<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. 2-99079A
PARKER & PARSLEY 85-A, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2064518
(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 85-A, 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 $72,369
at March 31 and $26,047 at December 31 $ 72,799 $ 26,174
Accounts receivable - oil and gas sales 66,833 66,583
---------- ----------
Total current assets 139,632 92,757
Oil and gas properties - at cost, based
on the successful efforts accounting
method 8,337,255 8,332,721
Accumulated depletion (6,809,705) (6,766,511)
---------- ----------
Net oil and gas properties 1,527,550 1,566,210
---------- ----------
$ 1,667,182 $ 1,658,967
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 50,719 $ 44,109
Partners' capital:
Limited partners (9,613 interests) 1,600,288 1,598,699
Managing general partner 16,175 16,159
---------- ----------
1,616,463 1,614,858
---------- ----------
$ 1,667,182 $ 1,658,967
========== ==========
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
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PARKER & PARSLEY 85-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Revenues:
Oil and gas sales $ 155,060 $ 131,117
Interest income 611 134
Salvage income from equipment disposals 27,471 -
--------- ---------
Total revenues 183,142 131,251
Costs and expenses:
Production costs 80,136 101,916
General and administrative expenses 4,652 3,933
Depletion 43,194 52,361
--------- ---------
Total costs and expenses 127,982 158,210
--------- ---------
Net income (loss) $ 55,160 $ (26,959)
========= =========
Allocation of net income (loss):
Managing general partner $ 552 $ (270)
========= =========
Limited partners $ 54,608 $ (26,689)
========= =========
Net income (loss) per limited
partnership interest $ 5.68 $ (2.78)
========= =========
Distributions per limited partnership
interest $ 5.52 $ 4.04
========= =========
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 85-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 1994 $ 22,313 $ 2,207,979 $ 2,230,292
Distributions (392) (38,868) (39,260)
Net loss (270) (26,689) (26,959)
---------- ---------- ----------
Balance at March 31, 1994 $ 21,651 $ 2,142,422 $ 2,164,073
========== ========== ==========
Balance at January 1, 1995 $ 16,159 $ 1,598,699 $ 1,614,858
Distributions (536) (53,019) (53,555)
Net income 552 54,608 55,160
---------- ---------- ----------
Balance at March 31, 1995 $ 16,175 $ 1,600,288 $ 1,616,463
========== ========== ==========
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
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PARKER & PARSLEY 85-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Cash flows from operating activities:
Net income (loss) $ 55,160 $ (26,959)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depletion 43,194 52,361
Salvage income from equipment disposals (27,471) -
Changes in assets and liabilities:
Increase in accounts receivable (250) (1,300)
Increase (decrease) in accounts payable 7,187 (3,695)
--------- ---------
Net cash provided by operating
activities 77,820 20,407
Cash flows from investing activities:
Proceeds from salvage income on equipment
disposals 27,471 -
Additions to oil and gas properties (5,111) (214)
--------- ---------
Net cash provided by (used in)
investing activities 22,360 (214)
Cash flows from financing activities:
Cash distributions to partners (53,555) (39,260)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 46,625 (19,067)
Cash and cash equivalents at beginning
of period 26,174 37,434
--------- ---------
Cash and cash equivalents at end of period $ 72,799 $ 18,367
========= =========
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
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PARKER & PARSLEY 85-A, 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 85-A, 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
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working interest owners, including the Registrant, on July 30, 1993.
The limited partners received their distribution of $330,598, or $34.39
per limited partnership interest, in September 1993.
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 October 26, 1985. 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 $9,613,000 representing 9,613
interests ($1,000 per interest) sold to a total of 828 limited partners.
Since its formation, the Registrant invested $8,337,255 in various
prospects that were drilled in Texas. At March 31, 1995, the Registrant
had 24 producing oil wells with one well plugged and abandoned during
1989. The Registrant received an additional producing oil and gas well
in 1993 due to the Registrant's back-in after payout.
