PARKER & PARSLEY 86-C LTD
10-Q, 1996-05-15
CRUDE PETROLEUM & NATURAL GAS
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                                  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, 1996, 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 14 pages.
                             There are no exhibits.


<PAGE>



                           PARKER & PARSLEY 86-C, LTD.
                          (A Texas Limited Partnership)

                          PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

                                 BALANCE SHEETS

                                                     March 31,    December 31,
                                                       1996           1995
                                                   ------------   ------------
                                                   (Unaudited)
               ASSETS

Current assets:
 Cash and cash equivalents, including
  interest bearing deposits of $87,233 at
  March 31 and $73,587 at December 31              $     87,914   $     73,796
 Accounts receivable - oil and gas sales                175,697        151,051
                                                    -----------    -----------
     Total current assets                               263,611        224,847

Oil and gas properties - at cost, based
 on the successful efforts accounting
 method                                              15,570,399     15,562,115
  Accumulated depletion                             (11,470,554)   (11,373,411)
                                                    -----------    -----------
     Net oil and gas properties                       4,099,845      4,188,704
                                                    -----------    -----------
                                                   $  4,363,456   $  4,413,551
                                                    ===========    ===========
  LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
 Accounts payable - affiliate                      $    116,495   $    113,085
Partners' capital:
 Limited partners (19,317 interests)                  4,205,799      4,258,769
 Managing general partner                                41,162         41,697
                                                    -----------    -----------
                                                      4,246,961      4,300,466
                                                    -----------    -----------
                                                   $  4,363,456   $  4,413,551
                                                    ===========    ===========

         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.

                                        2


<PAGE>



                      PARKER & PARSLEY 86-C, LTD.
                     (A Texas Limited Partnership)

                       STATEMENTS OF OPERATIONS
                              (Unaudited)


                                                         Three months ended
                                                              March 31,
                                                         1996          1995
                                                      ----------    ----------
Revenues:
 Oil and gas sales                                   $  390,535    $  384,522
 Interest income                                          1,306         1,669
 Salvage income from equipment disposals                 28,740            -
                                                      ---------     ---------
     Total revenues                                     420,581       386,191

Costs and expenses:
 Production costs                                       227,200       208,503
 General and administrative expenses                     11,716        11,536
 Depletion                                               97,143       175,205
 Abandoned property costs                                21,351            -
                                                      ---------     ---------
     Total costs and expenses                           357,410       395,244
                                                      ---------     ---------
Net income (loss)                                    $   63,171    $   (9,053)
                                                      =========     =========
Allocation of net income (loss):
 Managing general partner                            $      632    $      (90)
                                                      =========     =========

 Limited partners                                    $   62,539    $   (8,963)
                                                      =========     =========
Net income (loss) per limited
 partnership interest                                $     3.24    $     (.46)
                                                      =========     =========
Distributions per limited
 partnership interest                                $     5.98    $     9.12
                                                      =========     =========

         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.

                                        3


<PAGE>



                           PARKER & PARSLEY 86-C, LTD.
                          (A Texas Limited Partnership)

                         STATEMENTS OF PARTNERS' CAPITAL
                                   (Unaudited)



                                        Managing
                                        general      Limited
                                        partner      partners        Total
                                      -----------   -----------   -----------


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
                                       ==========    ==========    ==========


Balance at January 1, 1996            $    41,697   $ 4,258,769   $ 4,300,466

Distributions                              (1,167)     (115,509)     (116,676)

Net income                                    632        62,539        63,171
                                       ----------    ----------    ----------
Balance at March 31, 1996             $    41,162   $ 4,205,799   $ 4,246,961
                                       ==========    ==========    ==========



         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


<PAGE>



                           PARKER & PARSLEY 86-C, LTD.
                          (A Texas Limited Partnership)

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                       Three months ended
                                                            March 31,
                                                       1996           1995
                                                    ----------     ----------
Cash flows from operating activities:
 Net income (loss)                                  $   63,171     $   (9,053)
 Adjustments to reconcile net income
  (loss) to net cash provided by
  operating activities:
   Depletion                                            97,143        175,205
   Salvage income from equipment disposals             (28,740)            -
 Changes in assets and liabilities:
 (Increase) decrease in accounts receivable            (24,646)         2,778
  Increase in accounts payable                          22,229         28,283
                                                     ---------      ---------
    Net cash provided by operating
     activities                                        129,157        197,213

