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 June 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. 33-3353C
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.
Exhibit index on page 11.
<PAGE>
PARKER & PARSLEY 86-C, LTD.
TABLE OF CONTENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of June 30, 1997 and
December 31, 1996 .................................. 3
Statements of Operations for the three and six
months ended June 30, 1997 and 1996................... 4
Statement of Partners' Capital for the six months
ended June 30, 1997................................... 5
Statements of Cash Flows for the six months
ended June 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-C, LTD.
(A Texas Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
June 30, December 31,
1997 1996
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $170,842 at June 30
and $193,384 at December 31 $ 171,358 $ 205,207
Accounts receivable - oil and gas sales 161,401 265,255
------------ ------------
Total current assets 332,759 470,462
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 14,552,661 14,551,413
Accumulated depletion (11,007,174) (10,828,428)
------------ ------------
Net oil and gas properties 3,545,487 3,722,985
------------ ------------
$ 3,878,246 $ 4,193,447
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 41,641 $ 104,535
Partners' capital:
Managing general partner 37,058 39,581
Limited partners (19,317 interests) 3,799,547 4,049,331
------------ ------------
3,836,605 4,088,912
------------ ------------
$ 3,878,246 $ 4,193,447
============ ============
The financial information included as of June 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-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
1997 1996 1997 1996
--------- ---------- -------- ----------
Revenues:
Oil and gas $340,203 $ 415,925 $763,278 $ 806,460
Interest 3,537 1,845 6,576 3,151
Salvage income from
equipment disposal - - 14,656 28,740
Gain on sale of assets - 39,034 - 39,034
Litigation settlement - 704,864 - 704,864
------- --------- ------- ---------
343,740 1,161,668 784,510 1,582,249
------- --------- ------- ---------
Costs and expenses:
Oil and gas production 202,138 206,401 390,336 433,601
General and administrative 10,206 12,478 22,898 24,194
Depletion 85,514 86,010 178,746 183,153
Abandoned property - 6,572 - 27,923
------- --------- ------- ---------
297,858 311,461 591,980 668,871
------- --------- ------- ---------
Net income $ 45,882 $ 850,207 $192,530 $ 913,378
======= ========= ======= =========
Allocation of net income:
Managing general partner $ 459 $ 8,502 $ 1,925 $ 9,134
======= ======== ======= =========
Limited partners $ 45,423 $ 841,705 $190,605 $ 904,244
======= ========= ======= =========
Net income per limited
partnership interest $ 2.35 $ 43.57 $ 9.87 $ 46.81
======= ======== ======= ========
Distributions per limited
partnership interest $ 9.78 $ 44.12 $ 22.80 $ 50.10
======= ======== ======= ========
The financial information included herein has been prepared by
management without audit byindependent public accountants.
The accompanying notes are an integral part of these
financial statements.
4
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PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- ----------- ------------
Balance at January 1, 1997 $ 39,581 $ 4,049,331 $ 4,088,912
Distributions (4,448) (440,389) (444,837)
Net income 1,925 190,605 192,530
-------- ---------- -----------
Balance at June 30, 1997 $ 37,058 $ 3,799,547 $ 3,836,605
======== ========== ===========
The financial information included herein has been prepared by
management without audit byindependent public accountants.
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
-----------------------
1997 1996
---------- ----------
Cash flows from operating activities:
Net income $ 192,530 $ 913,378
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 178,746 183,153
Salvage income from equipment disposal (14,656) (28,740)
Gain on sale of assets - (39,034)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 103,854 (21,468)
Decrease in accounts payable (61,480) (25)
--------- ---------
Net cash provided by operating activities 398,994 1,007,264
--------- ---------
Cash flows from investing activities:
Proceeds from salvage income on equipment disposal 14,656 28,740
Proceeds from sale of assets - 39,318
Additions to oil and gas properties (2,662) (4,026)
--------- ---------
Net cash provided by investing activities 11,994 64,032
--------- ---------
Cash flows from financing activities:
Cash distributions to partners (444,837) (977,461)
--------- ---------
Net increase (decrease) in cash and cash equivalents (33,849) 93,835
Cash and cash equivalents at beginning of period 205,207 73,796
--------- ---------
Cash and cash equivalents at end of period $ 171,358 $ 167,631
========= =========
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-C, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
Note 1. Basis of presentation
In the opinion of management, the unaudited financial statements of Parker &
Parsley 86-C, Ltd. (the "Partnership") as of June 30, 1997 and for the three and
six months ended June 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
of operations 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, Controller, 303
West Wall, Suite 101, Midland, Texas 79701.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
Results of Operations
Six months ended June 30, 1997 compared with six months ended
June 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 5% to $763,278 from $806,460
for the six months ended June 30, 1997 as compared to the six months ended June
30, 1996. The decrease in revenues resulted from a 13% decrease in mcf of gas
produced and sold, a 7% decrease in barrels of oil produced and sold and a
decrease in the average price received per barrel of oil, offset by a 13%
increase in the average price received per mcf of gas. For the six months ended
June 30, 1997, 24,318 barrels of oil were sold compared to 26,147 for the same
period in 1996, a decrease of 1,829 barrels. For the six months ended June 30,
1997, 108,939 mcf of gas were sold compared to 125,693 for the same period in
1996, a decrease of 16,754 mcf. The decreases in production volumes were
primarily 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.
7
<PAGE>
The average price received per barrel of oil decreased slightly from $20.48 for
the six months ended June 30, 1996 to $20.40 for the same period in 1997, while
the average price received per mcf of gas increased from $2.16 during the six
months ended June 30, 1996 to $2.45 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 six months ended June 30, 1997.
