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 September 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 September 30, 1997 and
December 31, 1996 ........................................ 3
Statements of Operations for the three and nine
months ended September 30, 1997 and 1996..................... 4
Statement of Partners' Capital for the nine months
ended September 30, 1997..................................... 5
Statements of Cash Flows for the nine months ended
September 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 Schedules
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
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $76,914 at September 30
and $49,971 at December 31 $ 77,114 $ 50,279
Accounts receivable - oil and gas sales 51,293 100,147
---------- ----------
Total current assets 128,407 150,426
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 7,376,389 7,373,688
Accumulated depletion (6,153,698) (6,063,706)
---------- ----------
Net oil and gas properties 1,222,691 1,309,982
---------- ----------
$ 1,351,098 $ 1,460,408
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 17,918 $ 14,353
Partners' capital:
Managing general partner 13,343 14,472
Limited partners (9,613 interests) 1,319,837 1,431,583
---------- ----------
1,333,180 1,446,055
---------- ----------
$ 1,351,098 $ 1,460,408
========== ==========
The financial information included as of September 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 Nine months ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 118,260 $ 148,906 $ 406,067 $ 438,109
Interest 1,193 1,103 3,605 2,686
Litigation settlement - - - 32,694
-------- -------- -------- --------
119,453 150,009 409,672 473,489
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 81,389 68,178 229,474 229,155
General and administrative 3,548 4,467 12,182 13,143
Depletion 29,978 25,493 89,992 81,456
Loss on disposition of assets - 55 - 3,785
-------- -------- -------- --------
114,915 98,193 331,648 327,539
-------- -------- -------- --------
Net income $ 4,538 $ 51,816 $ 78,024 $ 145,950
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 45 $ 519 $ 780 $ 1,460
======== ======== ======== ========
Limited partners $ 4,493 $ 51,297 $ 77,244 $ 144,490
======== ======== ======== ========
Net income per limited
partnership interest $ .47 $ 5.34 $ 8.04 $ 15.03
======== ======== ======== ========
Distributions per limited
partnership interest $ 4.76 $ 6.50 $ 19.66 $ 19.37
======== ======== ======== ========
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 (1,909) (188,990) (190,899)
Net income 780 77,244 78,024
--------- --------- ---------
Balance at September 30, 1997 $ 13,343 $1,319,837 $1,333,180
========= ========= =========
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
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PARKER & PARSLEY 85-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
-----------------------
1997 1996
---------- ----------
Cash flows from operating activities:
Net income $ 78,024 $ 145,950
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 89,992 81,456
Loss on disposition of assets - 3,785
Changes in assets and liabilities:
Decrease in accounts receivable 48,854 6,001
Increase in accounts payable 3,565 3,872
-------- --------
Net cash provided by operating activities 220,435 241,064
-------- --------
Cash flows from investing activities:
Additions to oil and gas properties (2,701) (4,108)
Cash flows from financing activities:
Cash distributions to partners (190,899) (188,056)
-------- --------
Net increase in cash and cash equivalents 26,835 48,900
Cash and cash equivalents at beginning of period 50,279 36,955
-------- --------
Cash and cash equivalents at end of period $ 77,114 $ 85,855
======== ========
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
September 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 September 30, 1997 and for the
three and nine months ended September 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, Vice President and
Controller, 303 West Wall, Suite 101, Midland, Texas 79701.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
As of August 8, 1997, Pioneer Natural Resources USA, Inc. ("Pioneer USA") became
the general partner of the Partnership. Prior to August 8, 1997, the
Partnership's general partner was Parker & Parsley Development L.P. ("PPDLP"), a
wholly-owned subsidiary of Parker & Parsley Petroleum Company ("Parker &
Parsley"). On August 7, 1997, Parker & Parsley and Mesa Inc. received
shareholder approval to merge and create Pioneer Natural Resources Company
("Pioneer"). On August 8, 1997, PPDLP was merged with and into Pioneer USA, a
wholly-owned subsidiary of Pioneer, resulting in Pioneer USA becoming the
general partner of the Partnership as PPDLP's successor by merger. For a more
complete description of the Parker & Parsley and Mesa Inc. merger, see Pioneer's
Registration Statement on Form S-4 as filed with the Securities and Exchange
Commission.
Results of Operations
Nine months ended September 30, 1997 compared with nine months ended
September 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 7% to $406,067 from $438,109
for the nine months ended September 30, 1997 as compared to the nine months
7
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ended September 30, 1996. The decrease in revenues resulted from declines in
barrels of oil and mcf of gas produced and sold and a lower average price
received per barrel of oil, offset by an increase in the average price received
per mcf of gas. For the nine months ended September 30, 1997, 14,180 barrels of
oil were sold compared to 15,759 for the same period in 1996, a decrease of
1,579 barrels, or 10%. Of the decrease, 548 barrels, or 3%, was attributable to
the sale of four oil and gas wells during the nine months ended September 30,
1996, with the remaining decrease of 1,031 barrels, or 7%, due to the decline
characteristics of the Partnership's oil and gas properties. For the nine months
ended September 30, 1997, 51,785 mcf of gas were sold compared to 53,907 for the
same period in 1996, a decrease of 2,122 mcf, or 4%. The sale of four oil and
gas wells during the nine months ended September 30, 1996 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 decreased $1.05 or 5% from $20.87
for the nine months ended September 30, 1996 to $19.82 for the same period in
1997, while the average price received per mcf of gas increased 19% from $2.03
during the nine months ended September 30, 1996 to $2.41 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 nine months ended
September 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 increased to $331,648 for the nine months ended
September 30, 1997 as compared to $327,539 for the same period in 1996, an
increase of $4,109. This increase was due to increases in depletion and
production costs, offset by decreases in loss on asset disposition and general
and administrative expenses ("G&A").