Cash flows from investing activities:
 Proceeds from salvage income on equipment
  disposals                                             28,740             -
 (Additions) disposals of oil and gas
   properties                                          (27,103)        10,055
                                                     ---------      ---------
    Net cash provided by investing
     activities                                          1,637         10,055

Cash flows from financing activities:
 Cash distributions to partners                       (116,676)      (178,035)
                                                     ---------      ---------
Net increase in cash and cash equivalents               14,118         29,233
Cash and cash equivalents at beginning
 of period                                              73,796         67,305
                                                     ---------      ---------
Cash and cash equivalents at end of period          $   87,914     $   96,538
                                                     =========      =========

          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


<PAGE>




                           PARKER & PARSLEY 86-C, LTD.
                          (A Texas Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1996
                                   (Unaudited)


NOTE 1.

Parker  &  Parsley  86-C,  Ltd.  (the  "Registrant")  is a  limited  partnership
organized in 1986 under the laws of the State of Texas.

The Registrant  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.

In the opinion of management, the unaudited financial statements as of March 31,
1996 of 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,  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  Registrant's  Report on Form
10-K for the year ended  December 31,  1995,  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 3.

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  Parker  &  Parsley
Development L.P. ("PPDLP").   The May 25, 1993 settlement agreement called for a

                                        6

<PAGE>



payment  of  $115  million  in  cash  by  the  defendants,  and  Southmark,  the
Registrant,  and the other  plaintiffs  indemnified  the defendants  against the
claims of Jack N.  Price.  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.

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 was without  merit and has  vigorously  defended it,
PPDLP  has held in  reserve  approximately  12.5% of the total  settlement  (the
"Reserve") pending final resolution of the litigation.

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  of $6,972,477,  or $360.95 per limited  partnership  interest,  in
September 1993. The allocation of the lawsuit settlement amount was based on the
original  verdict  entered on October 26, 1990.  The  allocation  to the working
interest  owners in each well (including the Registrant) was based on a ratio of
the relative  amount of damages due to  overcharges  for services and  materials
("Materials") and damages for loss of past and future production ("Production"),
each as determined in that initial judgment. Within the Registrant,  damages for
Materials  were allocated  between the partners based on their original  sharing
percentages for costs of acquiring and/or drilling of wells. Similarly,  damages
related to Production were allocated to the partners in the Registrant  based on
their respective share of revenues from the subject wells.

As a condition of the purchase by Parker & Parsley Petroleum Company of Parker &
Parsley Development Company ("PPDC"),  which was merged into PPDLP on January 1,
1995,  from its former  parent in May 1989,  PPDC's  interest in the lawsuit and
subsequent  settlement was retained by the former parent.  Consequently,  all of
PPDC's share of the settlement  related to its separately  held interests in the
wells and its partnership  interests in the sponsored  partnerships (except that
portion allocable to interests  acquired by PPDC after May 1989) was paid to the
former parent.

On September  20,  1995,  the Beaumont  trial judge  entered a summary  judgment
against Southmark for the $13,790,000  contingent fee sought by Price,  together
with prejudgment interest,  and also awarded Price an additional  $5,498,525  in

                                        7

<PAGE>



attorneys'  fees. On January 22, 1996, the trial judge entered an  interlocutory
summary judgment  against Dresser  Industries and Baker Hughes for an amount yet
to be  determined.  Pursuant to their  indemnity  obligations,  the  Registrant,
Southmark,  PPDLP and other original  plaintiffs have  vigorously  protected the
rights of both Dresser and Baker Hughes.  Southmark has  vigorously  pursued its
appeal of the judgment,  and has posted a supersedeas  bond using the Reserve as
collateral. On April 29, 1996, all of the parties,  including the Registrant and
Southmark,  entered  into a $7.4 million  settlement  with Price which fully and
finally  resolves  all of the  litigation  and  disputes  between  the  parties,
including the Registrant's indemnity obligations to Dresser and Baker Hughes.

Pursuant to the settlement agreement,  all of the pending lawsuits and judgments
will be dismissed,  the supersedeas  bond released,  and the Reserve released as
collateral.  It is  expected  that  before  the end of the  third  quarter,  the
necessary dismissals and releases will be effected, the managing general partner
will conduct an accounting of income and expenses among the parties, and a final
distribution  will  be  made  to the  working  interest  owners,  including  the
Registrant and its partners.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS(1)

The  Registrant  was formed  December  30,  1986.  On January 1, 1995,  Parker &
Parsley Development L.P. ("PPDLP"), a Texas limited partnership, became the sole
managing general partner of the Registrant, by acquiring the rights and assuming
the obligations of Parker & Parsley Development Company ("PPDC"). 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 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  $16,048,823 in various prospects
that were drilled in Texas.  Four wells have been abandoned due to  uneconomical
operations;  one in 1992,  one in 1995 and two in 1996.  At March 31, 1996,  the
Registrant had 56 producing oil and gas wells.


