<PAGE> 1
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, 1995, 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. 33-3353C
PARKER & PARSLEY 86-C, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2142283
(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.
There are no exhibits.
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PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including
interest bearing deposits of $92,198 at
March 31 and $67,192 at December 31 $ 96,538 $ 67,305
Accounts receivable - oil and gas sales 161,354 164,132
----------- -----------
Total current assets 257,892 231,437
Oil and gas properties - at cost, based
on the successful efforts accounting
method 15,850,649 15,864,179
Accumulated depletion (10,221,264) (10,046,059)
----------- -----------
Net oil and gas properties 5,629,385 5,818,120
----------- -----------
$ 5,887,277 $ 6,049,557
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 118,851 $ 94,043
Partners' capital:
Limited partners (19,317 interests) 5,712,049 5,897,267
Managing general partner 56,377 58,247
----------- -----------
5,768,426 5,955,514
----------- -----------
$ 5,887,277 $ 6,049,557
=========== ===========
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 statements.
2
<PAGE> 3
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Revenues:
Oil and gas sales $ 384,522 $ 342,227
Interest income 1,669 705
Salvage income from abandoned property - 209
--------- ---------
Total revenues 386,191 343,141
Costs and expenses:
Production costs 208,503 216,003
General and administrative expenses 11,536 10,099
Depletion 175,205 193,106
--------- ---------
Total costs and expenses 395,244 419,208
--------- ---------
Net loss $ (9,053) $ (76,067)
========= =========
Allocation of net loss:
Managing general partner $ (90) $ (761)
========= =========
Limited partners $ (8,963) $ (75,306)
========= =========
Net loss per limited
partnership interest $ (.46) $ (3.90)
========= =========
Distributions per limited
partnership interest $ 9.12 $ 7.92
========= =========
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 statements.
3
<PAGE> 4
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 1994 $ 65,329 $ 6,598,251 $ 6,663,580
Distributions (1,545) (152,946) (154,491)
Net loss (761) (75,306) (76,067)
---------- ---------- ----------
Balance at March 31, 1994 $ 63,023 $ 6,369,999 $ 6,433,022
========== ========== ==========
Balance at January 1, 1995 $ 58,247 $ 5,897,267 $ 5,955,514
Distributions (1,780) (176,255) (178,035)
Net loss (90) (8,963) (9,053)
---------- ---------- ----------
Balance at March 31, 1995 $ 56,377 $ 5,712,049 $ 5,768,426
========== ========== ==========
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 statements.
4
<PAGE> 5
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Cash flows from operating activities:
Net loss $ (9,053) $ (76,067)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depletion 175,205 193,106
Salvage income from abandoned property - (209)
Changes in assets and liabilities:
Decrease in accounts receivable 2,778 16,845
Increase in accounts payable 28,283 9,801
--------- ---------
Net cash provided by operating activities 197,213 143,476
Cash flows from investing activities:
Proceeds from equipment salvage on
abandoned property - 209
(Additions) disposals of oil and gas
properties 10,055 (355)
--------- ---------
Net cash provided by (used in)
investing activities 10,055 (146)
Cash flows from financing activities:
Cash distributions to partners (178,035) (154,491)
--------- ---------
Net increase (decrease) in cash and
cash equivalents 29,233 (11,161)
Cash and cash equivalents at beginning
of period 67,305 149,143
--------- ---------
Cash and cash equivalents at end of period $ 96,538 $ 137,982
========= =========
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 statements.
5
<PAGE> 6
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
(Unaudited)
NOTE 1.
In the opinion of management, the unaudited financial statements as of
March 31, 1995 of Parker & Parsley 86-C, Ltd. (the "Registrant") 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, the results of operations for the
three months ended March 31, 1995 are not necessarily indicative of the
results for the full year ending December 31, 1995.
The financial statements should be read in conjunction with the
financial statements and the notes thereto contained in the Registrant's
Report on Form 10-K for the year ended December 31, 1994, 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.
NOTE 2.
On May 25, 1993, a final settlement agreement was negotiated, drafted
and finally executed, ending litigation which had begun on September 5,
1989, when the Registrant filed suit along with other parties against
Dresser Industries, Inc.; Titan Services, Inc.; BJ-Titan Services
Company; BJ-Hughes Holding Company; Hughes Tool Company; Baker Hughes
Production Tools, Inc.; and Baker Hughes Incorporated alleging that the
defendants had intentionally failed to provide the materials and
services ordered and paid for by the Registrant and other parties in
connection with the fracturing and acidizing of 523 wells, and then
fraudulently concealed the shorting practice from the managing general
partner, Parker & Parsley Development L.P. ("PPDLP") (see Item 2). The
May 25, 1993 settlement agreement called for a payment of $115 million
in cash by the defendants. The managing general partner received the
funds, deducted incurred legal expenses, accrued interest, determined
the general partner's portion of the funds and calculated any inter-
partnership allocations. A distribution of $91,000,000 was made to the
6
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working interest owners, including the Registrant, on July 30, 1993.
