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 September 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
---------------------------------------------------------------- ---------
(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 September 30, 2000 and
December 31, 1999.................................... 3
Statements of Operations for the three and nine
months ended September 30, 2000 and 1999.............. 4
Statement of Partners' Capital for the nine months
ended September 30, 2000.............................. 5
Statements of Cash Flows for the nine months ended
September 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
<TABLE>
BALANCE SHEETS
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 237,884 $ 206,408
Accounts receivable - oil and gas sales 233,224 179,740
----------- -----------
Total current assets 471,108 386,148
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 12,061,383 12,044,833
Accumulated depletion (10,248,696) (10,164,543)
----------- -----------
Net oil and gas properties 1,812,687 1,880,290
----------- -----------
$ 2,283,795 $ 2,266,438
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 51,200 $ 29,193
Partners' capital:
Managing general partner 21,050 21,096
Limited partners (17,208 interests) 2,211,545 2,216,149
----------- -----------
2,232,595 2,237,245
----------- -----------
$ 2,283,795 $ 2,266,438
=========== ===========
</TABLE>
The financial information included as of September 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>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- -----------------------
2000 1999 2000 1999
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas $ 470,780 $ 307,914 $1,265,828 $ 715,163
Interest 5,054 2,686 12,449 6,991
Gain on disposition of assets 1,255 - 3,505 -
-------- -------- --------- --------
477,089 310,600 1,281,782 722,154
-------- -------- --------- --------
Costs and expenses:
Oil and gas production 169,022 139,246 508,686 432,937
General and administrative 14,124 9,238 37,975 21,455
Depletion 26,659 32,312 84,153 142,407
-------- -------- --------- --------
209,805 180,796 630,814 596,799
-------- -------- --------- --------
Net income $ 267,284 $ 129,804 $ 650,968 $ 125,355
======== ======== ========= ========
Allocation of net income:
Managing general partner $ 2,673 $ 1,298 $ 6,510 $ 1,254
======== ======== ========= ========
Limited partners $ 264,611 $ 128,506 $ 644,458 $ 124,101
======== ======== ========= ========
Net income per limited
partnership interest $ 15.38 $ 7.47 $ 37.45 $ 7.21
======== ======== ========= ========
</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>
<CAPTION>
Managing
general Limited
partner partners Total
---------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1, 2000 $ 21,096 $2,216,149 $2,237,245
Distributions (6,556) (649,062) (655,618)
Net income 6,510 644,458 650,968
--------- --------- ---------
Balance at September 30, 2000 $ 21,050 $2,211,545 $2,232,595
========= ========= =========
</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
<PAGE>
PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 650,968 $ 125,355
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 84,153 142,407
Gain on disposition of assets (3,505) -
Changes in assets and liabilities:
Accounts receivable (53,484) (50,350)
Accounts payable 22,007 27,359
--------- ---------
Net cash provided by operating activities 700,139 244,771
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (19,146) (3,630)
Proceeds from asset dispositions 6,101 609
--------- ---------
Net cash used in investing activities (13,045) (3,021)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (655,618) (215,435)
--------- ---------
Net increase in cash 31,476 26,315
Cash at beginning of period 206,408 185,320
--------- ---------
Cash at end of period $ 237,884 $ 211,635
========= =========
</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
<PAGE>
PARKER & PARSLEY 86-B, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 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 September 30, 2000 and for the three and nine months ended
September 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 September 30, 1999 financial statements to conform to
the September 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
Nine months ended September 30, 2000 compared with nine months ended September
30, 1999
Revenues:
The Partnership's oil and gas revenues increased 77% to $1,265,828 for the nine
months ended September 30, 2000 as compared to $715,163 for the same period in
1999. The increase in revenues resulted from higher average prices received,
7
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offset by a decrease in production. For the nine months ended September 30,
2000, 31,100 barrels of oil, 15,890 barrels of natural gas liquids ("NGLs") and
61,540 mcf of gas were sold, or 57,247 barrel of oil equivalents ("BOEs"). For
the nine months ended September 30, 1999, 30,744 barrels of oil, 16,814 barrels
of NGLs and 65,111 mcf of gas were sold, or 58,410 BOEs.
