17.00 $ 55.25
======== ======== ========= =========
Distributions per limited
partnership interest $ 9.79 $ 10.60 $ 38.11 $ 64.44
======== ======== ========= =========
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 (6,625) (655,800) (662,425)
Net income 2,956 292,617 295,573
-------- --------- ---------
Balance at September 30, 1997 $ 39,620 $4,050,094 $4,089,714
======== ========= =========
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)
Nine months ended
September 30,
------------------------
1997 1996
--------- -----------
Cash flows from operating activities:
Net income $ 295,573 $ 960,404
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 235,091 245,884
Gain on disposition of assets - (72,729)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 97,795 (1,980)
Increase (decrease) in accounts payable (41,927) 43,696
-------- ----------
Net cash provided by operating activities 586,532 1,175,275
-------- ----------
Cash flows from investing activities:
Proceeds from disposition of assets 16,884 240,745
Cash flows from financing activities:
Cash distributions to partners (662,425) (1,120,065)
-------- ----------
Net increase (decrease) in cash and cash equivalents (59,009) 295,955
Cash and cash equivalents at beginning of period 294,971 151,763
-------- ----------
Cash and cash equivalents at end of period $ 235,962 $ 447,718
======== ==========
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 FINANCIAL STATEMENTS
September 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 September 30, 1997 and for the
three and nine months ended September 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, Vice President and
Controller, 303 West Wall, Suite 101, Midland, Texas 79701.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
As of August 8, 1997, Pioneer Natural Resources USA, Inc. ("Pioneer USA") became
the general partner of the Partnership. Prior to August 8, 1997, the
Partnership's general partner 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
general partner of the Partnership as PPDLP's successor by merger. For a more
complete description of the Parker & Parsley and Mesa Inc. merger, see Pioneer's
Registration Statement on Form S-4 as filed with the Securities and Exchange
Commission.
Results of Operations
Nine months ended September 30, 1997 compared with nine months ended
September 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 14% to $1,013,600 from
$1,178,727 for the nine months ended September 30, 1997 as compared to the nine
months ended September 30, 1996. The decrease in revenues resulted from declines
7
<PAGE>
in barrels of oil and mcf of gas produced and sold and a decrease in the average
price received per barrel of oil, offset by an increase in the average price
received per mcf of gas . For the nine months ended September 30, 1997, 35,530
barrels of oil were sold compared to 40,327 for the same period in 1996, a
decrease of 4,797 barrels, or 12%. Of the decrease, 1,792 barrels, or 4%, was
attributable to the sale of eight oil and gas wells during the nine months ended
September 30, 1996. The remaining decrease of 8%, or 3,005 barrels, was due to
the decline characteristics of the Partnership's oil and gas properties. For the
nine months ended September 30, 1997, 128,979 mcf of gas were sold compared to
155,807 for the same period in 1996, a decrease of 26,828 mcf, or 17%. Of the
decrease, 7,168 mcf, or 4%, was attributable to the sale of eight oil and gas
wells. The remaining decrease of 19,660 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 decreased 4% from $20.61 for the
nine months ended September 30, 1996 to $19.71 for the same period in 1997,
while the average price received per mcf of gas increased 9% from $2.23 for the
nine months ended September 30, 1996 to $2.43 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 nine months ended
September 30, 1997.
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.
Gain on disposition of assets of $72,729 for the nine months ended September 30,
1996 was comprised of $12,859 salvage income from the disposal of oil and gas
equipment on one fully depleted well, and a gain of $55,538 from the sale of six
oil and gas wells and four saltwater disposal wells to Costilla Energy, L.L.C.
An unrelated sale of four fully depleted oil and gas wells resulted in the
recognition of a gain of $4,332.
Costs and Expenses:
Total costs and expenses decreased to $730,239 for the nine months ended
September 30, 1997 as compared to $867,777 for the same period in 1996, a
decrease of $137,538, or 16%. This decrease was due to declines in production
costs, depletion, abandoned property costs and general and administrative
expenses ("G&A").
Production costs were $464,740 for the nine months ended September 30, 1997 and
$578,191 for the same period in 1996, resulting in a $113,451 decrease, or 20%.
The decrease was due to reductions in well maintenance and workover expenses.
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, 14% from $35,362 for the nine months ended September
30, 1996 to $30,408 for the same period in 1997. The Partnership agreement
limits G&A to 3% of gross oil and gas revenues.
Depletion was $235,091 for the nine months ended September 30, 1997 compared to
$245,884 for the same period in 1996, representing a decrease of $10,793, or 4%.
