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, 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. 33-12244-01
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 / /
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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, 1998 and
December 31, 1997........................................ 3
Statements of Operations for the three and nine
months ended September 30, 1998 and 1997.................. 4
Statement of Partners' Capital for the nine months
ended September 30, 1998.................................. 5
Statements of Cash Flows for the nine months ended
September 30, 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............................ 12
27.1 Financial Data Schedule
Signatures.................................................. 13
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,
1998 1997
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 321,150 $ 383,854
Accounts receivable - oil and gas sales 213,937 290,867
----------- -----------
Total current assets 535,087 674,721
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 20,135,660 20,138,832
Accumulated depletion (16,335,513) (16,020,451)
----------- -----------
Net oil and gas properties 3,800,147 4,118,381
----------- -----------
$ 4,335,234 $ 4,793,102
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 77,814 $ 56,856
Partners' capital:
Managing general partner 42,548 47,336
Limited partners (28,811 interests) 4,214,872 4,688,910
----------- -----------
4,257,420 4,736,246
----------- -----------
$ 4,335,234 $ 4,793,102
=========== ===========
The financial information included as of September 30, 1998 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,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 347,838 $ 470,111 $1,137,369 $1,636,128
Interest 4,543 6,319 15,111 19,335
Gain on disposition of assets - 16 765 16
--------- --------- --------- ---------
352,381 476,446 1,153,245 1,655,479
--------- --------- --------- ---------
Costs and expenses:
Oil and gas production 219,696 270,678 815,929 758,776
General and administrative 10,445 14,103 34,121 49,084
Depletion 109,354 114,111 315,062 376,491
--------- --------- --------- ---------
339,495 398,892 1,165,112 1,184,351
--------- --------- --------- ---------
Net income (loss) $ 12,886 $ 77,554 $ (11,867) $ 471,128
========= ========= ========= =========
Allocation of net income (loss):
Managing general partner $ 129 $ 775 $ (119) $ 4,711
========= ========= ========= =========
Limited partners $ 12,757 $ 76,779 $ (11,748) $ 466,417
========= ========= ========= =========
Net income (loss) per limited
partnership interest $ .44 $ 2.67 $ (.41) $ 16.19
========= ========= ========= =========
Distributions per limited
partnership interest $ 3.00 $ 8.79 $ 16.05 $ 34.51
========= ========= ========= =========
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, 1998 $ 47,336 $4,688,910 $4,736,246
Distributions (4,669) (462,290) (466,959)
Net loss (119) (11,748) (11,867)
--------- --------- ---------
Balance at September 30, 1998 $ 42,548 $4,214,872 $4,257,420
========= ========= =========
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,
-------------------------
1998 1997
---------- -----------
Cash flows from operating activities:
Net income (loss) $ (11,867) $ 471,128
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depletion 315,062 376,491
Gain on disposition of assets (765) (16)
Changes in assets and liabilities:
Accounts receivable 76,930 143,026
Accounts payable 20,958 (71,281)
--------- ----------
Net cash provided by operating activities 400,318 919,348
--------- ----------
Cash flows from investing activities:
Additions to oil and gas properties - (19,681)
Proceeds from asset dispositions 3,937 16
--------- ----------
Net cash provided by (used in) investing
activities 3,937 (19,665)
--------- ----------
Cash flows from financing activities:
Cash distributions to partners (466,959) (1,004,401)
--------- ----------
Net decrease in cash (62,704) (104,718)
Cash at beginning of period 383,854 481,657
--------- ----------
Cash at end of period $ 321,150 $ 376,939
========= ==========
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, 1998
(Unaudited)
Note 1. Organization and nature of operations
Parker & Parsley 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 development and production in
the Spraberry Trend area of West 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 of the
Partnership as of September 30, 1998 and for the three and nine months ended
September 30, 1998 and 1997 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, 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
Nine months ended September 30, 1998 compared with nine months ended September
30, 1997
Revenues:
The Partnership's oil and gas revenues decreased 30% to $1,137,369 from
$1,636,128 for the nine months ended September 30, 1998 and 1997, respectively.
The decrease in revenues resulted from lower average prices received, offset by
an increase in production. For the nine months ended September 30, 1998, 53,312
barrels of oil, 28,268 barrels of natural gas liquids ("NGLs") and 137,992 mcf
7
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of gas were sold, or 104,579 barrel of oil equivalents ("BOEs"). For the nine
months ended September 30, 1997, 54,494 barrels of oil and 226,881 mcf of gas
were sold, or 92,308 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 to periods prior
to September 30, 1997. Also, prices for gas products will not be comparable as
the price per mcf for natural gas for the three and nine months ended September
30, 1998 is the price received for dry residue gas and the price per mcf for
natural gas for the three and nine months ended September 30, 1997 is a price
for wet gas (i.e., natural gas liquids combined with dry residue gas).
