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, 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. 33-12244-1
PARKER & PARSLEY 87-A, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2185148
(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 15 pages.
-There are no exhibits-
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PARKER & PARSLEY 87-A, LTD.
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of September 30, 1996 and
December 31, 1995 .................................... 3
Statements of Operations for the three and nine
months ended September 30, 1996 and 1995................. 4
Statement of Partners' Capital for the nine months
ended September 30, 1996................................. 5
Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995.............................. 6
Notes to Financial Statements.............................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 9
Part II. Other Information
Item 1. Legal Proceedings.......................................... 14
Signatures................................................. 15
2
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PARKER & PARSLEY 87-A, LTD.
(A Texas Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
September 30, December 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $868,632 at September 30
and $340,340 at December 31 $ 869,003 $ 353,019
Accounts receivable - oil and gas sales 261,302 261,155
----------- -----------
Total current assets 1,130,305 614,174
----------- -----------
Oil and gas properties - at cost, based on
the successful efforts accounting method 20,108,427 22,340,532
Accumulated depletion (14,323,617) (15,981,095)
----------- -----------
Net oil and gas properties 5,784,810 6,359,437
----------- -----------
$ 6,915,115 $ 6,973,611
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 103,324 $ 138,353
Accounts payable - other 13,178 -
----------- -----------
Total current liabilities 116,502 138,353
----------- -----------
Partners' capital:
Limited partners (28,811 interests) 6,730,731 6,766,910
Managing general partner 67,882 68,348
----------- -----------
6,798,613 6,835,258
----------- -----------
$ 6,915,115 $ 6,973,611
=========== ===========
The financial information included as of September 30, 1996 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 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- -----------------------
1996 1995 1996 1995
--------- --------- ---------- ----------
Revenues:
Oil and gas $ 598,984 $ 546,238 $1,827,120 $1,774,057
Interest 11,058 6,509 21,163 12,962
Litigation settlement - - 848,304 -
Salvage income from equipment
disposal 5,493 922 52,510 922
Gain on sale of assets - 93 317,615 35,161
Gain on abandoned properties - - 2,552 -
-------- -------- --------- ---------
615,535 553,762 3,069,264 1,823,102
-------- -------- --------- ---------
Costs and expenses:
Oil and gas production 237,860 292,004 841,418 936,390
General and administrative 17,607 16,366 57,513 53,201
Depletion 123,917 195,606 379,730 741,818
Abandoned property 114 482 26,122 11,575
-------- -------- --------- ---------
379,498 504,458 1,304,783 1,742,984
-------- -------- --------- ---------
Net income $ 236,037 $ 49,304 $1,764,481 $ 80,118
======== ======== ========= =========
Allocation of net income:
Managing general partner $ 2,361 $ 493 $ 17,645 $ 801
======== ======== ========= =========
Limited partners $ 233,676 $ 48,811 $1,746,836 $ 79,317
======== ======== ========= =========
Net income per limited
partnership interest $ 8.11 $ 1.69 $ 60.63 $ 2.75
======== ======== ========= =========
Distributions per limited
partnership interest $ 10.91 $ 9.00 $ 61.89 $ 26.93
======== ======== ========= =========
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 87-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- ------------ ------------
Balance at January 1, 1996 $ 68,348 $ 6,766,910 $ 6,835,258
Distributions (18,111) (1,783,015) (1,801,126)
Net income 17,645 1,746,836 1,764,481
-------- ----------- -----------
Balance at September 30, 1996 $ 67,882 $ 6,730,731 $ 6,798,613
======== =========== ===========
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 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
1996 1995
----------- ----------
Cash flows from operating activities:
Net income $ 1,764,481 $ 80,118
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 379,730 741,818
Salvage income from equipment disposal (52,510) (922)
Gain on abandoned properties (2,552) -
Gain on sale of assets (317,615) (35,161)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (147) 36,633
Increase (decrease) in accounts payable (16,433) 25,955
---------- ---------
Net cash provided by operating activities 1,754,954 848,441
---------- ---------
Cash flows from investing activities:
(Additions) disposals to oil and gas properties (7,262) 24,765
Proceeds from salvage income on equipment
disposals 52,510 922
Proceeds from equipment salvage on abandoned
properties 6,215 -
Proceeds from sale of assets 510,693 156,570
---------- ---------
Net cash provided by investing activities 562,156 182,257
---------- ---------
Cash flows from financing activities:
Cash distributions to partners (1,801,126) (783,701)
---------- ---------
Net increase in cash and cash equivalents 515,984 246,997
Cash and cash equivalents at beginning of period 353,019 142,638
---------- ---------
Cash and cash equivalents at end of period $ 869,003 $ 389,635
========== =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these statements.
