<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. 2-99079B
PARKER & PARSLEY 85-B, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2075492
(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 13 pages.
There are no exhibits.
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PARKER & PARSLEY 85-B, 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
$57,486 at March 31 and $52,033 at
December 31 $ 58,346 $ 52,163
Accounts receivable - oil and gas sales 53,551 52,192
---------- ----------
Total current assets 111,897 104,355
Oil and gas properties - at cost, based
on the successful efforts accounting
method 5,921,994 5,922,086
Accumulated depletion (3,774,636) (3,718,231)
---------- ----------
Net oil and gas properties 2,147,358 2,203,855
---------- ----------
$ 2,259,255 $ 2,308,210
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 37,913 $ 26,725
Partners' capital:
Limited partners (7,988 interests) 2,198,779 2,258,321
Managing general partner 22,563 23,164
---------- ----------
2,221,342 2,281,485
---------- ----------
$ 2,259,255 $ 2,308,210
========== ==========
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
<PAGE> 3
PARKER & PARSLEY 85-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Revenues:
Oil and gas sales $ 129,443 $ 118,121
Interest income 835 235
Salvage income from abandoned property 3,580 -
--------- ---------
Total revenues 133,858 118,356
Costs and expenses:
Production costs 68,083 71,356
General and administrative expenses 3,883 3,543
Depletion 56,405 47,630
Abandoned property costs 3,016 -
--------- ---------
Total costs and expenses 131,387 122,529
--------- ---------
Net income (loss) $ 2,471 $ (4,173)
========= =========
Allocation of net income (loss):
Managing general partner $ 25 $ (42)
========= =========
Limited partners $ 2,446 $ (4,131)
========= =========
Net income (loss) per limited
partnership interest $ .31 $ (.52)
========= =========
Distributions per limited partnership
interest $ 7.76 $ 5.78
========= =========
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
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PARKER & PARSLEY 85-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 1994 $ 26,330 $ 2,571,771 $ 2,598,101
Distributions (466) (46,137) (46,603)
Net loss (42) (4,131) (4,173)
---------- ---------- ----------
Balance at March 31, 1994 $ 25,822 $ 2,521,503 $ 2,547,325
========== ========== ==========
Balance at January 1, 1995 $ 23,164 $ 2,258,321 $ 2,281,485
Distributions (626) (61,988) (62,614)
Net income 25 2,446 2,471
---------- ---------- ----------
Balance at March 31, 1995 $ 22,563 $ 2,198,779 $ 2,221,342
========== ========== ==========
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
<PAGE> 5
PARKER & PARSLEY 85-B, 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) $ 2,471 $ (4,173)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depletion 56,405 47,630
Salvage income from abandoned property (3,580) -
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (1,359) 1,772
Increase (decrease) in accounts payable 10,634 (2,170)
--------- ---------
Net cash provided by operating
activities 64,571 43,059
Cash flows from investing activities:
Proceeds from equipment salvage on
abandoned property 3,580 -
Disposals of oil and gas equipment 646 -
--------- ---------
Net cash provided by investing activities 4,226 -
Cash flows from financing activiites:
Cash distributions to partners (62,614) (46,603)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 6,183 (3,544)
Cash and cash equivalents at beginning
of period 52,163 54,243
--------- ---------
Cash and cash equivalents at end of period $ 58,346 $ 50,699
========= =========
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-B, 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-B, 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 $650,092, or $81.38
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 December 20, 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 $7,988,000 representing 7,988
interests ($1,000 per interest) sold to a total of 728 limited partners.
Since its formation, the Registrant invested $6,770,784 in various
prospects that were drilled in Texas. At March 31, 1995, the Registrant
had 19 producing oil and gas wells, one well was converted to a
saltwater disposal well during 1987 and two wells were plugged and
abandoned, one in 1989 and one in 1992.
