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. 2-99079B
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 11 pages.
Exhibit index on page 10.
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PARKER & PARSLEY 85-B, 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-B, 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 $84,333 at June 30
and $59,099 at December 31 $ 84,533 $ 77,190
Accounts receivable - oil and gas sales 68,754 94,494
---------- ----------
Total current assets 153,287 171,684
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,299,759 5,299,608
Accumulated depletion (3,698,882) (3,639,795)
---------- ----------
Net oil and gas properties 1,600,877 1,659,813
---------- ----------
$ 1,754,164 $ 1,831,497
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 15,419 $ 14,174
Partners' capital:
Managing general partner 17,737 18,522
Limited partners (7,988 interests) 1,721,008 1,798,801
---------- ----------
1,738,745 1,817,323
---------- ----------
$ 1,754,164 $ 1,831,497
========== ==========
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-B, 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 $ 117,813 $ 146,660 $ 264,669 $ 277,562
Interest 1,527 1,111 2,737 2,060
Gain on abandonment - 22,511 - 22,511
Litigation settlement - 62,948 - 62,948
-------- -------- -------- --------
119,340 233,230 267,406 365,081
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 61,613 60,980 120,811 126,186
General and administrative 3,534 4,400 7,940 8,327
Depletion 29,080 31,889 59,087 65,525
Abandoned property - 8,550 - 8,550
-------- -------- -------- --------
94,227 105,819 187,838 208,588
-------- -------- -------- --------
Net income $ 25,113 $ 127,411 $ 79,568 $ 156,493
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 251 $ 1,274 $ 796 $ 1,565
======== ======== ======== ========
Limited partners $ 24,862 $ 126,137 $ 78,772 $ 154,928
======== ======== ======== ========
Net income per limited
partnership interest $ 3.11 $ 15.80 $ 9.86 $ 19.40
======== ======== ======== ========
Distributions per limited
partnership interest $ 8.10 $ 16.40 $ 19.60 $ 22.90
======== ======== ======== ========
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-B, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- ---------- ----------
Balance at January 1, 1997 $ 18,522 $1,798,801 $1,817,323
Distributions (1,581) (156,565) (158,146)
Net income 796 78,772 79,568
-------- --------- ---------
Balance at June 30, 1997 $ 17,737 $1,721,008 $1,738,745
======== ========= =========
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-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
------------------------
1997 1996
---------- ----------
Cash flows from operating activities:
Net income $ 79,568 $ 156,493
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 59,087 65,525
Gain on abandonment - (22,511)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 25,740 (26,760)
Increase in accounts payable 1,245 3,963
--------- ---------
Net cash provided by operating activities 165,640 176,710
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (151) (3,524)
Proceeds from equipment salvage on abandoned
property - 6,287
--------- ---------
Net cash provided by (used in) investing
activities (151) 2,763
--------- ---------
Cash flows from financing activities:
Cash distributions to partners (158,146) (184,785)
--------- ---------
Net increase (decrease) in cash and cash equivalents 7,343 (5,312)
Cash and cash equivalents at beginning of period 77,190 77,485
--------- ---------
Cash and cash equivalents at end of period $ 84,533 $ 72,173
========= =========
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 85-B, 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-B, 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 $264,669 from $277,562
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 10% decrease in barrels of
oil produced and sold and a 6% decrease in mcf of gas produced and sold, offset
by higher average prices received per barrel of oil and mcf of gas. For the six
months ended June 30, 1997, 8,549 barrels of oil were sold compared to 9,501 for
the same period in 1996, a decrease of 952 barrels. For the six months ended
June 30, 1997, 33,596 mcf of gas were sold compared to 35,634 for the same
period in 1996, a decrease of 2,038 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.
The average price received per barrel of oil increased slightly from $20.54 for
the six months ended June 30, 1996 to $20.68 for the same period in 1997, while
7
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the average price received per mcf of gas increased 13% from $2.31 during the
six months ended June 30, 1996 to $2.62 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.
A gain on abandonment of $22,511 was recognized during the six months ended June
30, 1996. This gain was derived from equipment credits received on the
abandonment of one fully depleted well. Abandoned property costs incurred for
the abandonment of this property totaled $8,550.
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 $62,948, which included
$62,318, or $7.80 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $187,838 for the six months ended June 30,
1997 as compared to $208,588 for the same period in 1996, a decrease of $20,750,
or 10%. This decrease was due to declines in abandoned property costs,
depletion, production costs, and general and administrative expenses ("G&A").
