<PAGE> 1
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, 1995, 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. 33-12244-02
PARKER & PARSLEY 87-B, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2185706
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
303 West Wall, Suite 101,
Midland, Texas 79701
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code: (915)683-4768
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /x/ No / /
Page 1 of 13 pages.
There are no exhibits.
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PARKER & PARSLEY 87-B, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including
interest bearing deposits of
$143,291 at March 31 and $130,556
at December 31 $ 143,791 $ 131,056
Accounts receivable - oil and gas sales 200,544 172,678
----------- -----------
Total current assets 344,335 303,734
Oil and gas properties - at cost, based
on the successful efforts accounting
method 16,077,257 16,079,533
Accumulated depletion (9,217,973) (9,050,471)
----------- -----------
Net oil and gas properties 6,859,284 7,029,062
----------- -----------
$ 7,203,619 $ 7,332,796
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 130,512 $ 106,827
Partners' capital:
Limited partners (20,089 interests) 7,002,420 7,153,753
Managing general partner 70,687 72,216
----------- -----------
7,073,107 7,225,969
----------- -----------
$ 7,203,619 $ 7,332,796
=========== ===========
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.
2
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PARKER & PARSLEY 87-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Revenues:
Oil and gas sales $ 432,767 $ 365,350
Interest income 2,305 678
Gain on abandoned property - 22,358
--------- ---------
Total revenues 435,072 388,386
Costs and expenses:
Production costs 209,970 250,732
General and administrative expenses 12,983 10,961
Depletion 167,502 180,981
Abandoned property costs - 8,494
Interest expense - 331
--------- ---------
Total costs and expenses 390,455 451,499
--------- ---------
Net income (loss) $ 44,617 $ (63,113)
========= =========
Allocation of net income (loss):
Managing general partner $ 446 $ (631)
========= =========
Limited partners $ 44,171 $ (62,482)
========= =========
Net income (loss) per limited
partnership interest $ 2.20 $ (3.11)
========= =========
Distributions per limited partnership
interest $ 9.73 $ 7.00
========= =========
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.
3
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PARKER & PARSLEY 87-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 1994 $ 77,800 $ 7,706,709 $ 7,784,509
Distributions (1,419) (140,624) (142,043)
Net loss (631) (62,482) (63,113)
---------- ---------- ----------
Balance at March 31, 1994 $ 75,750 $ 7,503,603 $ 7,579,353
========== ========== ==========
Balance at January 1, 1995 $ 72,216 $ 7,153,753 $ 7,225,969
Distributions (1,975) (195,504) (197,479)
Net income 446 44,171 44,617
---------- ---------- ----------
Balance at March 31, 1995 $ 70,687 $ 7,002,420 $ 7,073,107
========== ========== ==========
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.
4
<PAGE> 5
PARKER & PARSLEY 87-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Cash flows from operating activities:
Net income (loss) $ 44,617 $ (63,113)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depletion 167,502 180,981
Gain on abandoned property - (22,358)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (27,866) 9,912
Increase in accounts payable 23,685 10,170
--------- ---------
Net cash provided by operating
activities 207,938 115,592
Cash flows from investing activities:
(Additions) disposal of oil and gas
properties 2,276 (1,079)
Proceeds from salvage equipment on
abandoned property - 3,640
--------- ---------
Net cash provided by investing
activities 2,276 2,561
Cash flows from financing activities:
Principal payments on note payable - (27,937)
Cash distributions to partners (197,479) (142,043)
--------- ---------
Net cash used in financing activities (197,479) (169,980)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 12,735 (51,827)
Cash and cash equivalents at beginning
of period 131,056 165,584
--------- ---------
Cash and cash equivalents at end of period $ 143,791 $ 113,757
========= =========
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.
5
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PARKER & PARSLEY 87-B, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
(Unaudited)
NOTE 1.
In the opinion of management, the unaudited financial statements as of
March 31, 1995 of Parker & Parsley 87-B, Ltd. (the "Registrant") include
all adjustments and accruals consisting only of normal recurring accrual
adjustments which are necessary for a fair presentation of the results
for the interim period. However, the results of operations for the
three months ended March 31, 1995 are not necessarily indicative of the
results for the full year ending December 31, 1995.
