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. 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 11 pages.
Exhibit index on page 10.
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PARKER & PARSLEY 85-A, 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............................. 10
27. Financial Data Schedule
Signatures................................................... 11
2
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PARKER & PARSLEY 85-A, 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 $79,934 at June 30
and $49,971 at December 31 $ 80,134 $ 50,279
Accounts receivable - oil and gas sales 60,753 100,147
---------- ----------
Total current assets 140,887 150,426
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 7,373,818 7,373,688
Accumulated depletion (6,123,720) (6,063,706)
---------- ----------
Net oil and gas properties 1,250,098 1,309,982
---------- ----------
$ 1,390,985 $ 1,460,408
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 16,124 $ 14,353
Partners' capital:
Managing general partner 13,760 14,472
Limited partners (9,613 interests) 1,361,101 1,431,583
---------- ----------
1,374,861 1,446,055
---------- ----------
$ 1,390,985 $ 1,460,408
========== ==========
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
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PARKER & PARSLEY 85-A, 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 $ 126,279 $ 149,497 $ 287,807 $ 289,203
Interest 1,365 922 2,412 1,583
Litigation settlement - 32,694 - 32,694
-------- -------- -------- --------
127,644 183,113 290,219 323,480
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 77,697 69,832 148,085 160,977
General and administrative 3,788 4,485 8,634 8,676
Depletion 30,669 26,092 60,014 55,963
Loss on sale of assets - 3,730 - 3,730
-------- -------- -------- --------
112,154 104,139 216,733 229,346
-------- -------- -------- --------
Net income $ 15,490 $ 78,974 $ 73,486 $ 94,134
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 155 $ 789 $ 735 $ 941
======== ======== ======== ========
Limited partners $ 15,335 $ 78,185 $ 72,751 $ 93,193
======== ======== ======== ========
Net income per limited
partnership interest $ 1.60 $ 8.13 $ 7.57 $ 9.69
======== ======== ======== ========
Distributions per limited
partnership interest $ 6.20 $ 9.37 $ 14.90 $ 12.87
======== ======== ======== ========
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
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PARKER & PARSLEY 85-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- ---------- ----------
Balance at January 1, 1997 $ 14,472 $1,431,583 $1,446,055
Distributions (1,447) (143,233) (144,680)
Net income 735 72,751 73,486
-------- --------- ---------
Balance at June 30, 1997 $ 13,760 $1,361,101 $1,374,861
======== ========= =========
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 85-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
-------------------------
1997 1996
---------- ----------
Cash flows from operating activities:
Net income $ 73,486 $ 94,134
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 60,014 55,963
Loss on sale of assets - 3,730
Changes in assets and liabilities:
Decrease in accounts receivable 39,394 14,225
Increase in accounts payable 1,771 3,586
--------- ---------
Net cash provided by operating
activities 174,665 171,638
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (130) (4,109)
Cash flows from financing activities:
Cash distributions to partners (144,680) (124,940)
--------- ---------
Net increase in cash and cash equivalents 29,855 42,589
Cash and cash equivalents at beginning of period 50,279 36,955
--------- ---------
Cash and cash equivalents at end of period $ 80,134 $ 79,544
========= =========
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
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PARKER & PARSLEY 85-A, 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 85-A, 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
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 slightly to $287,807 from
$289,203 for the six months ended June 30, 1997 as compared to the six months
ended June 30, 1996. The decrease in revenues resulted from an 8% decline in
barrels of oil produced and sold and a 3% decline in mcf of gas produced and
sold, offset by increases in the average prices received per barrel of oil and
mcf of gas. For the six months ended June 30, 1997, 9,666 barrels of oil were
sold compared to 10,518 for the same period in 1996, a decrease of 852 barrels.
Of the decrease, 548 barrels, or 5%, was attributable to the sale of four oil
and gas wells during the six months ended June 30, 1996, with the remaining
decrease of 304 barrels, or 3%, due to the decline characteristics of the
Partnership's oil and gas properties. For the six months ended June 30, 1997,
34,331 mcf of gas were sold compared to 35,481 for the same period in 1996, a
7
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decrease of 1,150 mcf. The sale of four oil and gas wells had only a slight
effect on the decrease in mcf of gas. Management expects a certain amount of
decline in production to continue in the future until the Partnership's
economically recoverable reserves are fully depleted.
The average price received per barrel of oil increased slightly from $20.43 for
the six months ended June 30, 1996 to $20.49 for the same period in 1997, while
the average price received per mcf of gas increased 24% from $2.10 during the
six months ended June 30, 1996 to $2.61 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 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.
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 $32,694, which included
$32,367, or $3.37 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $216,733 for the six months ended June 30,
1997 as compared to $229,346 for the same period in 1996, a decrease of $12,613,
or 5%. This decrease was due to declines in production costs, loss on sale of
assets and general and administrative expenses ("G&A"), offset by an increase in
depletion.