6
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PARKER & PARSLEY 87-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
Note 1.
Parker & Parsley 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 development and production in
the Spraberry Trend area of West Texas and in Colorado and is not involved in
any industry segment other than oil and gas.
Note 2.
In the opinion of management, the Registrant's unaudited financial statements as
of September 30, 1996 and for the three and nine months ended September 30, 1996
and 1995 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 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 L.P. ("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,
7
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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 $8,257,794, or $286.62 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.
8
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Pursuant to the settlement agreement, 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, including $839,821, or $29.15 per limited partnership interest
to the Registrant and its partners.
Note 4.
A gain of $317,615 on the sale of nine oil and gas wells and four saltwater
disposal wells to Costilla Energy, L.L.C. was recognized during the nine months
ended September 30, 1996, resulting from proceeds received of $510,693 less the
write-off of remaining capitalized well costs of $193,078. During the same
period in 1995, a gain of $35,161 on the sale of six wells to the same company
was recognized resulting from proceeds received of $146,475 less the write-off
of remaining capitalized well costs of $111,314.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
Results of Operations
Nine months ended September 30, 1996 compared with nine months ended September
30, 1995
Revenues:
The Registrant's oil and gas revenues increased to $1,827,120 from $1,774,057
for the nine months ended September 30, 1996 and 1995, respectively, an increase
of 3%. The increase in revenues resulted from higher average prices received per
barrel of oil and mcf of gas, offset by an 18% decrease in barrels of oil
produced and sold and a 10% decrease in mcf of gas produced and sold. For the
nine months ended September 30, 1996, 62,490 barrels of oil were sold compared
to 76,373 for the same period in 1995, a decrease of 13,883 barrels. Of the
decrease, 4,216 barrels, or 5%, was attributable to the sale of nine oil and gas
wells during the nine months ended September 30, 1996, while the remaining
decrease of 9,667, or 13%, was due to the decline characteristics of the
Registrant's oil and gas properties. For the nine months ended September 30,
1996, 252,449 mcf of gas were sold compared to 279,297 for the same period in
1995, a decrease of 26,848 mcf. The sale of nine oil and gas wells during the
nine months ended September 30, 1996 had no material effect on the decrease in
gas production. Because of the decline characteristics of the Registrant's oil
and gas properties, management expects a certain amount of decline in production
to continue in the future until the Registrant's economically recoverable
reserves are fully depleted.
The average price received per barrel of oil increased $3.55 or 21%, from $17.21
for the nine months ended September 30, 1995 to $20.76 for the same period in
1996 while the average price received per mcf of gas increased 28% from $1.65
during the nine months ended September 30, 1995 to $2.10 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
9
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production at average prices lower or higher than that received during the nine
months ended September 30, 1996.
A gain of $317,615 on the sale of nine oil and gas wells and four saltwater
disposal wells was recognized during the nine months ended September 30, 1996,
resulting from proceeds received of $510,693 less the write-off of remaining
capitalized well costs of $193,078. During the same period in 1995, a gain of
$35,161 on the sale of five wells was recognized, resulting from proceeds
received of $146,475 less the write-off of remaining capitalized well costs of
$111,314.