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Results of Operations
Revenues:
The Registrant's oil and gas revenues increased to $155,060 from
$131,117 for the three months ended March 31, 1995 and 1994,
respectively, an increase of 18%. The increase in revenues resulted
from increases in the average price received per barrel of oil and mcf
of gas, offset by a 3% decrease in barrels of oil produced and sold and
a 7% decrease in mcf of gas produced and sold. For the three months
ended March 31, 1995, 6,498 barrels of oil were sold compared to 6,675
for the same period in 1994, a decrease of 177 barrels. For the three
months ended March 31, 1995, 21,432 mcf of gas were sold compared to
23,092 for the same period in 1994, a decrease of 1,660 mcf. The
decreases in production volumes were primarily due to the decline
characteristics of the Registrant'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 Registrant's economically
recoverable reserves are fully depleted.
The average price received per barrel of oil increased 28% from $13.39
for the three months ended March 31, 1994 to $17.14 for the same period
in 1995, while the average price received per mcf of gas increased 13%
from $1.81 during the three months ended March 31, 1994 to $2.04 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.
Salvage income from equipment disposals of $27,471 for the three months
ended March 31, 1995 consisted of equipment credits received on one
fully depleted well.
Costs and Expenses:
Total costs and expenses decreased to $127,982 for the three months
ended March 31, 1995 as compared to $158,210 for the same period in
1994, a decrease of $30,228, or 19%. This decrease was due to declines
in production costs and depletion, offset by an increase in general and
administrative expenses ("G&A").
8
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Production costs were $80,136 for the three months ended March 31, 1995
and $101,916 for the same period in 1994, a decrease of $21,780, or 21%.
The decrease was primarily due to less 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, 18% from $3,933 for the
three months ended March 31, 1994 to $4,652 for the same period in 1995.
The Partnership agreement limits G&A to 3% of gross oil and gas
revenues.
Depletion was $43,194 for the three months ended March 31, 1995 compared
to $52,361 for the same period in 1994. This represented a decrease in
depletion of $9,167, or 18%. Depletion was computed property-by-property
utilizing the unit-of-production method based upon the dominant
mineral produced, generally oil. Oil production decreased 177 barrels
for the three months ended March 31, 1995 from the same period in 1994,
while oil reserves of barrels were revised downward by 31,176 barrels,
or 12%.
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 of $330,598, or
$34.39 per limited partnership interest, in September 1993.
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
9
<PAGE> 10
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.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased to $77,820 for the
three months ended March 31, 1995, a $57,413 increase from the same
period ended March 31, 1994. This increase was due to an increase in
oil and gas sales and decreases in production costs and G&A. The
increase in oil and gas sales was due to an increase in the average
price received per barrel of oil and mcf of gas. Production costs
decreased primarily due to less well repair and maintenance costs. G&A
decreased due to less expense being allocated by the managing general
partner.
Net Cash Provided by (Used in) Investing Activities
The Registrant's investing activities during the three months ended
March 31, 1995 related to repair and maintenance activity on various oil
and gas properties and proceeds from salvage income of $27,471 from
equipment credits received on one fully depleted well.
Net Cash Used in Financing Activities
Cash was sufficient for the three months ended March 31, 1995 to cover
distributions to the partners of $53,555 of which $53,019 was
distributed to the limited partners and $536 to the managing general
partner. For the same period ended March 31, 1994, cash was sufficient
for distributions to the partners of $39,260 of which $38,868 was
distributed to the limited partners and $392 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 of $330,598, or
$34.39 per limited partnership interest, in September 1993.
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 85-A, 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 85-A, 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
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000791230
<NAME> 85AL
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 72,799
<SECURITIES> 0
<RECEIVABLES> 66,833
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 139,632
<PP&E> 8,337,255
<DEPRECIATION> 6,809,705
<TOTAL-ASSETS> 1,667,182
<CURRENT-LIABILITIES> 50,719
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,616,463
<TOTAL-LIABILITY-AND-EQUITY> 1,667,182
<SALES> 155,060
<TOTAL-REVENUES> 183,142
<CGS> 0
<TOTAL-COSTS> 127,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 55,160
<INCOME-TAX> 0
<INCOME-CONTINUING> 55,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,160
<EPS-PRIMARY> 5.68
<EPS-DILUTED> 0
</TABLE>