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<PAGE> 8
Results of Operations
Revenues:
The Registrant's oil and gas revenues increased to $129,443 from
$118,121 for the three months ended March 31, 1995 and 1994,
respectively, an increase of 10%. The increase in revenues resulted
from a 28% increase in the average price received per barrel of oil and
a 5% increase in the average price received per mcf of gas, offset by a
9% decrease in barrels of oil produced and sold and a 9% decrease in mcf
of gas produced and sold. For the three months ended March 31, 1995,
5,297 barrels of oil were sold compared to 5,832 for the same period in
1994, a decrease of 535 barrels. For the three months ended March 31,
1995, 19,024 mcf of gas were sold compared to 20,820 for the same period
in 1994, a decrease of 1,796 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 $3.80 from $13.70
for the three months ended March 31, 1994 to $17.50 for the same period
in 1995 while the average price received per mcf of gas increased from
$1.84 during the three months ended March 31, 1994 to $1.93 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 abandoned property for the three months ended March
31, 1995 consisted of proceeds received from equipment salvage of $3,580
on one well abandoned in a prior year.
Costs and Expenses:
Total costs and expenses increased to $131,387 for the three months
ended March 31, 1995 as compared to $122,529 for the same period in
1994, an increase of $8,858, or 7%. This increase was due to increases
in depletion, general and administrative expenses ("G&A") and abandoned
property costs, offset by a decline in production costs.
8
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Production costs were $68,083 for the three months ended March 31, 1995
and $71,356 for the same period in 1994, resulting in a 5% decrease.
The decrease was the result of declines in ad valorem taxes, workover
expenses and well repair and maintenance costs.
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, 10% from $3,543 for the
three months ended March 31, 1994 to $3,883 for the same period in 1995.
The Partnership agreement limits G&A to 3% of gross oil and gas
revenues.
Depletion was $56,405 for the three months ended March 31, 1995 compared
to $47,630 for the same period in 1994. This represented an increase in
depletion of $8,775, 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 535 barrels
for the three months ended March 31, 1995 from the same period in 1994,
while oil reserves of barrels were revised downward by 44,116 barrels,
or 13%, resulting in a higher unit cost per barrel of production.
Abandoned property costs of $3,016 were incurred for the three months
ended March 31, 1995 on one well abandoned in a prior year. There were
no abandoned property costs incurred for the same period in 1994.
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 $650,092, or
$81.38 per limited partnership interest, in September 1993.
9
<PAGE> 10
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.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased to $64,571 during
the three months ended March 31, 1995, a $21,512 increase from the same
period ended March 31, 1994. This increase was due to an increase in
oil and gas sales and a decrease in production costs & G&A, offset by an
increase in abandoned property costs. 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, offset by a decline in barrels of oil and mcf of gas
produced and sold. The decrease in production costs was due to less
well repair and maintenance costs. G&A declined due to less expense
allocated by the managing general partner. The increase in abandoned
property costs was due to additional costs incurred on one well
abandoned in a prior year.
Net Cash Provided by Investing Activities
The Registrant's investing activities during the three months ended
March 31, 1995 related to proceeds received of $3,580 derived from the
sale of oil and gas equipment on one well abandoned in a prior year, in
addition to proceeds received of $646 from the disposal of equipment.
Net Cash Used in Financing Activities
Cash was sufficient for the three months ended March 31, 1995 to cover
distributions to the partners of $62,614 of which $61,988 was
distributed to the limited partners and $626 to the managing general
10
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partner. For the same period ended March 31, 1994, cash was sufficient
for distributions to the partners of $46,603 of which $46,137 was
distributed to the limited partners and $466 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.
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 $650,092, or
$81.38 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
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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
12
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PARKER & PARSLEY 85-B, 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-B, 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
13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000791231
<NAME> 85BL
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 58,346
<SECURITIES> 0
<RECEIVABLES> 53,551
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 111,897
<PP&E> 5,921,994
<DEPRECIATION> 3,774,636
<TOTAL-ASSETS> 2,259,255
<CURRENT-LIABILITIES> 37,913
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,221,342
<TOTAL-LIABILITY-AND-EQUITY> 2,259,255
<SALES> 129,443
<TOTAL-REVENUES> 133,858
<CGS> 0
<TOTAL-COSTS> 131,387
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,471
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,471
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,471
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0
</TABLE>