Salvage income of $14,656 and $28,740 was received during the six months ended
June 30, 1997 and 1996, respectively, from the disposal of oil and gas equipment
on two fully depleted wells.
A gain of $39,034 from the sale of four oil and gas wells to Costilla Energy,
L.L.C. was recognized during the six months ended June 30, 1996.
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 $704,864, which included
$697,816, or $36.12 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $591,980 for the six months ended June 30,
1997 as compared to $668,871 for the same period in 1996, a decrease of $76,891,
or 11%. This decrease was due to declines in production costs, abandoned
property costs, depletion, and general and administrative expenses ("G&A").
Production costs were $390,336 for the six months ended June 30, 1997 and
$433,601 for the same period in 1996 resulting in a $43,265 decrease or 10%.
This decrease was primarily due to a decline in well repair and maintenance
costs.
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, 5% from $24,194 for the six months ended June 30, 1996
to $22,898 for the same period in 1997. The Partnership agreement limits G&A to
3% of gross oil and gas revenues.
Depletion was $178,746 for the six months ended June 30, 1997 compared to
$183,153 for the same period in 1996. This represented a decline in depletion of
$4,407.
Abandoned property costs during the six months ended June 30, 1996 totaled
$27,923. These costs were incurred in association with the plugging and
abandonment of two uneconomical wells.
8
<PAGE>
Three months ended June 30, 1997 compared with three months ended
June 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 18% to $340,203 from $415,925
for the three months ended June 30, 1997 as compared to the three months ended
June 30, 1996. The decrease in revenues resulted from a 15% decrease in the
average price received per barrel of oil, an 8% decrease in the average price
received per mcf of gas, an 8% decline in mcf of gas produced and sold, and a 6%
decline in barrels of oil produced and sold. For the three months ended June 30,
1997, 11,927 barrels of oil were sold compared to 12,670 for the same period in
1996, a decrease of 743 barrels. For the three months ended June 30, 1997,
55,842 mcf of gas were sold compared to 60,830 for the same period in 1996, a
decrease of 4,988 mcf. The decrease in production volumes was primarily due to
the decline characteristics of the Partnership's oil and gas properties.
The average price received per barrel of oil decreased $3.25 from $22.07 for the
three months ended June 30, 1996 to $18.82 for the same period in 1997, while
the average price received per mcf of gas decreased from $2.24 during the three
months ended June 30, 1996 to $2.07 in 1997.
A gain of $39,034 from the sale of four oil and gas wells to Costilla Energy,
L.L.C. was recognized during the three months ended June 30, 1996.
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 $704,864, which included
$697,816, or $36.12 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $297,858 for the three months ended June
30, 1997 as compared to $311,461 for the same period in 1996, a decrease of
$13,603, or 4%. This decrease was due to declines in abandoned property costs,
production costs, G&A and depletion.
Production costs were $202,138 for the three months ended June 30, 1997 and
$206,401 for the same period in 1996 resulting in a $4,263 decrease. This
decrease was primarily the result of less workover costs.
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, 18% from $12,478 for the three months ended June 30,
1996 to $10,206 for the same period in 1997.
Depletion was $85,514 for the three months ended June 30, 1997 compared to
$86,010 for the same period in 1996. This represented a decrease in depletion of
$496.
9
<PAGE>
Abandoned property costs during the three months ended June 30, 1996 totaled
$6,572. These costs were incurred in association with the plugging and
abandonment of two uneconomical wells.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $608,270 during the six
months ended June 30, 1997 from the same period ended June 30, 1996. This
decrease was primarily due to the receipt of litigation proceeds in 1996 as
discussed in Item 2 and a decline in production costs paid, offset by an
increase in oil and gas receipts.
Net Cash Provided by Investing Activities
The Partnership's investing activities during the six months ended June 30, 1997
and 1996 were related to expenditures for equipment replacement on various oil
and gas properties.
Proceeds from salvage income of $14,656 and $28,740 were received during the six
months ended June 30, 1997 and 1996, respectively, from the sale of oil and gas
equipment on one fully depleted well.
Proceeds of $39,318 were received during the six months ended June 30, 1996 from
the sale of four oil and gas wells.
Net Cash Used in Financing Activities
Cash was sufficient for the six months ended June 30, 1997 to cover
distributions to the partners of $444,837 of which $4,448 was distributed to the
managing general partner and $440,389 to the limited partner. For the same
period ended June 30, 1996, cash was sufficient for distributions to the
partners of $977,461 of which $9,775 was distributed to the managing general
partner and $967,686 to the limited partners. Cash distributions to the partners
of $977,461 for the six months ended June 30, 1996 included $7,048 to the
managing general partner and $697,816 to the limited partners, resulting from
proceeds received in the litigation settlement 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
<PAGE>
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
<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: August 7, 1997 By: /s/ Rich Dealy
-------------------------------
Rich Dealy, Controller of PPUSA
12
<PAGE>
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<ARTICLE> 5
<CIK> 0000789791
<NAME> 86C.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 171,358
<SECURITIES> 0
<RECEIVABLES> 161,401
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 332,759
<PP&E> 14,552,661
<DEPRECIATION> 11,007,174
<TOTAL-ASSETS> 3,878,246
<CURRENT-LIABILITIES> 41,641
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,836,605
<TOTAL-LIABILITY-AND-EQUITY> 3,878,246
<SALES> 763,278
<TOTAL-REVENUES> 784,510
<CGS> 0
<TOTAL-COSTS> 591,980
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 192,530
<INCOME-TAX> 0
<INCOME-CONTINUING> 192,530
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<NET-INCOME> 192,530
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