                                        8

<PAGE>



Results of Operations

Revenues:

The  Registrant's  oil and gas revenues  increased to $390,535 from $384,522 for
the three  months ended March 31, 1996 and 1995,  respectively.  The increase in
revenues  resulted from a 10% increase in the average price  received per barrel
of oil, a 9%  increase  in the average  price  received  per mcf of gas and a 4%
increase in mcf of gas produced and sold,  offset by a 13% decline in barrels of
oil produced and sold. For the three months ended March 31, 1996, 13,477 barrels
of oil were sold  compared to 15,460 for the same period in 1995,  a decrease of
1,983 barrels. For the three months ended March 31, 1996, 64,863 mcf of gas were
sold  compared to 62,425 for the same period in 1995,  an increase of 2,438 mcf.
The  decrease  in oil  production  volumes  was  primarily  due  to the  decline
characteristics of the Registrant's oil and gas properties.  The increase in gas
production  volumes  was the result of  operational  changes  on several  wells.
Management expects a certain amount of decline in production in the future until
the Registrant's economically recoverable reserves are fully depleted.

The average price received per barrel of oil increased $1.77 from $17.20 for the
three  months  ended  March 31, 1995 to $18.97 for the same period in 1996 while
the average price  received per mcf of gas increased from $1.90 during the three
months  ended March 31, 1995 to $2.08 in 1996.  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, 1996.

Salvage income totaling $28,740 was received during the three months ended March
31,  1996,  attributable  to credits  received  from the disposal of oil and gas
equipment on one fully depleted well.

Costs and Expenses:

Total costs and expenses  decreased to $357,410 for the three months ended March
31,  1996 as compared  to  $395,244  for the same period in 1995,  a decrease of
$37,834,  or 10%.  This  decrease was due to a decline in  depletion,  offset by
increases in production costs,  general and administrative  expenses ("G&A") and
abandoned property costs.

                                        9

<PAGE>



Production  costs were  $227,200  for the three  months ended March 31, 1996 and
$208,503 for the same period in 1995,  resulting in an $18,697 increase,  or 9%.
This increase was the result of  additional  well repair and  maintenance  costs
incurred in an effort to stimulate well production.

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,  from $11,536 for the three months ended
March 31, 1995 to $11,716 for the same period in 1996. The Partnership agreement
limits G&A to 3% of gross oil and gas revenues.

Depletion  was $97,143  for the three  months  ended March 31, 1996  compared to
$175,205 for the same period in 1995.  This  represented a decrease in depletion
of $78,062, or 45%, primarily  attributable to the adoption of the provisions of
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of"
effective  for the fourth  quarter of 1995 and the  reduction of net  depletable
basis resulting from the charge taken upon such adoption. Depletion was computed
property-by-property  utilizing  the  unit-of-production  method  based upon the
dominant mineral produced, generally oil. Oil production decreased 1,983 barrels
for the three  months  ended March 31, 1996 from the same period in 1995,  while
oil reserves of barrels were revised downward by 34,442 barrels, or 5%.

Abandoned  property  costs  during the three months ended March 31, 1996 totaled
$21,351.  These  costs  were  incurred  in  association  with the  plugging  and
abandonment of two uneconomical wells. There was no abandonment activity for the
same period in 1995.

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 PPDLP. The May 25, 1993
settlement  agreement  called  for a  payment  of  $115  million  in cash by the
defendants,  and Southmark, the Registrant, and the other plaintiffs indemnified
the defendants against the claims of Jack N. Price. 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.


                                       10

<PAGE>



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 was without  merit and has  vigorously  defended it,
PPDLP  has held in  reserve  approximately  12.5% of the total  settlement  (the
"Reserve") pending final resolution of the litigation.

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  of $6,972,477,  or $360.95 per limited  partnership  interest,  in
September 1993. The allocation of the lawsuit settlement amount was based on the
original  verdict  entered on October 26, 1990.  The  allocation  to the working
interest  owners in each well (including the Registrant) was based on a ratio of
the relative  amount of damages due to  overcharges  for services and  materials
("Materials") and damages for loss of past and future production ("Production"),
each as determined in that initial judgment. Within the Registrant,  damages for
Materials  were allocated  between the partners based on their original  sharing
percentages for costs of acquiring and/or drilling of wells. Similarly,  damages
related to Production were allocated to the partners in the Registrant  based on
their respective share of revenues from the subject wells.

