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, 1996
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. 33-11193-1
PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2195512
(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 PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
March 31, December 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, all interest
bearing deposits $ 118,600 $ 133,580
Accounts receivable - affiliate 144,964 53,753
----------- -----------
Total current assets 263,564 187,333
Oil and gas properties - at cost, based on the
successful efforts accounting method 7,007,839 7,039,141
Accumulated depletion (4,546,044) (4,505,198)
----------- -----------
Net oil and gas properties 2,461,795 2,533,943
----------- -----------
$ 2,725,359 $ 2,721,276
========== ===========
PARTNERS' CAPITAL
Partners' capital:
Limited partners (24,426 interests) $ 2,696,865 $ 2,692,822
Managing general partner 28,494 28,454
------------ -----------
$ 2,725,359 $ 2,721,276
============ ===========
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.
2
<PAGE>
PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1996 1995
---------- ----------
Revenues:
Oil and gas sales $ 421,477 $ 391,795
Interest income 1,974 2,125
Salvage income from equipment disposals 20,520 -
Gain (loss) on abandoned properties 6,168 (11,732)
--------- ---------
Total revenues 450,139 382,188
Costs and expenses:
Production costs 237,616 236,765
General and administrative expenses 12,644 11,754
Abandoned property costs 22,736 5,652
Depletion 62,031 105,521
--------- ---------
Total costs and expenses 335,027 359,692
--------- ---------
Net income $ 115,112 $ 22,496
========= =========
Allocation of net income:
Managing general partner $ 1,151 $ 225
========= =========
Limited partners $ 113,961 $ 22,271
========= =========
Net income per limited partnership interest $ 4.67 $ .91
========= =========
Distributions per limited partnership interest $ 4.50 $ 4.55
========= =========
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.
3
<PAGE>
PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 1995 $ 35,453 $ 3,385,691 $ 3,421,144
Distributions (1,283) (111,139) (112,422)
Net income 225 22,271 22,496
---------- ---------- ----------
Balance at March 31, 1995 $ 34,395 $ 3,296,823 $ 3,331,218
========== ========== ==========
Balance at January 1, 1996 $ 28,454 $ 2,692,822 $ 2,721,276
Distributions (1,111) (109,918) (111,029)
Net income 1,151 113,961 115,112
---------- ---------- ----------
Balance at March 31, 1996 $ 28,494 $ 2,696,865 $ 2,725,359
========== ========== ==========
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
<PAGE>
PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1996 1995
----------- -----------
Cash flows from operating activities:
Net income $ 115,112 $ 22,496
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 62,031 105,521
Salvage income from equipment disposals (20,520) -
(Gain) loss on abandoned properties (6,168) 11,732
Changes in assets:
Increase in accounts receivable (79,292) (21,996)
---------- ----------
Net cash provided by operating activities 71,163 117,753
Cash flows from investing activities:
Disposals of oil and gas equipment 4,305 3,185
Proceeds from salvage income on equipment
disposals 20,581 13,193
---------- ----------
Net cash provided by investing activities 24,886 16,378
Cash flows from financing activities:
Cash distributions to partners (111,029) (112,422)
---------- ----------
Net increase (decrease) in cash and cash
equivalents (14,980) 21,709
Cash and cash equivalents at beginning of period 133,580 99,355
---------- ----------
Cash and cash equivalents at end of period $ 118,600 $ 121,064
========== ==========
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 PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
NOTE 1.
Parker & Parsley Producing Properties 87-A, Ltd. (the "Registrant") is a limited
partnership organized in 1987 under the laws of the State of Texas.
The Registrant engages primarily in oil and gas production in Texas and is not
involved in any industry segment other than oil and gas.
NOTE 2.
In the opinion of management, the unaudited financial statements as of March 31,
1996 of 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, these interim results are not
necessarily indicative of results for a full year.
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, 1995, 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 3.
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 Parker & Parsley
Development LP ("PPDLP"). The May 25, 1993 settlement agreement called for a
payment of $115 million in cash by the defendants, and Southmark, the
Registrant, and the other plaintiffs indemnified the defendants against the
claims of Jack N. Price. 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.