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, 1994, 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 2.
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 the managing general
partner, Parker & Parsley Development L.P. ("PPDLP") (see Item 2). The
May 25, 1993 settlement agreement called for a payment of $115 million
in cash by the defendants. 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. A distribution of $91,000,000 was made to the
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working interest owners, including the Registrant, on July 30, 1993.
The limited partners received their distribution of $5,741,966, or
$285.83 per limited partnership interest, in September 1993.
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 is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Registrant was formed November 25, 1987. The managing general
partner of the Registrant at December 31, 1994 was Parker & Parsley
Development Company ("PPDC"). On January 1, 1995, PPDLP, a Texas
limited partnership, became the sole managing general partner of the
Registrant, by acquiring the rights and assuming the obligations of
PPDC. PPDC was merged into PPDLP on January 1, 1995. PPDLP acquired
PPDC's rights and obligations as managing general partner of the
Registrant in connection with the merger of PPDC, P&P Producing, Inc.
and Spraberry Development Corporation into MidPar L.P., which survived
the merger with a change of name to PPDLP. The sole general partner of
PPDLP is Parker & Parsley Petroleum USA, Inc. PPDLP has the power and
authority to manage, control and administer all Program and Registrant
affairs. The limited partners contributed $20,089,000 representing
20,089 interests ($1,000 per interest) sold to a total of 1,603
subscribers.
Since its formation, the Registrant invested $16,710,531 in various
prospects that were drilled in Texas and Colorado. At March 31, 1995,
the Registrant had 60 producing oil and gas wells; one well was a dry
hole from a previous year; two wells were plugged and abandoned, one in
1990 and one in 1994; and one well was sold in 1994.
7
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Results of Operations
Revenues:
The Registrant's oil and gas revenues increased to $432,767 from
$365,350 for the three months ended March 31, 1995 and 1994,
respectively, an increase of 18%. The increase in revenues resulted
from a 12% increase in mcf of gas produced and sold and increases in the
average prices received per barrel of oil and mcf of gas, offset by a 9%
decline in barrels of oil produced and sold. For the three months ended
March 31, 1995, 18,885 barrels of oil were sold compared to 20,650 for
the same period in 1994, a decrease of 1,765 barrels. For the three
months ended March 31, 1995, 61,308 mcf of gas were sold compared to
54,964 for the same period in 1994, an increase of 6,344 mcf. The
decrease in oil production volumes was due to the decline
characteristics of the Registrant's oil properties. The increase in gas
production volumes was due to operational changes on several wells.
Management expects a certain amount of decline in production in the
future until the Registrant's economically recoverable reserves are
fully depleted.
The average price received per barrel of oil increased 28% from $13.39
for the three months ended March 31, 1994 to $17.12 for the same period
in 1995 while the average price received per mcf of gas increased 10%
from $1.62 during the three months ended March 31, 1994 to $1.79 in
1995. The market price for oil and gas has been extremely volatile in
the past decade, and management expects a certain amount of volatility
to continue in the foreseeable future. The Registrant may therefore
sell its future oil and gas production at average prices lower or higher
than that received during the three months ended March 31, 1995.
Costs and Expenses:
Total costs and expenses decreased to $390,455 for the three months
ended March 31, 1995 as compared to $451,499 for the same period in
1994, a decrease of $61,044, or 14%. This decrease was due to declines
in production costs, depletion, abandoned property costs and interest
expense, offset by an increase in general and administrative expenses
("G&A").
Production costs were $209,970 for the three months ended March 31, 1995
and $250,732 for the same period in 1994, resulting in a $40,762
decrease, or 16%. The decrease was due to a 15% decline in well repair
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and maintenance expenses and a 3% decline in ad valorem taxes, offset by
a 2% increase in production taxes due to an increase in the average
price received per barrel of oil and mcf of gas.
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, 18% from $10,961 for
the three months ended March 31, 1994 to $12,983 for the same period in
1995. The Partnership agreement limits G&A to 3% of gross oil and gas
revenues.
