PARKER & PARSLEY PRODUCING PROPERTIES 87-A LTD
10-Q, 1998-05-06
CRUDE PETROLEUM & NATURAL GAS
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                                  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, 1998

                                       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>



                PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD.

                                TABLE OF CONTENTS


                                                                          Page
                          Part I. Financial Information

Item 1.    Financial Statements

           Balance Sheets as of March 31, 1998 and
              December 31, 1997..........................................    3

           Statements of Operations for the three months
             ended March 31, 1998 and 1997...............................    4

           Statement of Partners' Capital for the three months
             ended March 31, 1998........................................    5

           Statements of Cash Flows for the three months
             ended March 31, 1998 and 1997...............................    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..............................   11

           27.1    Financial Data Schedule

           Signatures....................................................   12


                                        2

<PAGE>



                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,
                                                         1998          1997
                                                   -----------     -----------
                                                    (Unaudited)
                 ASSETS

Current assets:
  Cash and cash equivalents, including interest
     bearing deposits of $221,994 at March 31
     and $219,315 at December 31                   $   222,194     $   219,515
  Accounts receivable - affiliate                       80,652         163,949
                                                    ----------      ----------
        Total current assets                           302,846         383,464
                                                    ----------      ----------
Oil and gas properties - at cost, based on the
  successful efforts accounting method               5,988,877       6,060,618
Accumulated depletion                               (4,583,780)     (4,619,483)
                                                    ----------      ----------
        Net oil and gas properties                   1,405,097       1,441,135
                                                    ----------      ----------
                                                   $ 1,707,943     $ 1,824,599
                                                    ==========      ==========
            PARTNERS' CAPITAL

Partners' capital:
  Managing general partner                         $    18,320     $    19,487
  Limited partners (24,426 interests)                1,689,623       1,805,112
                                                    ----------      ----------
                                                   $ 1,707,943     $ 1,824,599
                                                    ==========      ==========

  The financial information included as of March 31, 1998 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 OPERATIONS
                                   (Unaudited)


                                                          Three months ended
                                                               March 31,
                                                       ------------------------
                                                          1998           1997
                                                       ----------    ----------
Revenues:
  Oil and gas                                          $  221,573    $  357,769
  Interest                                                  3,400         4,905
  Gain on disposition of assets                            35,489        11,008
                                                        ---------     ---------
                                                          260,462       373,682
                                                        ---------     ---------
Costs and expenses:
  Oil and gas production                                  183,736       227,562
  General and administrative                                6,647        10,628
  Depletion                                                40,483        40,599
  Abandoned property                                       46,991         2,966
                                                        ---------     ---------
                                                          277,857       281,755
                                                        ---------     ---------
Net income (loss)                                      $  (17,395)   $   91,927
                                                        =========     =========
Allocation of net income (loss)
  Managing general partner                             $     (174)   $      919
                                                        =========     =========
  Limited partners                                     $  (17,221)   $   91,008
                                                        =========     =========
Net income (loss) per limited partnership interest     $     (.71)   $     3.73
                                                        =========     =========
Distributions per limited partnership interest         $     4.02    $     9.75
                                                        =========     =========



         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)

                         STATEMENT OF PARTNERS' CAPITAL
                                   (Unaudited)




                                        Managing
                                        general        Limited
                                        partner        partners        Total
                                       ----------     ----------     ----------

Balance at January 1, 1998             $   19,487     $1,805,112     $1,824,599

    Distributions                            (993)       (98,268)       (99,261)

    Net loss                                 (174)       (17,221)       (17,395)
                                        ---------      ---------      ---------

Balance at March 31, 1998              $   18,320     $1,689,623     $1,707,943
                                        =========      =========      =========







         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)

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                          Three months ended
                                                                March 31,
                                                       ------------------------
                                                          1998           1997
                                                       ---------      ---------
Cash flows from operating activities:
  Net income (loss)                                    $ (17,395)     $  91,927
  Adjustments to reconcile net income (loss) to
    net cash provided by operating activities:
       Depletion                                          40,483         40,599
       Gain on disposition of assets                     (35,489)       (11,008)
  Changes in assets:
       Accounts receivable                                83,297        151,918
                                                        --------       --------
          Net cash provided by operating activities       70,896        273,436
                                                        --------       --------
Cash flows from investing activities:
  Additions to oil and gas properties                     (4,445)           -
  Proceeds from asset dispositions                        35,489         15,617
                                                        --------       --------
          Net cash provided by investing activities       31,044         15,617
                                                        --------       --------
Cash flows used in financing activities:
  Cash distributions to partners                         (99,261)      (240,556)
                                                        --------       --------
Net increase in cash and cash equivalents                  2,679         48,497
Cash and cash equivalents at beginning of period         219,515        327,443
                                                        --------       --------
Cash and cash equivalents at end of period             $ 222,194      $ 375,940
                                                        ========       ========




         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 PRODUCING PROPERTIES 87-A, LTD.
                          (A Texas Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998
                                   (Unaudited)


Note 1.     Organization and nature of operations

Parker & Parsley  Producing  Properties  87-A,  Ltd.  (the  "Partnership")  is a
limited partnership organized in 1987 under the laws of the State of Texas.