The limited partners received their distribution in 1993 of $6,972,477,
or $360.95 per limited partnership interest.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G.
"Zeke" Lancaster in the Federal Court lawsuit, filed suit in State Court
in Beaumont against all of the plaintiff partnerships, including the
Registrant and others, alleging his entitlement to 12% of the settlement
proceeds. Price's lawsuit claim for approximately $13.8 million is
predicated on a purported contract entered into with Southmark
Corporation in August 1988, in which he allegedly binds the Registrant
and the other defendants, as well as Southmark. Although PPDLP believes
the lawsuit is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Registrant was formed December 30, 1986. The managing general
partner of the Registrant at December 31, 1994 was Parker & Parsley
Development Company ("PPDC"). On January 1, 1995, PPDLP, a Texas
limited partnership, became the sole managing general partner of the
Registrant, by acquiring the rights and assuming the obligations of
PPDC. PPDC was merged into PPDLP on January 1, 1995. PPDLP acquired
PPDC's rights and obligations as managing general partner of the
Registrant in connection with the merger of PPDC, P&P Producing, Inc.
and Spraberry Development Corporation into MidPar L.P., which survived
the merger with a change of name to PPDLP. The sole general partner of
PPDLP is Parker & Parsley Petroleum USA, Inc. PPDLP has the power and
authority to manage, control and administer all Program and Registrant
affairs. The limited partners contributed $19,317,000 representing
19,317 interests ($1,000 per interest) sold to a total of 1,466 limited
partners.
Since its formation, the Registrant invested $16,057,613 in various
prospects that were drilled in Texas. At March 31, 1995, the Registrant
had 59 producing oil and gas wells and one well was abandoned in 1992.
7
<PAGE> 8
Results of Operations
Revenues:
The Registrant's oil and gas revenues increased to $384,522 from
$342,227 for the three months ended March 31, 1995 and 1994,
respectively, an increase of 12%. The increase in revenues resulted
from a 28% increase in the average price received per barrel of oil and
a 9% increase in the average price received per mcf of gas, offset by a
5% decrease in barrels of oil produced and sold and an 11% decrease in
mcf of gas produced and sold. For the three months ended March 31,
1995, 15,460 barrels of oil were sold compared to 16,290 for the same
period in 1994, a decrease of 830 barrels. For the three months ended
March 31, 1995, 62,425 mcf of gas were sold compared to 70,527 for the
same period in 1994, a decrease of 8,102 mcf. The decreases in
production volumes were primarily due to the decline characteristics of
the Registrant's oil and gas properties. Because of these characteris-
tics, management expects a certain amount of decline in production to
continue in the future until the Registrant's economically recoverable
reserves are fully depleted.
The average price received per barrel of oil increased $3.73 from $13.47
for the three months ended March 31, 1994 to $17.20 for the same period
in 1995 while the average price received per mcf of gas increased from
$1.74 during the three months ended March 31, 1994 to $1.90 in 1995.
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 Registrant 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, 1995.
Costs and Expenses:
Total costs and expenses decreased to $395,244 for the three months
ended March 31, 1995 as compared to $419,208 for the same period in
1994, a decrease of $23,964, or 6%. This decrease was due to declines
in production costs and depletion, offset by an increase in general and
administrative expenses ("G&A").
Production costs were $208,503 for the three months ended March 31, 1995
and $216,003 for the same period in 1994, resulting in a $7,500
decrease, or 3%. This decrease was the result of slight declines in well
repair and maintenance costs and ad valorem taxes, offset by a slight
increase in production taxes due to increased oil and gas revenues.
8
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G&A's components are independent accounting and engineering fees,
computer services, postage and managing general partner personnel costs.
During this period, G&A increased, in aggregate, 14% from $10,099 for
the three months ended March 31, 1994 to $11,536 for the same period in
1995. The Partnership agreement limits G&A to 3% of gross oil and gas
revenues.
Depletion was $175,205 for the three months ended March 31, 1995
compared to $193,106 for the same period in 1994. This represented a
decrease in depletion of $17,901, or 9%. Depletion was computed
property-by-property utilizing the unit-of-production method based upon
the dominant mineral produced, generally oil. Oil production decreased
830 barrels for the three months ended March 31, 1995 from the same
period in 1994, while oil reserves of barrels were revised downward by
61,421 barrels, or 7%.
