UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
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)
1400 Williams Square West, 5205 N. O'Connor Blvd., Irving, Texas 75039
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(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code : (972) 444-9001
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 / /
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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 June 30, 2000 and
December 31, 1999....................................... 3
Statements of Operations for the three and six
months ended June 30, 2000 and 1999...................... 4
Statement of Partners' Capital for the six months
ended June 30, 2000...................................... 5
Statements of Cash Flows for the six months
ended June 30, 2000 and 1999............................. 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........................... 10
27.1 Financial Data Schedule
Signatures................................................. 11
2
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PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
<TABLE>
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 213,297 $ 206,408
Accounts receivable - oil and gas sales 208,426 179,740
----------- -----------
Total current assets 421,723 386,148
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 12,059,708 12,044,833
Accumulated depletion (10,222,037) (10,164,543)
------------ -----------
Net oil and gas properties 1,837,671 1,880,290
----------- -----------
$ 2,259,394 $ 2,266,438
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 46,552 $ 29,193
Partners' capital:
Managing general partner 20,852 21,096
Limited partners (17,208 interests) 2,191,990 2,216,149
----------- -----------
2,212,842 2,237,245
----------- -----------
$ 2,259,394 $ 2,266,438
=========== ===========
</TABLE>
The financial information included as of June 30, 2000 has been prepared by
the managing general partner 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)
<TABLE>
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas $ 392,916 $ 231,875 $ 795,048 $ 407,249
Interest 4,323 2,338 7,395 4,305
Gain on disposition of assets 831 - 2,250 -
-------- -------- -------- --------
398,070 234,213 804,693 411,554
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 170,553 144,074 339,664 293,691
General and administrative 11,787 6,956 23,851 12,217
Depletion 23,496 36,312 57,494 110,095
-------- -------- -------- --------
205,836 187,342 421,009 416,003
-------- -------- -------- --------
Net income (loss) $ 192,234 $ 46,871 $ 383,684 $ (4,449)
======== ======== ======== ========
Allocation of net income (loss):
Managing general partner $ 1,922 $ 469 $ 3,837 $ (44)
======== ======== ======== ========
Limited partners $ 190,312 $ 46,402 $ 379,847 $ (4,405)
======== ======== ======== ========
Net income (loss) per limited
partnership interest $ 11.06 $ 2.69 $ 22.07 $ (.26)
======== ======== ======== ========
</TABLE>
The financial information included herein has been prepared by
the managing general partner 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)
<TABLE>
Managing
general Limited
partner partners Total
--------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1, 2000 $ 21,096 $2,216,149 $2,237,245
Distributions (4,081) (404,006) (408,087)
Net income 3,837 379,847 383,684
-------- --------- ---------
Balance at June 30, 2000 $ 20,852 $2,191,990 $2,212,842
======== ========= =========
</TABLE>
The financial information included herein has been prepared by
the managing general partner 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)
<TABLE>
Six months ended
June 30,
------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 383,684 $ (4,449)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depletion 57,494 110,095
Gain on disposition of assets (2,250) -
Changes in assets and liabilities:
Accounts receivable (28,686) (25,526)
Accounts payable 17,359 27,226
--------- ---------
Net cash provided by operating activities 427,601 107,346
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (17,471) (2,172)
Proceeds from asset dispositions 4,846 609
--------- ---------
Net cash used in investing activities (12,625) (1,563)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (408,087) (113,733)
--------- ---------
Net increase (decrease) in cash 6,889 (7,950)
Cash at beginning of period 206,408 185,320
-------- ---------
Cash at end of period $ 213,297 $ 177,370
======== =========
</TABLE>
The financial information included herein has been prepared by
the managing general partner 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
June 30, 2000
(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 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 of the
Partnership as of June 30, 2000 and for the three and six months ended June 30,
2000 and 1999 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 reclassifications may have been
made to the June 30, 1999 financial statements to conform to the June 30, 2000
financial statement presentations.
Certain information and footnote disclosures 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, 1999, as filed with the Securities and Exchange Commission, a copy
of which is available upon request by writing to Rich Dealy, Vice President and
Chief Accounting Officer, 5205 North O'Connor Boulevard, 1400 Williams Square
West, Irving, Texas 75039-3746.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
Results of Operations
Six months ended June 30, 2000 compared with six months ended
June 30, 1999
Revenues:
The Partnership's oil and gas revenues increased 95% to $795,048 for the six
months ended June 30, 2000 as compared to $407,249 for the same period in 1999.
The increase in revenues resulted from higher average prices received, offset by
a decrease in production. For the six months ended June 30, 2000, 20,591 barrels
of oil, 10,406 barrels of natural gas liquids ("NGLs") and 41,035 mcf of gas
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were sold, or 37,836 barrel of oil equivalents ("BOEs"). For the six months
ended June 30, 1999, 20,359 barrels of oil, 10,775 barrels of NGLs and 42,002
mcf of gas were sold, or 38,134 BOEs.
The average price received per barrel of oil increased $14.30, or 108%, from
$13.27 for the six months ended June 30, 1999 to $27.57 for the same period in
2000. The average price received per barrel of NGLs increased $6.56, or 95%,
from $6.87 during the six months ended June 30, 1999 to $13.43 for the same
period in 2000. The average price received per mcf of gas increased 42% from
$1.50 for the six months ended June 30, 1999 to $2.13 for the same period in
2000. 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, 2000.