The average price received per barrel of oil decreased $6.12, or 31%, from
$19.71 for the nine months ended September 30, 1997 to $13.59 for the same
period in 1998. The average price received per barrel of NGLs during the nine
months ended September 30, 1998 was $6.97. The average price received per mcf of
gas decreased 37% from $2.48 during the nine months ended September 30, 1997 to
$1.56 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 nine months ended September 30, 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 1998. On October 30, 1998,
the market price for West Texas intermediate crude was $13.33 per barrel. A
continuation of the oil price environment experienced during the first three
quarters 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.
A gain on disposition of assets of $765 was received during the nine months
ended September 30, 1998 from the sale of equipment on one saltwater disposal
well plugged and abandoned in a prior year.
Costs and Expenses:
Total costs and expenses decreased to $1,165,112 for the nine months ended
September 30, 1998 as compared to $1,184,351 for the same period in 1997, a
decrease of $19,239. This decrease was due to declines in depletion and general
and administrative expenses ("G&A"), offset by an increase in production costs.
Production costs were $815,929 for the nine months ended September 30, 1998 and
$758,776 for the same period in 1997, resulting in a $57,153 increase, or 8%.
The increase was due to additional well maintenance costs incurred in an effort
to stimulate well production, offset by a decline in production taxes.
8
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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, 30%, from $49,084 for the nine months ended September
30, 1997 to $34,121 for the same period in 1998.
Depletion was $315,062 for the nine months ended September 30, 1998 compared to
$376,491 for the same period in 1997, representing a decrease of $61,429, or
16%. 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 1,182 barrels for the period ended September 30, 1998 compared to the same
period in 1997, offset by a decrease in oil reserves during the period ended
September 30, 1998 as a result of lower commodity prices.
Three months ended September 30, 1998 compared with three months ended September
30, 1997
Revenues:
The Partnership's oil and gas revenues decreased 26% to $347,838 from $470,111
for the three months ended September 30, 1998 and 1997, respectively. The
decrease in revenues resulted from lower average prices received, offset by an
increase in production. For the three months ended September 30, 1998, 16,855
barrels of oil, 10,445 barrels of NGLs and 47,626 mcf of gas were sold, or
35,238 BOEs. For the three months ended September 30, 1997, 16,877 barrels of
oil and 74,869 mcf of gas were sold, or 29,355 BOEs.
The average price received per barrel of oil decreased $5.89, or 32%, from
$18.20 for the three months ended September 30, 1997 to $12.31 for the same
period in 1998. The average price received per barrel of NGLs during the three
months ended September 30, 1998 was $6.36. The average price received per mcf of
gas decreased 29% from $2.18 during the three months ended September 30, 1997 to
$1.55 in 1998.
Costs and Expenses:
Total costs and expenses decreased to $339,495 for the three months ended
September 30, 1998 as compared to $398,892 for the same period in 1997, a
decrease of $59,397, or 15%. This decrease was due to declines in production
costs, depletion and G&A.
Production costs were $219,696 for the three months ended September 30, 1998 and
$270,678 for the same period in 1997, resulting in a $50,982 decrease, or 19%.
The decrease was due to declines in production taxes, workover costs and well
maintenance costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A
decreased, in aggregate, 26% from $14,103 for the three months ended September
30, 1997 to $10,445 for the same period in 1998.
9
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Depletion was $109,354 for the three months ended September 30, 1998 compared to
$114,111 for the same period in 1997, representing a decrease of $4,757, or 4%.
This decrease was primarily attributable to a reduction in the Partnership's net
depletable basis from charges taken in accordance with SFAS 121 during the
fourth quarter of 1997 and a slight reduction in oil production for the period
ended September 30, 1998 compared to the same period in 1997, offset by a
decrease in oil reserves during the period ended September 30, 1998 as a result
of lower commodity prices.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $519,030 during the nine
months ended September 30, 1998 from the same period ended September 30, 1997.
This decrease was primarily due to a decline in oil and gas sales receipts,
offset by decreases in production costs paid and G&A expenses paid.
Net Cash Provided by (Used in) Investing Activities
During the nine months ended September 30, 1997, the Partnership's principal
investing activities were for expenditures related to equipment replacement on
various oil and gas properties.
Proceeds from asset dispositions of $3,937 received during the nine months ended
September 30, 1998 were comprised of $3,172 received from the salvage of
equipment on active properties and $765 from equipment salvage on one saltwater
disposal well plugged and abandoned in a prior year.
Net Cash Used in Financing Activities
Cash was sufficient for the nine months ended September 30, 1998 to cover
distributions to the partners of $466,959 of which $4,669 was distributed to the
managing general partner and $462,290 to the limited partners. For the same
period ended September 30, 1997, cash was sufficient for distributions to the
partners of $1,004,401 of which $10,065 was distributed to the managing general
partner and $994,336 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.
