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. 2-99079B
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.
<PAGE>
PARKER & PARSLEY 85-B, 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 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
September 30, December 31,
1997 1996
------------ -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $71,219 at September 30
and $59,099 at December 31 $ 71,419 $ 77,190
Accounts receivable - oil and gas sales 79,449 94,494
---------- ----------
Total current assets 150,868 171,684
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,304,077 5,299,608
Accumulated depletion (3,735,140) (3,639,795)
---------- ----------
Net oil and gas properties 1,568,937 1,659,813
---------- ----------
$ 1,719,805 $ 1,831,497
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 18,961 $ 14,174
Partners' capital:
Managing general partner 17,358 18,522
Limited partners (7,988 interests) 1,683,486 1,798,801
---------- ----------
1,700,844 1,817,323
---------- ----------
$ 1,719,805 $ 1,831,497
========== ==========
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-B, 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 $ 128,104 $ 144,348 $ 392,773 $ 421,910
Interest 1,374 1,261 4,111 3,321
Gain on disposition of assets 16 - 16 22,511
Litigation settlement - - - 62,948
-------- -------- -------- --------
129,494 145,609 396,900 510,690
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 65,972 63,885 186,783 190,071
General and administrative 3,843 4,330 11,783 12,657
Depletion 36,258 29,959 95,345 95,484
Abandoned property - 1,095 - 9,645
-------- -------- -------- --------
106,073 99,269 293,911 307,857
-------- -------- -------- --------
Net income $ 23,421 $ 46,340 $ 102,989 $ 202,833
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 234 $ 463 $ 1,030 $ 2,028
======== ======== ======== ========
Limited partners $ 23,187 $ 45,877 $ 101,959 $ 200,805
======== ======== ======== ========
Net income per limited
partnership interest $ 2.90 $ 5.74 $ 12.76 $ 25.14
======== ======== ======== ========
Distributions per limited
partnership interest $ 7.60 $ 9.20 $ 27.20 $ 32.10
======== ======== ======== ========
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 (2,194) (217,274) (219,468)
Net income 1,030 101,959 102,989
------- --------- ---------
Balance at September 30, 1997 $ 17,358 $1,683,486 $1,700,844
======= ========= =========
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-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
------------------------
1997 1996
---------- ----------
Cash flows from operating activities:
Net income $ 102,989 $ 202,833
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 95,345 95,484
Gain on disposition of assets (16) (22,511)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 15,045 (7,821)
Increase (decrease) in accounts payable 4,787 (7,091)
--------- ---------
Net cash provided by operating
activities 218,150 260,894
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (4,469) -
Proceeds from disposition of assets 16 22,490
--------- ---------
Net cash provided by (used in) investing
activities (4,453) 22,490
--------- ---------
Cash flows from financing activities:
Cash distributions to partners (219,468) (259,017)
--------- ---------
Net increase (decrease) in cash and cash equivalents (5,771) 24,367
Cash and cash equivalents at beginning of period 77,190 77,485
--------- ---------
Cash and cash equivalents at end of period $ 71,419 $ 101,852
========= =========
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
September 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 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 $392,773 from $421,910
for the nine months ended September 30, 1997 as compared to the nine 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
7
<PAGE>
received per barrel of oil, offset by a higher average price received per mcf of
gas. For the nine months ended September 30, 1997, 13,259 barrels of oil were
sold compared to 14,370 for the same period in 1996, a decrease of 1,111
barrels, or 8%. For the nine months ended September 30, 1997, 52,443 mcf of gas
were sold compared to 54,614 for the same period in 1996, a decrease of 2,171
mcf, or 4%. 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 decreased $1.04, or 5%, from $20.90
for the nine months ended September 30, 1996 to $19.86 for the same period in
1997, while the average price received per mcf of gas increased 11% from $2.23
during the nine months ended September 30, 1996 to $2.47 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 nine months ended September
30, 1997.
A gain on disposition of assets of $22,511 was recognized during the nine months
ended September 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 during the nine months ended September 30,
1996 totaled $9,645.
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 $293,911 for the nine months ended
September 30, 1997 as compared to $307,857 for the same period in 1996, a
decrease of $13,946, or 5%. This decrease was due to reductions in abandoned
property costs, production costs, general and administrative expenses ("G&A")
and depletion.
Production costs were $186,783 for the nine months ended September 30, 1997 and
$190,071 for the same period in 1996 resulting in a $3,288 decrease. The
decrease was primarily due to a reduction in well 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, 7% from $12,657 for the nine months ended September 30,
1996 to $11,783 for the same period in 1997. The Partnership agreement limits
G&A to 3% of gross oil and gas revenues.
