UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/ x / Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______ to _______
Commission File No. 33-12244-01
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 12 pages.
Exhibit index on page 11.
<PAGE>
PARKER & PARSLEY 87-A, LTD.
TABLE OF CONTENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of June 30, 1997 and
December 31, 1996 ...................................... 3
Statements of Operations for the three and six
months ended June 30, 1997 and 1996........................ 4
Statement of Partners' Capital for the six months
ended June 30, 1997........................................ 5
Statements of Cash Flows for the six months ended
June 30, 1997 and 1996..................................... 6
Notes to Financial Statements................................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................. 11
27. Financial Data Schedule
Signatures................................................... 12
2
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PARKER & PARSLEY 87-A, LTD.
(A Texas Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $446,913 at June 30
and $481,457 at December 31 $ 447,512 $ 481,657
Accounts receivable - oil and gas sales 231,985 382,030
----------- -----------
Total current assets 679,497 863,687
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 20,117,363 20,111,127
Accumulated depletion (15,065,363) (14,802,983)
----------- -----------
Net oil and gas properties 5,052,000 5,308,144
----------- -----------
$ 5,731,497 $ 6,171,831
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 63,296 $ 148,584
Partners' capital:
Managing general partner 56,659 60,229
Limited partners (28,811 interests) 5,611,542 5,963,018
----------- -----------
5,668,201 6,023,247
----------- -----------
$ 5,731,497 $ 6,171,831
=========== ===========
The financial information included as of June 30, 1997 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these
financial statements.
3
<PAGE>
PARKER & PARSLEY 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------- -----------------------
1997 1996 1997 1996
--------- ---------- ---------- ----------
Revenues:
Oil and gas $ 506,039 $ 626,733 $1,166,017 $1,228,136
Interest 6,664 5,566 13,016 10,105
Gain on sale of assets - 317,615 - 317,615
Salvage income from
equipment disposal - 257 - 47,017
Gain (loss) on abandoned
properties - (3,455) - 2,552
Litigation settlement - 848,304 - 848,304
-------- --------- --------- ---------
512,703 1,795,020 1,179,033 2,453,729
-------- --------- --------- ---------
Costs and expenses:
Oil and gas production 256,211 285,189 488,098 603,558
General and administrative 14,849 21,864 34,981 39,906
Depletion 124,502 123,608 262,380 255,813
Abandoned property - 4,444 - 26,008
-------- --------- --------- ---------
395,562 435,105 785,459 925,285
-------- --------- --------- ---------
Net income $ 117,141 $1,359,915 $ 393,574 $1,528,444
======== ========= ========= =========
Allocation of net income:
Managing general partner $ 1,172 $ 13,598 $ 3,936 $ 15,284
======== ========= ========= =========
Limited partners $ 115,969 $1,346,317 $ 389,638 $1,513,160
======== ========= ========= =========
Net income per limited
partnership interest $ 4.02 $ 46.73 $ 13.52 $ 52.52
======== ========= ========= =========
Distributions per limited
partnership interest $ 10.17 $ 42.01 $ 25.72 $ 50.98
======== ========= ========= =========
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, 1997 $ 60,229 $5,963,018 $6,023,247
Distributions (7,506) (741,114) (748,620)
Net income 3,936 389,638 393,574
-------- --------- ---------
Balance at June 30, 1997 $ 56,659 $5,611,542 $5,668,201
======== ========= =========
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 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
-------------------------
1997 1996
---------- -----------
Cash flows from operating activities:
Net income $ 393,574 $ 1,528,444
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of assets - (317,615)
Depletion 262,380 255,813
Salvage income from equipment disposal - (47,017)
Gain on abandoned property - (2,552)
Changes in assets and liabilities:
Decrease in accounts receivable 150,045 2,978
Increase (decrease) in accounts payable (84,017) 48,934
--------- ----------
Net cash provided by operating
activities 721,982 1,468,985
--------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (7,507) (6,133)
Proceeds from sale of assets - 510,693
Proceeds from salvage income on equipment disposal - 47,017
Proceeds from equipment salvage on abandoned
property - 6,215
--------- ----------
Net cash provided by (used in) investing
activities (7,507) 557,792
--------- ----------
Cash flows from financing activities:
Cash distributions to partners (748,620) (1,475,121)
--------- ----------
Net increase (decrease) in cash and cash equivalents (34,145) 551,656
Cash and cash equivalents at beginning of period 481,657 353,019
--------- ----------
Cash and cash equivalents at end of period $ 447,512 $ 904,675
========= ==========
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 87-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
Note 1. Basis of presentation
In the opinion of management, the unaudited financial statements of Parker &
Parsley 87-A, Ltd. (the "Partnership") as of June 30, 1997 and for the three and
six months ended June 30, 1997 and 1996 include all adjustments and accruals
consisting only of normal recurring accrual adjustments which are necessary for
a fair presentation of the results for the interim period. These interim results
are not necessarily indicative of results for a full year.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
should be read in conjunction with the financial statements and the notes
thereto contained in the Partnership's Report on Form 10-K for the year ended
December 31, 1996, as filed with the Securities and Exchange Commission, a copy
of which is available upon request by writing to Rich Dealy, Controller, 303
West Wall, Suite 101, Midland, Texas 79701.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
Results of Operations
Six months ended June 30, 1997 compared with six months ended
June 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 5% to $1,166,017 from
$1,228,136 for the six months ended June 30, 1997 as compared to the six months
ended June 30, 1996. The decrease in revenues resulted from a 13% decline in
barrels of oil produced and sold and an 8% decline in mcf of gas produced and
sold, offset by higher average prices received per barrel of oil and mcf of gas.