The average price received per barrel of oil increased $13.29, or 87%, from
$15.30 for the nine months ended September 30, 1999 to $28.59 for the same
period in 2000. The average price received per barrel of NGLs increased $5.97,
or 73%, from $8.16 during the nine months ended September 30, 1999 to $14.13 for
the same period in 2000. The average price received per mcf of gas increased 50%
from $1.65 for the nine months ended September 30, 1999 to $2.47 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 nine months ended September 30, 2000.
A gain on disposition of assets of $3,505 was received during the nine months
ended September 30, 2000 due to equipment credits received on one well.
Costs and Expenses:
Total costs and expenses increased to $630,814 for the nine months ended
September 30, 2000 as compared to $596,799 for the same period in 1999, an
increase of $34,015, or 6%. 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 $508,686 for the nine months ended September 30, 2000 and
$432,937 for the same period in 1999, resulting in a $75,749 increase, or 17%.
The increase was primarily due to higher production taxes of $43,823 associated
with higher oil and gas prices and additional well maintenance costs of $29,222
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, 77% from $21,455 for the nine months ended September
30, 1999 to $37,975 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 $84,153 for the nine months ended September 30, 2000 compared to
$142,407 for the same period in 1999, representing a decrease of $58,254, or
41%. This decrease was attributable to an increase in proved reserves as a
result of higher commodity prices as compared to the same period in 1999, offset
by an increase in oil production of 356 barrels for the nine months ended
September 30, 2000 compared to the same period in 1999.
8
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Three months ended September 30, 2000 compared with three months ended September
30, 1999
Revenues:
The Partnership's oil and gas revenues increased 53% to $470,780 for the three
months ended September 30, 2000 as compared to $307,914 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 September 30,
2000, 10,509 barrels of oil, 5,484 barrels of NGLs and 20,505 mcf of gas were
sold, or 19,411 BOEs. For the three months ended September 30, 1999, 10,385
barrels of oil, 6,039 barrels of NGLs and 23,109 mcf of gas were sold, or 20,276
BOEs.
The average price received per barrel of oil increased $11.31, or 59%, from
$19.27 for the three months ended September 30, 1999 to $30.58 for the same
period in 2000. The average price received per barrel of NGLs increased $5.01,
or 48%, from $10.46 during the three months ended September 30, 1999 to $15.47
for the same period in 2000. The average price received per mcf of gas increased
63% from $1.93 during the three months ended September 30, 1999 to $3.15 for the
same period in 2000.
A gain on disposition of assets of $1,255 was received during the three months
ended September 30, 2000 due to equipment credits received on one well.
Costs and Expenses:
Total costs and expenses increased to $209,805 for the three months ended
September 30, 2000 as compared to $180,796 for the same period in 1999, an
increase of $29,009, or 16%. This increase was due to increases in production
costs and G&A, offset by a decline in depletion.
Production costs were $169,022 for the three months ended September 30, 2000 and
$139,246 for the same period in 1999, resulting in a $29,776 increase, or 21%.
The increase was primarily due to higher production taxes of $16,647 associated
with higher oil and gas prices and additional well maintenance costs of $8,990
incurred to stimulate well production.
During this period, G&A increased, in aggregate, 53% from $9,238 for the three
months ended September 30, 1999 to $14,124 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 $26,659 for the three months ended September 30, 2000 compared to
$32,312 for the same period in 1999, representing a decrease of $5,653, or 17%.
This decrease was attributable to an increase in proved reserves as a result of
higher commodity prices as compared to the same period in 1999, offset by an
increase in oil production of 124 barrels for the three months ended September
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 $455,368 during the nine
months ended September 30, 2000 from the same period ended September 30, 1999.
This increase was due to an increase in oil and gas sales receipts of $552,989,
offset by increases in production costs paid of $73,551 and G&A expenses paid of
$24,070.
Net Cash Used in Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2000 and 1999 were related to upgrades of oil and gas equipment on various
oil and gas properties.
Proceeds from disposition of assets of $6,101 recognized during the nine months
ended September 30, 2000 consisted of equipment credits on two wells. Proceeds
of $609 received during the nine months ended September 30, 1999 were due to
equipment credits on one well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2000, cash distributions to the partners
were $655,618, of which $6,556 was distributed to the managing general partner
and $649,062 to the limited partners. For the same period ended September 30,
1999, cash distributions to the partners were $215,435, of which $2,154 was
distributed to the managing general partner and $213,281 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: November 13, 2000 By: /s/ Rich Dealy
-----------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
11
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