Depletion was $95,345 for the nine months ended September 30, 1997 compared to
$95,484 for the same period in 1996, representing a decrease of $139
8
<PAGE>
attributable to a decline in oil production of 1,111 barrels for the nine months
ended September 30, 1997 compared to the same period in 1996, offset by a
decrease in oil reserves during 1997 as a result of lower commodity prices.
Three months ended September 30, 1997 compared with three months ended
September 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 11% to $128,104 from $144,348
for the three months ended September 30, 1997 as compared to the three months
ended September 30, 1996. The decrease in revenues resulted from a lower average
price received per barrel of oil and declines in barrels of oil and mcf of gas
produced and sold, offset by a higher average price received per mcf of gas. For
the three months ended September 30, 1997, 4,710 barrels of oil were sold
compared to 4,869 for the same period in 1996, a decrease of 159 barrels, or 3%.
For the three months ended September 30, 1997, 18,847 mcf of gas were sold
compared to 18,980 for the same period in 1996, a decrease of 133 mcf. The
decreases were due to the decline characteristics of the Partnership's oil and
gas properties.
The average price received per barrel of oil decreased $3.23, or 15%, from
$21.59 for the three months ended September 30, 1996 to $18.36 for the same
period in 1997, while the average price received per mcf of gas increased 7%
from $2.07 for the three months ended September 30, 1996 to $2.21 for the same
period in 1997.
Costs and Expenses:
Total costs and expenses increased to $106,073 for the three months ended
September 30, 1997 as compared to $99,269 for the same period in 1996, an
increase of $6,804, or 7%. This increase was due to higher depletion and
production costs, offset by decreases in abandoned property costs and G&A.
Production costs were $65,972 for the three months ended September 30, 1997 and
$63,885 for the same period in 1996, resulting in a $2,087 increase, or 3%. The
increase was attributable to additional ad valorem taxes, offset by lower well
maintenance costs and 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, 11% from $4,330 for the three months ended September
30, 1996 to $3,843 for the same period in 1997.
Depletion was $36,258 for the three months ended September 30, 1997 compared to
$29,959 for the same period in 1996. This represented an increase in depletion
of $6,299, or 21%, primarily attributable to a decrease in oil reserves during
the third quarter of 1997 as a result of lower commodity prices.
Abandoned property costs of $1,095 were incurred on the abandonment of one well
during the three months ended September 30, 1996.
9
<PAGE>
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $42,744 during the nine
months ended September 30, 1997 from the same period in 1996. This decrease was
primarily due to the receipt of proceeds from the litigation settlement received
in 1996 as discussed in Item 2 and decreased oil and gas sales receipts, offset
by decreases in production costs paid and in abandoned property costs paid.
Net Cash Provided by (Used in) Investing Activities
The Partnership's investing activities for the nine months ended September 30,
1997 and 1996 included expenditures related to replacement or disposal of
equipment on several oil and gas properties.
Proceeds of $6,287 were received from the salvage of equipment on properties
abandoned during the nine months ended September 30, 1996. Proceeds of $16,203
were received from the disposal of equipment on active properties during the
nine months ended September 30, 1996.
Net Cash Used in Financing Activities
Cash was sufficient for the nine months ended September 30, 1997 to cover
distributions to the partners of $219,468 of which $2,194 was distributed to the
managing general partner and $217,274 to the limited partners. For the same
period ended September 30, 1996, cash was sufficient for distributions to the
partners of $259,017 of which $2,590 was distributed to the managing general
partner and $256,427 to the limited partners. Cash distributions to the partners
of $259,017 for the nine months ended September 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: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 6, 1997 By: /s/ Rich Dealy
-----------------------------------
Rich Dealy, Vice President and
Controller
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000791231
<NAME> 85B.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 71,419
<SECURITIES> 0
<RECEIVABLES> 79,449
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 150,868
<PP&E> 5,304,077
<DEPRECIATION> 3,735,140
<TOTAL-ASSETS> 1,719,805
<CURRENT-LIABILITIES> 18,961
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,700,844
<TOTAL-LIABILITY-AND-EQUITY> 1,719,805
<SALES> 392,773
<TOTAL-REVENUES> 396,900
<CGS> 0
<TOTAL-COSTS> 293,911
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 102,989
<INCOME-TAX> 0
<INCOME-CONTINUING> 102,989
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,989
<EPS-PRIMARY> 12.76
<EPS-DILUTED> 0
</TABLE>