For the six months ended June 30, 1997, 37,617 barrels of oil were sold compared
to 43,296 for the same period in 1996, a decrease of 5,679 barrels. Of the
decrease, 3,192 barrels, or 7%, were attributable to the sale of nine oil and
gas wells during 1996, while the remaining decrease of 2,487 barrels, or 6%,
were due to the decline characteristics of the Partnership's oil and gas
properties. For the six months ended June 30, 1997, 152,012 mcf of gas were sold
compared to 164,461 for the same period in 1996, a decrease of 12,449 mcf. The
sale of nine oil and gas wells during 1996 had no material effect on the
7
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decrease in gas production. Due to the decline characteristics of the
Partnership's oil and gas properties, management expects a certain amount of
decline in production to continue in the future until the Partnership's
economically recoverable reserves are fully depleted.
The average price received per barrel of oil increased slightly from $20.25 for
the six months ended June 30, 1996 to $20.40 for the same period in 1997, while
the average price received per mcf of gas increased 22% from $2.14 during the
six months ended June 30, 1996 to $2.62 in 1997. The market price for oil and
gas has been extremely volatile in the past decade, and management expects a
certain amount of volatility to continue in the foreseeable future. The
Partnership may therefore sell its future oil and gas production at average
prices lower or higher than that received during the six months ended June 30,
1997.
A gain 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 six months
ended June 30, 1996.
Salvage income of $47,017 received during the six months ended June 30, 1996 was
derived from equipment credits received on one well abandoned in a prior year
and two fully depleted wells.
A gain of $2,552 resulted from the abandonment of one oil and gas well and one
saltwater disposal well during the six months ended June 30, 1996. Associated
costs incurred to plug and abandon these properties totaled $26,008 during this
period.
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 $848,304, which included
$839,821, or $29.15 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $785,459 for the six months ended June 30,
1997 as compared to $925,285 for the same period ended June 30, 1996, a decrease
of $139,826, or 15%. This decrease was due to declines in production costs,
abandoned property costs and general and administrative expenses ("G&A"), offset
by an increase in depletion.
Production costs were $488,098 for the six months ended June 30, 1997 and
$603,558 for the same period in 1996 resulting in a decrease of $115,460, or
19%. Of the decrease, $42,780, or 7%, was attributable to the sale of nine oil
and gas wells and four saltwater disposal wells during 1996. The remaining
decrease of 12% was due to a decline in well repair and maintenance costs.
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, 12% from $39,906 for the six months ended June 30, 1996
to $34,981 for the same period in 1997.
Depletion was $262,380 for the six months ended June 30, 1997 compared to
$255,813 for the same period in 1996. This represented an increase in depletion
of $6,567, or 3%, primarily attributable to a decline in oil reserves during
1997 as a result of lower commodity prices.
Three months ended June 30, 1997 compared with three months ended
June 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 19% to $506,039 from $626,733
for the three months ended June 30, 1997 as compared to the three months ended
June 30, 1996. The decrease in revenues resulted from declines in the average
prices received per barrel of oil and mcf of gas and a 14% decline in barrels of
oil produced and sold, offset by a slight increase in mcf of gas produced and
sold. For the three months ended June 30, 1997, 18,195 barrels of oil were sold
compared to 21,075 for the same period in 1996, a decrease of 2,880 barrels. Of
the decrease, 936 barrels, or 4%, was attributable to the sale of nine oil and
gas wells during 1996. The remaining decrease of 1,944 barrels, or 9%, was due
to the decline characteristics of the Partnership's oil and gas properties. For
the three months ended June 30, 1997, 78,399 mcf of gas were sold compared to
78,386 for the same period in 1996, an increase of 13 mcf. The sale of nine oil
and gas wells during 1996 had no material effect on the Partnership's gas
production.