The decrease was attributable to the sale of properties during 1996 and a
decline in oil production of 3,005 barrels on the remaining active properties
for the nine months ended September 30, 1997 from the same period in 1996,
offset by a decline in oil reserves during 1997 as a result of lower commodity
prices.
Abandoned property costs of $8,340 were incurred on the abandonment of one well
during the nine months ended September 30, 1996.
Three months ended September 30, 1997 compared with three months ended September
30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 24% to $287,228 from $375,549
for the three months ended September 30, 1997 as compared to the three months
ended September 30, 1996. The decrease in revenues resulted from declines in
barrels of oil and mcf of gas produced and sold and a decrease in the average
price received per barrel of oil, offset by an increase in the average price
received per mcf of gas. For the three months ended September 30, 1997, 10,803
barrels of oil were sold compared to 12,418 for the same period in 1996, a
decrease of 1,615 barrels, or 13%. For the three months ended September 30,
1997, 41,533 mcf of gas were sold compared to 51,674 for the same period in
1996, a decrease of 10,141 mcf, or 20%. The decrease in production volumes was
due to the decline characteristics of the Partnership's oil and gas properties.
The average price received per barrel of oil decreased $3.10, or 14%, from
$21.39 for the three months ended September 30, 1996 to $18.29 for the same
period in 1997, while the average price received per mcf of gas increased
slightly from $2.13 during the three months ended September 30, 1996 to $2.16 in
1997.
Costs and Expenses:
Total costs and expenses decreased to $234,832 for the three months ended
September 30, 1997 as compared to $269,209 for the same period in 1996, a
decrease of $34,377, or 13%. This decrease was due to declines in production
costs, G&A and depletion.
Production costs were $152,855 for the three months ended September 30, 1997 and
$183,227 for the same period in 1996, resulting in a $30,372 decrease, or 17%.
The decrease resulted from reductions in well maintenance and workover expenses.
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, 24% from $11,267 for the three months ended September 30, 1996 to
$8,617 for the same period in 1997.
9
<PAGE>
Depletion was $73,360 for the three months ended September 30, 1997 compared to
$74,715 for the same period in 1996, representing a decrease of $1,355. The
decrease was attributable to a decline in oil production of 1,615 barrels for
the three months ended September 30, 1997 as compared to the same period in
1996, offset by a decrease in oil reserves during the third quarter of 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 $588,743 during the nine
months ended September 30, 1997 from the same period ended September 30, 1996.
This decrease was primarily due to the receipt of proceeds from the litigation
settlement in 1996 as discussed above and a decrease in oil and gas sales
receipts, offset by a decline in production costs paid.
Net Cash Provided by Investing Activities
The Partnership's investing activities during the nine months ended September
30, 1997 and 1996 were related to the disposal of oil and gas equipment on
active properties.
Proceeds from disposition of assets of $230,600, received during the nine months
ended September 30, 1996, were comprised of $12,859 from the sale of oil and gas
equipment on one fully depleted well and $217,741 from the sale of ten oil and
gas wells.
Net Cash Used in Financing Activities
Cash was sufficient for the nine months ended September 30, 1997 to cover
distributions to the partners of $662,425 of which $6,625 was distributed to the
managing general partner and $655,800 to the limited partners. For the same
period ended September 30, 1996, cash was sufficient for distributions to the
partners of $1,120,065 of which $11,200 was distributed to the managing general
partner and $1,108,865 to the limited partners. Cash distributions to the
partners of $1,120,065 for the nine months ended September 30, 1996 included
$5,525 to the managing general partner and $547,002 to the limited partners,
resulting from proceeds received from the litigation settlement in 1996 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
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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
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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: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 12, 1997 By: /s/ Rich Dealy
---------------------------------
Rich Dealy, Vice President and
Controller
12
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<ARTICLE> 5
<CIK> 0000789790
<NAME> 86B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 235,962
<SECURITIES> 0
<RECEIVABLES> 172,126
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 408,088
<PP&E> 12,265,139
<DEPRECIATION> 8,533,668
<TOTAL-ASSETS> 4,139,559
<CURRENT-LIABILITIES> 49,845
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,089,714
<TOTAL-LIABILITY-AND-EQUITY> 4,139,559
<SALES> 1,013,600
<TOTAL-REVENUES> 1,025,812
<CGS> 0
<TOTAL-COSTS> 730,239
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 295,573
<INCOME-TAX> 0
<INCOME-CONTINUING> 295,573
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 295,573
<EPS-PRIMARY> 17.00
<EPS-DILUTED> 0
</TABLE>