Salvage income of $52,510 received for the nine months ended September 30, 1996
was derived from equipment sales proceeds on one well abandoned in a prior year
and three fully depleted wells. During the same period in 1995, salvage income
of $922 was derived from equipment sales proceeds received on wells plugged and
abandoned in prior years.
A gain of $2,552 on the abandonment of one oil and gas well and one saltwater
disposal well during the nine months ended September 30, 1996, resulted from
proceeds received of $6,215 from equipment credits, less the write-off of
remaining capitalized well costs of $3,663. Associated costs incurred to plug
and abandon these properties totaled $26,122 during this period. During the same
period in 1995, abandoned property costs of $11,575 were incurred on the
abandonment of one uneconomical well.
Costs and Expenses:
Total costs and expenses decreased to $1,304,783 for the nine months ended
September 30, 1996 as compared to $1,742,984 for the same period in 1995, a
decrease of $438,201, or 25%. This decrease was due to declines in production
costs and depletion, offset by increases in general and administrative expenses
("G&A") and abandoned property costs.
Production costs were $841,418 for the nine months ended September 30, 1996 and
$936,390 for the same period in 1995, resulting in a $94,972 decrease, or 10%.
This decrease was due to reductions 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, 7%, from $53,201 for the nine months ended
September 30, 1995 to $57,513 for the same period in 1996.
Depletion was $379,730 for the nine months ended September 30, 1996 compared to
$741,818 for the same period in 1995, representing a decrease of $362,088, or
49%. This decrease was primarily attributable to the following factors: (i) a
reduction in the Registrant'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" ("FAS 121"), (ii) a reduction in oil production of 13,883 barrels for the
nine months ended September 30, 1996 as compared to the same period in 1995,
partially due to the sale of properties during 1996, and (iii) an increase in
oil and gas reserves during the third quarter of 1996 as a result of higher
commodity prices.
10
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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 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 $8,257,794, or $286.62 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
11
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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
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, including $839,821, or $29.15 per limited partnership interest
to the Registrant and its partners.
Three months ended September 30, 1996 compared with three months ended September
30, 1995
Revenues:
The Registrant's oil and gas revenues increased to $598,984 from $546,238 for
the three months ended September 30, 1996 and 1995, respectively, an increase of
10%. The increase in revenues resulted from higher prices received per barrel of
oil and mcf of gas, offset by a 19% decrease in barrels of oil produced and sold
and a 10% decrease in mcf of gas produced and sold. For the three months ended
September 30, 1996, 19,194 barrels of oil were sold compared to 23,554 for the
same period in 1995, a decrease of 4,360 barrels. Of the decrease, 2,861
barrels, or 12%, was attributable to the sale of nine oil and gas wells during
the three months ended September 30, 1996, while the remaining decrease of 1,499
barrels, or 7%, was due to the decline characteristics of the Registrant's oil
and gas properties. For the three months ended September 30, 1996, 87,988 mcf of
gas were sold compared to 97,710 for the same period in 1995, a decrease of
9,722 mcf. Of the decrease, 1,674 mcf, or 2%, was attributable to the sale of
nine oil and gas wells during the three months ended September 30, 1996, while
the remaining 8,048 mcf, or 8%, was due to the decline characteristics of the
Registrant's oil and gas properties.
The average price received per barrel of oil increased $5.46, or 33%, from
$16.45 for the three months ended September 30, 1995 to $21.91 for the same
period in 1996 while the average price received per mcf of gas increased 25%
from $1.62 during the three months ended September 30, 1995 to $2.03 in 1996.
A gain of $93 on the prior period sale of five wells was recognized during the
three months ended September 30, 1995 resulting from a receivable due on the
sale for post-closing adjustments.
Salvage income of $5,493 received during the three months ended September 30,
1996 consisted of proceeds received from equipment sales on one fully depleted
well. For the same period in 1995, salvage income of $922 was derived from the
receipt of equipment sales proceeds on a well plugged and abandoned in a prior
year.