On May 25, 1993, a final settlement agreement was negotiated, drafted
and finally executed, ending litigation which had begun on September 5,
1989, when the Registrant filed suit along with other parties against
Dresser Industries, Inc.; Titan Services, Inc.; BJ-Titan Services
Company; BJ-Hughes Holding Company; Hughes Tool Company; Baker Hughes
Production Tools, Inc.; and Baker Hughes Incorporated alleging that the
defendants had intentionally failed to provide the materials and
services ordered and paid for by the Registrant and other parties in
connection with the fracturing and acidizing of 523 wells, and then
fraudulently concealed the shorting practice from the managing general
partner. The May 25, 1993 settlement agreement called for a payment of
$115 million in cash by the defendants. The managing general partner
received the funds, deducted incurred legal expenses, accrued interest,
determined the general partner's portion of the funds and calculated any
inter-partnership allocations. A distribution of $91,000,000 was made
to the working interest owners, including the Registrant, on July 30,
1993. The limited partners received their distribution in 1993 of
$6,972,477, or $360.95 per limited partnership interest.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G.
"Zeke" Lancaster in the Federal Court lawsuit, filed suit in State Court
in Beaumont against all of the plaintiff partnerships, including the
Registrant and others, alleging his entitlement to 12% of the settlement
proceeds. Price's lawsuit claim for approximately $13.8 million is
predicated on a purported contract entered into with Southmark
Corporation in August 1988, in which he allegedly binds the Registrant
and the other defendants, as well as Southmark. Although PPDLP believes
the lawsuit is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
9
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pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities:
Net cash provided by operating activities increased to $197,213 for the
three months ended March 31, 1995, a 37% increase from the same period
ended March 31, 1994. This increase was due to an increase in oil and
gas sales and a decrease in production costs, offset by an increase in
G&A. The increase in oil and gas sales was due to an increase in
average prices received per barrel of oil and mcf of gas, offset by a
decline in the barrels of oil and mcf of gas produced and sold. The
decrease in production costs was due to less well repair and maintenance
costs for the three months ended March 31, 1995 compared to the same
period in 1994. The increase in G&A was due to an increase in allocated
expenses by the managing general partner.
Net Cash Provided by (Used in) Investing Activities:
The Registrant's principal investing activities during the three months
ended March 31, 1995 were for repair and maintenance activity on various
oil and gas properties. Proceeds of $209 were received during the three
months ended March 31, 1994 from the equipment salvage of one property
abandoned in a prior year.
Net Cash Used in Financing Activities:
Cash was sufficient for the three months ended March 31, 1995 to cover
distributions to the partners of $178,035 of which $176,255 was
distributed to the limited partners and $1,780 to the managing general
partner. For the same period ended March 31, 1994, cash was sufficient
for distributions to the partners of $154,491 of which $152,946 was
distributed to the limited partners and $1,545 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.
10
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 25, 1993, a final settlement agreement was negotiated, drafted
and finally executed, ending litigation which had begun on September 5,
1989, when the Registrant filed suit along with other parties against
Dresser Industries, Inc.; Titan Services, Inc.; BJ-Titan Services
Company; BJ-Hughes Holding Company; Hughes Tool Company; Baker Hughes
Production Tools, Inc.; and Baker Hughes Incorporated alleging that the
defendants had intentionally failed to provide the materials and
services ordered and paid for by the Registrant and other parties in
connection with the fracturing and acidizing of 523 wells, and then
fraudulently concealed the shorting practice from the managing general
partner. The May 25, 1993 settlement agreement called for a payment of
$115 million in cash by the defendants. The managing general partner
received the funds, deducted incurred legal expenses, accrued interest,
determined the general partner's portion of the funds and calculated any
inter-partnership allocations. A distribution of $91,000,000 was made
to the working interest owners, including the Registrant, on July 30,
1993. The limited partners received their distribution in 1993 of
$6,972,477, or $360.95 per limited partnership interest.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G.
"Zeke" Lancaster in the Federal Court lawsuit, filed suit in State Court
in Beaumont against all of the plaintiff partnerships, including the
Registrant and others, alleging his entitlement to 12% of the settlement
proceeds. Price's lawsuit claim for approximately $13.8 million is
predicated on a purported contract entered into with Southmark
Corporation in August 1988, in which he allegedly binds the Registrant
and the other defendants, as well as Southmark. Although PPDLP believes
the lawsuit is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
11
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PARKER & PARSLEY 86-C, 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-C, LTD.
By: Parker & Parsley Development L.P.,
Managing General Partner
By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
Dated: May 12, 1995 By: /s/ Steven L. Beal
----------------------------------------
Steven L. Beal, Senior Vice
President - Finance and
Chief Financial Officer
of PPUSA
12
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<ARTICLE> 5
<CIK> 0000789791
<NAME> 86CL
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 96,538
<SECURITIES> 0
<RECEIVABLES> 163,354
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 257,892
<PP&E> 15,850,649
<DEPRECIATION> 10,221,264
<TOTAL-ASSETS> 5,887,177
<CURRENT-LIABILITIES> 118,851
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 5,768,426
<TOTAL-LIABILITY-AND-EQUITY> 5,887,277
<SALES> 384,522
<TOTAL-REVENUES> 386,191
<CGS> 0
<TOTAL-COSTS> 395,244
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,053)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,053)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,053)
<EPS-PRIMARY> (0.46)
<EPS-DILUTED> 0
</TABLE>