Production costs were $148,085 for the six months ended June 30, 1997 and
$160,977 for the same period in 1996 resulting in a decrease of $12,892, or 8%.
The 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
slightly from $8,676 for the six months ended June 30, 1996 to $8,634 for the
same period in 1997. The Partnership agreement limits G&A to 3% of gross oil and
gas revenues.
Depletion was $60,014 for the six months ended June 30, 1997 compared to $55,963
for the same period in 1996. This represented an increase in depletion of
$4,051, or 7%, primarily attributable to a decline in oil reserves during 1997
as a result of lower commodity prices.
A loss of $3,730 on the sale of assets was recognized during the six months
ended June 30, 1996. This loss resulted from the sale of four fully depleted oil
and gas wells and four saltwater disposal wells to Costilla Energy, L.L.C.
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 16% to $126,279 from $149,497
for the three months ended June 30, 1997 as compared to the three months ended
June 30, 1996. The decrease in revenues resulted from declines in the average
prices received per barrel of oil and mcf of gas and a 6% decline in barrels of
oil produced and sold. For the three months ended June 30, 1997, 4,713 barrels
of oil were sold compared to 4,988 for the same period in 1996, a decrease of
275 barrels, primarily attributable to the sale of four oil and gas wells during
the three months ended June 30, 1996. For the three months ended June 30, 1997,
17,635 mcf of gas were sold compared to 17,603 for the same period in 1996, an
increase of 32 mcf of gas.
The average price received per barrel of oil decreased $3.27, or 15%, from
$22.06 for the three months ended June 30, 1996 to $18.79 for the same period in
1997, while the average price received per mcf of gas decreased 4% from $2.24
during the three months ended June 30, 1996 to $2.14 for the same period in
1997.
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 $32,694, which included
$32,367, or $3.37 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses increased to $112,154 for the three months ended June
30, 1997 as compared to $104,139 for the same period in 1996, an increase of
$8,015, or 8%. This increase was due to increases in production costs and
depletion, offset by declines in loss on sale of assets and G&A.
Production costs were $77,697 for the three months ended June 30, 1997 and
$69,832 for the same period in 1996 resulting in a $7,865 increase, or 11%. The
increase was primarily due to higher well repair and maintenance costs incurred
in an effort to stimulate well production.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A
decreased, in aggregate, 16% from $4,485 for the three months ended June 30,
1996 to $3,788 for the same period in 1997.
Depletion was $30,669 for the three months ended June 30, 1997 compared to
$26,092 for the same period in 1996. This represented an increase in depletion
of $4,577, or 18%, primarily attributable to a decline in oil reserves during
1997 as a result of lower commodity prices.
9
<PAGE>
A loss of $3,730 on the sale of assets was recognized during the three months
ended June 30, 1996. This loss resulted from the sale of four fully depleted oil
and gas wells and four saltwater disposal wells to Costilla Energy, L.L.C.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $3,027 during the six months
ended June 30, 1997 from the same period ended June 30, 1996. This increase was
due to an increase in oil and gas sales receipts and a decline in production
costs paid, offset by the receipt of proceeds from the litigation settlement in
1996 as discussed in Item 2.
Net Cash Used in Investing Activities
The Partnership's investing activities during the six months ended June 30, 1997
and 1996 included expenditures related to equipment replacement on various oil
and gas properties.
Net Cash Used in Financing Activities
Cash was sufficient for the six months ended June 30, 1997 to cover
distributions to the partners of $144,680 of which $1,447 was distributed to the
managing general partner and $143,233 to the limited partners. For the same
period ended June 30, 1996, cash was sufficient for distributions to the
partners of $124,940 of which $1,249 was distributed to the managing general
partner and $123,691 to the limited partners. Cash distributions to the partners
of $124,940 for the six months ended June 30, 1996 included $327 to the managing
general partner and $32,367 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.
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
10
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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: August 7, 1997 By: /s/ Rich Dealy
---------------------------------
Rich Dealy, Controller of PPUSA
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000791230
<NAME> 85A.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 80,134
<SECURITIES> 0
<RECEIVABLES> 60,753
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 140,887
<PP&E> 7,373,818
<DEPRECIATION> 6,123,720
<TOTAL-ASSETS> 1,390,985
<CURRENT-LIABILITIES> 16,124
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,374,861
<TOTAL-LIABILITY-AND-EQUITY> 1,390,985
<SALES> 287,807
<TOTAL-REVENUES> 290,219
<CGS> 0
<TOTAL-COSTS> 216,733
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 73,486
<INCOME-TAX> 0
<INCOME-CONTINUING> 73,486
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,486
<EPS-PRIMARY> 7.57
<EPS-DILUTED> 0
</TABLE>