Production costs were $229,474 for the nine months ended September 30, 1997 and
$229,155 for the same period in 1996 resulting in a $319 increase. The increase
was primarily attributable to an increase in well repair and maintenance costs
incurred in an effort to stimulate 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, 7% from $13,143 for the nine months ended September 30,
1996 to $12,182 for the same period in 1997. The Partnership agreement limits
G&A to 3% of gross oil and gas revenues.
Depletion was $89,992 for the nine months ended September 30, 1997 compared to
$81,456 for the same period in 1996, representing an increase of $8,536, or 10%.
This increase was primarily attributable to a decline in oil reserves during
1997 as a result of lower commodity prices.
8
<PAGE>
A loss on disposition of assets of $3,785 was recognized during the nine months
ended September 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.
Three months ended September 30, 1997 compared with three months ended
September 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 21% to $118,260 from $148,906
for the three months ended September 30, 1997 as compared to the three months
ended September 30, 1996. The decrease in revenues resulted from declines in
barrels of oil and mcf of gas produced and sold and a lower average price
received per barrel of oil, offset by an increase in the average price received
per mcf of gas. For the three months ended September 30, 1997, 4,514 barrels of
oil were sold compared to 5,241 for the same period in 1996, a decrease of 727
barrels or 14%. For the three months ended September 30, 1997, 17,454 mcf of gas
were sold compared to 18,426 for the same period in 1996, a decrease of 972 mcf,
or 5%.
The average price received per barrel of oil decreased $3.38, or 16%, from
$21.75 for the three months ended September 30, 1996 to $18.37 for the same
period in 1997, while the average price received per mcf of gas increased 7%
from $1.89 for the three months ended September 30, 1996 to $2.02 for the same
period in 1997.
Costs and Expenses:
Total costs and expenses increased to $114,915 for the three months ended
September 30, 1997 as compared to $98,193 for the same period in 1996, an
increase of $16,722, or 17%. This increase was due to increases in production
costs and depletion, offset by declines in G&A and loss on asset disposition.
Production costs were $81,389 for the three months ended September 30, 1997 and
$68,178 for the same period in 1996 resulting in a $13,211 increase, or 19%. The
increase was primarily attributable to an increase in well repair and
maintenance costs incurred in an effort to stimulate 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, 21%, from $4,467 for the three months ended September 30, 1996 to
$3,548 for the same period in 1997.
Depletion was $29,978 for the three months ended September 30, 1997 compared to
$25,493 for the same period in 1996. This represented an increase in depletion
of $4,485, or 18%, primarily attributable to a decline in oil reserves during
1997 as a result of lower commodity prices.
A $55 loss on disposition of assets was recognized during the three months ended
September 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.
9
<PAGE>
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $20,629 during the nine
months ended September 30, 1997 from the same period ended September 30, 1996,
primarily due to the receipt of proceeds from the litigation settlement received
in 1996 as discussed in Item 2, offset by an increase in oil and gas sales
receipts and a decline in production costs paid.
Net Cash Used in Investing Activities
The Partnership's investing activities during the nine months ended September
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 nine months ended September 30, 1997 to cover
distributions to the partners of $190,899 of which $1,909 was distributed to the
managing general partner and $188,990 to the limited partners. For the same
period ended September 30, 1996, cash was sufficient for distributions to the
partners of $188,056 of which $1,881 was distributed to the managing general
partner and $186,175 to the limited partners. Cash distributions to the partners
of $188,056 for the nine months ended September 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 above.
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: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 12, 1996 By: /s/ Rich Dealy
------------------------------------
Rich Dealy, Vice President and
Controller
11
<PAGE>
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<NAME> 85A.TXT
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 77,114
<SECURITIES> 0
<RECEIVABLES> 51,293
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 128,407
<PP&E> 7,376,389
<DEPRECIATION> 6,153,698
<TOTAL-ASSETS> 1,351,098
<CURRENT-LIABILITIES> 17,918
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,333,180
<TOTAL-LIABILITY-AND-EQUITY> 1,351,098
<SALES> 406,067
<TOTAL-REVENUES> 409,672
<CGS> 0
<TOTAL-COSTS> 331,648
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 78,024
<INCOME-TAX> 0
<INCOME-CONTINUING> 78,024
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,024
<EPS-PRIMARY> 8.04
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