Production costs were $120,811 for the six months ended June 30, 1997 and
$126,186 for the same period in 1996 resulting in a $5,375 decrease, or 4%. The
decrease was attributable to declines 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 $8,327 for the six months ended June 30, 1996
to $7,940 for the same period in 1997. The Partnership agreement limits G&A to
3% of gross oil and gas revenues.
Depletion was $59,087 for the six months ended June 30, 1997 compared to $65,525
for the same period in 1996. This represented a decrease in depletion of $6,438,
or 10%, primarily attributable to a decline in oil production of 952 barrels for
the six months ended June 30, 1997 compared to the same period in 1996.
Three months ended June 30, 1997 compared with three months ended
June 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 20% to $117,813 from $146,660
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
8
<PAGE>
prices received per barrel of oil and mcf of gas, a 13% decrease in barrels of
oil produced and sold and a 7% decrease in mcf of gas produced and sold. For the
three months ended June 30, 1997, 4,083 barrels of oil were sold compared to
4,713 for the same period in 1996, a decrease of 630 barrels. For the three
months ended June 30, 1997, 16,945 mcf of gas were sold compared to 18,293 for
the same period in 1996, a decrease of 1,348 mcf. The decreases were primarily
due to the decline characteristics of the Partnership's oil and gas properties.
The average price received per barrel of oil decreased $2.83, or 13%, from
$21.78 for the three months ended June 30, 1996 to $18.95 for the same period in
1997, while the average price received per mcf of gas decreased slightly from
$2.41 during the three months ended June 30, 1996 to $2.39 for the same period
in 1997.
A gain on abandonment of $22,511 was recognized during the three months ended
June 30, 1996. This gain was derived from equipment credits received on the
abandonment of one fully depleted well. Abandoned property costs incurred for
the abandonment of this property totaled $8,550.
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 $62,948, which included
$62,318, or $7.80 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $94,227 for the three months ended June
30, 1997 as compared to $105,819 for the same period in 1996, a decrease of
$11,592, or 11%. This decrease was due to declines in abandoned property costs,
depletion, and G&A, offset by an increase in production costs.
Production costs were $61,613 for the three months ended June 30, 1997 and
$60,980 for the same period in 1996 resulting in a $633 increase. The increase
was the result of higher well repair and maintenance costs incurred in an effort
to stimulate well production, offset by a decrease in production taxes.
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, 20% from $4,400 for the three months ended June 30,
1996 to $3,534 for the same period in 1997.
Depletion was $29,080 for the three months ended June 30, 1997 compared to
$31,889 for the same period in 1996. This represented a decrease in depletion of
$2,809, or 9%, primarily attributable to a decline in oil production of 630
barrels for the three months ended June 30, 1997 compared to the same period in
1996.
9
<PAGE>
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $11,070 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 proceeds in 1996 from the
litigation settlement as discussed in Item 2, offset by an increase in oil and
gas sales receipts.
Net Cash Provided by (Used in) Investing Activities
The Partnership's investing activities for the six months ended June 30, 1997
and 1996 included expenditures related to equipment replacement on several oil
and gas properties.
Proceeds were received from the salvage of equipment on properties abandoned
during the six months ended June 30, 1996.
Net Cash Used in Financing Activities
Cash was sufficient for the six months ended June 30, 1997 to cover
distributions to the partners of $158,146 of which $1,581 was distributed to the
managing general partner and $156,565 to the limited partners. For the same
period ended June 30, 1996, cash was sufficient for distributions to the
partners of $184,785 of which $1,848 was distributed to the managing general
partner and $182,937 to the limited partners. Cash distributions to the partners
of $184,785 for the six months ended June 30, 1996 included $630 to the managing
general partner and $62,318 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
<PAGE>
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: August 8, 1997 By: /s/ Rich Dealy
---------------------------------
Rich Dealy, Controller of PPUSA
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000791231
<NAME> 85B.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 84,533
<SECURITIES> 0
<RECEIVABLES> 68,754
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 153,287
<PP&E> 5,299,759
<DEPRECIATION> 3,698,882
<TOTAL-ASSETS> 1,754,164
<CURRENT-LIABILITIES> 15,419
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,738,745
<TOTAL-LIABILITY-AND-EQUITY> 1,754,164
<SALES> 264,669
<TOTAL-REVENUES> 267,406
<CGS> 0
<TOTAL-COSTS> 187,838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 79,568
<INCOME-TAX> 0
<INCOME-CONTINUING> 79,568
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,568
<EPS-PRIMARY> 9.86
<EPS-DILUTED> 0
</TABLE>