The Partnership  engages primarily in oil and gas production in Texas and is not
involved in any industry segment other than oil and gas.

Note 2.     Basis of presentation

In the opinion of management, the unaudited financial statements as of March 31,
1998 of the Partnership  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.  Certain  reclassifications
have been made to the March 31,  1997  financial  statements  to  conform to the
March 31, 1998 financial statement presentations.

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,  1997,  as filed with the  Securities  and
Exchange  Commission,  a copy of which is  available  upon request by writing to
Rich Dealy,  Vice President and Chief  Accounting  Officer,  5205 North O'Connor
Boulevard, 1400 Williams Square West, Irving, Texas 75039-3746.

Item 2.     Management's Discussion and Analysis of Financial Condition
              and Results of Operations(1)

Results of Operations

Revenues:

The Partnership's  oil and gas revenues  decreased 38% to $221,573 from $357,769
for the three months ended March 31, 1998 and 1997,  respectively.  The decrease
in revenues  resulted  from  declines in  production  and lower  average  prices
received.  For the three  months ended March 31,  1998,  12,524  barrels of oil,
3,259  barrels of natural gas liquids  ("NGLs") and 14,514 mcf of gas were sold,
or 18,202 barrel of oil equivalents  ("BOEs").  For the three months ended March
31, 1997, 13,976 barrels of oil and 26,683 mcf of gas were sold, or 18,423 BOEs.

As of September 30, 1997, the Partnership began accounting for processed natural
gas   production  as  processed   natural  gas  liquids  and  dry  residue  gas.
Consequently,  separate product volumes will not be comparable for periods prior

                                        7

<PAGE>



to September 30, 1997.  Also,  prices for gas products will not be comparable as
the price per mcf for natural gas for the three  months  ended March 31, 1998 is
the price received for dry residue gas and the price per mcf for natural gas for
the three months ended March 31, 1997 is a price for wet gas (i.e.,  natural gas
liquids combined with dry residue gas).

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  $6.44,  or 30%,  from
$21.12 for the three  months  ended March 31, 1997 to $14.68 for the same period
in 1998.  The average price  received per barrel of NGLs during the three months
ended  March 31,  1998 was $6.04.  The  average  price  received  per mcf of gas
decreased  47% from $2.34  during the three months ended March 31, 1997 to $1.24
for the same period in 1998. 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 three months ended March 31, 1998.

During  most of 1997,  the  Partnership  benefitted  from  higher  oil prices as
compared to previous  years.  However,  during the fourth  quarter of 1997,  oil
prices began a downward  trend that has continued  into March 1998. On April 23,
1998, the market price for West Texas  intermediate crude was $13.80 per barrel.
A continuation of the oil price environment experienced during the first quarter
of 1998 will have an adverse effect on the Partnership's  revenues and operating
cash flow and could result in additional  decreases in the carrying value of the
Partnership's oil and gas properties.

Gain on disposition  of assets of $35,489 and $11,008 was recognized  during the
three  months ended March 31, 1998 and 1997,  respectively.  The gain of $35,489
was comprised of $31,549  resulting from equipment  credits received on one well
plugged and abandoned in 1998, in addition to $3,940 from  equipment  credits on
wells  abandoned in a prior year.  The gain of $11,008  resulted from $14,394 on
equipment disposals for properties  abandoned in prior years, offset by a $3,386
loss on the abandonment of one well in 1997.

Costs and Expenses:

Total costs and expenses  decreased to $277,857 for the three months ended March
31,  1998 as compared  to  $281,755  for the same period in 1997,  a decrease of
$3,898.  This decrease was the result of declines in production  costs,  general
and  administrative  expenses  ("G&A") and  depletion,  offset by an increase in
abandoned property costs.

Production  costs were  $183,736  for the three  months ended March 31, 1998 and
$227,562 for the same period in 1997,  resulting in a $43,826 decrease,  or 19%.
This decrease was primarily  attributable to declines in well maintenance  costs
and production taxes.
                                        8

<PAGE>



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,  37% from $10,628 for the three months ended March 31,
1997 to $6,647 for the same period in 1998.