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,
6
<PAGE>
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 was without merit and has vigorously defended it,
PPDLP has held in reserve approximately 12.5% of the total settlement (the
"Reserve") pending final resolution of the litigation.
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 $208,711, or $8.54 per limited partnership interest, in
September 1993. The allocation of the lawsuit settlement amount was based on the
original verdict entered on October 26, 1990. The allocation to the working
interest owners in each well (including the Registrant) was based on a ratio of
the relative amount of damages due to overcharges for services and materials
("Materials") and damages for loss of past and future production ("Production"),
each as determined in that initial judgment. Within the Registrant, damages for
Materials were allocated between the partners based on their original sharing
percentages for costs of acquiring and/or drilling of wells. Similarly, damages
related to Production were allocated to the partners in the Registrant based on
their respective share of revenues from the subject wells.
As a condition of the purchase by Parker & Parsley Petroleum Company of Parker &
Parsley Development Company ("PPDC"), which was merged into PPDLP on January 1,
1995, from its former parent in May 1989, PPDC's interest in the lawsuit and
subsequent settlement was retained by the former parent. Consequently, all of
PPDC's share of the settlement related to its separately held interests in the
wells and its partnership interests in the sponsored partnerships (except that
portion allocable to interests acquired by PPDC after May 1989) was paid to the
former parent.
On September 20, 1995, the Beaumont trial judge entered a summary judgment
against Southmark for the $13,790,000 contingent fee sought by Price, together
with prejudgment interest, and also awarded Price an additional $5,498,525 in
attorneys' fees. On January 22, 1996, the trial judge entered an interlocutory
summary judgment against Dresser Industries and Baker Hughes for an amount yet
to be determined. Pursuant to their indemnity obligations, the Registrant,
Southmark, PPDLP and other original plaintiffs have vigorously protected the
rights of both Dresser and Baker Hughes. Southmark has vigorously pursued its
appeal of the judgment, and has posted a supersedeas bond using the Reserve as
collateral. On April 29, 1996, all of the parties, including the Registrant and
Southmark, entered into a $7.4 million settlement with Price which fully and
finally resolves all of the litigation and disputes between the parties,
including the Registrant's indemnity obligations to Dresser and Baker Hughes.
Pursuant to the settlement agreement, all of the pending lawsuits and judgments
will be dismissed, the supersedeas bond released, and the Reserve released as
collateral. It is expected that before the end of the third quarter, the
necessary dismissals and releases will be effected, the managing general partner
will conduct an accounting of income and expenses among the parties, and a final
distribution will be made to the working interest owners, including the
Registrant and its partners.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations(1)
The Registrant was formed October 1, 1987. On January 1, 1995, Parker & Parsley
Development L.P. ("PPDLP"), a Texas limited partnership, became the sole
managing general partner of the Registrant, by acquiring the rights and assuming
the obligations of Parker & Parsley Development Company ("PPDC"). 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 Registrant affairs. The limited partners contributed $12,213,000
representing 24,426 interests ($500 per interest) sold to a total of 1,150
limited partners.
Since its formation, the Registrant invested $8,707,175 in various prospects
that were purchased in Texas. The Registrant completed seven purchases of
producing properties involving working interests in 187 properties, of which two
previously productive wells were plugged and abandoned during 1988, 18 in 1989,
17 in 1990, 19 in 1991, nine in 1992, three in 1993, ten in 1994, three in 1995
and one during 1996. In addition, one well was sold during 1995. The Registrant
also participated in the drilling of two oil and gas wells during 1988 which
were completed as producers. All the properties are operated by the managing
general partner.
Results of Operations
Revenues:
The Registrant's oil and gas revenues increased to $421,477 from $391,795 for
the three months ended March 31, 1996 and 1995, respectively, an increase of 8%.