As a condition  of the purchase by Parker & Parsley  Petroleum  Company of PPDC,
which was merged  into PPDLP on January 1, 1995,  from its former  parent in May
1989,  PPDC's interest in the lawsuit and subsequent  settlement was retained by
the former parent.  Consequently,  all of PPDC's share of the settlement related
to its separately held interests in the wells and its  partnership  interests in
the sponsored  partnerships (except that portion allocable to interests acquired
by PPDC after May 1989) was paid to the former parent.

On September  20,  1995,  the Beaumont  trial judge  entered a summary  judgment
against Southmark for the $13,790,000  contingent fee sought by Price,  together
with prejudgment  interest,  and also awarded Price an additional  $5,498,525 in
attorneys'  fees. On January 22, 1996, the trial judge entered an  interlocutory
summary judgment  against Dresser  Industries and Baker Hughes for an amount yet
to be  determined.  Pursuant to their  indemnity  obligations,  the  Registrant,
Southmark,  PPDLP and other original  plaintiffs have  vigorously  protected the
rights of both Dresser and Baker Hughes.  Southmark has  vigorously  pursued its
appeal of the judgment,  and has posted a supersedeas  bond using the Reserve as
collateral. On April 29, 1996, all of the parties,  including the Registrant and

                                       11

<PAGE>



Southmark,  entered  into a $7.4 million  settlement  with Price which fully and
finally  resolves  all of the  litigation  and  disputes  between  the  parties,
including the Registrant's indemnity obligations to Dresser and Baker Hughes.

Pursuant to the settlement agreement,  all of the pending lawsuits and judgments
will be dismissed,  the supersedeas  bond released,  and the Reserve released as
collateral.  It is  expected  that  before  the end of the  third  quarter,  the
necessary dismissals and releases will be effected, the managing general partner
will conduct an accounting of income and expenses among the parties, and a final
distribution  will  be  made  to the  working  interest  owners,  including  the
Registrant and its partners.

Liquidity and Capital Resources

Net Cash Provided by Operating Activities:

Net cash  provided by operating  activities  decreased to $129,157 for the three
months ended March 31, 1996, a 35% decrease from the same period ended March 31,
1995.  This  decrease  was due to a decline  in oil and gas sales  receipts  and
increases in expenditures  for production  costs,  abandoned  property costs and
G&A.  The  decrease  in oil and gas sales  receipts  was due to a decline in the
barrels of oil produced and sold. The increase in production  cost  expenditures
was due to additional  well repair and  maintenance  costs.  Abandoned  property
costs increased  during the three months ended March 31, 1996 as a result of the
plugging and  abandonment of two wells,  as compared to no abandonment  activity
during the same  period in 1995.  The  increase in G&A was due to an increase in
allocated expenses by the managing general partner.

Net Cash Provided by Investing Activities:

The Registrant's  investing  activities  during the three months ended March 31,
1996 included $27,103 in expenditures related to repair and maintenance activity
on various oil and gas properties.  Proceeds of $10,055 were received during the
three months ended March 31, 1995 from the disposal of oil and gas  equipment on
active properties.

Proceeds of $28,740  received from salvage  income during the three months ended
March 31, 1996 were derived  from the  disposal of oil and gas  equipment on one
fully depleted well.

Net Cash Used in Financing Activities:

Cash  was  sufficient  for the  three  months  ended  March  31,  1996 to  cover
distributions  to  the partners of $116,676 of which $115,509 was distributed to

                                       12

<PAGE>



the limited partners and $1,167 to the managing  general  partner.  For the same
period  ended March 31,  1995,  cash was  sufficient  for  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.

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 1.  LEGAL PROCEEDINGS

The Registrant is a party to material litigation which is described in Note 3 of
Notes to Financial Statements above.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits - none

(b)  Reports on Form 8-K - none


                                       13

<PAGE>


                           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 14, 1996        By: /s/ Steven L. Beal
                              ----------------------------------------
                               Steven L. Beal, Senior Vice
                                President and Chief Financial
                                Officer of PPUSA


                                       14

<PAGE>




<TABLE> <S> <C>

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<CIK> 0000789791
<NAME> 86C.TXT
       
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