Year 2000 Project Readiness
Historically, many computer programs have been developed that use only the last
two digits in a date to refer to a year. As the year 2000 nears, the inability
of such computer programs and embedded technologies to distinguish between
"1900" and "2000" has given rise to the "Year 2000" problem. Theoretically, such
computer programs and related technology could fail outright, or communicate
inaccurate data, if not remediated or replaced. With the proliferation of
electronic data interchange, the Year 2000 problem represents a significant
10
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exposure to the entire global community, the full extent of which cannot be
accurately assessed.
In proactive response to the Year 2000 problem, the managing general partner
established a "Year 2000" project to assess, to the extent possible, the
Partnership's and the managing general partner's internal Year 2000 problem; to
take remedial actions necessary to minimize the Year 2000 risk exposure to the
managing general partner and significant third parties with whom it has data
interchange; and, to test its systems and processes once remedial actions have
been taken. The managing general partner has contracted with IBM Global Services
to perform the assessment and remedial phases of its Year 2000 project.
The assessment phase of the managing general partner's Year 2000 project is 85%
complete and has included, but is not limited to, the following procedures:
o the identification of necessary remediation, upgrade and/or replacement
of existing information technology applications and systems;
o the assessment of non-information technology exposures, such as
telecommunications systems, security systems, elevators and process
control equipment;
o the initiation of inquiry and dialogue with significant third party
business partners, customers and suppliers in an effort to understand and
assess their Year 2000 problems, readiness and potential impact on the
managing general partner and its Year 2000 problem;
o the implementation of processes designed to reduce the risk of
reintroduction of Year 2000 problems into the managing general partner's
systems and business processes; and,
o the formulation of contingency plans for mission-critical information
technology systems.
The managing general partner expects to complete the assessment phase of its
Year 2000 project by the end of the first quarter of 1999 but is being delayed
by limited responses received on inquiries made of third party businesses. To
date, the managing general partner has distributed Year 2000 problem inquiries
to over 500 entities and has received responses on approximately 10% of those
inquiries.
The remedial phase of the managing general partner's Year 2000 project is
approximately 40% complete, subject to the results of the third party inquiry
assessments and the testing phase. The remedial phase has included the upgrade
and/or replacement of certain application and hardware systems. The managing
general partner has upgraded its Artesia general ledger accounting systems
through remedial coding and is currently testing this system for Year 2000
compliance. The remediation of non-information technology is expected to be
completed by mid-1999. The managing general partner's Year 2000 remedial actions
have not delayed other information technology projects or upgrades.
11
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The testing phase of the managing general partner's Year 2000 project is on
schedule. The managing general partner expects to complete the testing of the
Artesia system upgrades by March 1999 and all other information technology
systems by May 1999. The testing of the non-information technology remediation
is scheduled to be completed by the end of September 1999.
The managing general partner expects that its total costs related to the Year
2000 problem will approximate $3.5 million, of which approximately $500 thousand
will have been incurred to replace non-compliant information technology systems.
As of September 30, 1998, the managing general partner's total costs incurred on
the Year 2000 problem were $1.5 million, of which $200 thousand were incurred to
replace non-compliant systems. 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
and such allocation should not be significant to the Partnership.
The risks associated with the Year 2000 problem are significant. A failure to
remedy a critical Year 2000 problem could have a materially adverse affect on
the Partnership's results of operations and financial condition. The problems
which may be encountered as a result of a Year 2000 problem could include
information and non-information system failures, the receipt or transmission of
erroneous data, lost data or a combination of similar problems of a magnitude
that cannot be accurately assessed at this time. In the assessment phase of the
managing general partner's Year 2000 project, contingency plans are being
designed to mitigate the exposures noted above. However, given the uncertainties
regarding the scope of the Year 2000 problem and the compliance of significant
third parties, there can be no assurance that contingency plans will have
anticipated all Year 2000 scenarios.
- ---------------
(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
27.1 Financial Data Schedule
(b) Reports on Form 8-K - none.
12
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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: Pioneer Natural Resources USA, Inc.
Managing General Partner
Dated: November 9, 1998 By: /s/ Rich Dealy
----------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810999
<NAME> 87A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 321,150
<SECURITIES> 0
<RECEIVABLES> 213,937
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 535,087
<PP&E> 20,135,660
<DEPRECIATION> 16,335,513
<TOTAL-ASSETS> 4,335,234
<CURRENT-LIABILITIES> 77,814
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,257,420
<TOTAL-LIABILITY-AND-EQUITY> 4,335,234
<SALES> 1,137,369
<TOTAL-REVENUES> 1,153,245
<CGS> 0
<TOTAL-COSTS> 1,165,112
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,867)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,867)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,867)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> 0
</TABLE>