The increase in revenues was the net result of a 10% increase in the average
price received per barrel of oil and a 13% increase in the average price
received per mcf of gas, offset by a 3% decline in barrels of oil produced and
sold and a 2% decline in mcf of gas produced and sold. For the three months
ended March 31, 1996, 18,200 barrels of oil were sold compared to 18,786 for the
same period in 1995, a decrease of 586 barrels. For the three months ended March
31, 1996, 38,594 mcf of gas were sold compared to 39,217 for the same period in
1995, a decrease of 623 mcf. These volume decreases were due to the decline
characteristics of the Registrant's oil and gas properties and 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 $1.77 from $17.22 for the
three months ended March 31, 1995 to $18.99 for the same period in 1996 while
the average price received per mcf of gas increased from $1.74 for the three
months ended March 31, 1995 to $1.96 for the same period in 1996. 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, 1996.
8
<PAGE>
During the three months ended March 31, 1996, salvage income of $20,520 was
derived from equipment credits received from the disposal of oil and gas
equipment on properties that were plugged and abandoned in prior years.
A gain on abandoned properties of $6,168 was recognized during the three months
ended March 31, 1996, resulting from equipment credits received on one fully
depleted abandoned property. A loss on abandoned properties of $11,732 was
recognized during the three months ended March 31, 1995. This loss was the
result of proceeds received of $23,575 from equipment salvage on abandoned
properties, less the write-off of remaining capitalized well costs of $35,307.
Costs and Expenses:
Total costs and expenses decreased to $335,027 for the three months ended March
31, 1996 as compared to $359,692 for the same period ended March 31, 1995, a
decrease of $24,665, or 7%. This decrease was the result of a decline in
depletion, offset by increases in production costs, general and administrative
expenses ("G&A") and abandoned property costs.
Production costs were $237,616 for the three months ended March 31, 1996 and
$236,765 for the same period in 1995, resulting in an $851 increase. This
increase was attributable to a small increase in 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, 8% from $11,754 for the three months ended
March 31, 1995 to $12,644 for the same period in 1996.
Expenses incurred during the three months ended March 31, 1996 and 1995 to plug
and abandon uneconomical wells totaled $22,736 and $5,652, respectively.
Depletion was $62,031 for the three months ended March 31, 1996 compared to
$105,521 for the same period in 1995. This represented a decrease in depletion
of $43,490, or 41%, primarily attributable to the adoption of the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
effective for the fourth quarter of 1995 and the reduction of net depletable
basis resulting from the charge taken upon such adoption. Depletion was computed
property-by-property utilizing the unit-of-production method based upon the
dominant mineral produced, generally oil. Oil production decreased 586 barrels
for the three months ended March 31, 1996 from the same period in 1995, while
oil reserves of barrels were revised upward by 62,496 barrels, or 8%.
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
9
<PAGE>
other parties in connection with the fracturing and acidizing of 523 wells, and
then fraudulently concealed the shorting practice from PPDLP. The May 25, 1993
settlement agreement called for a payment of $115 million in cash by the
defendants, and Southmark, the Registrant, and the other plaintiffs indemnified
the defendants against the claims of Jack N. Price. 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.
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 was without merit and has vigorously defended it,
PPDLP has held in reserve approximately 12.5% of the total settlement (the
"Reserve") pending final resolution of the litigation.
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 $208,711, or $8.54 per limited partnership interest, in
September 1993. The allocation of the lawsuit settlement amount was based on the
original verdict entered on October 26, 1990. The allocation to the working
interest owners in each well (including the Registrant) was based on a ratio of
the relative amount of damages due to overcharges for services and materials
("Materials") and damages for loss of past and future production ("Production"),
each as determined in that initial judgment. Within the Registrant, damages for
Materials were allocated between the partners based on their original sharing
percentages for costs of acquiring and/or drilling of wells. Similarly, damages
related to Production were allocated to the partners in the Registrant based on
their respective share of revenues from the subject wells.