The average price received per barrel of oil decreased $3.03, or 14%, from
$21.66 for the three months ended June 30, 1996 to $18.63 for the same period in
1997, while the average price received per mcf of gas decreased slightly from
$2.17 during the three months ended June 30, 1996 to $2.13 for the same period
in 1997.
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 three months
ended June 30, 1996.
Salvage income of $257 received during the three months ended June 30, 1996 was
derived from equipment credits received on one well abandoned in a prior year.
A loss of $3,455 during the three months ended June 30, 1996 resulted from the
plugging and abandonment of one uneconomical saltwater disposal well. Abandoned
property costs of $4,444 were incurred during the same period from the
abandonment of one oil and gas well and one saltwater disposal well.
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
9
<PAGE>
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 $848,304, which included
$839,821, or $29.15 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $395,562 for the three months ended June
30, 1997 as compared to $435,105 for the same period in 1996, a decrease of
$39,543, or 9%. This decrease was due to declines in production costs, G&A and
abandoned property costs, offset by an increase in depletion.
Production costs were $256,211 for the three months ended June 30, 1997 and
$285,189 for the same period in 1996 resulting in a $28,978 decrease, or 10%. Of
the decrease, $13,216, or 5%, was attributable to the sale of nine oil and gas
wells and four saltwater disposal wells during 1996. The remaining decrease of
5% was due to a decline in well repair and maintenance costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A
decreased, in aggregate, 32% from $21,864 for the three months ended June 30,
1996 to $14,849 for the same period in 1997.
Depletion was $124,502 for the three months ended June 30, 1997 compared to
$123,608 for the same period in 1996. This represented an increase in depletion
of $894.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $747,003 during the six
months ended June 30, 1997 from the same period ended June 30, 1996. This
decrease was primarily due to the receipt of litigation proceeds during 1996 as
discussed in Item 2 and an increase in production costs and abandoned property
costs paid, offset by an increase in oil and gas sales receipts.
Net Cash Provided by (Used in) Investing Activities
The Partnership's principal investing activities during the six months ended
June 30, 1997 and 1996 were for expenditures related to equipment replacement on
various oil and gas properties.
Proceeds of $510,693 were received during the six months ended June 30, 1996
from the sale of nine oil and gas wells and four saltwater disposal wells.
Proceeds of $47,017 received during the six months ended June 30, 1996 were
attributable to credits received from the disposal of oil and gas equipment on
one well abandoned in a prior year and two fully depleted wells.
10
<PAGE>
Proceeds of $6,215 from equipment salvage resulted from the abandonment of one
oil and gas well and one saltwater disposal well during the six months ended
June 30, 1996.
Net Cash Used in Financing Activities
Cash was sufficient for the six months ended June 30, 1997 to cover
distributions to the partners of $748,620 of which $7,506 was distributed to the
managing general partner and $741,114 to the limited partners. For the same
period ended June 30, 1996, cash was sufficient for distributions to the
partners of $1,475,121 of which $6,367 was distributed to the managing general
partner and $1,468,754 to the limited partners. Cash distributions to the
partners of $1,475,121 for the six months ended June 30, 1996 included $8,483 to
the managing general partner and $839,821 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
11
<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: August 12, 1997 By: /s/ Rich Dealy
-------------------------------
Rich Dealy, Controller of PPUSA
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810999
<NAME> 87A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 447,512
<SECURITIES> 0
<RECEIVABLES> 231,985
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 679,497
<PP&E> 20,117,363
<DEPRECIATION> 15,065,363
<TOTAL-ASSETS> 5,731,497
<CURRENT-LIABILITIES> 63,296
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,668,201
<TOTAL-LIABILITY-AND-EQUITY> 5,731,497
<SALES> 1,166,017
<TOTAL-REVENUES> 1,179,033
<CGS> 0
<TOTAL-COSTS> 785,459
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 393,574
<INCOME-TAX> 0
<INCOME-CONTINUING> 393,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 393,574
<EPS-PRIMARY> 13.52
<EPS-DILUTED> 0
</TABLE>