The volatility of commodity prices has had, and continues to have, a significant
impact on the Partnership's revenues and operating cash flow and could result in
additional decreases to the carrying value of the Partnership's oil and gas
properties.
A gain on disposition of assets of $2,250 was received during the six months
ended June 30, 2000 due to equipment credits received on one fully depleted
well.
Costs and Expenses:
Total costs and expenses increased to $421,009 for the six months ended June 30,
2000 as compared to $416,003 for the same period in 1999, an increase of $5,006,
or 1%. This increase was due to increases in production costs and general and
administrative expenses ("G&A"), offset by a decline in depletion.
Production costs were $339,664 for the six months ended June 30, 2000 and
$293,691 for the same period in 1999, resulting in a $45,973 increase, or 16%.
The increase was due to higher production taxes due to higher oil and gas prices
and additional well maintenance costs incurred 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
increased, in aggregate, 95%, from $12,217 for the six months ended June 30,
1999 to $23,851 for the same period in 2000 primarily due to a higher allocation
of the managing general partner's G&A being allocated (limited to 3% of oil and
gas revenues) as a result of increased oil and gas revenues.
Depletion was $57,494 for the six months ended June 30, 2000 compared to
$110,095 for the same period in 1999, a decrease of $52,601, or 48%. This
decrease was due to an increase in proved reserves during the period ended June
30, 2000 due to higher commodity prices, offset by an increase in oil production
of 232 barrels for the six months ended June 30, 2000 compared to the same
period in 1999.
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Three months ended June 30, 2000 compared with three months ended June 30, 1999
Revenues:
The Partnership's oil and gas revenues increased 69% to $392,916 for the three
months ended June 30, 2000 as compared to $231,875 for the same period in 1999.
The increase in revenues resulted from higher average prices received, offset by
a decrease in production. For the three months ended June 30, 2000, 9,770
barrels of oil, 5,347 barrels of NGLs and 20,600 mcf of gas were sold, or 18,550
BOEs. For the three months ended June 30, 1999, 10,068 barrels of oil, 5,881
barrels of NGLs and 20,138 mcf of gas were sold, or 19,305 BOEs.
The average price received per barrel of oil increased $12.64, or 85%, from
$14.91 for the three months ended June 30, 1999 to $27.55 for the same period in
2000. The average price received per barrel of NGLs increased $5.31, or 65%,
from $8.17 during the three months ended June 30, 1999 to $13.48 for the same
period in 2000. The average price received per mcf of gas increased 50% from
$1.67 during the three months ended June 30, 1999 to $2.51 for the same period
in 2000.
A gain on disposition of assets of $831 was received during the three months
ended June 30, 2000 due to equipment credits received on one fully depleted
well.
Costs and Expenses:
Total costs and expenses increased to $205,836 for the three months ended June
30, 2000 as compared to $187,342 for the same period in 1999, an increase of
$18,494, or 10%. This increase was due to increases in production costs and G&A,
offset by a decline in depletion.
Production costs were $170,553 for the three months ended June 30, 2000 and
$144,074 for the same period in 1999 resulting in a $26,479 increase, or 18%.
The increase was due to additional well maintenance costs incurred to stimulate
well production and higher production taxes due to higher oil and gas prices.
During this period, G&A increased, in aggregate, 69%, from $6,956 for the three
months ended June 30, 1999 to $11,787 for the same period in 2000 primarily due
to a higher allocation of the managing general partner's G&A being allocated
(limited to 3% of oil and gas revenues) as a result of increased oil and gas
revenues.
Depletion was $23,496 for the three months ended June 30, 2000 compared to
$36,312 for the same period in 1999, a decrease of $12,816, or 35%. This
decrease was primarily attributable to an increase in proved reserves during the
period ended June 30, 2000 as a result of higher commodity prices and a decline
in oil production of 298 barrels for the three months ended June 30, 2000
compared to the same period in 1999.
9
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Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $320,255 during the six
months ended June 30, 2000 from the same period ended June 30, 1999. This
increase was due to an increase in oil and gas sale receipts of $387,729, offset
by increases in operating costs paid of $47,535 and G&A expenses paid of
$19,939.
Net Cash Used in Investing Activities
The Partnership's investing activities during the six months ended June 30, 2000
and 1999 were related to expenditures for upgrades of oil and gas equipment on
active properties.
Proceeds from disposition of assets of $4,846 recognized during the six months
ended June 30, 2000 consisted of $2,250 from equipment credits on one fully
depleted well and $2,596 from equipment credits on an active property. Proceeds
of $609 recognized during the six months ended June 30, 1999 resulted from
equipment credits on active properties.
Net Cash Used in Financing Activities
For the six months ended June 30, 2000, cash distributions to the partners were
$408,087, of which $4,081 was distributed to the managing general partner and
$404,006 to the limited partners. For the same period ended June 30, 1999, cash
distributions to the partners were $113,733, of which $1,137 was distributed to
the managing general partner and $112,596 to the limited partners.
---------------
(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
27.1 Financial Data Schedule
(b) Reports on Form 8-K - none
10
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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: August 7, 2000 By: /s/ Rich Dealy
--------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
11
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