As a condition of the purchase by Parker & Parsley Petroleum Company of PPDC,
which was merged into PPDLP on January 1, 1995, from its former parent in May
1989, PPDC's interest in the lawsuit and subsequent settlement was retained by
the former parent. Consequently, all of PPDC's share of the settlement related
to its separately held interests in the wells and its partnership interests in
the sponsored partnerships (except that portion allocable to interests acquired
by PPDC after May 1989) was paid to the former parent.
On September 20, 1995, the Beaumont trial judge entered a summary judgment
against Southmark for the $13,790,000 contingent fee sought by Price, together
with prejudgment interest, and also awarded Price an additional $5,498,525 in
attorneys' fees. On January 22, 1996, the trial judge entered an interlocutory
summary judgment against Dresser Industries and Baker Hughes for an amount yet
to be determined. Pursuant to their indemnity obligations, the Registrant,
Southmark, PPDLP and other original plaintiffs have vigorously protected the
rights of both Dresser and Baker Hughes. Southmark has vigorously pursued its
appeal of the judgment, and has posted a supersedeas bond using the Reserve as
collateral. On April 29, 1996, all of the parties, including the Registrant and
Southmark, entered into a $7.4 million settlement with Price which fully and
10
<PAGE>
finally resolves all of the litigation and disputes between the parties,
including the Registrant's indemnity obligations to Dresser and Baker Hughes.
Pursuant to the settlement agreement, all of the pending lawsuits and judgments
will be dismissed, the supersedeas bond released, and the Reserve released as
collateral. It is expected that before the end of the third quarter, the
necessary dismissals and releases will be effected, the managing general partner
will conduct an accounting of income and expenses among the parties, and a final
distribution will be made to the working interest owners, including the
Registrant and its partners.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased to $71,163 during the three
months ended March 31, 1996, a $46,590 decrease from the same period ended March
31, 1995. The decrease was the result of increases in expenditures for
production costs, offset by an increase in oil and gas sales receipts. The
production cost expenditure increase was related to an increase in well repair
and maintenance costs. Higher average prices received for oil and gas was the
contributing factor to the increase in oil and gas sales receipts.
Net Cash Provided by Investing Activities
The Registrant's investing activities during the three months ended March 31,
1996 and 1995, respectively, yielded proceeds of $4,305 and $3,185 received from
the disposal of oil and gas equipment on active properties.
Proceeds from salvage income of $20,581 and $13,193 from the sale of oil and gas
equipment on properties abandoned in prior years were received during the three
months ended March 31, 1996 and 1995, respectively.
Net Cash Used in Financing Activities
Cash was sufficient for the three months ended March 31, 1996 to cover
distributions to the partners of $111,029 of which $109,918 was distributed to
the limited partners and $1,111 to the managing general partner. For the same
period ended March 31, 1995, cash was sufficient for distributions to the
partners of $112,422 of which $111,139 was distributed to the limited partners
and $1,283 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.
- - ---------------
(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.
11
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The Registrant is a party to material litigation which is described in Note 3 of
Notes to Financial Statements above.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
12
<PAGE>
PARKER & PARSLEY PRODUCING PROPERTIES 87-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 PRODUCING
PROPERTIES 87-A, LTD.
By: Parker & Parsley Development L.P.,
Managing General Partner
By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
Dated: May 14, 1996 By: /s/ Steven L. Beal
--------------------------------
Steven L. Beal, Senior Vice President
and Chief Financial Officer of PPUSA
13
<PAGE>
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<ARTICLE> 5
<CIK> 0000809016
<NAME> 87AP.TXT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 118,600
<SECURITIES> 0
<RECEIVABLES> 144,964
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 263,564
<PP&E> 7,007,839
<DEPRECIATION> 4,546,044
<TOTAL-ASSETS> 2,725,359
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,725,359
<TOTAL-LIABILITY-AND-EQUITY> 2,725,359
<SALES> 421,477
<TOTAL-REVENUES> 450,139
<CGS> 0
<TOTAL-COSTS> 335,027
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 115,112
<INCOME-TAX> 0
<INCOME-CONTINUING> 115,112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,112
<EPS-PRIMARY> 4.67
<EPS-DILUTED> 0
</TABLE>