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Abandoned property costs of $114 were incurred during the three months ended
September 30, 1996 from the abandonment of one oil and gas well and one
saltwater disposal well . During the same period in 1995, abandoned property
costs of $482 were incurred on the abandonment of one uneconomical well.
Costs and Expenses:
Total costs and expenses decreased to $379,498 for the three months ended
September 30, 1996 as compared to $504,458 for the same period in 1995, a
decrease of $124,960 or 25%. This decrease was due to declines in oil and gas
production and depletion, offset by increases in G&A and abandoned property
costs.
Production costs were $237,860 for the three months ended September 30, 1996 and
$292,004 for the same period in 1995, resulting in a $54,144 decrease, or 19%,
which resulted from lower 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 $16,366 for the three months ended
September 30, 1995 to $17,607 for the same period in 1995.
Depletion was $123,917 for the three months ended September 30, 1996 compared to
$195,606 for the same period in 1995, representing a decrease of $71,689, or
37%, primarily attributable to the following factors: (i) a reduction in the
Registrant's net depletable basis from charges taken in accordance with FAS 121,
(ii) a reduction in oil production of 4,360 barrels for the three months ended
September 30, 1996 as compared to the same period in 1995, and (iii) an increase
in oil and gas reserves during the third quarter of 1996 as a result of higher
commodity prices.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $906,513 during the nine
months ended September 30, 1996 from the same period ended September 30, 1995.
This increase was due to the receipt of litigation proceeds as discussed in Note
3 and a decrease in production costs, offset by an increase in abandoned
property costs.
Net Cash Provided by Investing Activities
During the nine months ended September 30, 1996, the Registrant invested $7,262
in expenditures related to equipment replacement on various oil and gas
properties. The Registrant's investing activities during the nine months ended
September 30, 1995 resulted in the receipt of $24,765 from the disposal of oil
and gas equipment on active properties.
Proceeds of $52,510 received during the nine months ended September 30, 1996
were attributable to credits received from the sale of oil and gas equipment on
one well abandoned in a prior year and three fully depleted wells. Proceeds from
13
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salvage income of $922 from the sale of oil and gas equipment on a property
abandoned in a prior year were received during the nine months ended September
30, 1995.
Proceeds of $6,215 were received from the salvage of equipment on properties
abandoned during the nine months ended September 30, 1996.
Proceeds from sale of assets of $510,693 were received during the nine months
ended September 30, 1996 from the sale of nine oil and gas wells and four
saltwater disposal wells. Proceeds of $156,570 from sale of assets were received
from the sale of five wells during the nine months ended September 30, 1995.
Net Cash Used in Financing Activities
Cash was sufficient for the nine months ended September 30, 1996 to cover
distributions to the partners of $1,801,126 of which $1,783,015 was distributed
to the limited partners and $18,111 to the managing general partner. For the
same period ended September 30, 1995, cash was sufficient for distributions to
the partners of $783,701 of which $775,865 was distributed to the limited
partners and $7,836 to the managing general partner.
Cash distributions to the partners of $1,801,126 for the nine months ended
September 30, 1996 included $839,821 to the limited partners and $8,483 to the
managing general partner resulting from proceeds received in the litigation
settlement as discussed in Note 3.
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 1. Legal Proceedings
During April 1996, the Registrant completed the settlement of a material
litigation to which it was a party. This litigation and settlement thereof is
described in Note 3 of Notes to Financial Statements above.
14
<PAGE>
PARKER & PARSLEY 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 87-A, LTD.
By: Parker & Parsley Development L.P.,
Managing General Partner
By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
Dated: November 6, 1996 By: /s/ Steven L. Beal
-----------------------------------------
Steven L. Beal, Senior Vice President
and Chief Financial Officer of PPUSA
15
<PAGE>
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