A gain of $22,358 was recognized during the three months ended March 31,
1994 from equipment credits on the abandonment of one uneconomical well.
The expense to plug and abandon this well was $8,494 in 1994. There was
no abandonment activity for the same period in 1995.
Depletion was $167,502 for the three months ended March 31, 1995
compared to $180,981 for the same period in 1994. This represented a
decrease in depletion of $13,479, or 7%. Depletion was computed
property-by-property utilizing the unit-of-production method based upon
the dominant mineral produced, generally oil. Oil production decreased
1,765 barrels for the three months ended March 31, 1995 from the same
period in 1994, while oil reserves of barrels were revised downward by
54,404 barrels, or 5%.
Interest expenses were $331 for the three months ended March 31, 1994.
There was no interest charged for the same period in 1995. The decrease
was due to the note payable being paid off during the first quarter of
1994.
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 the managing general
partner. The May 25, 1993 settlement agreement called for a payment of
$115 million in cash by the defendants. 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. A distribution of $91,000,000 was made
9
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to the working interest owners, including the Registrant, on July 30,
1993. The limited partners received their distribution of $5,741,966,
or $285.83 per limited partnership interest, in September 1993.
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 is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities:
Net cash provided by operating activities increased to $207,938 during
the three months ended March 31, 1995, a $92,346 increase from the same
period ended March 31, 1994. This increase was due to an increase in
oil and gas sales and decreases in production costs, abandoned property
costs and G&A. The increase in oil and gas sales was due to an increase
in mcf of gas produced and sold, as well as higher average prices
received for both oil and gas, offset by a decline in barrels of oil
produced and sold. The decrease in production costs was due to declines
in well repair and maintenance costs. There were no abandoned property
costs for the period ended 1995 as compared to the same period in 1994.
Interest expense decreased as a result of the loan pay-off in 1994. The
decrease in G&A was due to a decline in the allocation of expenses by
the managing general partner.
Net Cash Provided by Investing Activities:
The Registrant's principal investing activities for the three months
ended March 31, 1995 were proceeds derived from the disposal of oil and
gas equipment. Investing activities during the three months ended March
31, 1994 included repair and maintenance activity on various oil and gas
properties and the receipt of proceeds of $3,640 from salvage income on
one abandoned property.
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Net Cash Used in Financing Activities:
Cash was sufficient for the three months ended March 31, 1995 to cover
distributions to the partners of $197,479 of which $195,504 was
distributed to the limited partners and $1,975 to the managing general
partner. For the same period ended March 31, 1994, cash was sufficient
for distributions to the partners of $142,043 of which $140,624 was
distributed to the limited partners and $1,419 to the managing general
partner.
It is expected that future net cash provided by operating activities
will be sufficient for any capital expenditures and any distributions.
As the production from the properties declines, distributions are also
expected to decrease.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 the managing general
partner. The May 25, 1993 settlement agreement called for a payment of
$115 million in cash by the defendants. 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. 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 $5,741,966,
or $285.83 per limited partnership interest, in September 1993.
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
11
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Corporation in August 1988, in which he allegedly binds the Registrant
and the other defendants, as well as Southmark. Although PPDLP believes
the lawsuit is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
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PARKER & PARSLEY 87-B, 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-B, LTD.
By: Parker & Parsley Development L.P.,
Managing General Partner
By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
Dated: May 12, 1995 By: /s/ Steven L. Beal
----------------------------------------
Steven L. Beal, Senior Vice
President - Finance and
Chief Financial Officer
of PPUSA
13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000811000
<NAME> 87B395.FDS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 143,791
<SECURITIES> 0
<RECEIVABLES> 200,544
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 344,335
<PP&E> 16,077,257
<DEPRECIATION> 9,217,973
<TOTAL-ASSETS> 7,203,619
<CURRENT-LIABILITIES> 130,512
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 7,073,107
<TOTAL-LIABILITY-AND-EQUITY> 7,203,619
<SALES> 432,767
<TOTAL-REVENUES> 435,072
<CGS> 0
<TOTAL-COSTS> 390,455
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 44,617
<INCOME-TAX> 0
<INCOME-CONTINUING> 44,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,617
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 0
</TABLE>