Depletion  was $40,483  for the three  months  ended March 31, 1998  compared to
$40,599  for the same  period in 1997,  a decrease of $117.  This  decrease  was
primarily  attributable to a reduction in the Partnership's net depletable basis
from  charges  taken  in  accordance  with  Statement  of  Financial  Accounting
Standards No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
Long-Lived  Assets to be Disposed Of" ("SFAS 121") during the fourth  quarter of
1997 and a reduction  in oil  production  of 1,452  barrels for the period ended
March 31, 1998  compared to the same period in 1997,  offset by a decline in oil
reserves  during  the three  months  ended  March 31,  1998 as a result of lower
commodity prices.

Abandonment  expenses of $46,991 and $2,966 were incurred on one well  abandoned
during  each  period  for the  three  months  ended  March  31,  1998 and  1997,
respectively.

Liquidity and Capital Resources

Net Cash Provided by Operating Activities

Net cash provided by operating  activities  decreased  $202,540 during the three
months  ended March 31, 1998 from the same period in 1997.  The decrease was the
result of a decline in oil and gas sales  receipts  and  increases  in abandoned
property costs and production costs paid.

Net Cash Provided  by Investing Activities

The Partnership's  principle investing  activities during the three months ended
March 31, 1998 were related to expenditures  for oil and gas equipment on active
properties.

Proceeds from  disposition of assets of $35,489 and $15,617  received during the
three months ended March 31, 1998 and 1997,  respectively,  were  primarily from
equipment  credits  received on one well plugged and  abandoned  during 1998 and
from equipment credits received on wells plugged and abandoned in a prior year.

Net Cash Used in Financing Activities

Cash  was  sufficient  for the  three  months  ended  March  31,  1997 to  cover
distributions  to the partners of $99,261 of which $993 was  distributed  to the
managing  general  partner  and $98,268 to the  limited  partners.  For the same
period  ended March 31,  1997,  cash was  sufficient  for  distributions  to the
partners of $240,556 of which $2,406 was  distributed  to the  managing  general
partner and $238,150 to the limited partners.

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.

                                        9

<PAGE>



Information systems for the year 2000

The managing general partner will be required to modify its information  systems
in order to  accurately  process  Partnership  data  referencing  the year 2000.
Because of the importance of occurrence  dates in the oil and gas industry,  the
consequences of not pursuing these  modifications  could be very  significant to
the Partnership's ability to manage and report operating activities.  Currently,
the managing general partner plans to contract with third parties to perform the
software  programming  changes  necessary to correct any existing  deficiencies.
Such programming  changes are anticipated to be completed and tested by March 1,
1999. The managing  general  partner will allocate a portion of the costs of the
year 2000 programming  charges to the Partnership when they are incurred,  along
with recurring general and administrative  expenses.  Although the costs are not
estimable at this time, they should not be significant to the Partnership.
- ---------------
(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.

                                       10

<PAGE>



                           Part II. Other Information

Item 6.     Exhibits and Reports on Form 8-K

(a)    Exhibits

       27.1    Financial Data Schedule

(b)    Reports on Form 8-K

        (1)  On April 2, 1998,  the  Partnership  filed a Current Report on Form
             8-K dated  March 31,  1998,  reporting  under  Item 4  (Changes  in
             Registrant's  Certifying  Accountants)  the  engagement  of Ernst &
             Young  LLP  as  the  Partnership's  independent  auditors  and  the
             dismissal of KPMG Peat Marwick LLP effective upon the completion of
             the audit of the  Partnership  for the fiscal year ending  December
             31, 1997.



                                       11

<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:      Pioneer Natural Resources USA, Inc.
                                              Managing General Partner



Dated:  May 6, 1998                 By:      /s/ Rich Dealy
                                             ---------------------------------
                                             Rich Dealy, Vice President
                                               and Chief Accounting Officer



                                       12

<PAGE>




<TABLE> <S> <C>

<ARTICLE> 5
<CIK> 0000809016
<NAME> 87AP.
<MULTIPLIER> 1
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               MAR-31-1998
<CASH>                                         222,194
<SECURITIES>                                         0
<RECEIVABLES>                                   80,652
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                               302,846
<PP&E>                                       5,988,877
<DEPRECIATION>                               4,583,780
<TOTAL-ASSETS>                               1,707,943
<CURRENT-LIABILITIES>                                0
<BONDS>                                              0
                                0
                                          0
<COMMON>                                             0
<OTHER-SE>                                   1,707,943
<TOTAL-LIABILITY-AND-EQUITY>                 1,707,943
<SALES>                                        221,573
<TOTAL-REVENUES>                               260,462
<CGS>                                                0
<TOTAL-COSTS>                                  277,857
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                               (17,395)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                           (17,395)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                  (17,395)
<EPS-PRIMARY>                                    (.71)
<EPS-DILUTED>                                        0
        

</TABLE>


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